If your loan ain’t vanilla, you may be in for a rocky road.
Rhonda Porter on 08 9, 2007
Just a week ago, I wrote about what you should do if you’re contemplating obtaining a mortgage. If you’re all ready in the process, I have a [photopress:ice_cream_1.jpg,thumb,alignright]few extra tips for you. Contact your Mortgage Professional as soon as possible to:
- Make sure you loan is approved. Not preapproved, not prequalified: I’m talking your supporting documentation has been reviewed and signed off by an underwriter.
- Confirm that your loan is locked and locked for a long enough time period (ideally 5 days or more beyond your closing date in case something unexpected happens). Lenders are looking for ways out of “non-vanilla” transactions right now. If your lock expires, the extension fees are becoming either very expensive or extending is not an option. If your lock is not for a long enough time period, you could be out of luck. Obtain a lock confirmation from your lender.
- While in the process, really mind your p’s and q’s. Refrain from using too much credit or spending too much money. Lenders are picking and chosing who they’re lending to. Act as if your credit is being re-ran, employment and assets re-verified prior to your loan funding–it may be! Don’t give them a reason to back out on their loan approval.
I’m telling you this as I’ve been reviewing memos from lenders for the past few days. Every lender we work with is reacting differently to this market. If your mortgage is non-conforming (loan amounts over $417,000) and/or non-traditional mortgages, such as interest only, reduced documentation (stated income, stated assets, NIV) be prepared for a challenging closing. Homecomings Financial began their memo today stating: “The mortgage market is continuing to adjust by limiting its appetite for certain products.”
This is not a time to be causal about your mortgage or you could wind up a casualty.
About the Author: Rhonda Porter
- Author's website: http://www.mortgageporter.com
- More posts by Rhonda Porter
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13 Responses to “If your loan ain’t vanilla, you may be in for a rocky road.”
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Watching how the finance markets are responding to all this is interesting to say the least. I’ve been getting LOTS of emails about this from the lenders I work with regularly, some communicating a greater sense of alarm than others. I’m not alarmed but I’m definitely feeling a sense of urgency and trying convey that to the people I am working with so that they don’t get caught in a bind. This isn’t just a buyer problem anymore either.
I contacted USAA a bank where I was pre approved a few months ago when we almost pulled a purchase. Their Jumbos are still sub 7% with 10% down, they appear to not be following the rest of the industry with the 8% + jumbos. We may purchase something if the time & price is right but not in any hurry.
My brother runs a WAMU in southern calif and he told me 2 days ago about a refi jumbo that was quoted in the 9% range, its going to get pretty ugly.
Hi Sandy, I know what you mean. I’ve noticed some sensationalism and others seem to be in total denial. And, this isn’t done yet. I just read this about Countrywide: http://online.wsj.com/article/SB118670096225293580.html?mod=googlenews_wsj
This will impact homeowners, buyers and sellers (not to mention us real estate professionals).
Magnolia44, it will be interesting to see how long they’ll offer the money at that rate.
4. Make sure you really want to spend what you’re spending on that house, because right now not qualifying for a loan you’re barely able to get might not be the worst thing that could happen to you.
Maybe having to walk on eggshells just to get that loan is the market’s way of telling you you’re spending more than you probably should. There are a lot of people in places like California, Florida, and Arizona who probably wish they hadn’t qualified for their loans.
faster, I don’t think “not qualifying for a loan you’re barely able to” is happening much anymore. It’s back to the good ol’ days of actually having to qualify for a mortgage and not how much home you can buy.
Rhonda–I don’t know how familiar you are with them but USAA is a pretty unique business — they only allow active duty and retired military personel, and children of members, to be members. Used to be they only allowed officers and officers’ kids, but they seem to have opened it up to enlisted too. Anyway, they may be somewhat insulated from what is going on given they’ve got a pretty low-risk clientele.
Sandy, it sounds like a great resource for non-conforming. Especially during these times.
To be honest only way we buy is a family home that is in probate right now. $$ would go to my MIL and her brother, PITI would come in @ around 28% of income, a bit high but no other serious debt & incomes should rise (we are 28). If we dont get this home we sit on the sidelines and wait with our nice downpayment thats been building for 3 years now. Time will tell dealing with family can be tough but we have 1/2 the party on our side
.
Best case scenario is MIL carries some $$ say 20% of her portion and we pay her, next thing you know we lock in a conforming. The home is in Magnolia and to be honest I see a few sitting around with asking prices that are a bit high.
BTW is this scenario legal.
MIL & Brother are on Title.
MIL refinances 80% of home value pays off brother for his 50% takes him off title, adds me and the wife with her on title. MIL takes remaining proceeds and we give mother in law our down payment 10%. The wife and I take over the refi payments and have a small side loan for the remaining purchase price 10%.
80% refi+10% down+10% loan to MIL = purchase price.
In doing this we avoid many fees and it may work out pretty well, but is it legal?
Is it legal sounds like a question for an attorney.
Family can gift real estate and there may be excise tax due. Lenders may have requirements with how long a person has been on title before consumating a loan. “Taking over payments” may be an issue with the underlying lender.
You need to speak to a real estate attorney. If you’re going to do this, do it right. The agreement (deed of trust) with the lender is with certain parties who signed the deed of trust. Cutting corners on fees upfront could really cost you (and your family) in the long run.
magnolia44,
I highly encourage you to bring your scenario to a real estate attorney. There’s two of them on this blog that you can contact: Russ or Craig.
There are alot of title issues I see that you’re not even covering, there’s the issue of the MIL’s obligation to the bank, as Rhonda pointed out.
If you’re not sure if this is “legal” why not get a legal opinion? My first thought when I read your scenario was, “who is talking them into this, and why?”
I mean, don’t you even want to have the home appraised and inspected? What if the family member is selling you a home that’s going to need a lot of work and they’re not giving you the full picture? Who’s going to prepare the final documents and get them recorded?
From my 25 years in the business, when dealing with family members, it is absolutely imperative that everything is dealt with on the up-and-up, because this usually translates into family peace down the road.
You need a disinterested, arm’s length, third party to give you a reality check.
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