Your Chicago Mortgage Guy

Pre-Approval!

Here we go again. Every Spring, as the first batch of contracts are signed, I get the calls from either Agents or Borrowers who now under contract, are finding out that they either don't qualify for the mortgage they thought they were going to get, or who are not at all happy with the monthly payment that was just put in front of them.

Admittedly, the Pre-Approval process is flawed. Most people these days start off on the internet. There are mortgage calculators on basically every Real Estate site on the internet. You can research lenders, programs, mortgage terms, all without leaving your cubicle. When your Realtor says you need a pre-approval letter, most people pick up the phone and call either the recommended Loan Officer, or their local bank and ask for a pre-approval for the maximum they can afford. The Loan Officer in turn, generally asks about income, assets, runs a credit report and sends out a very generic letter to a specific purchase price or loan amount. But here's the flaw. Most Loan Officer's never ask how much you are comfortable with on a monthly basis or, if you have looked at your own personal budget to come up with a number that fits. And what happens? You sign that contract for $300,000.00 only to find out the monthly payment eats into the $500 per month you had budgeted for your next vacation or your kid's college fund.

Why are we so afraid to talk about budgets? As a Loan Officer, we are guiding people through the single biggest purchase of their lives. As such, it's the largest monthly liability that they are going to carry. Why are so many mortgage professionals not broaching this with their customers?

The first question I ask a potential borrower when we speak is what they are comfortable with in terms of monthly payment. If they don't know, I ask them to think about that before we start talking about purchase price. It's easy to back into a purchase price range once you have that number and the amount of money being put towards down payment. Here's a dirty little secret. Realtor's don't want to sell you more property than you can afford. Especially considering the state so many of our past clients are in post bubble burst. A good Realtor does not care if they sell you a $200K home instead of a $250K home. What they do care about is getting a referral from you after close. They will not be getting referrals for very long if you are not able to make the monthly payment on the home that you have to live in for the next five years.

Just as important as monthly payment is knowing for sure that you meet current mortgage guidelines. It has never been harder for me to just say to someone, 'Congratulations, you are Pre-approved'. There are just too many things that go into the process now, and too many guidelines to follow. It has never been more important to get a credit check, have a loan officer look at your paystubs, W2's and assets, and even run the file through automated underwriting to make sure the loan will be approved. There are so many things now that can negatively affect the quoted interest rate, that it's imperative to get that out of the way up front. While your best friend may have just locked in 5.00% on a 30 Year Fixed, your particular situation could easily push that rate to 5.500% and change your monthly payment on a $300K loan by as much as $90 per month, before you figure in that your mortgage insurance just got more expensive as well.

So, if you haven't spoken to a loan officer, call one. If you have, but you don't feel like they went through your finances, or talked to you about your comfort level or budget, don't call anyone, call me!

Joe Burke

Your Chicago Mortgage Guy

773-742-6707

joe@yourchicagomortgageguy.com

 

 

Mortgage Boot Camp

Happy Friday Everyone!

So, when I posted last week regarding a new 97% Financing option, I just kind of figured the general response would be 'Woo Hoo'!  But, the response I received was a lot more '97 percent?  I didn't even know we could go to 95%?'.  And I started thinking about it.  I guess most of what you get from us in the mortgage industry is the negative.  We can't do this, we can't do that, we are cutting this program, and you need a higher FICO score for this program.  That's on us.  We should be telling you about what you can do.  What can be financed and what you can safely tell your clients is out there so that you can sell more property. 

Over the next couple of weeks I am going to post regularly regarding current Mortgage Programs and Guidelines.  Not the negative, but the positive.  What you can go out and sell this Spring.  What is going to get your First Time Home Buyers into their first Condo or Single Family Home.  What is going to get your move up buyer out of their condo and into that next property. 

We are going to cover Conventional and FHA.  Mortgage Insurance and FICO scores.  We'll go over what exists in terms of Second Mortgage products and what you can expect in the Jumbo market. 

So, stay tuned.  There is a lot of great information on the horizon. 

Joe Burke

Your Chicago Mortgage Guy

773-742-6707

joe@yourchicagomortgageguy.com

ChicagoAgent Magazine - Ask A Lender

Well, I guess I made the big time!  Here's my article from this month's ChicagoAgent Magazine.  You can also find it here at ChicagoAgent Magazine Online.

Ask A Lender

6 December 2010 No Comment

For this issue’s Ask a Lender, Joe Burke, a vice president of mortgage lending with Guaranteed Rate, answers questions posed by Chicagoland Realtors.

Q: I have spent countless hours and marketing dollars on condominium listings this year, only to find out on more than one deal that the condominium associations are not eligible for conventional mortgages. Is there any way to avoid this?
A: It has long been the norm to prequalify our potential buyers, but the same can’t be said of the properties themselves, and that needs to change. It is the logical next step these days when so many condominium projects are not currently ‘warrantable’ by Fannie Mae and Freddie Mac.

When a mortgage application is taken and the property or collateral is a condominium, the loan application is basically split into two separate underwrites. The first is the borrower package, consisting of income, assets and credit. The second is the condominium package, which is deemed by Fannie Mae and Freddie Mac standards as either warrantable or non-warrantable. If the condominium project is deemed non-warrantable, it is difficult, or even impossible, to obtain financing.

So, how can this be avoided? By prequalifying your client’s condominium association. While there are variances from lender to lender, some are more conservative than others when interpreting guidelines, there are 10 questions that can be asked up front that should give you a reasonable idea if there are going to be any problems that crop up during the mortgage process:

1. Is there a ‘Right of First Refusal’ in the condo declarations?
2. Does the project allow for a buyer to purchase more than one unit with a single mortgage?
3. Is the condo association currently involved in any litigation?
4. Does the project contain any commercial space? If so, what is the square footage?
5. Does any single entity own more than 10 percent of total units in the project?
6. Are more than 15 percent of the total condo units 30 days or more delinquent on their monthly assessments?
7. Is the project a condotel, have a rental desk, daily or weekly rentals?
8. Are there any special assessments currently approved, or have there been any in the past year?
9. If a unit is taken over in foreclosure or “deed-in-lieu,” is the mortgagee responsible for the delinquent HOA dues?
10. Does the budget call for at least 10 percent of the operating cost to be put into a reserve account as a line item in the budget?

Some of these questions can be deal killers if you get a “yes.” Others can be harmless to the transaction with the right documentation. And a few, if apparent up front, can be corrected before the unit ever goes on the MLS. But they will all become a problem during the underwriting process at some point if you don’t ask the questions up front, because the lender will.
As a Realtor, it has never been more important to have a strong relationship with a loan officer, who can help to prequalify your clients’ properties before the MLS. When a challenge presents itself prior to listing, everyone in the transaction can be prepared, the listing can be priced appropriately and potential borrowers can be targeted appropriately.

Q: If my client’s condominium association is deemed “non-warrantable,” are there any financing options available?
A: Yes, Guaranteed Rate has access to lenders that will finance a non-warrantable condominium project, but they won’t necessarily finance any non-warrantable condominium project. For instance, if it’s the owner occupancy that is an issue, there are lenders that will allow financing in the project. They will generally require a higher down payment and have a more limited product array, but are still generally very aggressive when it comes to interest rates.

Joe Burke is a vice president of mortgage Lending at Guaranteed Rate. He has been a loan officer since 2002 with a concentration in first-time condo buyers. He can be reached at 773.742.6707 or joe.burke@guaranteedrate.com.

30 Days To Go....

It seems like just yesterday that the First Time Home Buyers Credit was extended through April 30th, yet here we are with only thirty days to go. 

In case you don't know, and I still get questions on this, you must be under contract by April 30th, with a closing prior to June 30th.  Both what I am seeing personally and what I am hearing from Realtor's out in the field, it's a mad dash for the finish line.  I have personally never written so many pre-approval letters in such a short period of time, but I haven't seen that many contracts yet.  That means my potential buyers are all still out there looking to write a contract. 

Advice from Your Chicago Mortgage Guy?  Don't wait until the last minute to write that contract.  You never know if there are going to be multiple offers, or worse yet, inspection or attorney review issues that end up killing your deal.  Since we basically only get one shot at this now, and only have 30 days left to take that shot, it's best you make an informed decision.  It's also best to be prepared.

What can you do to be prepared?  Line up your Lender.  Get Pre-Approved.  Talk to an Attorney and make sure they know that your contract is coming.  Ask your Realtor who they recommend for an Inspector and if you feel like you need to shop or vet them, do it before you write that contract.  We are about to get very, very busy with a lot of people who will be under pressure to do everything at once.  You don't want to be left on the outside looking in.

As always, contact Your Chicago Mortgage Guy if you have any questions or need any advice.

Joe Burke

Your Chicago Mortgage Guy

773-742-6707

joe@yourchicagomortgageguy.com

When should I get Pre-Approved? Now!!!

If you are even thinking about buying a home, whether it's this year or next, you should sit down with a mortgage consultant to work up a plan of attack.  With all of the changes to programs and the increased scrutiny put on borrowers, it has never been more important to be prepared when you go out looking for a property. 

It is truly a buyer's market right now, but it is also a very skeptical one.  More and more listing agents are refusing to even show a property to a potential borrower that cannot prove that she/he is not already pre-approved.  In the event that you make an offer on a property, the borrower that has done his or her homework is going to be the one that wins out every time. 

"But, I'm not looking to buy anything until next Spring or Summer".  Doesn't matter!!  Sit down.  Go through your documentation.  Run your credit.  Put together a plan.  Whether that means paying off some debt, fixing a negative on your credit report, or just putting together a budget so that you can save a few more dollars, it is always best to sit down with someone early.  Credit scores have never been as important as they are right now and given time, anyone can work towards increasing those scores prior to making an offer on a property.  In the past there was very little difference, if any at all, in interest rate if you were in a wide range in regards to your FICO score.  An individual with a 660 score might have gotten the same interest rate as someone with a 760 score.  No more.  There can be a .125% difference in Interest rate for the smallest of margins these days.  At 720 FICO, you might get quoted one interest rate while at 740, you will get quoted another.  All the more reason to sit down early so you can get this resolved.

So what should you do?  Find someone who will spend time with you.  Either in person or via phone and email, find someone who is genuinely interested in you, not the transaction.  The good Mortgage Professionals are not dependent on an immediate sale and recognize the value of consulting and advising there clients throughout the process and will welcome the opportunity to work with a potential client, no matter the time frame. 

For more information drop me a line!

Joe Burke

Your Chicago Mortgage Guy

joe@yourchicagomortgageguy.com

773-742-6707