Heads Up! A new lending law coming in October is going to stop you from closing your loan fast as you might like. Currently, some lenders (not the big banks) are closing purchase loans in three weeks. At my office, we closed a loan in 14 business days, because the seller’s circumstances demanded a rush.
But the Consumer Finance Protection Bureau (CFPB), the watchdog committee set up by the White House, has decided that folks getting a mortgage need more time to think about their financing. Even though, per current law, borrowers must have received the Good Faith Estimate, Truth-in-Lending, Lock Confirmation, Notice of Settlement Service Providers, and other documents that come to approximately 100 pages of disclosures at least three days after making an application… and even though they have several weeks while the loan is processing to discuss their financing with their loan officer… and even though they have the legal right to review the Settlement Statement for 24 hours before signing… even though… the CFPB has determined that is not enough time for people to think about their financing.
A new 3-day delay period in which borrowers can think some more about their financing is being instated with the new law called TRID (which, interestingly, is DIRT backwards).
That is a mouthful, and it is so convoluted that banks and lenders have had their attorneys trying to decipher it for the past year. To help explain it to regular folks, the CFPB has written a shorter “plain language” version that is ONLY 91 pages. You can download it here.
If you don’t feel like reading it all, just know that the days of quick and easy loan closings are fast coming to an end. Most closing agents, escrow and title companies, attorneys, and lenders are suggesting that if you’re buying a home after TRID comes in October, you allow 45 days to close (60 days if your financing is with a big bank).
The public has a right to comment on this upcoming law until July 7, so act fast!
Real estate agents, this is your opportunity to make your voice heard!
Here is the link.
In addition to your down payment, there are closing costs that go into a mortgage. The down payment lowers your loan and goes toward the price of the house. The closing costs are fees paid for services rendered. Here are the seven most common and what they are for:
1) Origination Fee: The lender’s fee for processing, underwriting, and funding your loan.
2) Credit Report: Goes to the credit reporting agency that provides your tri-merge credit report to the lender. You have the right to know your credit score.
3) Tax Service Fee: Lenders use a third party service to ensure the property taxes are properly paid and posted. (You don’t want your property taxes going to the neighbor’s address.)
4) Flood Certification: Federal banking law requires lenders to determine whether or not the property is in a flood zone and needs flood insurance.
5) Escrow or Attorney: Federal law requires a neutral middle party to handle the disbursement of funds. They also sign and notarize your final loan documents, send the Deed of Trust to the county for recording, and perform other required tasks for your loan closing.
6) Title Fee: Insurance to protect your title against false liens and judgments, fraud, errors, and other incorrect encumbrances on your title.
7) Recording Fee: The local county charges to record your Deed of Trust.
None of the above fees are unnecessary, bogus, or junk fees. They are all costs for legitimate and required services.
Added, unnecessary fees would be things like Application Fee, Archive Fee, Doc Prep, Doc Fulfillment, Email or E-doc Fee, Wire Fee, and so on.
Discount Points are not a junk fee. This is when you choose to buy down your interest rate to a lower rate by paying a chunk of the interest up front. This is optional.
A no-fee loan means you are paying for the fees by taking a higher interest rate. One way or the other, you do pay required and necessary closing costs.
The seller may pay some or all of your closing costs. The real estate agent may not pay your closing costs, per federal banking law.
In addition to closing costs, there are “pre-paids.” These are not fees; but rather, your taxes and insurance as well as daily interest. (More about pre-paids in an upcoming blog post.)
There is a lot more information about fair and unfair mortgage costs than what I can put into a blog post. Feel free to check out my best-selling book that was chosen by The Washington Post as their Book of the Month (“Color of Money” book club). Mortgage Rip-Offs and Money Savers
I love California, and I am excited to announce that I am licensed to do mortgage loans in the Golden State. Whether you are a first-time home buyer, a seasoned home buyer, or a home owner refinancing, I can help you get the best loan for your situation.
Here are some of the loan programs I can help you with:
* First-time home buyer FHA loan with 3.5% down or with gift money for the down payment.
* Grant money for the down payment on an FHA loan with no pay back whatsoever. A true grant, from a private bank. No neighborhood restriction.
* Conventional loans: 30-year fixed, 20-year fixed, 15-year fixed, 10-year fixed rates.
* 5/1 ARM: fixed for the first five years, then adjusts annually. A good loan for people who plan to keep the home for five years or less.
* VA loan for U.S. Veterans
Getting Pre-Approved is No Cost
There is no cost to get pre-approved and/or to find out how much house you qualify for. Let me know what you want, and I will take it from there.
What Does It Mean to Be “State Licensed”?
Loan originators who work for banks and credit unions do not have to be state licensed. The CFPB assumes the bank will vouch for their integrity and competence. However, mortgage brokers and direct lenders (such as myself) have to pass multiple hurdles in order to do business in California. Here are the requirements we go through that those at banks and credit unions get to skip over:
* 20 course hours plus additional class hours for California state law.
* Pass both a national test and a CA state test.
* Get fingerprinted and have a background check done.
* Have a credit report pulled and checked for personal financial responsibility.
* Be approved by the CA state authority.
You might say that state licensing ensures a higher level of scrutiny, which means more security and peace of mind for you.
Please feel free to contact me about your mortgage questions or financing needs via the Ask a Question page here.
Looking for a Recommendation for a Licensed Real Estate Agent?
I have worked with fine real estate agents in California. If you would like my recommendation for an agent who will work hard and put YOUR best interests first, send me a message here.
Zillow, the company that tracks more home sales and amasses more stats than any other company I know of, tells us these surprising facts:
1) If you price your house too high and then reduce it later, you will end up selling for LESS than if you had priced it correctly from the get-go.
2) If you live in a neighborhood with a Chinese population of over 10%, your house will sell for more if the price ends in a lucky number (lucky according to Chinese culture).
3) The same applies if your address ends in a lucky Chinese number.
4) For the general American population, house prices that end with the two digits 99 sell faster and for more. There seems to be something about 99 that makes people think it is a bargain.
In an experiment where the same dress was put for sale at $35 and $39.99, it sold better at $39.99. In another example, a wine seller sold more bottles of a particular wine when the price ended in .99 even though it was more expensive than the previous price. Evidently, the same applies to selling houses.
5) Women and men real estate agents seemed to be equal at selling homes. That is, according to Zillow, neither sex outsold the other. However, women tended to over-price homes more often than men, but they were also quicker to drop the price. The men who over-priced a home tended to stick with it longer and lower the price by less when it was reduced.
That last point may prove to be controversial. If you disagree, I’d love to hear it! To leave a comment, see the top of this post, right side.
6) There is nothing you can do to control this one, but I found it interesting that house addresses that contained the words Place, Way, or Court sold for more than addresses with the more generic words of Street or Avenue.
The second most important strategy for home sellers is to present their property in the most favorable light possible. If you were going for a job interview, would you wear a rumpled shirt, dirty slacks, and smelly shoes? The same goes for your home. Clean it, fix it, de-clutter it, and stage it to best advantage. Listen to the advice of your experienced real estate agent. He or she is not emotionally attached to your belongings, so when they tell you that something has to go, take the advice.
Third, don’t over-do the remodeling right before placing your house on the market. Your taste in décor might be different than a buyer’s, so you will not recoup the total cost. Discuss the possible advantage of selling “as is” with your Realtor and make only the improvements he or she suggests. Not everyone is going to pay more for a swimming pool, sunroom, or granite counters.
As always, thank you for stopping by my blog.
1) Stay in town during the loan process.
This is not the time to travel so that you are unavailable to provide additional documents the underwriter might ask for. If your vacation to Europe was pre-planned and cannot be changed, then allow ample time after you return home before the closing date. It is unrealistic to think you can check out during the loan processing and come back to sign one day later.
2) Leave your money where it is.
Do not transfer funds from one account to another during the loan process without your loan officer specifically instructing you to do so. In addition, do not transfer funds the two months prior to applying for a mortgage. The reason is because doing so can cause a paper-trail nightmare for you and the underwriter.
3) Leave your credit as is; open no new accounts.
If you open a new credit card or installment loan during the loan process, you are potentially sacrificing your home. Don’t do it! Although your credit has been checked and approved, it is likely your credit will be checked again right before closing. If new accounts appear, then your debt ratio and/or your credit score could suffer.
One first time home buyer decided to buy new appliances for the new home during the loan process. When her credit was re-checked, the new Sears account showed up and the payments put her debt ratio over the line. Her loan was denied! In order to proceed, she had to return the appliances and prove with receipts that she had done so. How embarrassing, right?
The same goes for buying a new automobile. Don’t even think about it! Your priority must be buying the house.
4) Write your purchase offer contingent on a home inspection.
Waiving a home inspection is a dangerous move. Inspectors are paid to find fatal flaws and major problems that are not obvious to the eye. When you visit a home, do you climb up on top of the roof? Do you crawl under the house? Do you inspect the electrical wiring, plumbing, water heater, sump pump, etc.? That is what your home inspector is for. It is an important step that prevents you from having to shell out thousands (or tens of thousands) of dollars later.
5) Obtain your own buyer’s agent.
Calling the real estate agent listed on the for sale sign is a colossal mistake. The same goes for using the agent that is hosting the open house. When you use the seller’s agent, it is like using your opponent’s attorney in a court of law. Who would do that?! The seller’s agent is required by law to get the highest price and best terms for the seller. Dual-agency is not in your favor!
Since the seller pays for both the listing agent and the buyer’s agent, it is free to you to have your own expert agent representation. Therefore, there is never a reason not to do so. You do not save money or get a cheaper price on the house if you use the seller’s agent. Be smart and get your own agent representation.
Good question. The answer has to do with the European bond market. After a year and a half of all time lows, it has reversed its course; consequently, investors are quickly selling their bond market holdings, which forces prices lower and interest rates higher. The U.S. rates are inter-connected with European rates, so this has pushed mortgage rates back up to the 4% to 4.25% range for the 30-year fixed rate. The 15-year fix rates are in the 3.25% to 3.375% range, so don’t look for anything that starts with a two.
Is this movement temporary and will rates drop by to record lows? Friday we got a brief reprieve, but rates were back up Monday morning. No one can predict the future. Right now, rates are volatile and one day can make a difference of an eighth of a percent (.125%).
If you are risk adverse, the safest move is to lock in your rate. If you are refinancing and not under time pressure, then you have the luxury of floating rather than locking to see what happens. Last Friday, for example, we saw a dip in rates, but it lasted only the day. It could happen again–no one knows.
Please note that interest rates quoted are for top tier credit and at least 20 percent down on a single family residence. Factors such as your credit score, down payment, property type (condo, co-op, manufactured home), and region of the U.S. all affect the credit score.
When purchasing a home or refinancing your mortgage, locking in your interest rate is an important step. This is your security against rates going up while your loan is in process. A rate lock is a three-way agreement between the borrower, lender, and the investor that says the loan will be done at a specific interest rate, for a specific cost (or credit), on a specific property.
Here are five important things to know about locking in your rate:
1) You, the borrower, are in charge of choosing when to lock in your rate, and you must instruct your loan officer when to do that. Neither the loan officer nor the lending institution chooses the day for your lock.
2) You need to call your loan officer to request the rate lock. Do not leave something of this importance to the uncertainty of email or text, because you have no way of knowing if your loan officer will see your message before the rate you want changes. Interest rates can change midday when the market is volatile.
3) Within 48 hours of locking in your rate, you will receive a confirmation of the rate lock. If you do not receive confirmation in writing (email is fine), then do not assume your rate is locked. Call your loan officer again to verify and ask for a written statement.
4) If interest rates go down after your rate is locked, your rate is still locked. This is not a one-way contract where you are protected if rates go up (and the lender takes the loss), but the reverse is not true. That said, if rates drop by at least half a percent (0.5%), then lenders will often compromise with a decrease of .25%.
5) Your rate lock includes an expiration date. If your loan does not close and fund by that date, then you have two choices.
First, you can buy a rate lock extension. It is a per day fee, and you need to ask your loan officer what their company’s policy is. This option makes sense if rates are higher.
Second, you can take the new, higher rate. If rates are the same or lower than when you locked, the lender will extend your current rate at no charge.
Note: You cannot get a lower rate by letting your lock run out and then grabbing the new, lower rate.
Another note: If the rate lock expires due to the fault of the lender, you do not get to demand a free extension. You have no recourse. That is just the way it works. This is one reason why I offer my clients a Peace of Mind Guarantee that includes closing on time (or the lender pays)*, best pricing, and timely updates.
If you have any additional questions about locking in an interest rate, let me know. The comment button is at the top of this post.
* This is for my mortgage clients. I am licensed in CA and WA states. For details on the Peace of Mind Guarantee, simply ask and I will email you the official flyer.
If so, I have good news for you. After looking at local banks, credit unions, and other lenders, I have joined VITEK Mortgage Group, a lender with a stellar reputation. As a mortgage loan officer, I can shop the wholesale divisions of lenders such as Wells Fargo, Chase, Ditech, Caliber, and more — as well as VITEK’s own line of loan products.
It is important to me to get the very best loan at the very best pricing available for my clients. Having the ability to shop without being limited to only one lender’s loan products gives me the ability to do that. If I worked for a bank or credit union, I would be limited to their loan products only — and when it comes to a mortgage, it is NOT a “one size fits all” situation.
If you want a seasoned professional who wrote the book on mortgage rip-offs and money savers to do your loan shopping for you, then I am your gal. Not only that, but I go another step in helping you get a good title and escrow company, because now in 2015, too many title and escrow companies are piling on the junk fees and over-charges.
As a loan originator for VITEK Mortgage Group, I can extend their Peace of Mind Guarantee:
* Guaranteed On-Time Closing
* Guaranteed Real-Time Status Updates
* Guaranteed Best Value
VITEK stands for Value, Integrity, Teamwork, Excellence, Knowledge.
That is pretty much everything you and I want in a company.
I am licensed in WA state and will soon be licensed in CA as well. (I have met all the requirements for California and am awaiting on the Dept. of Business Oversight for their acknowledgement.)
Please let me know how I can help you with your home purchase or refinance.
NMLS License # 1284134
“Can I buy a house with bad credit on my report?” She felt like she was being unfairly profiled and locked out of buying a house. She knew she could afford the mortgage payment; after all, the rent she was paying was higher than that.
Maybe her credit was inaccurately placing her in a category in which she did not belong. Maybe it is happening to you or someone you know. Here is what landlords say about people with low or no credit score.
“It is a fact that lower credit score individuals engage in riskier behaviors… Lighting off fireworks in a high-density environment, fighting, speeding, being drunk in public, DWI, driving without insurance, dealing and using drugs, etc. would be examples of risky behaviors that we would want to avoid.”
~No Nonsense Landlord
Does that describe you or the person you know who has a lower score than average? Maybe not, but that is what “they” are thinking about you when they see your credit score or see that you have no score.
A gentleman, a construction worker, wrote to me after his credit score took a dive and he wanted to restore his good name. It all started when a truck ran over his foot. He couldn’t work and medical bills piled up and slipped into collections faster than his insurance company took care of business. He was neither irresponsible nor a deadbeat. He didn’t light fireworks off in crowds nor did he drive drunk or deal drugs.
You don’t need perfect credit to buy a house. A score of 580 will qualify you for an FHA loan with some lenders, and a score of 620 will qualify you for a conventional, VA, or USDA loan. However, you will have to take a higher interest rate and make a higher payment with those scores. I think it is worth taking a few months to raise your score first.
You will save yourself a lot of money if your score is at least 620 rather than 580 for the FHA loan.
Similarly, if your score is at least 740 rather than 620 for the conventional loan.
Your credit score is something you control. It is a number, and when you understand what it takes to get that number, you can make it happen. There is no need to be a victim of the credit system.
“No one can get bad credit off of their report” is a false statement. People — lawyers, credit repair specialists, and individual citizens — do get bad credit off of their reports every day of the year that the credit bureaus are open.
If you’d like to know how this is done, if you’d like to boost your credit score and qualify for a GOOD home loan, then take a look at Repair Your Credit Like the Pros: How credit attorneys and certified consultants legally delete your bad credit and restore your good name. It contains insider information from some of the top credit specialists on the planet. Loan officers and journalists tell you it’s impossible… and all the while, these people are quietly raising their scores.
If you have questions, I am happy to help the best I can. Your comments are welcome. Thanks for stopping by.
It was bad enough seeing the impossibly low interest rates posted by Amerisave, but when they showed up on reputable websites like Bankrate and Mortgage Professor, it was downright disturbing. Why would they let a liar post on their websites? Didn’t they value their reputations? I sent an email asking and received a very unsatisfactory reply. It seemed like the god of greed was ruling over decency.
I heard from several good folks who had read Mortgage Rip-Offs and Money Savers that they were promised a low interest rate and then locked in at a higher rate. And the fees! The huge, ridiculous fees! It was like old fashioned highway robbery.
But justice finally caught up with the scheme that took advantage of borrowers in all 50 states. The Consumer Finance Protection Bureau, the watchdog organization set up by the White House, busted Amerisave, its affiliate Noro Appraisal Management Company, and the owner, Patrick Markert.
* $14.8 million must be paid back to consumers who were sucked in and taken advantage of.
* $6 million in fines and penalties for the companies and Mr. Markert.
* An order to stop advertising rates that are not actually available.
* An order to follow the disclosure law by revealing the relationship between the lender and the appraisal company.
* An order to stop collecting money from borrowers before providing a Good Faith Estimate (which is illegal).
The Lesson for Everyone
Listen to your gut instinct and common sense. When someone claims to have an interest rate that is so much lower than every other lender in America, you know something is amiss. Choose the honest, ethical loan officer over the smooth-talker who refuses to answer your questions directly. Never give your credit card to pay for a lender fee or appraisal before you have received a Good Faith Estimate.
To read more about this news story, see the CFPB post here.