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2/17/2014

Stop The Ten Mistakes Buyers Make on Home Loan Application


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1)Lack of disclosure: Buyers need to be honest. Disclose everything that remotely affects the financing of the home.
I  can fix “broken deals”. I’m here to close your loan on time. But I can’t fix issues that aren’t disclosed.
For example: Just because an issue doesn’t pop up on a buyer’s first credit report, it does not mean it won’t raise its ugly head at the very end of underwriting. Layers of checks occur after the initial mortgage credit report.
Issues that involve past government contact, (i.e. tax liens, unpaid student loans, pending litigation, or criminal fines) often go undisclosed (particularly where there is a “remarriage”) and one (or both) of partners wish to hide their past from the new spouse.
Often these items are so far in the past they (conveniently) “forget” to disclose.  A CAVIRS is run at  closing and sometimes other checks to government data bases. You can be sure the ghosts come out of the closet
Cavirs is the LAST STEP of the “Quality Control” or QC process (after loan docs are drawn, signed and returned to the doc dept.).

Lying will can “sour” Underwriter on a file and may cause them to decline a marginal loan application even after you signed.
2) Lack of preparation/ cooperation.
I am the greatest loan officer when your borrower cooperates  with me.
If buyers aren’t providing information in a timely manner there are usually reasons why…
 Don’t spin your wheels with buyers who have not gotten preapproved.

Agents who remaining in close contact me aids to closing on time. As me to teach you to read a DU and an LP approval. Banks will only have access to one but as a mortgage brokers I can go a variety of ways.
3) Buyer’s go out and apply for credit (in anticipation of redecorating their new home) or make large purchases
I have seen borrowers who went to Car Max and they purposely run your FICO fifteen times through every lender that they can to block you from buying a vehicle elsewhere. Fifteen inquiries in one day can knock your score down one hundred points.
In addition to drastically lowering scores, new debt raises debt ratios.
4) Transferring money around without a “clear paper trail”.
After 9/ 11  the United States government has strict currency laws about funds in and out of accounts greater than five hundred dollars that are not payroll deposits.
If the borrower is receiving gift funds, put the funds into the receiver’s account ninety days before loan submission. This eliminates the need for a gift letter (and the giver’s subsequent documentation).
The problem with gifts is: givers must provide a proof/source of funds (bank statements) and often the giver resents / refuses to provide banking info. The gift person has to provide bank statements all pages.
The solution: Convince the giver to fax banking info directly to the loan officer so their privacy is preserved.
5) Liquidation of 401k or IRA accounts.
Borrowers need to begin the liquidation process inquiry three weeks before the close of escrow.
6) Illegible or Unsigned Documents
From an illegible purchase contract to “blacked out account numbers” on bank statements borrowers and sometimes agents submit unreadable documents.  Borrowers take smart phone photographs of small items such as driver’s licenses and argue about if they are legible.
7) Many loan officers simply prefer processing “refi” transactions.
Purchase transactions are more tedious and require much more attention to detail than refinances. Escrow must provide accurate fee structure before we disclose, and they are often under-staffed to gather this information the first day of the transaction. Home owner associations have become a mousetrap of fees and misinformation. Banks mostly refuse to get Condominium complexes back on the FHA approved list because the fines for errors are $250,000 and five years in jail. A small mortgage outfit will not take it upon themselves to make this risk. At Eagle Home Mortgage I have in house staff to gather the documentation and submit to HUD. I share the same break room with Underwriters in our same office, processing and funders.
8) Appraisal value comes in low.
With multiple offers on each property it’s tempting for sellers to choose the highest offer.  If the offer is all (or mostly) cash; it’s a good choice.
If the buyer has minimum down and a lack of capacity to make up the difference between sales price and appraised value there is nothing but to renegotiate with the seller.
Dodd-Frank legislation requires all appraisals to be conducted by an independent appraisal (arm’s length) service. Loan Officers CAN NOT speak to appraisers.
Appraisals are to REFLECT current home prices (based only on previously closed escrows) vs. LEADING home prices (based on future/anticipated close of escrows).
If the loan is FHA or VA, the appraised value is “set in stone” for at least the near future (no second appraisal is allowed).
The best way to avoid a low appraisal is for the listing agent to show up for the appraisal appointment armed with comparables in hand, and to provide those to the Loan Officer.  
Often appraisers have their own lock box key (it does speed the appraisal process) allowing appraisers to bypass the contact with agent. Listing agents do not give them access to wander in.
9) Verification of (previous) employment.
Many buyers working for large corporations must be verified thru automated systems.
If the borrower has a job change, this process will be repeated if we’re to count overtime, bonus or commission to qualify.
Some companies only verify “gross wages” in which case we need to have all the past 2 years of paystubs to count the additional income. Tax returns must not show employee expenses to match up and use the overtime, bonus and or commission.
10) Borrower leaves town, takes a vacation or thinks they are all done. The loan process is no longer simple. More paperwork is always going to be required if your deal goes past thirty days as the paperwork becomes aged/ old.
 

 





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