Jo Garner, Mortgage Officer with Evolve Bank and Trust (901) 482 0354 www.MortgageLoansBlog.com www.MoneyShoppe.NET
Host of the Real Estate Mortgage Shoppe on News Radio AM 600 WREC
When is the last time you have taken a nice vacation and gotten to your destination via airplane? I just returned from a vacation in Southern California. There are so many similarities between getting a good mortgage and having a good flight on a commercial airline.
First of all, how many of you just show up these days to the airport without a ticket and expect to board a plane to your destination right away? I have only done that once many years ago—when Fed Ex lost a jumbo loan package that needed to be underwritten in Birmingham, Alabama. This was before loan files were transmitted electronically. The loan had to close that day. My processer had a copy package and I personally flew with the package and delivered it into my underwriter’s hand that day so my loan could close that afternoon. It closed. Wow.
Today we call our travel agents or we surf around on the internet checking up ORBITZ, CheapFlights.com or Priceline.com . We shop for the most fairly priced flights but with an itinerary that fits our schedule and our family needs. It’s the same with shopping for the right mortgage. Step 1: It is recommended that you shop 3 different mortgage companies letting them give you bona fide estimates for the exact same financing scenario. Talk with the loan officer who will be handling your file. Does he listen to what YOU want from this mortgage? Does he ask YOU how long you plan to stay in the house? Does he ask YOU what YOU want to achieve from getting the mortgage? Check the BBB rating of the bank. The cheapest rate is almost never the best deal.
Which reminds me of a story I read recently on the internet about an airline:
by Pilot D.J. Frost
Taxiing down the tarmac, the jetliner abruptly stopped, turned around and
returned to the gate.
After an hour-long wait, it finally took off.
A concerned passenger asked the flight attendant, “What was the problem?”
“The pilot was bothered by a noise he heard in the engine,” explained the Flight
Attendant, “and it took us a while to find a new pilot.”
Step 2: You are ready to complete the loan application, over the phone, on the internet or in person with the mortgage person you have chosen. It’s like getting ready to head to the airport to board your plane. More than likely you won’t show up empty-handed. You know some of the most important items, your driver’s license or passport and your credit card— and clean clothes—especially underclothes—Mother also told me to keep one clean pair, some clean socks and some toiletries in the carry-on bag.
When you are ready for your loan application, here are some items that are important:
Your latest paystubs and ALL pages of your bank statements and other asset accounts. If you are self-employed or over 25% of your income is from commissions, you will need to deliver to the loan officer all pages of your last 2 years tax returns. Have a good idea on how long you plan on staying in the house that you are either going to purchase or refinance.
I had a customer a couple of years ago that owned a trucking company and when he called he said the banks he talked to turned him down for his mortgage because they said he didn’t show any profit on his tax returns. Susan and I reviewed the tax return and found items we could add back to income totaling over $100,000 dollars. We closed the loan and he is still enjoying the low payment today.
We recently had a customer who said he made about $3,500 per month but when we got his IRS transcripts we saw that he claims a significant amount of unreimbursed employee expenses bringing his net income down to about $1,600/mo—not enough to qualify. The only solution for him right now is to get a co-signer whose income might help him get his debt –to-income ratios down. He could also file an amendment to his taxes but this could take a couple of months and might create a flag for the IRS—and we don’t want to do that.
We had a customer yesterday that has not been employed until recently but she was a full-time college student prior to getting her job. She sent transcripts from her school to show that she was a full-time student before getting the job. This documentation is evidence that she should enjoy stable employment.
All pages of the bank statements are required now. If you have a bank account with plenty of funds sitting in it with little or no deposits going in, this is the bank statement you probably want to use so that you do not have to show proof of the source of the deposits. If the deposits are clearly payroll, you do not have to prove their source. On other deposits you just need to ask your banker to fax or scan the mortgage officer an image of the deposit to show the source. Most of the time it’s a lot easier to do than you think.
If you are applying for a loan that will require an appraisal, be prepared to use your credit card or write a check to cover the appraisal. Usually full appraisals run about $400 to $550. Once you have paid, it can be shown at closing as a credit and listed as Paid Outside of Closing.
Now that you have your airline ticket and your bags packed, you are ready to go through airport security. Lucky for you, in the mortgage office, you won’t have to endure a full body scan—BUT the credit report goes back seven to ten years and it is AMAZING what it remembers.
On the credit report verification is made that your name matches a valid social security number. There is a check of public record reports to insure there are no unpaid judgments against you. If there are outstanding judgments or liens, these need to be paid off or satisfied before the mortgage office can proceed. Tax liens, back child support and bankruptcies show up here too. If you had a full bankruptcy Chapter 7, you will need to wait at least 2 years from the discharge date. For a foreclosure or short sale on a house, you will need to wait 3 to 5 years from the foreclosure date depending on the loan program you are applying to receive.
Your payment history is reported in black and white. If you have late payments showing over 30 days late within the last year or two, these can negatively affect your credit scores. Susan and I are trained to use Credit Simulators (like a flight simulator only for your credit) and other credit tools to suggest things you can do if you need about a 50 to 60 point credit score increase within 60 to 90 days. The higher your credit scores, the lower your mortgage rate these days, so it pays to have your credit scores as high as possible. It is not 100% effective because your credit is a moving target, but does wonders in a lot of cases.
If you’re buying a home or refinancing one, the title company runs a title search on the subject property. It’s here that unreleased liens or other clouds on the title show up. Usually these issues can be easily fixed in short order but sometimes not like in the case we encountered several months ago on a purchase contract that fell through because all of the heirs did not sign when the estate was settled on the property our customer was trying to buy. It can take several months and sometimes over a year to get estate problems worked out. Anthony Bradley, a local attorney here in Memphis is the only attorney I ever met who walked documents through even in Mississippi to make sure our loan closed on time with a clean title. Very unusual for that to happen though.
Now we are through the security check and everyone has their shoes back on and their bags collected at the end of the conveyor belt. It’s time to move to the gate where you do what? Don’t wait, go ahead and get to the gate. In the mortgage business Susan and I process your loan and put it together so that it looks great by the time it gets to underwriting. It’s like going to the gate in the airport. When you lock your mortgage rate and terms the clock starts ticking. Most rates are locked for 30 or 45 or 60 days. If the rates move up and you go past your expiration date, it can be financially painful. Get an email or something in writing from your mortgage officer reminding you of your rate and the expiration date.
It is time to board the plane and take your seat. There may be some turbulence during the flight like an unexpected detail on the appraisal of the property or your student loan is deferred LESS than a year from now instead of OVER 12 months from now so we have to count the payment. These are normal bobbles along the way that usually get straightened out before closing time. Again, you want to have chosen an experienced mortgage officer and you do not want to have chosen an inexperienced one like the airline captain in this story :
An airline pilot wrote that on this particular flight he had
hammered his ship into the runway really hard. The airline had a
policy which required the first officer to stand at the door while
the Passengers exited, smile, and give them a “Thanks for flying
our airline.” He said that, in light of his bad landing, he had a
hard time looking the passengers in the eye, thinking that
someone would have a smart comment. Finally everyone had
gotten off except for a little old lady walking with a cane. She
said, “Sir, do you mind if I ask you a question?” “Why, no,
Ma’am,” said the pilot. “What is it?” The little old lady said, “Did
we land, or were we shot down?”
The captain has turned on the fasten seats belts sign again. The underwriter has approved your loan and your loan file has been turned over to the closing department. Once the plane lands there are a number of important things need to do.
Like get a cashier’s check for the funds to close from the bank where the mortgage company verified your funds. Bring two forms of ID including your driver’s license. If you are purchasing or refinancing a primary residence, remember you spouse needs to sign a few documents even if he is not on the loan or title.
Like your exit from the plane, you leave the closing table into the arms of your new home. Ah, how sweet it is.
Here are some examples of sweet deals:
Our customers over the last couple of years who have purchased their homes with historic low home prices with historic low rates have been very happy when they left the closing table. When comparing rent vs. buy for people planning to stay in Memphis for 3 or more years—buying usually wins the contest by a mile. You can buy more house and amenities today with a smaller payment than renting a small apartment. The question is “How long do you plan to stay? One of my customers was showing me a comparison of the size of his 2 bedroom apartment with rent of $1,300/mo to buying a 3 bedroom 2 bath home for about $900/mo including taxes and insurance. That’s a $400 per month difference and now you own something.
One of the many refinance customers Susan and I have worked with was floored when he found out what he could accomplish on a simple refinance. Here is his situation:
They owed about $230 thousand on their mortgage and were paying $2,211/mo principal and interest per month. They had 25 years left to pay at this rate. But, they wanted to retire in a few years and at the same time put their teenage daughters through college. How were they going to do both?
We refinanced them to a 15 year loan. Getting rid of the last 10 years of the mortgage saved them the principal and interest payment of $2,211/mo x 120 month (which is 10 years). This alone saved them $265,320 dollars in payments. Then, to add icing to the cake, we lowered the rate significantly saving them about $664/mo. Over the next 15 years the savings on the payment will save them $119,676. Imagine your banker writing you a check for this cash—She totals up on her adding machine the $265,320 and then the $119,676 and makes the check out to you for $384,996. So what if you enjoy it a little at a time for the next 15 years? Its REAL MONEY! And you can get your children through college AND retire all at the same time. You can free up enough money to invest in other places or just enjoy life more. WHAT A DEAL!
Richard Scarbrough and Don and Holly Swogger and Jeremy Veldman and a few others have been speakers here at Talk Shoppe and co-host on the Real Estate Mortgage Shoppe program every Saturday from 9A to 10A CST on AM 600 WREC. They have taught us much about building a real estate portfolio using the power of teamwork to minimize risk and cost. The benefits of buying real estate at a profit range from tax deductions, to a positive monthly cash flow to a self-controlled retirement income plan. To hear some of the podcast you can catch them on my blog. www.MortgageLoansBlog.com Think of some of your life long dreams. Would it be easier living your dream if you didn’t have to work a job every day? Real estate has made that possible for a lot of people.
Are you a first –time homebuyer? It is so rewarding getting to work with first-time homebuyers. They are excited about getting their new home and they are scared too all at the same time. For most first time homebuyers Susan and I can get them down payment assistance money from a number of sources for properties in Tennessee, Arkansas and Mississippi –and a few other states too. We have gotten a number of our customers into homes with very little or nothing down. The amount of money needed from the borrower depends on the price of the house, the loan amount and loan type, the type of down payment assistance programs available and the amount the seller is willing to pay for the buyer’s closing costs and prepaid taxes and insurance.
For regular, more experienced homebuyers who may be self-employed or have other reasons why they do not want to spend their own funds for a down payment. Susan and I have worked out some great solutions for minimizing the money out of their pockets AND we have been able to lessen or eliminate the private mortgage insurance on loans. Since the private mortgage insurance does not help the borrower, a good loan officer will look for ways to help the borrower minimize the amount of pmi paid.