Your best resource for mortgage news and information.

Tip of the Week, What We Know About the Wizard of Oz

Posted: February 24th, 2011 | Author: | No Comments »

Tip of the Week, What We Know About the Wizard of Oz from Tom Matthews on Vimeo.

Tom Matthews
Hometown Lenders LLC
(615) 773-5350 office
(615) 852-0229 cell
tom@hometownloan.net
www.hometownloan.net

Tips to help you with time management (great fun!)

Posted: February 10th, 2011 | Author: | No Comments »

Time Management at it’s best. from Tom Matthews on Vimeo.

Super Secret Place for Best Price Shopping

Posted: February 3rd, 2011 | Author: | No Comments »

Shopping For the Best Price from Tom Matthews on Vimeo.

Tip of the Week – GPS Safety

Posted: January 27th, 2011 | Author: | No Comments »

Foggy Mirrors for your Tip of the Week

Posted: January 20th, 2011 | Author: | No Comments »

What are the steps to get a pre-qualification letter?

Posted: November 17th, 2010 | Author: | No Comments »

Almost every good real estate agent will want you to be pre-qualified before you go out house hunting.  The reason is why look for a $200,000 home when you only qualify for a $150,000 home.  Or why go house hunting if your credit scores will not allow you to get a mortgage.

Every lender has a different set of rules when issuing a pre-qualification letter.  Some will give you a letter without even running your credit.  Others won’t ever give you a letter.  Here are our guidelines:

Rules to issue a pre-qualification letter

 

Summary A real estate agent typically needs a pre-qualification letter to accompany an offer to purchase.  In the past, these letters have had very little value because there was almost no work done to qualify the buyer.  That is not the right approach to this process and, as a consequence, we have these new guidelines.
Goal We need to raise the “approval certainty” to a 90% confidence level.  This will give our realtor partner a much better comfort level that we can close a deal and, at the same time, not be such a burden on our time and money.
Specific Guidelines
  1. We need to take a full application.  This can be done over the phone, in person or via email.
  2. Must run credit
  3. Verify credit scores meet minimum underwriting guidelines
  4. Check credit report for anomalies:  judgments, collections, bankruptcies.
  5. Cash to close does not need to be documented.  Experience shows that a buyer knows exactly how much they have available for the purchase of a home.
  6. Income is a challenge because of underwriting guidelines.  That means we need the following documentation to help us calculate the proper monthly income.
    1. Salary employee not in sales.  If the person is paid a salary with no bonus and no overtime, we do not need any further documentation.  His income is calculated as annual salary divided by 12.
    2. Hourly employee.  A paycheck showing year to date numbers is sufficient as long as 1) we don’t need to document overtime, 2) position is not in sales and 3) position is not as a truck driver.
    3. Hourly employee with overtime.  We need  a year to date paycheck and W-2’s for the previous two years.  Please note, this category excludes any sales or truck driver position.
    4. All other income sources.  We will need a year to date paystub (if available), W-2’s for the last two years and personal 1040’s for the last two years.  This includes anyone that is in sales, is a truck driver, is self employed or has rental properties.
    5. The file needs to be run through automated underwriting where we need an Approve/Eligible or LP Accept.
    6. We are now able to issue the pre-qualification letter.  Please note the letter must reference the following:
      1. Specific loan program
      2. Maximum purchase price
      3. Maximum base loan amount
      4. Date the credit report was created.

There is no way a loan officer can tell you “here is today’s rate.”

Posted: November 4th, 2010 | Author: | No Comments »

For those of us that have been buying homes for many years, what is it we do when we talk to a mortgage guy?  “What’s the rate?”  In today’s new environment that’s like walking into an appliance store and asking the salesman “How much does a TV cost?”  The salesman would not give you an answer because he does not have enough information.  Do you want plasma, hi-def, 3-D and what size do you want:  42 inch, 50 inch, 65 inch?  All of these questions go to defining the specific product you want and therefore the price you have to pay.

Mortgages are exactly the same these days.  When you hear a rate quoted on the news they are not telling you anything about the specific mortgage you want or the underlying criteria for that loan.

For a conventional loan, the best rate comes with this set of facts:

  • You are buying a home (not refinancing it)
  • The loan amount is between $300,000 and $417,000
  • You can close 15 days after the interest rate is locked
  • Both your score and your spouse’s middle credit score are 740 or higher
  • You are putting 40% down
  • The home you are buying is a town home or single family home, not a condo.
  • You are going use this home as your personal residence
  • You are going to escrow your taxes and insurance rather than pay them yourself.
  • The loan is a 10 year fixed rate

That’s quite the list of rules that you need to meet if you want the best interest rate possible.  And every single deviation to one of these rules raises the rate.   Most of the increments are small but there sure are a lot of them.  If you ask me the last time someone met all this criteria I would answer: With 14 years in this business I have never once had a deal that was this good.

If you want me to quote a rate for you that you can count on then you need to give me quite a bit of information.  When I have a customer call me and insist that I quote him a rate before he gives me any information,  I will do so but with so many qualifications (I assume your credit score is … your loan to value is …, etc) that the value of what I am quoting is very low. 

Your home is probably your most valuable asset    Give me the time to really understand your wants, needs and facts then I can help you.

Have a great day,

Tom

What is your lender’s responsibility to you.

Posted: November 2nd, 2010 | Author: | No Comments »

The idea for this blog entry came from one of my clients.  They are a husband and wife, both retired and living on a fixed income.  They want to move from their current home to a retirement community.  The problem is they are at the high end of their debt to income rations and getting them qualified will be difficult.

The wife is very strong on wanting to purchase this property – and I can probably find a way to get them into the home using an ARM.  And I would certainly be in my “legal and responsible” high ground to get them this loan.  After all, they are the customer and it is my job to deliver what they want.

This is where my (and and loan officer) moral responsibility kicks in.  This couple can qualify and buy this home.  But their residual income is so small that life needs to be perfect for them or they will fall and risk foreclosure.  They cannot get sick, have unexpected expenses and real estate taxes cannot go up much.  So do I take the high road and tell them I cannot get the deal done for them or do I take the low road, get them into their home and move on to my next client?

As you can probably tell from the tone of this post, I have to take the high road.  We, as loan officers, have a huge moral obligation to not only get the customer what he wants but we have to make sure we do it wisely.  We can never fall back on “I just gave them what they wanted.”  That would be too easy and not right.  But we also cannot play god to them.  They have to make their own financial decisions.

Se we cannot say no and we don’t want to say yes.  A dilemma?  Not really if we truly understand out job.  And that is we have to make them understand the risks and benefits like we do then we have to let them make a decision.  Once we get to this point, we have truly done a good job. 

I will let you know what happens with these customers.  I really don’t know myself.   But I hope and pray that they make a good decision.

Have a great day,

Tom

Can I Make My Down Payment With A Gift?

Posted: October 20th, 2010 | Author: | No Comments »

The short answer is yes.  Ee are talking about FHA loans (the most standard loan when a gift is made).  The down payment you need is 3.5% of the purchase price.  And you will probably need 4% – 5% more for closing costs and setting up your escrows. 

HUD says a gift from a related party is just fine – as long as it is properly documented.  A related party is a family member (even distant), a significant other or some other type of special relationship.  It is not OK for a third party involved with the transaction (seller) to make the gift.

You’re not done yet.  Part 2 of gift giving (part 1 is to find someone that will do it!) is to “properly document” the gift transfer.  Here is what you need:

  1. A gift letter acknowledging the donor’s desire to make the gift.
  2. The donor’s ability to make the gift – done with a copy of the donor’s bank statement.
  3. The transfer of money out of the donor’s account
  4. A copy of the check the donor gives the buyer
  5. A bank statement of the borrower showing the deposit into his account.

The FHA underwriters have become very picky on exactly what documentation works as proof and what does not work.  Of course, everyone wants to give me the things that don’t work!  Here is a list of problems I encounter on a pretty routine basis.

  • The donor does not want to give us a copy of their bank statement.  After all, their financial pictures is none of our business .  This is a non-starter.  If we do not get the donor’s bank account, there will be no allowed gift.
  • There is cash involved.  This will not be allowed as a gift.  The donor should put the money into their account then make the gift from their account to the borrower via check.
  • The donor wants to give a cashier’s check or money order so we don’t need their bank account.  This no longer works (it used to), we need the bank statement.
  • The donor takes money out as a cash advance from a credit card.  This usually will not work.  Most underwriters will not allow a donor to borrow money for a gift.
  • The borrower deposits the check along with other checks and/or cash so the amounts from the donor’s bank withdrawal to the borrower’s deposit do not exactly match.  The underwriter needs proof positive that the entire transfer was done properly – from the donor to the borrower.
  • The donor gives us a screen print of an online statement.  This usually does not work because it is missing information.  We need account name, account number, detailed transactions including balances.  And the bottom of each page has to show the URL that the page came from.

As you can see, there are a lot of pitfalls with a father, mother or grandparent making a gift to the new home buyer.  My best advice is to work closely with your mortgage loan officer to make sure the transaction is properly documented.

Have a great day,

Tom

First Time Home Buyers Rejoice!

Posted: October 14th, 2010 | Author: | No Comments »

The Tennessee Housing Development Agency (THDA) announced that have reduced their interest rate for all three first time home buyer programs.

THDA has three programs

Great Rate.  This program has the best interest rate.  And it has just been reduced to 3.95% for a 30 year fixed mortgage.

Great Advantage.   The rate for this program is now 4.25% and you get the bonus of THDA make a grant to you of 2% of your loan amount.  This money can be used for down payment or closing costs.

Great Start.  This is the most popular of the THDA programs.  The interest rate is 4.55% but THDA will give you a grant of 4% of the loan amount.  This program is so popular because the grant will cover your down payment.

All the more reason why now is just a great time to buy a new home.  You can probably buy your first home and spend less than you do on your rent.  And with the help of THDA, you may be able to get into your home with no money down.  No money needed for closing costs.

So if you want to hear more about this program, give me a call at 615-773-3775.  This is a great program for all Middle Tennessee first time home buyers.

Have a great day,

Tom

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