Borrowers Face Greater Scrutiny from Lenders

Lenders have a lot of questions for potential borrowers and they want detailed documentation when processing a mortgage application. Even applicants with stellar credit should expect extensive scrutiny when applying for a mortgage today, The New York Times reports. 

Questions over divorces, gaps in employment, and pending lawsuits are all fair game. For borrowers whose incomes rely heavily on bonuses and commissions, they may have to verify the history of that income over time — and tax returns, W2s, and pay stubs may not suffice.  

For borrowers who are on disability, they may have to prove that they are indeed entitled to receive aid for their disability and show the payout over the long term.

Any large, irregular deposit in the borrower’s bank account will also need to be accounted for. 

Borrowers who are counting alimony and child support payments as income are now required to show a year’s worth of canceled checks, according to new underwriting rules by the Consumer Financial Protection Bureau.

The increase in probing and documentation is all aimed at making sure the borrower has the ability to repay the loan. 

Source: “For Borrowers, Many Questions,” The New York Times (Aug. 22, 2013)

Lending Gets Even Tighter for Borrowers

The average FICO score for first-lien loans reached 750 in October, a rise from 741 in August, according to Ellie Mae, an analysis that encompasses about 20 percent of all loan applications in the U.S. Meanwhile, the average FICO score on applications that were denied by lenders was 706. That is up from 700 compared to year ago levels and 697 in September 2011. Last week, Federal Reserve Chairman Ben Bernanke said that tighter lending conditions are contributing to a housing slowdown. He said that some tightening in mortgage lending was necessary following the housing crisis. But, he added, “it seems at this point the pendulum has swung too far the other way, and that overly tight lending standards may now be preventing creditworthy borrowers from buying homes." Source: “Average FICO Score Getting higher for Approved Mortgages,” HousingWire (Nov. 19. 2012)

The Market is Competitive for Home Buyers

More home buyers are finding they’re losing their power position in the real estate market and that when they submit an offer for a home, they are not alone in the bidding. In fact, buyers who submit low offers may not even get a courtesy of a callback nowadays. Money Magazine recently offered potential buyers the following tips if they want to get the winning bid on a home: Get pre-approved, not prequalified: Pre-approval for a loan based on a buyer's credit, income, and assets is viewed as better than getting pre-qualified, which is just an estimate of how much that buyer may be able to borrow. Find an experienced REALTOR®: Money Magazine advised home buyers to find a real estate professional who knows how to handle multiple-offer situations and can advise how much to offer and help buyers determine if they’re getting a home at a fair price. Watch the contingencies: “The best offer isn't always the one with the best price," says George Miller, a Sarasota, Fla., real estate agent. Buyers who put in too many contingencies with their offer may lose out. Source: “Winning in a Seller's Housing Market,” Money Magazine (Sept. 12, 2012)

Do You Really Need a Realtor?

Great Blog... By Alain Pinel Senior Vice President/Managing Officer Intero Real Estate Services, Inc. Every so often, when I feel like a sponge for professional knowledge or when I want to justify the hefty dues I have to pay to NAR -the National Association of Realtors-, I read the “Economists’ Outlook” blog. The other day, one caught my eye. The title and the content were not particularly new or earthshaking but I still read the piece twice. I guess I liked it. You’ll know why when I unveil the title. Here it is: “Home Buyers Use of an Agent in Transaction Has Risen For Past Decade”. Music to my ears. As a Realtor, I like being liked. There is nothing like recognition for a job well done. Sure it is self serving but it’s nice to see that home sellers are more aware today than ever before of the value of trusting a Realtor with the sale or the purchase of a home. You see, even a guy like me needs a pro. I have been around the block a few times, I bought and sold many homes for my own account and personal use, but when my money is concerned, I need an objective expert opinion and someone who can negotiate on my behalf. I need a Realtor. Buying or selling a home is highly emotional. You don’t want to be emotional and confused when you sign a listing or a purchase contract. It’s your money that we are talking about. It is your home. It’s where you and your family lived or will soon live. Buying or selling is also a very difficult task, judging by the number of attorneys who specialize in the discipline and make a good living at it. In the high end, using a pro is not an option: there is too much at stake, too much to win or to lose. Playing Russian roulette is not a game to play in a real estate transaction. According to the NAR “2011 Profile of Home Buyers and Sellers”, a record 89% of recent buyers purchased their home through a real estate agent or broker. On one hand, I am pleased to learn that the percentage is moving up; on the other, I honestly wonder who on earth are the 11% of buyers who did not get the message!... Promise me you will never do that again! In 2001, just a few years back, “only” 69% of the buyers bought through a Realtor. I guess those who did not learned their lesson quickly because, as we mentioned above, the percentage has gone up ever since, with the strange exception of 2009 when it dropped a few notches to 77% after 81% the year before. My take on this anomaly is that after a couple of lousy years when properties did not move and values went the other way, some home sellers blamed their agent and decided to go “For sale by owner.” That lasted only as long as a New England winter (about 6 months…). Actually, the NAR study suggests that only 4% of the 2011 buyers bought directly from the previous owners (It was 15% in 2001). The other 7% missing bought from a builder or a builder’s agent. When you look at the trend over the 10 year stretch of time, jumping from 69% to a record of 89%, you’ve got to feel good if you are a Realtor. At that tempo, if we are not careful, we may get well over 100% in another 10 years!... It is particularly comforting to note that many crystal ball readers, years ago, were predicting that Realtors would phase out as more and more knowledge about the business, about the inventory of homes, about values, about financing, about contracts…was dispensed online for the Public to read, learn and use. Obviously it did not happen that way; quite the opposite in fact. At a time when buyers and sellers know as much as they do, the more they know, the more they know ….. what they don’t know. That’s why Realtors are more relevant and essential than ever. Thank you.

Consigliere Files: RESPA and FEE SPLITTING

Consigliere Files: RESPA and FEE SPLITTING

Are Home Warranties A Good Deal?

When something malfunctions in your home, wouldn't it be great if you could pick up the phone, request a service call, pay a nominal service charge and have the problem fixed? In theory, this is how a home protection plan works.

A home protection plan--also know as a home warranty-is an insurance policy that insures homeowners against defects in the major systems of their home. Precisely what is covered will vary from one company to the next. Most policies cover the heating, plumbing and electrical systems as well as built-in appliances like the stove, dishwasher and garbage disposal. Some companies will cover movable appliances like the refrigerator, washer and dryer for an extra charge. And some policies even include roof coverage-if you pay an additional fee.

Policy terms are usually for one year and they are renewable. The annual cost of a policy varies but you might expect to pay about $250 for a moderate-size home. Protection plans are available for both single-family residences and condominiums.

Home protection plans are popular in the home sale industry because they provide a relatively inexpensive way to take care of home defects that develop soon after the home sale closes. For example, let's say the water heater quits working the day after closing. Depending on the terms of the purchase agreement, the seller may be responsible for replacing the water heater. A new hot water heater can cost several hundred dollars. However, if there is a home protection plan in place at closing, the hot water heater will probably be replaced for the nominal cost of a service charge. Home warranty service charges vary but they are often in the range of $45-$55 per call.

Some sellers offer to pay for a home protection plan to cover the home for the buyer for one year. If problems arise during that year, the buyers simply call the warranty company and pay the service charge. The warranty company pays for the repair or replacement.

FIRST-TIME TIP: Be sure to read the policy carefully because there are exclusions from coverage. For example, pre-existing conditions are not usually covered. So if the furnace hasn't worked properly for years, it probably won't be covered by the buyer's home protection plan. Also, there are limitations on coverage. For instance, some policies offer roof and septic system coverage, but only up to $1,000 of work.

Seller coverage is also available to cover the home during the listing and sale period. Seller coverage works the same as buyer coverage except that there are usually more limitations on the coverage. For example, the furnace is usually covered under both buyer and seller coverage. But, the amount of coverage offered under seller coverage is often less than the amount that's available to the buyer if the furnace breaks down after closing.

One seller who had signed up for seller coverage was able to have some of the defects that were discovered during the buyer's inspections fixed by the home protection plan company for the cost of a service charge. This was a great deal for the seller because it saved him money and he didn't have to pay the policy premium until closing. Seller coverage is usually charged by the day. The cost varies, but it can run about 75 to 95 cents a day.

THE CLOSING: If the seller of a home you're buying does not offer to pay for a home protection plan, you can pay for one. Be sure to order it before the closing date.
There are a few companies that will allow you to purchase a home warranty at any time.

Hot Wheels for Kids-Intero Saratoga May 14, 2011

Join us for some fun, tunes, food, hot rods, and making a difference in the lives of Children. Mark your calendars!

Hot Wheels for Kids-Intero Saratoga May 14, 2011