The
mortgage industry has seen major changes in the last few years.
Underwriting standards have tightened up and seem to vary considerably
between banks and other major lenders. As a result, when a buyer who is
dealing with just one lender (be it a bank or a credit union) has no
where else to turn should the underwriter of that institution come up
with a rejection or conditions for the loan.
Mortgage brokers
though, have a clear advantage in that they have multiple
lenders/underwriters they can place the loan with. Interestingly, many times one
can get 1/8 to 1/4% better rate with a mortgage broker due to the number
of lenders competing. Homeowners Concept has had a great relationship
with NetCentral Mortgage (NCM) for their extremely high reliability and smooth closings. It helps that Netcentral is located in the same building as our central office in Wauwatosa. If they EVER do not do what they promise, they will certainly hear it from all the Homeowners Concept agents and we do a lot of sales each year. In
one recent case we had a buyer that was preapproved for 5% down with a
bank but a few days before closing the underwriter demanded 20%. Buyer
took the file away from the bank, placed it with NCM and was able to
close with only 5% down.
In another case the bank required the buyer to repair a major item on
the property even though the buyer's downpayment was 30%! NCM got the
loan approved with no issues.
Buyers, sellers and agents want a "close to 100%" probability that the loan will get
approved and for the same rate and conditions as when it was originated.
Our vast experience shows that mortgage brokers absolutely offer the
best odds of getting a loan through and in a hassle free way. NetCentral Mortgage can be found at NetCentralMortgage.com
Friday, January 25, 2013
Friday, January 11, 2013
WHAT YOU NEED TO KNOW ABOUT SHORT SALES.
For a homeowner that owes more money
than the home is worth and needs to sell now, short sale is the best
route. In a “normal” sale, the seller has money left over after paying
closing costs, proration of taxes, liens and the outstanding balance of
any loans/mortgages against the property. This money is known as “net
equity”. Unfortunately, there are a growing number of sellers who, due
to a variety of reasons, find that they owe more on the property than it
is currently worth. They are “upside down” or have “negative” equity.
There are two ways to handle “negative” equity. First, if the seller had the funds available, he could pay off the negative equity by bringing money to closing. This way the lender gets paid in full and there are no adverse consequences to the seller’s credit rating. The second way is with a “short sale”. The assumption here is that the seller does not have the funds to make up the deficiency. It is also often that a seller in this situation has stopped making payments on his mortgage(s) and is suffering from a degraded credit rating because of this. Foreclosure would be the end result, if neither of these options are available.
Foreclosure should be avoided as it is worse than a short sale for the seller and the lender. The short sale closing impacts the seller's credit much less than a foreclosure. FNMA guidelines require a minimum of 2 years before one becomes eligible for a mortgage with a short sale on their record. It is 5 years minimum with a foreclosure. For the lenders, selling a property short is better than foreclosure because of time and cost savings.
You might wonder why lenders are so eager to take such a huge discount, so you have to consider the nature of the banking business. Some lenders report that if the home goes into foreclosure by the time the home actually closes with the new buyer the lender will be lucky to have netted 50% of the original loan balance.
What‘s the bottom line from the lenders perspective? They are in the business of lending money, not owning homes. If they can accept a short sale offer and rid themselves of the bad loan AND net more versus the home going into foreclosure…they will do it every time. It‘s simply smart business for them.
There are a number of hoops however one has to jump through in order to get the short sale approved by the bank and ultimately close. For a successful short sale, it is necessary to employ a seasoned agent - as all the Homeowners Concept agents are. There is technical skill involved in knowing how to price the property, write the contract, and ultimately assemble and deliver a good “package,” providing all the information that the lender will need to make their decision. Each lender has a different “punch-list” of documents that they require. All of the agents at Homeowners Concept have been trained and are quite capable of short sales due to our high volume. There's definitely more work involved in a short sale but it is good for all: sellers, buyers and lenders.
There are two ways to handle “negative” equity. First, if the seller had the funds available, he could pay off the negative equity by bringing money to closing. This way the lender gets paid in full and there are no adverse consequences to the seller’s credit rating. The second way is with a “short sale”. The assumption here is that the seller does not have the funds to make up the deficiency. It is also often that a seller in this situation has stopped making payments on his mortgage(s) and is suffering from a degraded credit rating because of this. Foreclosure would be the end result, if neither of these options are available.
Foreclosure should be avoided as it is worse than a short sale for the seller and the lender. The short sale closing impacts the seller's credit much less than a foreclosure. FNMA guidelines require a minimum of 2 years before one becomes eligible for a mortgage with a short sale on their record. It is 5 years minimum with a foreclosure. For the lenders, selling a property short is better than foreclosure because of time and cost savings.
You might wonder why lenders are so eager to take such a huge discount, so you have to consider the nature of the banking business. Some lenders report that if the home goes into foreclosure by the time the home actually closes with the new buyer the lender will be lucky to have netted 50% of the original loan balance.
What‘s the bottom line from the lenders perspective? They are in the business of lending money, not owning homes. If they can accept a short sale offer and rid themselves of the bad loan AND net more versus the home going into foreclosure…they will do it every time. It‘s simply smart business for them.
There are a number of hoops however one has to jump through in order to get the short sale approved by the bank and ultimately close. For a successful short sale, it is necessary to employ a seasoned agent - as all the Homeowners Concept agents are. There is technical skill involved in knowing how to price the property, write the contract, and ultimately assemble and deliver a good “package,” providing all the information that the lender will need to make their decision. Each lender has a different “punch-list” of documents that they require. All of the agents at Homeowners Concept have been trained and are quite capable of short sales due to our high volume. There's definitely more work involved in a short sale but it is good for all: sellers, buyers and lenders.
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