First Stop 4 Home Loans

Is this house-hunting thing making you feel a little unraveled?  With all the homes on the market, people telling you to “buy now” and the overwhelming amounts of information about programs — who can blame you for not keeping it together!  Okay, so maybe do have this process all figured out.  I commend you for doing some homework and getting educated.

Let’s start with what you need to do BEFORE you start househunting — get pre-approved with a reputable and reliable lender.  A pre-approval means you’ve completed an application with a lender, had credit pulled, provided supporting documentation and your loan has been through an automated underwriting system and/or been seen by an underwriter.  If these things DON’T happen, you’re NOT pre-approved.  There are many things that the lender looks at when determining your qualifications. 

In order to determine the accuracy of your application, we must gather supporting documentation — hence, having you “pull it together”.  The list applies to anyone on the loan application and not all items on this list will pertain to everyone. 

-most recent TWO paystubs

-last TWO years W2s*

-last TWO years federal taxes, all schedules*

-most recent month bank statement, showing beginning and ending balance, all pages

-most recent quarterly statement for any accounts not monthly, i.e. retirement, stocks or bonds, all pages

-any court papers such as decrees or bankruptcy documentation

*If you intend on using a first time buyer program, you will need the last THREE years W2s and federal taxes.  This proves to us and the first time buyer powers-that-be  that you have not owned a home in the last 3 years which is the criteria to be considered a first time buyer.

I know what you’re thinking … along the way I may ask for more, including your first born, right?  People have stories and some are quite good.  My goal is to get everything I need upfront so there aren’t last minute dashes to find other paperwork.  Also, if other things enter your situation for buying, we need to address them with … more paperwork, i.e. a gift from family or document a large deposit into your account.  If you want to avoid some of the pitfalls that can cause havoc in your loan process, check out this great article written by my manager.  She makes a very boring thing, like what not to do while in the process, very funny.

Moral of this story — pull it together to support your application information.  If other documentation is requested, please provide that in a timely manner.  The sooner we have your paperwork, the better.  And before I forget, I am NOT perfect.  I make mistakes and sometimes miss things.  So forgive me if I ask for something you gave/emailed me.  I have so many conversations in a day and receive my share of emails.  I try to keep it all straight, but sometimes, it’s just better to ask again.  No double guessing.   The past few months have been fun as I am working with three ladies that all have the same first name!  Mama Mia!  So, forgive me now.  And most importantly, just know that you WILL be given the best service and communication around.

We just completed another successful first time buyer seminar this past Thursday night.  That was quite the night of storms — thought we might be talking to a small, non-existent audience, but we got lucky and people “weathered” the storm!  I hope you all did too and thanks to those of you who did make the trek!

Every month, on the third Thursday, we perform an exciting light show with music and dance — okay, not really.  But we do present an evening of information so you can learn what you need to know before you get out and look at homes.  Please join us from 6:30-8 pm at the Cornerstone Mortgage office located in Burnsville at 436 Gateway Blvd. 

Steve Howe from Re/Max, and I, will walk you through the homebuying process starting with the first step … pre-approval.  That’s the step of getting your financing set up so you know you can actually purchase a home if you find one.  This is CRUCIAL in today’s market since, as a loan officer, I am seeing changes constantly on what investors are requiring to get a loan.  Come learn what the new changes are and come find out about the special programs you may be eligible for to help you afford your new home.

Steve will explain the home purchasing process and what you can expect from a Realtor.  He makes this process simple and easy to understand; whereas I just confuse you!  Just kidding.  Making sure you’re still reading!  He specializes in in helping first time buyers which is important since your needs are vastly different than a current homeowner.

Anyway, we’d love to have you at the seminar, whether it’s in July or our future classes.  And speaking of classes — this is NOT the Homestretch class that is required to qualify for the first time buyer programs.  You can see this as the Cliff Notes, but with additional information on the special programs that Homestretch doesn’t delve into.

Please RSVP with Cheryl to let us know how many spaces to save.  Can’t wait to meet you!  Oh and one pre-requisite … come with questions!

Every third Thursday of the month we are happy to offer you a free seminar* to learn more about the First Time Homebuyer Process.  Join us on Thursday, the 17th, 6:30-7:30 pm at the Cornerstone Mortgage office located at 436 Gateway Blvd in Burnsville.

From the starting point of getting pre-approved and all that entails to going to closing and signing a bunch of papers to officially dub you a First Time Home OWNER!  We are here to educate, not sell you something.  Steve Howe, Realtor with the Minnesota Real Estate Team, and I will also talk about purchase agreements, the many down payment assistance programs and answer ANY questions you have. Ultimately, we hope you will leave the seminar with a greater understanding of buying a home.

If you’d like to attend, please call Cheryl (952-808-0042) or email her to get your name on the list.  Bring any questions you have so we can address those throughout the seminar or at the end.  We look forward to seeing you this week!

*This is NOT Homestretch.  Go to www.HOCMN.org to register for this 8-hour class.

Believe me; I ask myself this daily.  You hear that you need 20% down to get financing or sterling credit.  And though these are GREAT attributes, they aren’t a guarantee that you will get a mortgage OR that you won’t have to go through a few hurdles.  It used to be so easy to get financing.  It wasn’t that we just handed money out to anyone, though there were people who did and look where that got us.  It’s not just them; it’s the lenders that accepted high risk buyers and did deals that should have never been done.  This is neither here nor there.  Right now, we need to focus on what the rules or guidelines are NOW, not what they used to be.  Those days are gone my friends.

Let’s start with the simplest issue I see today and the piece that has had the most changes — CREDIT.  Let’s talk about credit scores first.  Way back when, credit scores mattered; but they weren’t as much of a guage as they are now.  What I mean by that is we were able to create credit for people if they had lower scores or if they had NO scores.  It may have been acceptable to help someone who had lower scores, let’s say 560, if we could show clean credit on alternative sources such as insurance, utilities, rent, cell bills, etc — this is how we “created” credit.  And, if there was a clean credit history in the last 12 months, this deal could have probably worked.  Now, the line is drawn.  For the most part, you will need scores AND the middle of the 3 scores (most of us have a score from each bureau – Experian, Equifax and TransUnion) must be at least 620 or higher.  This is NOW.  I am guessing in the next few months, or sooner, most investors will be at 640, as some have already taken that leap.

Still referring to credit, you now need at least THREE tradelines (an item of credit on your credit report) AND they each must have 12 months’ history.  Plus, these lines need to be current.  Let’s say you haven’t done anything with your credit for a few years because you worked abroad.  You may have great credit scores because, before you left, you did a good job managing your credit.  Unfortunately, most, if not all, of your tradelines will be older in terms of the last active date.  This is one of the things that’s catching people and making it so they can’t get a loan.  It’s a shame really because you can tell they’re good at making payments and are responsible.  Thing is, the score isn’t a true representation of their credit since it doesn’t have current information reporting.  There is one exception to this rule, as of now.  The 3 main first time buyer programs, CityLiving, Dakota County Bond and MN Housing, in conjunction with an FHA loan, will allow less than 3 tradelines and less than the 12 month history.  If there is a score, it must still be over 620, however.  With the first time programs, we would work on creating credit and we WOULD need to find 3 items of credit to have added to our credit report — again, car insurance, utilities, layaway plans, healthclub memberships, utilities, etc., are all items we can use to create your history.  And by the way, this will NOT help your score as we do this on our credit report we pulled.  This does not get reported to the credit bureaus.

Another fun credit change that is COMING, and fast — Fannie Mae is requiring that lenders verify the borrower’s credit prior to closing.  It’s under the new Loan Quality Initiative.   Some Minnesota lenders have already put this in motion.  The interpretation of pulling credit prior to closing is within 48 hours of closing.  So, in my article, “Things Not to Do”, you learned that while in the loan process, don’t open new accounts or close accounts.  Well, this just became CRUCIAL to follow.  If you open a new account, just have a creditor check your credit for a possible new account, increase balances on what you owe, or anything … your approved, ready-to-go-to-closing loan could be un-approved.  For instance, the credit pull or increase in balances, could have dropped your score under what your approval requires.  Or, the new debt now makes it so your ratios are too high for qualifying.  If you want to deal with stress or the possibility of not closing on a home, then feel free to mess with your credit.  My advice is far different and will be quite bold.  If you want your loan to stay approved, DO NOT, under any circumstances, open new credit, consider opening new credit so your credit has to be pulled by another lender or increase your balances on your current debts.  This could make or break whether you close on your home or not.  There is no first time buyer exception to this either, so my advice stands in all circumstances — Just Don’t!

What else is making it hard to get financing?  How about qualifying ratios?  This is how a lender determines what you qualify for.  We use your gross monthly income and run some calculations.  In most cases, the “debt ratio” is the most common one for us to look at.  We want to make sure your new house payment PLUS all other obligations, does not exceed the program guidelines.  Essentially, for most loans, that means not spending more than 45% of your income toward the new housepayment and your other debts.  PMI companies (private mortgage insurance) have put their guidelines on this too.  Many PMI companies require a ratio of 41% or less.  Even though you may have an approval through an automated underwriting system, the PMI company could trump it and disapprove your loan due to excessive ratios.  I can remember the “days” when we saw ratios at 65%.  Now, was that a good underwriting decision?  Maybe, maybe not.  For an underwriter to make this call, the borrower must have excessive compensating factors, such as plenty of money left over after closing, good credit scores as well as good job stability.

This is a small sampling of the changes in the loan industry.  They are a few of the guideline changes that have impacted much of the business I do.  So, in answer to the blog’s title question … yes, many people can get loans.  No, you don’t need 20% down and sterling credit.  Fortunately, FHA is a great loan requiring only 3.5% down and more leniency with credit.  FHA also allows us to go a little higher in ratios and doesn’t limit us to the 45%.  I am not saying we can go over that just willy nilly.  That’s not the case.  We can go a little higher if, and only if, there are good compensating factors.  And I bet you didn’t know this (well, unless you read the blog), City Living and Dakota Bond programs ONLY allow FHA loans or VA, no conventional.  And don’t forget FHA and their guidelines in regards to disputed accounts.  This just adds another item on the checklist of things we have to watch for in order to make sure you can get approved for a loan.

Enough already, huh?  That’s all I have to say.  There are just too many variables that if it’s something YOU can control, you should.  You may want to check out our office blog titled Pain in the Assets – this goes over another important piece to your loan puzzle.  With all that can go wrong in the loan process now due to guideline changes, title issues or bank issues, we need all the humor we can get, so hopefully you like our article.  I’d love to do your loan right the first time by educating you BEFORE things become an issue.

Huh? What dispute? The one I am having with my roommate or with my parents about buying a home? You may have many disputes going on in your life. The one I am referring to is a dispute you started yesterday or 10 years ago with a creditor.

If you’ve been one to check your credit or maybe have had some issues in the past, you may have seen erroneous “tradelines” on your credit report.  A tradeline is an item of credit — car loan, credit card, mortgage, student loan,etc.  Now, if I were you I would be all over that like a bee to honey.  I’d contact the creditor and “dispute” the inaccurate information.  Wouldn’t you?  The whole goal is to get the right things reporting on your report, not items that don’t reflect your score and ability to pay on time.  True.  BUT one little catch.  Though you’re trying to BETTER your credit situation, you are actually making it harder to get financing.

Seriously?  Helping your credit/disputing an account = tough time getting a loan.  Tough to follow that logic,huh?  FHA is the most popular loan right now and the most lenient when it comes to credit scoring, as well as only requiring 3.5% down.  However, they have this little guideline that has been creating BIG issues for folks getting home loans.  The deal is, if you have disputed an account on your report, regardless of what the dispute consists of, your loan guidelines just got stricter.  Yes, your loan qualifications got tighter because you were trying to help your score improve.  Does that make sense?  Nope, not to me, but lately, many of the “rules” and changes have caused me to scratch my head quite often.

So, what changes with your underwriting guidelines?  For one, your loan must be manually underwritten.  90% of my loans are run through and approved through AUS (automated underwriting system).  Information about you in … decision on a loan for you out.  Slick and easy.  Your file is still processed, verified and still gets in front of an underwriter for the final stamp of approval.  In a manual underwrite, it doesn’t matter what the loan decision is through the AUS.  It’s no longer eligible for this to move to the underwriter faster and with more assurances of getting  your final approval.  It now has to be reviewed in depth and documented in depth in order for an underwriter to make a decision.

The rules to follow:

• Your ratios cannot exceed 31/43%.  This means you cannot spend over 31% of your GROSS monthly income toward your house payment, OR over 43% of your gross monthly income toward your house payment and other monthly debts.  This is concrete; no wiggle room here.  We will use the lesser payment for qualifying when choosing the payment you can be approved for.
• We must get traditional VOE’s and VOD’s (verification of employment and deposits)  So, even though you provided me with W2′s and paystubs, as well as bank statements, we must still get this information from a 3rd party.  No fun especially since some banks and some employers charge a fee to give us that information.  Unbelievable.
• We must do a VOR which is a verification of rent.  Important that we confirm you make rent payments on time.  Don’t worry if you’re not renting and with family; this won’t hurt your chances of getting a loan.
• The biggest one — you must have 2 months of reserves.  In layman’s terms, that means after closing, you need 2 months of your PITI payment leftover.  This can include retirement.  Here’s the thing.  Most first time buyers have a hard enough time coming up with their down payment or minimum investment depending on the first time program the buyer uses.  Now you’re saying we need money left over?  Yup and it hurts.

So how do you combat this?  Well, there may be a way to work on getting the dispute removed.  For instance, you could contact the creditor and tell them you don’t want to dispute the account any longer.  About 30 days after you call, we can re-pull credit to make sure the verbiage “account in dispute” has been removed.  It’s not an ideal situation, BUT, it would allow for a faster decision, more leniency on what you qualify for and NO requirement to have money leftover after you close, though there is nothing wrong with that!

The moral of this story — don’t wait to find a house to make an offer to find out you might have to wait due to this rule.  Make sure you’re getting pre-approved with a lender that knows these guidelines and looks for them when reviewing your report.  Also, there are people I can refer you to with regard to credit restoration if you’re in that boat.  Let me help you get ready for the biggest purchase of your life.  Knowledge is power and the more you know and can prepare for now will save a lot of headaches and stress when you do buy.  I think you’ll have enough of that just from doing something new!

Oh no, the tax credit is gone!  Why would I want to buy a home?  A fantastic question that we will answer in this educational evening about buying your first home.  Please join Steve Howe, Realtor MN Real Estate Team, and me, on Thursday May 20th to learn the steps involved in purchasing a home.  The seminar goes from 6:30-7:30 pm and is located at the Cornerstone Mortgage office at 436 Gateway Blvd in Burnsville.  

Our agenda is simple — to educate.  Would we love to be your Realtor and loan officer … of course.  Do we make you feel like you HAVE to use us — no.  This isn’t a high-pressure seminar.  It’s a relaxed atmosphere where we hope you will learn a lot, get your questions answered and be able to make good choices moving forward in this process.

We will talk about the process in the order you’ll go through it, starting with pre-approval and ending with getting the keys to your home.  We will also discuss the available first time buyer programs and the many reasons why it is still the BEST time to buy, even without a tax incentive.

If you’re interested, please RSVP to clavey@houseloan.com as soon as possible.  We’d love to have you and look forward to sharing our knowledge.  Most importantly, come with questions!

That all depends on who you ask. The first time buyer tax credit ends on April 30th. What exactly does that mean? Do you have to close  on a home by that time – because that’s only 2 weeks away and you’d be hard-pressed to do that. 

The reality is you just need an accepted purchase agreement by the 30th of April. So, that gives you 2 weeks to look at houses and make offers like homes are going out of style. Houses are moving quickly, especially in the first time buyer price point — under $250,000.

So what do you need to get that offer accepted? Most importantly, a SOLID pre-approval. These are tough to find. Many lenders aren’t able to stand behind their pre-approval letters. We can and we do. If you haven’t given your lender your W2s, federal taxes, paystubs and bank statements, you haven’t been fully pre-approved. Your lender is just “assuming” the information you provided is accurate. Proof of these things is crucial to make a backable decision — as is running your loan through an automated system.

Okay, so you have the pre-approval.  Have you been informed of all the first time buyer programs that are available to you or is your lender just brushing off their importance?  Lately, I have had so many people ask how they can get down payment assistance, but they’re pre-approved.  Weird, since their lender should be telling them about ALL their options.  Have you had this happen yet?  I hope not.  These programs may be able to help you get into a home sooner than later too.

The other important date … June 30th.  This is the date you need to close by.  Another important reason to make sure you’re working with a reputable lender.  Seems like this isn’t a problem, it’s over 2 months away, right?  Some lenders aren’t getting things done in a timely manner.  If you have your pre-approval figured out ahead of time, then it’s a quicker process once you’ve found the home.

Long and short, you’re not too late.  You just need to make sure you start looking now.  Oh, and not only is your pre-approval important, but so is the Realtor you choose.  Realtors play a huge part in whether this $8000 can become a reality.  Are they looking for homes every day within your search parameters?  Are they having you act immediately on homes that interst you?

There’s a lot to this puzzle.  It can easily be put together if you have the right corner foundations — reputable lender, knowledgable Realtor, backable pre-approval and desire to be a homeowner!  All the other stuff will fall into place.  As long as you make the efforts to be open to looking daily, willing to take the advice of your Realtor and are willing to supply all paperwork required by the lender in a timely manner. 

So, let me know what I can do to help you reach that pot of gold at the end of the home-buying rainbow — more importantly, give you all the pieces you need to complete your home purchase!  And if we’re lucky, we can help you get that $8000 just for “showing up” to buy a home.

As you may know, there are so many things available for first time home buyers — ending soon is the federal tax credit of $8000.  You need an accepted purchase agreement by the end of April and must close by the end of June.  There have been lower rates and of course, plenty of first time buyer programs.  One in particular is the Ramsey County FirstHOME. 

If you’re looking in Ramsey County, or I should say, the “suburbs” of Ramsey County, you could take advantage of a great opportunity.  If you’re looking in the city of St. Paul, then there is a different program you may be interested in — the CityLiving program.  But, if you want to live in one of the many cities* of Ramsey County, this may just be the program for you.

Available as an interest-free loan, is up to $20,000 that you can use toward closing costs and down payment.  There’s a few ways you can use this money to your benefit.  One, is to help your buying power.  The $20,000 may allow you to afford a larger home or higher sale price.  Speaking of sale price, the maximum purchase price on this program is $200,000.  Or, two, you could keep the price range you’re pre-approved for and bring your payment down.  Not a bad deal.  Did you know that for every $10,000 in price, it’s about $70/mo in your payment?

There are a few guidelines that are specific to this program.  Like all first time buyer programs, there are income limits.  These income limits take into account the total income from the household, not just from the person on the loan.  This even includes children 18 years or older that are working.  Along with this, there is a requirement that you have at least THREE years of working full-time.  The FirstHOME program is not a solution to help first time buyers coming right out of school to qualify for down payment assistance.  A year or so ago, a GREAT change occurred to this program — you no longer have to WORK in Ramsey County to qualify, which opens a lot of doors for more people to qualify.

You must attend the first time buyer Homestretch class overseen by the MN Home Ownership Center.  Even if you didn’t have to take this 8-hour course, I highly recommend it.  It will go over everything from the process with your loan, buying the house and even talk about “what ifs” as you’re a homeowner, such as foreclosure prevention.  And hopefully, with guidelines that are getting tighter and tighter, you won’t have the opportunity to get in ‘over-your-head’ with a house payment.  Trust me when I say, this is never my goal.  Sure, I want to help you get the house you want, but it should never be a the expense of you not being comfortable with or able to make the payment.

An interesting requirement for the FirstHome program has to do with ratios.  Ratios are a certain percentage of your GROSS income (pre-tax) that we can use toward your house payment (housing ratio) or your house payment and your other monthly debts (debt ratio), which ever is less.  For all practical purposes, we are limited to keeping your debt ratio under 45%.  In order to be eligible for the assistance, your “housing” ratio needs to be OVER 30% of your gross income.  The purpose then, for the assistance, is to bring your housing ratio down as close to 30% as possible.  If you are under 30% to start, then this program won’t work for you .

Wanna know something else that’s cool with this program??  How about the ability to use this WITH the MN Housing program, where you not only can get a lower-than-market rate,  but also could qualify for another $5000.  Yes, another $5000 — you could receive a total of $25,000 to use for your new home purchase.  Wowsers!

Anyway, this is a super program!   Let’s see if you can make these monies work for you while you’re still a first-time homebuyer.  If you want further information, please don’t hesitate to give me a shout or email.  I am here to help. 

*Cities eligible for the program:
Arden Hills, Falcon Heights, Lauderdale, Little Canada, Maplewood, Mounds View, New Brighton, North Oaks, North Saint Paul, Roseville, Shoreview, Vadnais Heights and White Bear Lake

As much as I’d like to say pre-approvals are all the same — they’re not.  Though you can buy the same pair of jeans at numerous stores, you cannot get the same pre-approval from numerous companies.  So why not?  If an FHA loan is an FHA loan, then I should get the same product anywhere I go, right?  Not so much.  The thing is, it’s more that all lenders aren’t created equally, meaning you won’t get the same answer or loan suggestions from everyone.  Also, many lenders don’t have access to the first time home buyer programs.  Due to this, you may very well be steered into a program that may not be right for you OR you may be steered away from those first time programs because they’re “too much work”.  Cry me a river.

The question remains, why aren’t pre-approvals the same?  A pre-approval means different things to everyone.  For instance, one lender may see the pre-approval as just running your numbers over the phone, pulling credit and then issuing you a pre-approval letter.  What’s wrong with this picture?  Isn’t this what pre-approval means?  Nope.  The reputable lenders, me included , realize there is a lot that goes into saying “you can buy a house”.  Yes, we need to run numbers and yes we need to get credit; there is still much more to do.  Your loan must be run through an automated underwriting system (AUS).  This is a program with a million different checks and balances to identify risk or maybe conclude it isn’t a risk at all.  We can run FHA, VA and Conventional loans through this system.  And, it’s HIGHLY advised.  Sometimes the program alerts us to something we missed, such as an issue in credit that’s pages down in the credit report and we missed it.  Other times, it helps us pre-approve a buyer that may not have qualified otherwise.  For instance, let’s say the normal guideline is to take 41% of your gross monthly income toward your debts and proposed house payment.  Maybe this is a bit limiting for what you’re looking for.  Looking at your credit and assets, I can determine that you are well qualified to extend yourself a bit.  (NOTE:  I am not here to increase your payment just so I can do a bigger loan.  You need to spend what you feel is comfortable.)  After I run it through AUS, I may get an approval up to 45% of your income.  This just made it so you can afford a larger loan amount and possibly the house you want.  If the payment is something you can live with, then off to the races we go.  If not, then let’s chat about where you want to be.  Ultimately, this decision should be driven by a budget — something that lays out what you owe and what expenses you have monthly in relation to your NET income (after taxes).  You know, things like clothes, dinner out with friends, a $4 cup of coffee every Monday and Friday, or whatever.  It’s crucial to budget.

Okay, so now you know we need to have the loan run through the automated system.  Now what?  We’re all human.  There is that element of imperfection — typing something wrong, from income to assets — the information is only as good as the accuracy of the data entered.  The next part of the pre-approval is gathering documentation for your loan, paperwork that supports what you supplied on the loan application.  I have had this happen before — a client told me he worked an extra 4 hours a week in overtime.  I confirmed verbally that this has been going on for the last 2 years (need a history of this type of income).  He stated that 4 hours was on the low end and sometimes it’s more.  To be safe, I used the lesser number to avoid a possible inaccurate pre-approval.  It was crazy when I finally got the paystub and low and behold, overtime didn’t really exist at all!    Either he’s not telling the truth (and I always give the benefit of the doubt) or the company isn’t paying him as they should be.  Turns out it was the latter.  Bummer, huh?  Needless to say, my income was off, so it was putting a damper on their qualifying power.  We had to adjust their searches down.  As simple as this may seem, it’s not.  I liken it to buying a TV.  Let’s say your research shows that based on your savings, you can afford a 27″ TV (do they make those anymore??).  You head over to the “big box” store and right there, first thing you see, is a beautiful, crystal clear 32″ LCD TV.  Now, I don’t know about you, but that TV is going home with me TODAY!  I’ve seen what I could have (if I could afford it) and know that’s what I want.  Looking at the piddly 27″ TVs just doesn’t cut it.  This is the same experience with buying a home.  If you’re looking at homes in a higher price range and then come to find out you don’t qualify that high because your paystubs don’t support the higher income, you’ll be disappointed.  Nothing compares to the home that was $20000 more than your new approval amount.  And the truth is, nothing will compare.  It’s tough to wean yourself off something so much nicer, bigger or what-have-you than what really works in your budget.  It’s critical that your lender gets this documentation ahead of time before you start looking.  No sense getting your hopes up for something that isn’t obtainable.

Okay, so now we know the AUS system has pre-approved your home loan and your documentation supports that — now what?  How can the pre-approval differ if the lenders are playing by the same rules?  Another great question.  First, not all lenders know what to look at with the documentation or how to even calculate your income.  Sad to say, but true.  And, not all lenders are supported in the back end to fulfill their commitments to your pre-approval.  Anyone can say you’re pre-approved; but can they actually process your loan in a timely manner, underwrite the file in-house AND fund the loan on time locally?  Not many lenders can say this.  The “big box” lenders are having a very hard time getting deals done in a 60-90 day window.  Don’t get me wrong; they can be great lenders.  It’s tough to give great customer service and attention when there are so many pieces of business coming in — too much they just can’t handle it.  Truth be told, some lenders, more specifically loan officers, just flat out lie.  Many years ago, the lending industry got an “escape” clause if you will.  Essentially, per MN Statute, the pre-approval and the full approval are NOT guaranteed since things may change.  Remember the stuff you shouldn’t do while in the home-buying process?  People do those things, such as quitting a job a few days prior to closing.  I mean really, you couldn’t wait 2 days?  It was just that bad?  He didn’t think it was an issue — we had him approved and ready to go.  Bummer is that investors are requiring a verbal verification of employment within 5 or even 3 days of closing.  We MUST call your company to make sure you still work there.  You can imagine our surprise when the answer was no.  He was stuck — closing supposed to happen in 2 days, no job, no loan.  We did the only thing we could — wait until he got the job.  Since this wasn’t my deal, I have no idea how the listing agent/seller reacted to this big delay.  My guess is they weren’t too happy.  Can you blame them?

And last, the company, and/or the loan officer, can make or break whether that pre-approval is just a piece of paper with no value.  There are a few good loan officers out there that do the right things to insure you are actually pre-approved for a home loan.  Then there are those who somehow survived all the changes and still don’t have a clue how to read a paystub, let alone ask for one.  It’s common sense.  If someone mentions that they get paid tips a huge flashing light goes off saying “Verify Income” sooner than later.  Why?  Well, tips vary and we need a 2-year history of earning them to use that type of income to qualify.  Oh and those tips that don’t make it to the W2 or tax return … can’t use them.  You will find that Realtors who have been around a long time, know and recognize those lenders and loan officers who perform with their pre-approvals.  Admittedly, I made a mistake last summer using alimony income.  I took the word of the borrower that it was consistent, month after month she was receiving it.  When I received the bank statements to confirm the stability of this income, I failed to look closely for the consistency.  When the underwriter can’t see a pattern, it’s really tough to use the income.  Holy cow did I learn my lesson by doing a loan that was completely free – no income for my company and no income for me.  But that’s what you do … stand behind your letters and do what you say you’ll do.  I put it out there and I will make it happen.  You need to find a lender that will do that — of course, I would love to be that person for you!

In a nutshell (of say 1600 words or so ), you can see that more things go into a pre-approval than just “running your numbers” on a calculator and calling it a day.  Knowing the lender you work with is so important.  The Realtors I work with are number one in the Minnesota area and realize the importance of working with someone who can perform, even if the audience did pay for the show!  Be cautious and be certain that you work with the best lenders who come through, day in and day out.  It’s not just a piece of paper that is the same no matter who you work with; it’s truly the “ticket” to whether you get on the home-buying train or have to get off right before your destination.  No fun being dropped off in the middle of nowhere with nothing to do but start the journey over — assuming you can find a ride that can get you there.  Hope to help you get there soon!

Another month, another seminar frenzy.  It’s all about you — it’s in my Vision for You and truly is part of who I am.  To me, education is key to owning your first home.  Sure, I want to help you navigate through your first financing experience on a house.  The Realtors I work with want to help you find your very first house.  Business is business, right?  Partly.  As a team, we have an alterior motive — we want you to be as prepared as possible for buying a home.  So, to this end, I dedicate three nights a month to first time buyer seminars with the help of some very awesome Realtors.

So, what’s in it for you?  My hope is that you will walk away with a greater understanding of what the process is, how to get started, what programs can help with down payment assistance and other information to understand what you’re “getting into”.  There are many people out there, maybe you included, that have a desire to own a home, but hang in the shadows due to fear, credit challenges or even stories about your friend’s bad home-buying experience.  With something so big as buying a house, you do not want to go in blindly, not to mention work with people that don’t have the market knowledge and extensive resources for assistance.   This process should be educational, stress-free and believe it or not, fun!  I get reminded quite often while talking to people refinancing that lenders and Realtors are not created equally.  Not everyone gets to experience this knowing the facts, being given options on first time buyer programs or being led through the process.  Many of my clients who weren’t first time buyers with me were slammed into the system of homeownership without a clue about the loan they were doing, consequences of certain programs, and some were even put into loans that they didn’t have to be in. 

How would you like to get a grip on your first home-buying experience?  The awesome team I surround myself with would love to help “get your education on,” with NO obligation.  We’ll discuss the process from the first step of pre-approval to the last step of closing on your home and getting the keys!  Oh, and did I mention it’s FREE*?

I have THREE seminars coming up in March.  These are the same seminars, so feel free to pick the one that fits with your work or home location. 

The South metro seminars are on Monday the 15th and Thursday the 18th from 6:30-8pm at the Cornerstone Mortgage office located at 436 Gateway Blvd. in Burnsville.  I will be presenting these steps with trusted partners, Brandon Hedges — Homes of Minnesota Team, as well as Steve Howe – Minnesota Real Estate Team.  We will help you take that first step to home ownership. 

If the North metro is a better fit, then join us Thursday the 25th from 6:30-8pm at the Shoreview Community Center — 4580 Victoria St N #203.  This time, I have the pleasure of presenting with Steve, as well as Tony D’Agostino, also with the Minnesota Real Estate Team. 

Trust me — you will go away knowing so much more about the process AND will feel more comfortable now that you’re armed with information – info that many lenders just don’t share!!  Both will be a fun and educational evening. 

Please register by calling 952-808-0042 as space is limited.  Hope to see you there!

*ALL of our team’s seminars are FREE of charge. Cornerstone Mortgage is proud to be a drop-off site for the CAP agency, which is a non-profit organization that collects food items and gently used clothing for Scott, Carver and Dakota Counties. If you can, please donate a canned food item, baby food or clean clothing so we can continue to support the families in need in the communites we serve!