Detroit Real Estate

Why do you need to get a mortgage pre-approval before you shop?  There are lots of examples of people who thought they would get approved and didn't.    Early in my career I took somebody out that was "positive" they would be able to get a mortgage.  After spending about 2 days and quite a bit of time with them we were ready to put in an offer on a Canton home.  Well when they went to get a mortgage they couldn't get a mortgage.  So all they wasted my time and theirs.  I chalked it up to a learning experience.

I had a self employed person that always got a stated income loan before.  They had a 750 credit score.  They were adamant that they would be approved for a Northville home.  Well they sent in their tax returns to the mortgage lender to find out they could only get approved for $150,000 house not the $400,000 home they wanted!  

Over the years I have heard many new agents go through the same situation before they learn to get the pre-approval letter first. 

Now I like my home buyers to have their pre-approval in their hand before they go out and look at homes.  It's not the cost of gas that bothers me, it's the time.  $3 gas in nothing, but the time is.  I can't get that time back.  It could be time I could be relaxing with friends and family.

                                           

I had the same experience last Monday.  The client said they were working on their mortgage pre-approval and they had 640 scores.  So I was going to take them out on Saturday.  Thursday I called them to find out they were not approved.  This client was positive they were going to get mortgage approval.  BUT THEY  DIDN'T.

So if a real estate agent doesn't want to take you out until you get a mortgage pre-approval, don't be offended.  The banks have more stringent rules now days.  You as a consumer don't know all the bank rules that may cause a problem.  We as real estate agents don't want to waste time, gas, and money on a client that can not buy.                                                           

It usually only takes a day to get a mortgage pre-approval and a little time to get your documents to the lender.  If it is not worth your time to do that why would you expect a real estate agent to invest their time.  By not wanting to take the time to get a mortgage pre-approval tells a real estate agent that you really are not ready to buy at this time. You  don't want to find that perfect home to only find out later that you can't buy.

So take the time and get your Mortgage pre-approval before you call a real estate agent.  It makes the process go so much easier for you. 

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5 items to bring to your Michigan Mortgage application

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One of the major mortgage issues that always comes up with newlywed buyers and many other buyers is sourcing the money used for down payment and closing costs.

Banks want to know where all the money comes from that you use for closing costs and the down payment.  Banks always seem to ask buyers to show them and prove to them where the money came from.  So the bank is going to ask you about any check that is out of the ordinary that has been deposited into your bank account in the last two months.

So they are going to ask you about:

1. inheritance checks
2. checks from wedding guests
3. work bonus checks
4. money from the parents

They won't take a letter stating that you got the money from so and so.  

To make your mortgage application go smoother get these items:

1. copies of the checks you deposited....you can get these from your bank 
2. write a short letter of explanation of the deposits....be specific with dollar amounts, dates, and sources of the funds.  This will explain in black and white where the money came from so the bank can follow it.
3. source of the money - if you got it from work a letter from HR or the boss should suffice.  If from a bank, or mutual fund you will need the latest statement from the account it cam from.  It can not be a loan from your 401k because then they will take the payment into account.  It will become part of your debt ratio.
4. Money from your parents will require a signed gift letter.  (you can get this from your mortgage person).  Then you will need to get a copy of the cancelled check and a bank statement from your parents account showing it has cleared.  Their bank can print you a statement to show this.
5. checks from wedding guests are next to impossible to prove where they all came from.  One of my clients just had this happen to them.  They ended up getting more money from their parents with a gift letter because the bank would not accept their explanation of the wedding gifts.

The banks are very strict on following the money from the source, proving that the check cleared, seeing the check, and seeing the account statement where it came from.  They will not close the loan without the information.     

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HUD settlement statement is a standardized government form that details out the costs of closing a house with a mortgage.  It has both a buyers and sellers side that breaks down all the costs and fees.  It gives the buyer and seller of all their incoming and outgoing funds.  Nothing can be done as a side deal when having a mortgage loan.  EVERYTHING HAS TO SHOW UP ON THE HUD SETTLEMENT STATEMENT. 

Here are some of the items that will be on the HUD settlement statement:

• sales price
• loan amount
• appraisal fee
• underwriting fee
• processing fee
• points (origination or discount points)
• bank fees such as tax service fee, and flood certification fee
• tax pro-rations
• deposit
• sellers concessions
• mortgage broker credit
• escrow set up costs for taxes and insurance
• up front PMI costs
• title company costs such as closing costs, title insurance, overnight fees, recording fees
• real estate transaction fees
• water escrow
• survey costs
• real estate commissions

The HUD settlement statement is a 3 page document that was changed in the last year to make it more transparent.  But like everything the government does, they made it a little more convoluted.  But the title company closer will go over the settlement statement line by line so you the buyer or seller knows where the money is going to.

The HUD settlement statement is usually looked at by the lending company's closing department to make sure it meets their approval.  Then the buyer and seller know their bottom lines. 

It is called a HUD-1 statement because the form is printed by the Department of Housing and Urban Development (HUD).   The Real Estate Settlement Procedures Act (RESPA) require the form be used as the standard real estate settlement form in all transactions in the United States which involve federally related mortgage loans.   Their are no alternative forms.  It is the same form for every real estate transaction with a mortgage.  Sometimes cash real estate purchases do not use the form. 

I hope this explains what a HUD settlement statement is.

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Each day you wake up you have a concious choice to be happy and positive, or angry and hateful,  So what do you chose to be today?

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I had to go to bat for my client last month.  A local Metro Detroit loan officer was trying to steal (money) home from my client. 

                                  

 My single woman home buyer was being victimized by a local loan officer.  She was buying a Oakland County MI Lakefront home.  When I first met my lakefront home buyer I called the loan officer to go over what my buyer needed in sellers concessions.  He told me she would need about 3.5% sellers concessions.  I point blank asked him what the closing costs would be in the beginning so I could figure out what was needed.  He had told me there were no points for the loan as my client had great credit.

Well tonight the night before closing my buyer got a big surprise.  Her closing costs were much higher.  Some of the things she was telling me made me nervous.  These were some tell tale signs that you should be nervous about a loan officer.

1. You ask for a good faith and you don't get one
2. You ask for a good faith again and you still don't get a copy
3. Your loan officer says not to worry about how much you have to bring to the closing
4. Your loan officer says you have a lot of money your account and doesn't understand that you need some of that money for car payments, your living expenses, and moving expenses

It's not all his money to spend on loan closing costs.  I didn't get the seller's concessions for him to up his origination fee.  This is what the new HUD form was supposed to stop, but it didn't in this case.  So I had to go to bat for my client.

I called the loan officer and asked what was up.  I reminded him that we had talked and he told me in the beginning what was needed.  So why did my buyer need more now?

He told me his $2600 origination fee covered the $800 underwriting fee and his $700 processing fee.  But what about the other $1100.  Well he went on to tell me he has to charge more for "harder" loans.  I asked him what about what he told me in the beginning.  No real good answer from him.  I said fine, that the buyer and I would call the home office in the morning and get a manager.  I left it at that when we hung up.  Well about 15 minutes later the loan officer called back and said he would give the buyer a $762 credit to reduce the closing costs.

My buyer agreed to take it and move on.  I am glad it wasn't one of my referred loan officers that did that.  My buyer had found this loan officer.  He worked for a good company, but....  I myself don't ever try to change a loan officer that a buyer has.  Unless the company is really bad, or the loan officer is attrocious I don't go there.  I haven't had that problem yet.  I feel the buyer knows what they are doing.

But this loan officer is going on my "DO NOT CALL LIST"

                              

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I got an email about buying a Redford home, bankruptcy, and bad credit.  Here is what the email said. 

I don't know what to do, I'm at my wit's end.  I have to have one of the lowest credit scores possible that it is under 500.  I can afford most of the Redford homes that I have looked at.  Most will cost me $300.00 less than the rent that I am currently paying ($800.00 a month) including property taxes.  But my credit is so bad is that I can't get out of the hole, what can I do other than file bankruptcy?  And how will filing bankruptcy affect my chances of getting into one of the homes I like.

 My answer is to this poor guy is:

If you are looking to buy  a Redford home this year you are out of luck, there is no quick fix so you can buy a house.  Sure a credit repair company "MAY" be able get you into a Redford home in six months, but you will be doomed to fail.  Simply because you haven't gotten into the habit of making your payments on time.  I would bet a hundred dollars that you would lose the house in the future.

My suggestion is to take it slow and do it right.  Get into a routine of making your payments on time.  The key in your situation is to file bankruptcy and start over.  But be sure to consult with a bankruptcy lawyer, don't rely on my advice.  You should seek legal advice and make your decision based on their advice.  You have to make a clean start otherwise you will always be in this predicament.  After you file bankruptcy you need to start establishing new credit slowly.  Get one secured credit card and use it to buy gas or groceries.  Pay it off in full each month.

I hate to say it but having a good credit score boils down to making your payments on time.  A good credit score is good credit history.

Now this will take time, but it is the only way.  There is no quick fix to bad credit.  You have to earn it.  You can get a FHA loan 2 years after a bankruptcy.  But you need at least 3 credit lines open for a year with most lenders in this current market.

So don't get upset and feel bad that you can't get credit now.  That you can't buy a home now isn't a bad thing because if you did I would bet you would be in foreclosure within two years.  So start putting your financial building blocks back together.  Bankruptcy first, open a secured credit line, pay your payments in full on time, open a second line after 6 months, don't let anything go over 30 days late.

It's not hard once you put your mind to making your payments on time.  No excuses if you want a home.  So I ask you how bad do you want that Redford home?

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My quote of the day is:

For time and the world do not stand still. Change is the law of life. And those who look only to the past or the present are certain to miss the future.

                                                                                            John F Kennedy 

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