Mortgage Pre-Approvals and Open Communication

Prior to all of the issues surrounding the sub-prime mortgage sector, which has caused most if not all lenders to tighten their underwriting guidelines, a mortgage broker could issue a pre-approval letter based on the fact that they would definitely be able to place the loan somewhere. An applcation, in most cases, would be taken and credit run and a pre-approval letter could be generated within an hour. Stated Income, First Time Homebuyer, 100% Financing, a late payment on an existing mortgage -- these and others were non-issues.

Well, the times have changed! I know mortgage brokers who've used the quick issuance of a pre-approval letter as a way to gain the confidence and hopefully the business from customers. You still have the stellar credit, high income borrowers who are putting down 20% and can get approved everywhere. But, those people are few and far between. It is now imperative to take more time and effort to ensure that the loan that you pre-approve your customer for can actually close. A credit approval at the very least and ideally a commitment letter from the bank is now what you should provide to your customers. You also need to counsel your customers and realtors that "may" have issues down the line that banks are constantly changing their guidelines and that based on the information provided and on the current credit situation, I can place your loan today. That may or may not be the case tomorrow.

Obviously, I am referencing customers that today would fall into the Alt-A or Sub-Prime buckets. People who can't prove their incomes (self employed), don't have a ton of assets, have a low credit score. I know personally of many sales that have been falling through due to the buyers not being able to obtain the financing that they thought they could get. Providing honest information throughout the process can help to avoid this. (http://www.stevehawkmortgage.com/)

Low Credit Scores can quailfy for conforming rate mortgages

Recently I've had a few customers who had poor credit scores (in the 500s) and were having difficulty obtaining financing from other lenders. Many mortgage brokers or loan officers (usually new to the business with little or no training) make the assumption that these borrowers are automatically sub-prime and try to sell them a 2/28 mortgage at 9% (paying 2 points). Loan Officers should always run these files through DU or LP, especially if you have compensating factors -- lots of reserves, clean mortgage history, stable job history, etc. because you never know. It's a good way to gain a customer from the competition and it certainly is in the best interest of the customer.

My customer last month had a 581 middle FICO score, with a BK discharge 3 years ago. And he was looking for 100% financing, of course! His options were limited to say the least and he had already been turned down. I was able to get an EA1/Eligible through DU, and give him a conforming 30 year fixed rate mortgage. Yes, he has to pay MI but he's still in a better position, the loan was approved based on the DU findings and he's in his home. Oh, and there was a 3% sellers concession.

Certainly there are many instances where a sub-prime score = a sub-prime loan, but this is not always the case. (www.stevehawkmortgage.com)

Another Benefit of working with a Mortgage Broker

I'm working on a situation currently which made me think of one of the benefits that customers have working with mortgage broker rather than a direct lender/bank.

My customers signed the purchase contract, put down 5% (which is the max they can put down), sent me their income docs, and I ordered the appraisal. The appraisal just came back and, as luck would have it, value is less than the purchase price. The sellers won't budge and my customers want the home. It's a small loan but my customers would need to come up with an additional $7500 for the 95% LTV loan we were going with. They do not have it on top of having to pay closing costs. I need to now get them 100% financing. The bank that I had the original loan placed with will go to a maximum 95% LTV/CLTV.

As a broker with almost 150 different lenders at my disposal, I was able to place the loan with little effort and ease the minds of my customers. If I only had my original bank of choice at my disposal, I would have lost the deal and my customers would be scrambling to find financing.

FHA -- Subprime Loan Alternative

As most of us know, the sub-prime mortgage market is in a shambles. Many sub-prime customers who are looking to refinance out of high interest rate 2/28 adjustable mortgages can't even qualify for another sub-prime loan today. And, I've found in many cases their credit hasn't improved dramatically even though they've paid their mortgage on time. There's also equity issues to contend with.

I had a wholesaler come to my office today for lunch who works for a bank that aggressively manually underwrites VA and FHA loans. If a loan makes sense, they'll underwrite it. They told our office stories of approving customers with very low ficos -- high 400's to low 500's -- and getting them high LTV FHA loans with very competitive fixed rates. We're talking 7.25 - 7.50% versus much higher sub-prime rates. There needs to be compensating factors for approval -- mortgage history, reserves, debt ratio -- but it seems like a tremendous alternative product. This product doesn't replace your conventional FHA loans but rather provides a sub-prime alternative. (www.stevehawkmortgage.com)

100% Mortgage Financing is Still Available

Contrary to popular opinion, it is still possible to finance 100% of the purchase price of your new home AND have the seller provide between 3-6% to cover closing costs! You can basically move into a new home with little or no money coming out of your pocket. This is especially important for some First Time Homebuyers who may not have accumulated a large enough nest egg to but down 10-20% to purchase a home in NY or CT, where I do most of my business and home prices remain high.

Sub-Prime Mortgage Alternative

Many mortgage customers with less than perfect credit are having a lot of difficulty qualifying for homeloans in today's lending market. I have discovered an alternative with a lender I have access to who will qualify customers with very low credit scores for low interest, FHA , fixed rate loans. This is a tremendous product for homeowners who are currently in high interest rate adjustable mortgages and for new homebuyers who don't have great credit, for whatever reason. Feel free to contact me for more information.