DO/DU is Fannie Mae’s automatic underwriting system.  When an application is taken, it is run through this pre-determined set of criteria to determine a borrower’s eligibility for a new mortgage loan.  The problem is that these criteria do not take into consideration other compensating factors.

Why America needs to go back to manually underwritten loans and not a computer generated decision?  Here are two examples that have happened in the past week of why America needs to go back to manual underwriting of mortgage loans.

Scenario 1: The borrower has a credit score of 740.  Is putting down 10-20% of the purchase price.  The debt-to-income (all monthly debts plus PITI) is 20%.  Has been on the job for 3 months, but in the same line of work for 20 years.  His new job has a higher salary then his previous employer.  These are all things that under a common sense, manually underwritten loan would have me saying congratulations.

FNMA’s DO/DU denied the loan.  Why?  Because he had a mortgage credit late of 30 days.  Why did he have a mortgage credit late?  Because his previous employer laid everyone off.  If was not his fault, he did what he could to stay on top of his payments till he could find a new job.  In his quest to find a new job, he had to relocate to where the job would hire him.  He sold his house without having to do a short sale and moved to the new area.  Now, he cannot buy despite that credit mortgage late.  It is a pity that the bank will not even  take a look at this to argue an exception because FNMA is not allowing exceptions.

Scenario 2:  This is very similar to scenario 1, but instead of a  mortgage late there was a bankruptcy approximately 3 years ago.  This time last year, no problem.  Now, it has to be 4 years, no exceptions.  Never mind the fact that he has 20% down, or a credit score in the 700s, or a very low debt-to-income ratio, or many years on the job.

A trained underwriter would see that the bankruptcy was actually stemming from a divorce to handle the debt accrued during the marriage.  It was not that payments could be made.  It was to get him from being responsible for debt that his ex-wife got him into by being on joint accounts.

Going back to manual underwrites opens many doors for many people that are qualified borrowers, but are getting the door slammed in their face because a computer cannot look at the big picture.  Plus, if we go back to manual underwrites, lenders would need to hire more underwriters (a boost in employment), they would close more loans, and more money would be back in the economy.  By letting a computer decide, there are no jobs, there are no common sense decisions being made, and there is no help to the economy.

Perhaps, we should take the same voice that we all hold for the medical reform and shout it out at reforming the mortgage industry and going back to good old traditional manual underwriting.

Over the next couple days to weeks, we will post on what is new with the mortgage industry and what specific items have transpired in the State of Florida.

While you are waiting for these posts to be released, I will give you an update on mortgage rates.  Monday’s rates were a small step up from the 4.875% closing rate on Friday.  Today, the market is in a frenzy.  At 12PM EST, there have already been two rate adjustments.  Both of them have been in the upward direction.  Currently, rates for a 30 year fixed are sitting the in the mid-5% range.  Several lenders have stopped the option to fax in rate locks due to the volatility of the market and are only accepting online locks.

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Located on the southeastern tip of Florida, Miami’s sandy beaches and tropical weather attracts thousands of tourists and vacationers every year. Although Florida does not contain naturally occurring asbestos, the substance still made its way to a large portion of the state. When on the path to home buying or seeking mortgage solutions, there are many things to consider.

Homes built before 1980 may still contain asbestos, a fibrous
mineral used through the majority of the 20th century. Asbestos can still appear in piping, insulation, flooring and roofing. Asbestos
exposure is easily prevented by taking simple precautions. There are many green, eco-friendly materials that replace the need for asbestos and can reduce energy costs annually.

Asbestos Tips

Asbestos made its name because of its resistance to fire and heat
properties. Improper insulation was used in millions of homes and while it is safe when enclosed or in good condition, deteriorated asbestos can cause a slew of health problems, such as mesothelioma. The increasing rate of asbestos-related diseases has resulted in mesothelioma lawyer firms advocating and protecting victim rights for their unjust illness. Manufacturers were aware of the health hazards involved with asbestos but repressed this evidence from the public.

If you locate any suspected asbestos, most experts advise to leave it alone. If you are having home renovations, performed, do not panic. In most cases, the best action is no action in regards to asbestos. However, if removal is necessary, it must be performed by a licensed abatement contractor who is trained and licensed to deal with hazardous
materials.

Florida Going GREEN

Implementing green methods of building can have positive environmental, health and economic benefits. These include:

-          Conservation of natural resources

-          Enhance air quality and protect ecosystems

-          Energy sustainability

-          Increase property value

-          Improve quality of life

-          Improvement of pulmonary and cardiac health

-          Reduce waste

Environmental efficiency is on the rise because of technology and green sustainable methods progressing rapidly.  Not only will these methods produce a healthier lifestyle, it will save you money! The Department of Energy concluded that cooling and heating counts for up to 50-70 percent of all energy used in the average home in the U.S. In today’s state, this philosophy can also save natural resources.

Environmentally sustainable insulations are made from recycled materials including cellulose, polyurethane foam and cotton fiber. Cotton fiber is made from recycled batted material and treated to be fireproof. A water based spray polyurethane foam, lcynene features no toxic components. The implementation of these eco-friendly products can reduce annual energy costs in the household by 25 percent annually.

Each mortgage loan that is available to Eustis borrowers has its own unique set of guidelines and characteristics.  In general though, they have the same basic ground rules: must have a job, must have credit (Good to Excellent), and must be able to afford the mortgage payment.

It is from these main ground rules that lenders and programs deviate into the individual programs that are offered. ( To avoid a long, drawn out post, we will cover the individual programs in more detail in separate posts.)  Here is basic list and summary of the programs that are available to potential mortgage loan borrowers:

• USDA 100% Guaranteed – 100% Financing, Seller can credit up to 6% of purchase price towards closing costs, not credit score driven, schooling can be used in lieu of work history, no Mortgage Insurance, must meet income limit guidelines
• HomePath – 97% Financing, Seller can credit up to 6% of purchase price towards closing costs, need a 660 credit score to obtain 97% (580 credit scores maxes at 80%), no Mortgage Insurance, no Appraisal
• FHA – 96.5% Financing, Seller can credit up to 3% of purchase price towards closing costs, not credit score driven, Mortgage Insurance needed if over 80%, strict appraisal guidelines
• Conventional – 90% Financing, Seller can credit up to 3% of purchase price towards closing costs, needs at least a 580 credit score, Mortgage Insurance if over 80%

And should a foreign national want to vacation here in Eustis, there is even financing available for them.  So, as you can see, Eustis, Florida offers a homebuyer many options in finding the perfect home and getting the best financing to meet their needs.  And just a heads up when shopping for that new home, most Realtors will want a buyer to pre-approved or pre-qualified for a mortgage before they schedule a showing.  Click here to begin the application process and get your pre-approval/pre-qualification today.

Stay tuned for Part 3 where we will discuss insuring your new home.

In this first part, we are going to be covering the real estate side of buying a home.  The first thing that one should consider when purchasing their new home is where in Eustis they want to live: in a community, in the country, in town, near downtown, etc.  There is, despite the cities perceived small size, a large diversity in real estate locations.

The city even has elevations to chose from despite the misconception of Florida being flat.  You can opt for a home at the top of a hill looking out over a lake, or you can have a home at the bottom of the hill on the lake.   These are all possible locations that one can find when shopping for their new home.

Besides location, pricing has a large range.  Some homes can be purchased for less than $100,000 while others can reach well over $1,000,000.  Part 2 (Mortgages) will go into more detail on determining what value of home a potential buyer/borrower will qualify for when shopping for their new home.

The third thing that one should take heed of when buying is the age of the home.  Eustis is an older city (over 125 years old), and as such has old buildings and homes.  Driving down some of the side streets of downtown Eustis will show the historic styles of the area.  Move out from there and you find the traditional “Florida Cracker Box,” a concrete block rectangular style home popular in the mid-20th century.  Move out a little more and you get into the real estate boom houses that were built between 2000-2007.

So as you can see, when shopping for that dream home in Eustis, Florida, you have lots of options available.  To help narrow down your choices and to aid with the buying of the home, a Realtor will become your best friend.  There are several long standing and reputable Real Estate companies in the Eustis area.  For a list of these companies or for a recommendation on Realtors, please feel free to contact us.

As we mentioned earlier, our next part will cover mortgages.  Just like your options in finding a home, you have options on financing your new home.  Stay tuned for Part 2 to roll out next week.

PS. Photos of newly listed homes will be posted under our Real Estate Listings/Residential Listings category.  This section will be coming shortly.

Here is what the Realtor finds out:

1. They have a legitimate buyer.
2. They know what price range to shop for.

Okay, now keep that second point in mind as we delve into the pre-qualification process.  And to explain this, I am going to use a recent buyer’s story.

The buyer came to us to be pre-qualified for the purchase of a new home.  Based on early findings, we were able to qualify this buyer for a mortgage of $x.xx and a monthly payment not to exceed $y.yy.  Now, the monthly payment took into consideration the basic PITI (Principle, Interest, Taxes, and Insurace) for a home of that value for which she qualified for.

When we notified the Realtor for what the borrower qualified for, we also explained which programs the buyer was eligible for.  In this case, if the buyer wanted 100% financing through USDA, then the loan amount could not exceed $a.aa and a monthly payment of $b.bb.  If the buyer put 3% down, then HomePath financing was available at a mortgage amount of $x.xx and a payment of $y.yy.  Conventional and FHA financing were not optional.

Pretty straight forward, right?  Wrong.  The buyer is insisting on a home in a neighborhood where the HOA fees are over $200/month.  Yes, the home prices are in the range that the buyer is qualified for, but the monthly payment is well over $200 for what they are eligible to borrower.  Now with HomePath, we were able to get a FNMA DO/DU approval even with this $200 a month increase, but the home the buyer wants is not HomePath approved.

There are homes in that area, in that same neighborhood, in that same model, that are on HomePath, but someone did not show them to the buyer.  I am not going to speculate why they were not shown.  But I am going to ask, why did the Realtor allow the buyer to enter into a contract, put earnest money down, when they have something in writing that states what the buyer qualifies for and that property does not meet that criteria?

Oh, wait… it does.  It meets the value of the house.  The Realtor only listened to the buyer when they asked the question, “Have you already been pre-qualified for a mortgage?”  The answer was probably something like this, “Yes, I was pre-qualified for a purchase price of $x.xx.”  So, when the Realtor got out letter, they just checked to make sure the purchase price was what they were told.  Monthly payments went right out the window.

Now, I am not pointing fingers as to who is to blame because it can go many directions.  But as a potential home owner, the buyer should have said right away when they learned of the $200+ per month HOA fees, that the house was now out of range.  However, when we got the approval from HomePath to continue with that price range with the HOA fees, the Realtor should then have switched to HomePath homes for those homes with higher monthly payments.

In the end, a pre-qualification or even a pre-approval is only as good as the terms that are given in it.  Going outside those terms, means a big fat DENIED!!!  If one does not listen to the terms, then a lot of time is lost and possibily a lot of money.  Communication is key.  Each player of the buyer’s team needs to be clear as to what each other team member is doing to help direct that buyer to a victory of a new home.  If you find a team member slacking, wake them up and tell them to get on the ball.  If they continue, bench them and bring in the second string.

Many people in today’s market are hesitant to apply for a mortgage, whether it be a purchase or refinance.  They are scared, or more so embarrassed, about the possibility of being denied for the loan.  However, those that are denied for a mortgage are one step closer to getting approved than those that sit around doing nothing and hoping that time will solve their problems.

Unlike many insitutions, Knightlines Mortgage Services, LLC views a denial as an opportunity to help and eventually turn that denial into an approval.  We do not just send you a simple letter that says your mortgage has been denied with a generic reason (usually something like “Decision was based on information obtained from a credit reporting agency.”)  That does a lot of help… what information on the report?

If a borrower is denied because of derogatory credit, Knightlines will work with the borrower on how to improve the credit to meet qualifying standards.  In some cases, it could just be a matter of removing old information that is incorrect.  In others, it can be formulating a plan that can have you in a new home within 3-6 months.  And in extreme cases, it can take up to 12 months.  But any way you slice it, Knightlines works with you to get that home.  We do not just send a letter and say sorry, try again later.

If the issue is more than credit keeping a borrower from their new loan, we structure a plan.  The plan could be as simple as a budget to help save money each month so reserves can be met.  Whatever the issue is, Knightlines does not stop when a denial is obtained.

So, if you are concerned about being denied, do not be.  We are here to help.  And who knows, you might just already be approvalable.  Call us today to start you path to being approved.  Or apply online now for same day decisions.

May 1, 2009 – Policy went into effect whereby lenders are no longer accepting broker/3rd party appraisals.  This is better known as the Home Valuation Code of Conduct (HVCC).  Lenders will now order an appraisal for a newly submitted loan.  Why is this bad?

• Brokers must make a decision on what lender they will use prior to knowing the value of a the house.  Some lenders have better “bumps” for varying LTVs.  If the LTV comes in too high, the bumps may offset the “Par” rate.  If it come in too low, the borrower could be missing out on a lower rate.
• Brokers can no longer submit to more than one lender.  Let’s say the lender all of a sudden becomes backlogged (YES, this does happen) and are no longer turning loans over in a couple of days but rather weeks, brokers used to be able to submit the file to another lender to get the faster turn time.  Now that the broker no longer owns the appraisal, a new appraisal would need to be ordered for the new lender.
• Relationships break down.  Brokers and appraisers will no longer work in unison to help a borrower determine a range value for their house prior to ordering the appraisal and working on the file to make sure that a loan is even possible.
• Home values will decrease, as appraisers will want to low ball a value to make sure that they stay on the lender’s good side to see future business.
• Etc. Etc. Etc.

May 4-8, 2009 – Mortgage rates started at 4.5% on Monday.  On Friday, mortgage rates climb up to 4.75% for a 30 year fixed.  This rate increase was sparked by the failure of mortgage backed securities (MBS) to be sold on the market Thursday.  Fannie Mae stepped up to the plate to buy the MBS in hopes to keep rates down a little longer.  But investors want rates to come back up before they will start buying MBS again.  FNMA only has so much money and time left to keep rates low.  A .25% increase in less than 5 days is a sign of things to come.  Especially when you look at market trends.  The ceiling is being tested… it is only a matter of time before the ceiling becomes the new floor.

I can go on about how time is coming to an end for low mortgages and favorable financing guidelines, but I felt that these two items were the most important of this week.  One ties the hands of those who are here to protect you and get you the best possible deal, and the other proves that rates are on the rise.

The clock is striking eleven… don’t wait for it to strike twelve and the fairytale ends because there is no happily ever after for those waiting for lower rates.

Just last week, mortgage loan rates were in the 4-5% range.  But by the end of this week, mortgage rates could be as high as 7-8%.  Those people who were waiting for the right time to buy have missed that ship, as it set sail last week.  The great deals of low priced houses and low rates, may never be seen again in our life time.  Those who jumped on the golden opportunity have the potential of turning their gold into platinum, while those who procrastinated will struggle to even purchase cardboard box big enough to cover them from head to toe.

But in all this bad news, there is good new!!!  What you have already read has not happened yet.  Rates are still at all time lows.  They are still in 4-5% range.  There are still some 100% mortgage financing programs out there.  Banks are still lending money.  And homes are still being purchase at great prices.  Don’t wait till the title becomes a reality.

Call your realtor today to find a deal, I mean home, that is right for you.  And call us today, to get your financing in place and your rate locked in before they really do go back up.  Time is not on your side…

Last week, President Obama talked about the record low interest rates available for home loans and how this is a great time for millions of homeowners to refinance.

Quite a few news sources criticized him for sounding too much like a salesman – but hey, they have to have something to complain about….

Regardless, the fact remains that interest rates on mortgages are STILL available below 5%.

So if you’re looking to change your adjustable-rate loan to a fixed, or just get the rate dropped on your current fixed-rate home loan, NOW would be a great time to do it.

Or, like so many people are inclined to do, you can wait and wait  until rates go up again and you can start with the “I wish I would have” game.

Even if you your existing mortgage is greater than 80% LTV, you still have options through RefiPLUS.

Call Knightlines(or Apply Online) if you’re ready to refinance.