Texas Home Loan Blog: May 2007

It happened again this week.... Got an appraisal that came in $10,000 short. I wonder where this will lead?!?!?!

Now, to be fair.... there was some seller paid closing costs(just under 3%). BUT..... The contract was BELOW the list price of ~ $232,000!!!

Typical deal. Realtor writes up contract close to list price with seller paids.... All is good in approval land until the appraisal comes in really low. Then, yep, you guessed it, the listing agent calls me to tell me they have another appraiser who will be able to come in higher. They found some comps that were priced higher. Seems that the builder in town is putting out some killer incentives and driving down the existing sales market for the time being.... But they really feel like the property supports the higher price as it has upgrades itself.

But, it seems that this appraiser was willing to build an appraisal out of a deck of playing cards.... because these new comps are NEW CONSTRUCTION.

Now, lets not even get into the discussion about why you can't use new construction for an appraisal comp on existing sales. I am sure that Meg Stewart can discuss all the ins and outs of that. But for ANY Realtor, regardless of which side of the transaction you are on, to suggest that we 'need a new appraiser' is absolutely ridiculous.

I blogged about this a while back.... "Don't Be That Realtor" actually got all of 3 comments(one of them was my own comment). It seems that either this topic is a sore subject... or maybe it is just so darn ridiculous that no one thinks it is necessary to mention. But it seems that it IS worthy of mention.... Because it keeps happening!!!!

My first notice of this was when the appraiser left me a message. 30 minutes later I get a phone call from listing agent wanting to use new appraiser. My first phone call was to the referring Buyer's Agent and she was rolling on the floor laughing. She would NEVER agree to a new appraiser. Besides, the current appraiser is very well respected around town and unless there are some FSBO comps they missed the Listing Agent will have to explain himself to the sellers.

So, we all agreed to have the Seller Agent submit any new comps to the appraiser for reconsideration as they do have a right to challenge the appraisal. And it seems that the Seller Paid Closing Costs will have to be amended out of the contract as the buyer wants to proceed. But myself and the Buyer's Agent undoubtedly have counseled the borrower/buyer on the ramifications of paying full list price and have encouraged them to resist any thoughts of re-appraising the property so they can roll in the seller paids. Although it would be nice to keep that extra cash free for curtains and appliances, they do qualify with paying those expenses out of pocket.

How do YOU respond when the appraisal comes in low?

Or, for that matter.... how do you respond when an appraiser is willing to fabricate an appraisal out of thin air?

Tom Burris
DallasLoanGuy.com
Dallas, TX

Texas Home Loans

http://www.dallasloanguy.com/

Hip Shot Cartoons
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Other products and services include: Hip Shot greeting cards, and autographed Hip Shot cartoon prints. He also offers gag-writing services.

Edited to add: I thought I made my point that the listing agent has the right to challenge an appraisal. But I wanted to clarify that in this case since it has been commented on. The listing agent found an appraiser that would use New Construction for comps(you can't do that). And there are NO MORE comps in the area. Everyone knows this. The listing was over priced, plain and simple. The buyer in this case can pay the difference, so this will not drag out several days before getting re-listed. The point of my article is not that it is ridiculuos for a realtor to challenge an appraiser's value. What is ridiculuous is for a realtor to go appraiser shoping or suggest a new appraiser when everyone involved knows that the appraisal is sound. Read my other article..... the first words out of the mouth of the listing agent was: "We just need a new appraiser". <= this is the problem. And THAT realtor got busted by me(think that realtor gets any referrals from me or that client?). I have been told that I should stay out of the real estate side and focus on mortgages. That goes for those who think they know more than an appraiser. It is one thing to find a couple of comps the appraiser missed because of faulty MLS data or FSBO. It is another thing to suggest that that we can find an appriser to hit the number.

Regardless of what value the appraiser comes in with..... the lender CAN and WILL bust down the value if they feel that the appraisal was pushed.

When is it right for the client?

Many people took advantage of lower rate Adjustable Rate Mortgages (ARMs) several yrs ago and saved thousands in interest. But now that the fixed period is coming to an end, it is time to pay the piper. But what to do? Should the Homeowner refinance? Should they gamble on another ARM? Fixed rate?

First of all.... the homeowner needs to be honest with themselves. How long do they intend to be in the home? You see, there are real costs associated with doing a Home Loan. And although those costs can be rolled into either the mortgage or the rate.... people have to get paid. The loan officer doesn't work for free. The appraiser doesn't either. Documents need to be recorded at the courthouse, ect, ect, ect. And don't get caught up in the unscrupulous advertising of Zero Cost Home Loans. They don't exist!! There ARE COSTS. And those costs have to be paid. Now, there is usually no out of pocket expense as the fees can almost always be rolled into the loan if the homeowner has the equity. And the fees can be paid or reduced if the homeowner wishes.... by taking a higher interest rate(this is the wrong thing to do for most borrowers). But the costs are still there..... it either costs you fees which are rolled in or it costs you higher loan payments than you qualify for via the higher interest rate.

Now... SHOULD the homeowner refi? Maybe not. If the homeowner is expecting a job transfer or is ready to buy another home, they can almost always win by riding out the higher rates after the ARM adjusts. What time frame are we talking about? 6 months, 1 yr, 5 yrs? Well, at DallasLoanGuy.com we understand the importance of putting our clients into a loan that is right for them!! So, after getting pre-approved for a refinance, we can go back and make some 'breakeven' calculations to see if refinancing today makes sense. Giving the homeowner 'real numbers' that show how many months they would have to stay in the property before refinance would be a good idea. For some, the ARM adjustment is not significant enough to push the payment higher than today's fixed rates. Yet, others will be wise to refinance right away depending on future rates and how long they plan to stay.

DallasLoanGuy.com can peform a Free Mortgage Analysis for folks who would like answers to these and any other Texas Home Loan question.

Tom Burris
DallasLoanGuy.com
Dallas, TX

"A Home Loan For Every Texan"

I got a contract earlier this month. 100% financing on new construction. The preapproval was sent a while back and I had kind of forgotten about it so it was a nice surprise. And about an hour after the contract hits my fax machine, I get a courtesy call from a local realtor. After exchanging pleasantries we get down to discussing the deal. And as I have discussed in another blog..... 'The Question' came right away.

"Are we going to have any problems with the 100% financing?"

Now, I do understand that some times a 100% financing deal can be difficult to get closed. I also understand that as little as 5% down tends to raise the chances of the loan actually closing and funding by quite a bit. But what does this really mean? Does it mean that a 100% financing deal is a roll of the dice? Does it mean that we should judge our buyers/borrowers based on just ONE of very many aspects in a real estate transaction? No!!

Let's examine a simple little Truth In Lending. And it is that there is a profound difference between the borrower who NEEDS 100% financing an one who ELECTS 100% financing. You see... this particular borrower in my scenario qualified for 100% even without selling their other home. But, they wanted to hold on to as much money as possible until their other home does sell. And they weighed the options of the interest rate differences between 100% financing and the reduced rates with money down..... They ELECTED to get the 100% loan!! The deal closed.... and closed on time with out a hitch. Much to the amazement of my friendly neighborhood realtor. ;-)

So, before we judge our buyers/borrowers, let's look harder at the deal and try and understand it fully. A simple call to the loan officer and some smart questioning can determine whether the deal is solid or not. Brian Brady, America's Most Opinionated Mortgage Broker, has offered a blog on how to prequalify a buyer. Use this information as a foundation of knowledge when you work alongside your lending partners.

Tom Burris
DallasLoanGuy.com
Dallas, TX

Texas Home Loans

http://www.dallasloanguy.com/

You've heard the stories..... Loan terms change at the last minute. You only find out at the closing table. Did you know that you can get up and walk away from the table?!?!?! YES, you can!!!

Signs of Predatory Lending:

~ Pressured into borrowing more than you want.... consolidating bills unnecessarily.
~ Getting technically confusing answers to your questions.
~ Did your lender offer you more than one option?!?!
~ Do you get an uneasy feeling when the lender explains the rates and fees?
~ Being pressured into a 'special' loan program before the opportunity goes away.

Remember, you have options..... MANY options. Get a competitive quote. Don't stop asking questions until you FULLY understand the answers. And never sign a document that wasn't filled out completely.

Above are some signs that you may be falling victim to a Predatory Lender. Go with your gut feeling and scramble out of there if you are uncomfortable. Not only do you have options... but you also have resources. If you don't fully understand some forms or ates andd fees.... seek help. Ask your CPA, Accountant, Realtor, Friend/Co-worker. But don't get suckered into a loan that you do not fully understand.

Learn more about Predatory Lending here => http://www.dontborrowtrouble.com/

You are quite possibly making decisions about the single most important investment you will make in your lifetime. Buyer Beware!!!!

Tom Burris
DallasLoanGuy.com
Dallas, TX

Texas Home Loans

 Well, the KEYS..... of course!!!

Call me the emotional support person of the Real Estate Transaction. I get to babysit the client after they put in a contract on a property.... and try as I might, I still have to calm the fears and jitters of those that are nervous about final approval. Once the client has an accepted offer.... lots of things are happening in their minds. Most First Time Homebuyers are really, really nervous about the final approval. Even the veteran of home purchases can get a little nervous. Maybe they experienced a counter-offer from the bank and the rate changed in the past. Maybe they have been denied credit in the past. Whatever event is driving their emotions, the borrower can be a bundle of nerves, even when it doesn't show.

My #1 advice to my clients is to not get emotionally attached until they have the keys in hand. Because until the loan funds, the property is just a house..... A part of a business transaction..... The most important investment in most people's portfolio, yes, but it isn't their home.... not just yet. It isn't time to get emotionally attached to a property until you get those keys.

Now, this advice doesn't just serve as a nerve calming technique. Because, I still have to worry about the borrower who goes nuts and buys all kinds of appliances and curtains and even backyard playsets for the kids. LOL. Even AFTER I have told them to NOT acquire any new debt because a lot of transactions are contingent upon the borrower NOT taking on any new debt since the loan application was taken!!!!

What makes a house a home? Well, it really is the KEYS....!!

More opinions on=>  What Makes A House A Home?

Tom Burris
DallasLoanGuy.com
Dallas, TX

Texas Home Loans

http://www.dallasloanguy.com/

........ And 'go to jail'

I know all the tricks. I hear about the techniques. I know that people can read the "Fair Credit Reporting Act" or "Fair Debt Collections Practices Act" and use that info to remove some bad stuff from their credit reports. I have even seen folks get added to mommy's credit card as an "Authorized User" to boost their credit depth, and FICO scores as a result.

But, have you heard the latest craze? It's called "Piggybacking". For a fee, an internet site will add you to a good credit card with a high limit, low balance and perfect payment history revolving credit account. Net result? 50+ FICO point boost!!!

Some people call this practice, at best, deceptive. Others inerpret this as flat out "Mortgage Fraud". What say you... Ed Rybczynski? What do you think a loan officer should do when they find out about this?

My answer? "Deny the loan". Why? Well, I blogged about it here => http://activerain.com/blogsview/22154/The-dangers-of-Credit ..... any questions?

While I haven't seen or heard of any law against this practice... I DO BELIEVE that the current laws can be used to interpret Piggybacking as fraudulent behavior.

Food for thought.... and reason to be very skeptical of any credit repair companies.

Tom Burris
DallasLoanGuy.com
Dallas, TX
Texas Home Loans

"A Home Loan for Every Texan"

http://www.dallasloanguy.com/

I'm still doing 100% financing in the Great State of Texas!!! 

I got a call from a realtor on a deal we were working on together. She asked all of the usual questions about what I have done and what she could get for me to smooth this deal. Then came 'THE question".

"Is there going to be any problems with the "100% Financing"? <= I get that one a LOT!!!   LOL

What a lot of people do not understand is that the people who 'NEED' 100% financing are more affected by the recent tightening of guidelines than people who 'ELECT' 100% financing. This borrower could have put down 5-10% if they chose, but wanted to reserve their cash until their other house sold.

I still do more 100% financing for Texas Purchase Loans than any other deal. And there is nothing 'dicey' about them. Full approval requires an underwriter's review of income and assets, but the conditional approval is just minutes away with Automated Underwriting.

Still nervous about those 100% financing deals on your listings? Then learn what to ask.

Brian Brady, America's Most Opinionated Mortgage Broker wrote about this. Even did a podcast about Realtors Prequalifying Buyers.

1. What type of loan is this? Conforming? Alt-A? Subprime?
2. What conditions need to be met in order for the borrower to get this loan?
3. Are the debt ratios well within lender's guidelines?
4. Has income been calculated?

I am sure there are lots more questions.... I bet 'ole Brian can think of some.... because I need to publish this and get back to work.

Tom Burris
DallasLoanGuy.com
Dallas, TX
Texas Home Loans

"A Home Loan for Every Texan"

http://www.dallasloanguy.com/

When Banks Compete, You Lose?!?!?!

Huh? How can that be? Didn't Lending Tree tell me differently? Yes they did!! And they are kind of right, banks competing for your business does help you obtain a lower rate. Borrowers should shop around, getting a quote from both a bank and a mortgage banker. Compare what you have been offered and make an informed decision....But if you use one of the 4 or 5 companies that Lending Tree ‘sells your information to' then you have to cover their overhead that came from Lending Tree. So, now that you are getting this info, you can make an informed decision about exactly ‘how' to shop around and ‘how' to engage a lender/broker.

First, lets look at the facts, it takes a considerably amount of money for a broker/lender to sign up with Lending Tree(or the many other lead generation websites). Thousands of dollars!! $10,000 is a number that I have heard from people who have used them to get leads. Then on top of that there is a fee per lead or a fee after the loan funds which can be in the hundreds of dollars. Who pays that? Do you think the lender/broker pays all of that money just so they can offer you the same rates as everyone else? Or do you think they have figured in the costs associated with buying your information when they offer rates and fees? I bet it is the latter....

Next, let's consider why people ‘buy leads' from Lending Tree. Do you think maybe it has something to do with the fact that those loan officers aren't getting enough referrals from their friends, families and networking partners?  It sure does!! Actually, these loan officers that buy mortgage leads are typically new loan officers who haven't built up a network of influence for referrals. Basically, they buy leads because no one is sending business to them!! Do you want to trust your most important financial transaction to rookie loan officer? I wouldn't. Now, while there are some very good loan officers who use ‘purchased leads' as a way to diversify.... I believe that most consumers can do better for themselves by getting referred to good loan officers and doing their own comparison shopping without letting a lead generation website add on some costs.

Have you figured it out yet? Lending Tree spends millions of dollars on marketing/advertising to get the phone ringing. They cover those expenses by selling your information to a bunch of ‘wet behind the ears' loan officer so these rookies can handle the most important financial transaction that most people will ever make!!

Lets take a pause. Let that last statement sink in.......... kind of scary, huh?!?!

Lending Tree is right, when banks compete you win but they left out the part about how thousands of professional loan officers in the business can offer better terms and rates without the added expenses from the lead generation companies.

So, how do we find a loan officer to handle this most important transaction? How do we know who to trust? As you may have guessed, the DallasLoanGuy has some advice on that topic.

First, I always suggest to folks that they ask friends and family or maybe a trusted co-worker who they closed their home loan with and how they felt about the whole transaction. Next, try asking someone like your CPA or Financial Advisor. These folks know financing. They may even have a relationship with a trusted lender. Realtors are also a good source. They refer business to loan officers several times per month. And with many transactions under their belts, they certainly know who is competent and who is not. Now, that you have been referred.... What's next?

Mortgage Bank or Mortgage Broker? Which is right for you...?

Most borrowers these days have seen better rates/fees through brokers. Direct lenders can and do offer competitive deals, but usually those are for the ‘vanilla borrower' who has a bag down payment and no job gaps or other issues that make their deal unique. But how do you really know for sure? Get a quote from one of each. Compare the ‘Good Faith Estimate'(GFE) for rates and fees. Pay particular to the fees numbered in the 800's. The other fees are charged by third parties and the lender does not control these costs. Don't get suckered into a loan with low third party fees to only get surprised later.

Need help? Your realtor/CPA/financial advisor can help you compare the GFE from each loan officer to determine which is the right deal for you.

Remember, this could quite possibly be the most important investment in your portfolio. Do your homework and don't be afraid to ask questions.

DallasLoanGuy.com does Texas Home Loans statewide. I am a loan officer for a Mortgage Broker in North Dallas.
Please consider my bias when you read my article. LOL

Tom Burris
DallasLoanGuy.com
Dallas, TX

"A Home Loan for Every Texan"

http://www.dallasloanguy.com/

Thanks for the comments everyone.

Don't forget to rate this blog.....

Recently, I wrote a blog about the upcoming changes in Fannie Mae Underwriting Guidelines.

So, today, I get a random call from one of my competitors.... seems that they haven't heard of the changes. And after stumbling upon my prominently Google Juiced blogs... they couldn't resist calling me. They had gone all over their underwriting dept and secondary marketing dept to ask about these program changes.... yet, they couldn't verify my data. Curiosity got to them and they called looking for a copy of the news release I had referenced. I was so flattered that I spilled my guts..... gave them a .pdf of the news release and even chatted for a while about the ramifications of this new set of underwriting guidelines. I actually enjoyed my chat.

Now, I am really tempted to tell you about this 'Prime' lender who claims to be experts in 'Lending' and how they must be a little behind the times.... but I just cannot bring myself to do it. And while it is amazing that this high profile lender didn't get the news about Fannie Mae's new guidelines..... It is even MORE amazing that they learned about these changes from their competitor's ActiveRain blog.

Just thought I would share this 'wierd' experience.

DallasLoanGuy.com originates Texas Home Loans and specializes in running EVERY file through Automated Underwriting because I truly believe that EVERY loan file deserves the efforts of 'no stone goes unturned' in looking for the best deal.

Tom Burris
DallasLoanGuy.com

And WTH? "Google" isn't in our spell checker?