real estate blog :: SoundBiteBlog.com

Applying for a mortgage is stressfull under the best of circumstances. Even experienced borrowers feel a little twinge of anxiety at the thought of taking on hundreds of thousands of dollars worth of debt. There are things you can do to reduce the stress. Lists such as this one can be found on all mortgage websites, yet no real estate related site is complete without one. So here’s SoundBiteBlog’s list of Do’s and Don’ts.

The mortgage approval process is forgiving of many things, but these items will throw a serious wrench in the works. The following is a list of things that I see most often as a Loan Officer, that derail the process of getting approved for a mortgage loan.

1. Don’t quit your job.
2. Don’t pay your bills late.
3. Don’t procrastinate getting stuff to the loan officer.
4. Don’t lie to your loan officer.
5. Don’t withhold information from the Loan Officer.
6. Tell your loan officer in advance if you plan on making a large purchase.
7. Don’t open any new credit card accounts.
8. Do take your time. Make sure you understand everything that is happening.
9. Do overestimate expenses and underestimate income. Be conservative.
10. Do have fun!

On occasion, you might have to break one of the rules in this list. Life happens and there is just no way to make it a perfect one. When you simply must break one of the rules (with the exceptions of #4 and #5!), let your Loan Officer know about it right away. Let him or her know in advance it at all possible. There are ways to compensate for almost any sitution that can arise during the mortgage loan approval process. But it is much easier to anticipate a problem, than it is to pick up pieces after the fact.

Posted in Buyers, Credit Bites, Miscellaneous, Mortgage Bites | 8 Comments »

Tags: bremerton real estate, kitsap real estate blog, port orchard real estate, poulsbo real estate, real estate blog, seattle real estate blog, silverdale real estate

There is a very questionable practice on the increase in WA Real Estate communities. Potential buyers of Condominiums, Manufactured Homes, Modular Homes and Stick-Built Homes are finding themselves in an uncomfortable position created by the seller. The discomfort occurs when the buyer finds that they will be penalized if they try to use a Realtor® or Lender of their own choice. This practice is called steering.

Unfortunately, at the moment, gray areas in the law and RESPA (Real Estate Settlement Procedures Act) are being abused by builders and developers intent on improving their profit at any cost.

Steering is the practice of guiding a potential buyer towards an affiliated or related Lender, Title Company or Insurance Company. Steering reduces a buyers access to fair representation. Many home buyers have an existing relationship with a Realtor® they trust, or a Loan Officer they trust. Yet, when the buyers attempts to pruchase the property of their dreams, they are confronted with the information that, if the do not use the builder’s chosen Real Estate Company or Lender, they may be penalized in the form of Higher Earnest Money requirements and additional pre-qualification demands.

An example of the deceptive way this begins.

If you are a buyer interested in one of the new Condominium projects in Downtown Bremerton WA, you will be forced to fill out a “Registration Form” before you can view any of the units. While there is nothing wrong with this in itself, what happens later is, at the very least, questionable. Should you decide that you would like to buy one of these condos, you will find that, in the Condominum’s view, you already agreed to use the Listing Agent as your representative! Not only that, if you insist on using your own Agent, your agent will be given a reduced commission. The last person I want representing me when I purchase property, is the Listing Agent. The Listing Agent is legally required to protect the seller’s interest. In my mind, there is no way an Agent can represent my best interests at the same time that Agent is protecting the seller.

An example of the pressure you can expect.

If you are a buyer looking at property in Port Orchard WA, and you decide to pursue the purchase of a home in one of the new develpments, you will have to agree to disclose all of your personal financial information to a Lender that the developer chooses. In other words, even if you walk into the office with a Pre-Approval Letter and Proof of Sufficient Funds to Close, this developer will insist that you cannot make an offer on the home unless you get pre-qualified by his Lender!

An example of the financial penalties to watch for.

If you are a buyer interested in one of King County’s new condo projects, you can expect to be informed that if you insist on using your own Lender, your Earnest Money Deposit will be increased by $5000! No, you didn’t mis-read that. This is currently happening to a member of my own family. This buyer is prepared to put up a normal Earnest Money deposit. She has $2500 set aside for just that purpose. That’s just not good enough for this condo development, unless the buyer uses the seller’s Lender. If the buyer is determined to use her own choice of Lenders, she must come up with $7500! Does that sound like a financial penalty to you? It did to this buyer. She was incensed and furious. The sellers response? “Other buyers haven’t had a problem with it”. This form of coersion is happening with increasing frequency at the moment. I think a more accurate response from the seller would be “We have forced others to do it this way, and we’ll force you too!”

These are not fictitious examples. Each of these situations has happened this year. They happened right here in Washington State. Your Realtor® did not gain your trust by accident. Your Realtor® gained your trust by proving to you he or she is worthy of it. The seller has not proven that you can trust them. On the contrary, didn’t the seller, by practicing these business techniques prove beyond a doubt, that you had better be very careful around them?

As a buyer, you have a right to representation of your choosing! You may have to fight for this right. Your Trusted Realtor® and Loan Officer are the people you can count on. Don’t let yourself be manipulated this way. Eventually, the government will put a stop to these practices. For now, you must protect yourself. And if a seller tries to tell you that these are acceptable practices, you may want to ask them why there is a current lawsuit in progress.

Posted in Bite Me Blogs, Buyers, Miscellaneous, Mortgage Bites, Real Estate Bites | 1 Comment »

Tags: bremerton real estate, kitsap real estate blog, port orchard real estate, poulsbo real estate, real estate blog, seattle real estate blog, silverdale real estate

Did you know that many mortgage lenders view Consumer Credit Counseling as worse than bankruptcy? It’s true. Getting a mortgage loan approval for a client who has a bankruptcy is easier than getting an approval for a client who has been in a Consumer Credit Counseling program.

The revolving debt nightmare is faced by many Americans everyday. An entire industry has developed because of it. As with any industry, there are some good companies, many mediocre companies and too many very poor companies. In this industry, the mediocre and poor companies can make a bad situation significantly worse. The impact of this mediocrity shows up on your credit report. While you believe all your credit problems are under control, the reality is often quite different.

THE PITCH – When you see commercials for consumer credit counseling, the sales pitch is amazing.  “Consolidate your bills into one low monthly payment!”  “Never worry that this credit card bill can’t be paid or that other payment will be late.”  They promise that you will make one affordable payment to the credit counseling service, and they will divert the funds to all of your creditors as necessary to keep everyone satisfied.  You will have no more bill collectors calling you daily, hounding you for payment.  Is it to good to be true? Should you consider other alternatives? What are the alternatives?

WHAT HAPPENS – The way a credit counseling service consolidates your bills can actually be more damaging than helpful.  Initially, the service will have you collect information on all of the bills you wish to consolidate. You turn this information over to them.  They will request information on your income and help come up with a monthly payment that you can afford.  They will then contact your creditors, inform them of the consolidation, and set up slow payments.  This will get the bill collectors off your back and usually stop compounding of interest on accounts, but it can also affect your credit.  Also, rolled into this payment is a fee for the service that the consumer credit counseling service keeps for itself.

REALITY CHECK ON YOUR CREDIT – Understand that, if you allow the counseling service to “slow pay” your creditors, your credit score will be reduced, and your credit report will be severely tarnished.  While you will live more comfortably, knowing that all creditors are receiving payments, no one is hounding you for money, and you can afford your monthly payment, your creditors are reporting you as either a “charge off” or a “slow pay” to the credit bureaus. A charge off is the worst rating you can have on a credit line. Slow pays show up as current activity while you are in credit counseling. This information is rarely disclosed by Consumer Credit Counselors.

This article may be disturbing if you have been considering Consumer Credit Counseling. The point of the article is not to cause you concern, it is simply to make sure you are informed. There are other solutions to the debt trap. Consumer Credit Counseling is just one of the possible solutions. It is by far, in my opinion, the most heavily adveritsed solution.

You can find alternative solutions on this site as the site develops. These alternatives will all be in the Credit category that you can jump to from the sidebar.

Posted in Credit Bites, Miscellaneous | 6 Comments »

Tags: bremerton real estate, kitsap real estate blog, port orchard real estate, poulsbo real estate, real estate blog, seattle real estate blog, silverdale real estate

An adjustable rate mortgage (A.R.M.) is one of the most popular options available to both home buyers and homeowners considering a refinance. Many borrowers do not fully understand the concept of an A.R.M. and as a result may be somewhat hesitant to pursue this type of a mortgage. There are some situations in which an A.R.M. or a hybrid mortgage can be the best mortgage solution for a homeowner who is in the process of refinancing. This article will focus on explaining the concept of an A.R.M., explaining situations where it is the best solution, debunking the most popular misconception regarding A.R.M.s and explaining how those with bad credit can benefit from an A.R.M. At the conclusion of this article you should have a better understanding of A.R.M.s and may want to investigate this option further.

What is an A.R.M.?

A.R.M. is an acronym for an adjustable rate mortgage. This means the interest rate associated with the mortgage is not fixed. Instead it is tied to an index such as the prime index and may rise and drop as the associated index rises and drops. The fact that the interest rate is variable scares many borrowers away from considering this option further. However, there are certain safety measures in place which protect the homeowner from rapid increases.

The Biggest A.R.M. Myth

The variability of the interest rate in an A.R.M. makes many homeowners feel apprehensive. Many borrowers envision interest rates going through the roof during their loan term, and resulting in their monthly payments skyrocketing. Fortunately for these borrowers, rapidly increasing interest rates may not have a significant effect on A.R.M. s.

This is because  A.R.M. s have a built in clause which prevents the interest rate from rising more than a certain amount during a specific time period. Although the national interest rate may rise significantly, the A.R.M. is strictly limited to a predetermined maximum. This maximum limit is determined before the borrower signs a single document.

When is an A.R.M. Desirable?

One of the most popular types of  adjustable rate mortgage is the hybrid mortgage. Hybrid mortgages typically have one component which is fixed and one component which is adjustable. These types of mortgages may have a fixed rate for a set number of years. The don’t truly begin to vary until after this initial period. Alternately, a hybrid loan may be variable for a number of years and then become fixed after this initial period.

The adjustable rate mortgage loan which begins with a fixed rate is often desirable because the introductory rate is typically lower than the rate offered on traditional fixed rate mortgage loans for homeowners with comparable credit ratings. Homeowners may particularly like this option if they are not planning to be in the home for an extended period of time.

A.R.M. s for Those with Bad Credit

A.R.M. s can also be very helpful for assisting those with bad credit in purchasing a home for the first time. There are a variety of loan options available today which makes it possible for even homeowners with poor credit to obtain a home loan. However, those with bad credit are usually offered these loans with unfavorably higher interest rates. Additionally, lenders may only be able to offer those with poor credit an A.R.M. Lenders take significantly greater risk when they lend money to a homeowner with bad credit. As a result the lenders often compensate for this increased risk by only offering the homeowner an adjustable rate as opposed to a fixed rate mortgage loan.

Knowledge is the key to deciding what type of mortgage loan is best for your situation. The best advice? Ask questions until you thoroughly understand the terms of any mortgage. Make sure you have no questions at all before you sign any paperwork.

Posted in Buyers, Miscellaneous, Mortgage Bites | 1 Comment »

Tags: adjustable rate mortgage, arm mortgage, bremerton real estate, kitsap real estate blog, port orchard real estate, poulsbo real estate, real estate blog, seattle real estate blog, silverdale real estate

I believe most people are basically honest. Sure, we cut corners at times. We deduct items on our tax returns that may not be quite legitimate. We call in sick to work when we just want a day off without having to explain the true reason. Most people though, would never think of robbing a friend, or lying to their children.

But, there is one area when it comes to home loans where I see folks take a very casual approach to something that can land them in some very hot water.

Pull your chair in closer to the desk and give me five minutes to explain what I mean. It will be worth your time.

Liar’s Loans?

One of the first industry slang terms I heard as a new Loan Officer was ‘Liars Loans’. Of course, I didn’t want to appear ignorant so when time allowed, I turned to my trusty computer to tell me what the term meant. As you have guessed, it’s the derogatory phrase for any Stated Loan product. The attitude behind the term still fascinates me. Does it mean that mortgage professionals have become so used to the abuse of a legitimate loan product that they have become cynical? Yet, the abuse could not have been perpetrated without the loan officer’s involvement, could it? So do they feel cynical towards the clients, or themselves?

What makes a Stated Income Loan legitimate?

The simplest example of a legitimate Stated Income Loan pertains to restaurant employees. Often, the majority of their income is derived from tips. Many restaurants have their servers claim the IRS minimum of 8% of the day’s receipts. The employee has no control over this unless they are willing to change employers. In addition, tips are often paid in cash. Cash goes into the purse or wallet at shift’s end. On payday, the paycheck is deposited in the bank. Items like gasoline and groceries are paid for with the cash. Items like rent are paid from the bank account. There is nothing wrong with this system. It works well for thousands of American waiters and waitresses.

The problem becomes obvious when they apply for a mortgage loan. There is no way to prove their true income! Their employer didn’t provide the IRS with an accurate accounting, so they can’t produce an accurate W2. The tips were never deposited in a bank so bank statements won’t work. And the tips were paid in cash so no cancelled checks are available. These borrowers legitimately earn more than they can prove. Hence, the need for a non-standard type of loan.

When is it mortgage fraud?

The answer is very simple. There is no such thing as a white lie when you are applying for a mortgage! A Stated Income Loan cannot be used simply because you don’t make enough to qualify for the mortgage you want to get. There are other loan programs available for those situations like No Ratio Loans or No Doc Loans.

What I see happening all to often is this. A client meets a Loan Officer and brings along all the requested paperwork. The client arrives with bank statements, tax returns and paystubs. The Loan Officer proceeds to enter data into a computer program prior to printing up paperwork and finds that the client’s income is too low to fit the loan guidelines. One of two things happens at this point. Either the client asks, “Well can’t we just get a Stated Income Loan?” or worse, the Loan Officer says “This won’t work, we’ll have to go Stated Income”. The client might have a defense, if they don’t understand what these loans are for. The Loan Officer has no defense.

In either case, mortgage fraud is about to happen if both parties proceed on with a Stated Income Loan. You cannot just fabricate an income!

If this is suggested to you as a borrower, don’t go along with it just because the person across the desk seems sure of themselves. If you can’t say “I told the truth, the whole truth and nothing but the truth”, something is very wrong. Your money, your home and your future are in peril.

Stated Income Loans were designed to solve a very specific problem. They were never intended to solve all problems. As a borrower, you have a right to expect a mortgage professional who can lead you through the maze of available loan programs with accurate knowledge. But remember, ignorance of the law is a very weak defense. Most courts take a dim view of a defendant who’s only defense is “Gosh, I didn’t realize it’s wrong to lie!”.

Posted in Buyers, Miscellaneous, Mortgage Bites | 1 Comment »

Tags: bremerton real estate, kitsap real estate blog, mortgage fraud, port orchard real estate, poulsbo real estate, real estate blog, seattle real estate blog, silverdale real estate, state income