ANN ARBOR MORTGAGE’S QUESTION OF THE WEEK:  February 17th, 2012

Question: My buyer just told me he would like to buy his home using VA financing. I've never done one ...a little help please!?

Answer: Nothing to fear. A VA loan is actually pretty simple to get through the system. The advantages are zero down, high qualifying ratios, no monthly mortgage insurance and they are assumable ( a great selling tool when it comes time to sell). The seller may pay all of the costs involved and the rates are no different than any other mortgage programs.

Many Veterans are not aware that they can use their VA entitlement over and over again. Ask your buyers if they are Veterans and you just might pick up a couple more deals. There will be many more opportunities to work with Veterans as they begin to return home from overseas. Hooray!!

SITE CONDO CLARIFICATION FROM BILL HOLMES: Conventional, FHA, RD and Jumbo loans all view a site condo as a stick-built home and do not require any extra types of approvals.

The VA is the only agency that views site condos as "true" condos and do require that the complex in which they are located be approved by the VA before they will place a loan in there. Ann Arbor Mortgage can help in obtaining the approval through the Veteran's Administration.

ANN ARBOR MORTGAGE’S QUESTION OF THE WEEK:  February 3rd, 2012

Question: As a listing agent, can I call the buyer’s lender?

Answer: Yes, you certainly can. The buyer’s lender may be unable to answer your questions, because of privacy, but for certain questions, go ahead. Most commonly we have listing agents call to make sure they understand exactly what we did to preapprove a buyer, contingency dates/removals, appraisal timing and many other reasons. It never hurts to ask!

ANN ARBOR MORTGAGE’S QUESTION OF THE WEEK:  January 13th, 2012

Question: With the new sales agreement, is there a form that will address the fact that the buyer has officially applied and caused the appraisal to be ordered?

Answer: We, at Ann Arbor Mortgage, have designed a form to be used for that purpose. It has the buyer’s loan information, loan officer information, date of application and appraisal order. We also thought it was important to add the date that the financing contingency will be removed, so that we are all on the same page.

ANN ARBOR MORTGAGE’S QUESTION OF THE WEEK:  January 6th, 2012

Question: Can rates move any lower?

Answer: We shouldn't expect mortgage rates to get much better. An example of why: the yield on the 10-year note is nearly 2%, and inflation by virtually any measure is higher than that. What does this mean? That in this uncertain environment, investors are not even looking to get a return ON their principal, they are just looking for the return OF their principal. But this will change, and at some point investors will demand higher yields to take on the risk of buying US Bonds. With this in mind, we will guide our clients to lock when the time is right, and not hold out for markedly improved rates.

One other consideration...today's stronger Jobs Report has the market speculating that there may be no QE3. Too early to make that call, but something to consider.

ANN ARBOR MORTGAGE’S QUESTION OF THE WEEK:  December 16th, 2011

Question: I have heard that some of the condominium complexes that were approved for FHA Financing have expired. Is that correct?

Answer:  Two years ago, the FHA stopped allowing lenders to perform a “spot loan approval” for condominiums and required that the entire complex be formally approved for FHA financing. The FHA has also required that the complex renew that approval every two years so that risk can be effectively monitored and if the legal or financial health of the condominium complex changes significantly enough, the FHA can refuse to renew that approval. We will continue to review the current status of condominiums in our area, e-mail lists to our realtor partners and are always available to look-up the status of any complex for you at any time.

ANN ARBOR MORTGAGE’S QUESTION OF THE WEEK:  December 9th, 2011

Question:  Why am I being charged a verification of employment fee on the HUD? Don’t most companies do those for free?

Answer:  More and more companies are using an online service for verifications of employment. The most common is called “The Work Number”. Lenders can go to this website and request information about the borrower. There are basically two levels of verification. The first gives a lender the employee’s date of hire and their title/position at the company. The second goes a bit further and breaks down annual and year-to-date income. These verifications cost under $20. So when you see that charge that is most likely what it is for.

ANN ARBOR MORTGAGE’S QUESTION OF THE WEEK:  November 11th, 2011

Since today is Veteran’s Day...

Question:  Do you do VA loans?

Answer:  Yes, we do. More and more veterans are returning home or are still “active duty” and many are eligible for a VA loan. These loans are much more streamlined than they used to be and are one of only two options for a true “zero down” program. Happy Veteran’s Day!

ANN ARBOR MORTGAGE’S QUESTION OF THE WEEK:  November 4th, 2011

Question:  I have heard that the Good Faith Estimate is in the process of being revised. Is that true?

Answer:  Yes, the "new" Good Faith Estimate form that was introduced in 2010 is hopefully being revised. Thus far we have seen a few examples that are far better that the current version. The forms that are being considered all have lines to show seller's concessions, EMD deposits and a borrower's signature line. Stay tuned!

ANN ARBOR MORTGAGE’S QUESTION OF THE WEEK:  October 28th, 2011

Question:  FHA and VA have condo lists. Why isn't there a list of condos that are approved for conventional financing?

Answer:  Good question! FHA and VA condo loans are either insured or quaranteed by the Federal Government. Therefore, a list of approved condos is easily maintained. Conventional condos are typically underwritten to Fannie Mae or Freddie Mac guidelines. Each lender that underwrites conventional loans keeps records of approved complexes. Every time a buyer seeks financing for a conventional condo, the process starts over.

Incidentally, even though a condo may be approved for FHA or VA financing and on their list, a new condo questionnaire must be completed for each new mortgage as the makeup of the complex may have changed. In some cases changes in condo circumstances may preclude a lender from loaning in an approved FHA or VA complex.

ANN ARBOR MORTGAGE’S QUESTION OF THE WEEK:  October 14th, 2011

Question:  Does Ann Arbor Mortgage do Fannie Mae Homepath loans?

Answer:  Yes, we do! Homepath loans can be done with as little as a 3% down payment and no PMI. However, the rate gets much better once the borrower gets to 5 or 10% down payment. The two pros of doing this loan is that an appraisal is not required and there is no monthly private mortgage insurance. There are currently 112 houses in Washtenaw County available via Homepath, http://www.HomePath.com/ and up to $305,000. 

ANN ARBOR MORTGAGE’S QUESTION OF THE WEEK:  September 16th, 2011

Question:  What research goes into a pre-approval letter in order to submit with an offer?

Answer:  We need to verify as much accurate data as possible that goes along with the property; this includes checking the MLS, cross-referencing the municipality website for the property taxes, updating a cash to close worksheet for the borrower with new purchase price, loan amount, property taxes and escrow account based on proposed closing date and update any necessary borrower info such as income and assets.

Once that is complete we can issue a pre-approval letter to submit with the offer.

ANN ARBOR MORTGAGE’S QUESTION OF THE WEEK:  September 9th, 2011

Question:  What type of documentation is required for two different Earnest Money Deposit (EMD) checks?

Answer:  If your purchase agreement is written such that the buyer is to increase the EMD after inspections, be prepared to give the lender a copy of the second EMD check, as well as proof from the buyer that both checks have cleared. It is important that both amounts show on the final HUD (Housing and Urban Development document).

ANN ARBOR MORTGAGE’S QUESTION OF THE WEEK:  September 2nd, 2011

Question:  Can a Veteran buy a site condo?

Answer:  Yes, but only if the entire complex has been approved by the Veteran's Administration. The VA still looks at site condos the same as traditional condos. Remember, Michigan is the only state with site condos and the VA has not fully grasped the concept as of yet. All of the same documentation that would be required to have a traditional complex approved is needed by the VA, i.e. recorded articles of incorporation, master deed, bylaws, budgets, etc. One gathered, the entire packet is shipped off to Cleveland VA offices for review. They typically take at least 30 days to make an initial determination of project eligibility. There are only a handful of fully approved complexes in Washtenaw and Livingston at this time. We would be happy to work with you and any site condo project to get them approved for VA financing.

ANN ARBOR MORTGAGE’S QUESTION OF THE WEEK:  August 12th, 2011

Question:  What constitutes a full Purchase Agreement in the lenders eye?

Answer:  Great question.  A complete purchase agreement package would include all of the following:

• Bottom-lined purchase agreement signed by all parties
• All associated disclosures (i.e. lead based paint, sellers disclosure)
• Copy of Earnest Money Deposit (EMD)
• FHA Purchase Agreement (PA) Addendum (if applicable)
• Any addendums making changes to the over-all price or seller concessions

ANN ARBOR MORTGAGE’S QUESTION OF THE WEEK:  August 5th, 2011

Question:  It was mentioned that credit inquiries make up only 10% of a credit score - what is the rest composed of?

Answer:  The most important parts are the payment history (35%) and amounts owed (30%). The length of your credit history comprises 15% and the types of credit used only 10%. The highest percentage - 65% of your score - has to do with paying on time and not having too much credit being utililized at one time. Using more that 30% of the available credit limit on a credit card will drop your credit score significantly.

ANN ARBOR MORTGAGE’S QUESTION OF THE WEEK:  July 29th, 2011

Question:  Why does a buyer have to get their home insurance set up two weeks before closing? Is this new?

Answer:  The change in the timing is not brand new, however, it is not like it used to be where the buyer showed up at closing with a new policy. The main reason is that underwriters want to review the insurance policy as part of the file-we all know PITI. Well, insurance is that last “I”. There are times that the monthly premium can be higher than expected and can put that monthly payment ratio over the limit. Common items that can increase an annual premium, that are not known at the time of application include: jewelry, furs, coin collections, gun collections, art work, antiques, computer equipment and the like.

ANN ARBOR MORTGAGE’S QUESTION OF THE WEEK:  July 1st, 2011

Question:  How long should we give our mortgage team to get a loan closed?

Answer:  45 ‘Calendar’ Days. It is recommended to write as the closing date ’30-45 days from final acceptance date of contract’. The mortgage process has only continued to be more arduous than ever and the more time, and planning, done up front – the smoother the transaction will go for everyone.

Keep in mind – if you re-negotiate an item after an inspection has occurred and the deal is held up while you negotiate you MUST extend the contract dates. Everyone comes out looking as professional as possible when we all work together and plan properly.

ANN ARBOR MORTGAGE’S QUESTION OF THE WEEK:  June 24th, 2011

Question:  What are RD inspection requirements for well and septic systems?

Answer:  RD requires a county well and septic inspection plus water test. The water test results must include nitrate, nitrite, coliform, e.coli, lead and arsenic levels. Please be aware that these requirements are more comprehensive than required for other loans. Please make sure that when ordering the test that all of the aforementioned results are included in the request or delays may occur.

ANN ARBOR MORTGAGE’S QUESTION OF THE WEEK:  June 10th, 2011

Question:  How long do you need to get a loan processed from beginning to end? What time frames should we be using when writing up an offer?

Answer:  We still request 30-45 days. Our company goal is to keep underwriting turn times at 72 hours or less. Some loans we can close sooner depending on the type of financing. Typically FHA, VA and Rural Home will be closer to the 45 day mark, but there are exceptions to this time frame. Conventional loans are typically a bit easier to take from start to finish. Always ask us if there needs to be a rush on a closing and we will do our best to accommodate all parties involved.

ANN ARBOR MORTGAGE’S QUESTION OF THE WEEK:  June 3rd, 2011

Question:  Why are lenders asking buyers for letters of explanation about old credit inquiries?

Answer:  Lenders pull a credit report at application that is good for 90-120 days depending on the type of loan. Any “inquiry” from another creditor must be explained by the borrower. Each credit report has a section where they list any inquiries within the past 120 days. Using today as an example: My credit report is pulled today, June 3rd. That credit report will show any inquiries for the past 4 months or as far back as February 3rd. The loan officer will ask the borrower to write and SIGN a letter as to what went on with that inquiry. Underwriters are looking for the possibility of more monthly debt that has not yet hit the current credit report. New debt must then be counted in the overall ratios that one uses to qualify.

ANN ARBOR MORTGAGE’S QUESTION OF THE WEEK:  May 27th, 2011

Question:  I have heard some very mixed information about getting site condominiums approved for different types of loans. Can you give me more clarity on this?

Answer:  Although all loan types require some type of in-depth clarification as to the status and health of condominium complexes, site condos are treated very differently. With almost all loan types, ie: Conventional, FHA or Rural Home, site condos are treated the same way as single family homes and require no special documentation regarding the association or neighborhood. Detailed forms that are used for condominiums are not required for site condos. The only exception to this is when the borrower’s financing is going to be a VA Loan. VA requires that the lender address 27 different questions related to the health and status of the association and neighborhood. The process is fairly complex and covers a wide variety of issues. Because we see a lower volume of VA Loans here in the local area, this situation arises only occasionally, but when it does, we have the experience to help you and your clients work through the issue quickly and efficiently. If you have a client that is approved VA and is interested in a site condo, just be aware that this issue exists and feel free to contact us any time to gain clarity. We are happy to assist!

ANN ARBOR MORTGAGE’S QUESTION OF THE WEEK:  May 13th, 2011

Question:  Recently, we were asked if a seller is "stuck" with a bad FHA appraisal for 120 days?

Answer:  The answer is NO. While an FHA case number remains attached to the property address for a full 120 days, a lender can set aside a "bad" appraisal. The following information came to us directly from FHA:

• FAQ:  Do FHA appraisals expire?
• Solutions details:  The FHA appraisal validity period is 120 days for existing, proposed or under-construction properties.

• FAQ:  When a case number is transferred with a completed appraisal, may a new appraisal be requested?
• Solution details:  When a borrower has switched lenders, the lst lender must transfer the case to the second lender upon borrower request. A second appraisal may be ordered by the second lender when:

1. The lst appraisal contains material deficiencies determined by the DE underwriter for the second lender.
2. The appraiser performing the 1st appraisal is on the second lender’s exclusionary list.

ANN ARBOR MORTGAGE’S QUESTION OF THE WEEK:  May 6th, 2011

Question:  What is the maximum allowable contribution a seller may make?

Answer:

• For FHA mortgages the seller may contribute up to 6%, of the purchase price, toward the buyer's closing costs, prepaid expenses, discount points and other financing concessions.
• For VA mortgages the limit is 4%.
• For USDA Rural Development Program the maximum is generally 6% of the purchase price, this may be exceeded in a case by case basis.
• For Conventional mortgages the limits are a little more defined:

For a principal residence or second home:

1. A loan with 10% or less down,  3% is the maximumn sellers concession allowed.
2. A loan greater than 10% - up to 25% down,   6% is the maximumn sellers concession allowed.
3. A loan greater than 25% down, 6% is the maximunm sellers concession allowed.

ANN ARBOR MORTGAGE’S QUESTION OF THE WEEK:  April 29th, 2011

Question:  Can I convert my current house into a rental and use the income from that rental towards my overall income (or debt ratio)?

Answer:  Not really. There are strict guidelines on converting a ‘primary residence into a rental’ for the purpose of buying a new home. The current primary residence needs to have 30% remaining equity; verified via an appraisal. And the borrower needs to have six months of ‘liquid or easy to liquidate reserves/savings’ to pay both the old mortgage and the new mortgage payments including the principal & interest, property taxes, insurance, home owners association (if relevant) and PMI (if needed). This can add up to a large sum of liquid money needed that can hinder the next purchase. Be sure to have your potential buyers – and sellers – check with us before attempting to make this move.

*Note: this is for Conventional Financing Only. Please call us for FHA scenarios as guidelines are slightly less stringent.

ANN ARBOR MORTGAGE'S QUESTION OF THE WEEK:  April 22nd, 2011

Question:  I have recently heard that appraisers do not use comps that are older than 3 months….is this true?

Answer:  That is a partial truth. Ideally, the appraiser is going to look back on the most recent three month period of time. They will look at recent sales surrounding the subject property (the same sub is best and they work their way out from there). The farther a comparable property is away from the subject property the less weight it may carry. If they do not have 3 comps in that three month period of time, they will look back further but those properties are not looked at in the same light as something more recent. Most investors feel that 3 months is “recent history” in the housing market. Anything older is considered less favorable and may not dictate current market trends.

ANN ARBOR MORTGAGE'S QUESTION OF THE WEEK:  April 15th, 2011

Question:  "I thought I heard that the Federal Homebuyer Tax Credit is still available for Veteran's, is this correct?"

Answer:  It is not available for Veteran's. However, the Tax Credit is available for some active-duty personnel. The up to $8,000 credit has been extended through April 30, 2011 for the contract date and June 30, 2011 for the closing date.

ANN ARBOR MORTGAGE'S QUESTION OF THE WEEK:  April 8th, 2011

Question: "I have heard that FHA appraisals now require fewer repair items than in the past, is this true?"

Answer: An enthusiastic YES! The FHA has recently reduced its repair requirements in a big way. Examples of minor conditions that no longer require automatic repair on existing properties include:

• Missing handrails.
• Cracked or damaged exit doors that are otherwise operable.
• Cracked window glass.
• Defective paint surfaces in homes constructed post 1978.
• Minor plumbing leaks.
• Defective floor finish/covering (worn through, badly soiled carpeting).
• Evidence of previous ƚnon-active) wood destroying insect/organism damage where there is no evidence of unrepaired structural damage.
• Rotten or worn out countertops.
• Damaged plaster, sheet rock or other wall and ceiling materials in homes constructed after 1978.
• Trip hazards (cracked or partially heaving sidewalks, poorly installed carpeting).
• Crawl space with debris and trash.
• Lack of an all-weather driveway surface.

Please take note of the fact that the word automatic is used in the guideline. That means that the condition of the items above is subjective and at the appraiser's discretion, however, we have seen a vast reduction in these types of conditions on recent appraisals. Whether you are showing or listing properties, we hope that awareness of this change will help you and your clients be more successful in your future negotiations.

ANN ARBOR MORTGAGE'S QUESTION OF THE WEEK:  April 1st, 2011

Question:  How long does someone need to wait after a short-sale to get a new conventional mortgage?

Answer:  At least 2 years. With extenuating circumstances a maximum of 90% LTV or 80% LTV without extenuating circumstances. With 10% down a 4 year waiting period and 7 years for maximum loan of 95% LTV.