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As the Winter Olympics wind down, here were ten things I did to avoid them….

10. PartyPoker.net
09. Read the comments on theJetsBlog.com
08. Created two more mortgage sites
07. Skimmed a book - Jeffrey Gitomer’s The Sales Bible
06. Posted on Brokeroutpost
05. Got my haircut at Great Clips for $8.99
04. Watched the NFL Scouting Combine on the NFL Network
03. Activated HBO on DirecTV so I can watch the Sopranos
02. Did I mention that I read the comments on theJetsBlog
01. I watched Grey’s Anatomy for the 1st time… YIKES!

A short sale is when a lender accepts a discount on a mortgage to avoid a possible foreclosure auction or bankruptcy. For Example: A homeowner, who is facing foreclosure, has an existing mortgage of $300,000 and you have a buyer willing to pay $220,000, you would write up a contract between the buyer and the seller, and fax it to the lender. This could be accepted as full payment of the loan.

Borrowers should be aware that receiving a short sale from the lender will still have a detrimental effect on their credit standing. Most lenders will report the mortgage as “account settled for less than amount due” or some similar type verbiage. Such a reporting will have a derogatory effect on their credit score and may hamper their ability to get a mortgage loan in the future.

Banks do not like excess inventory and bad loans on their books; therefore, if they see an opportunity where they can get rid of the property without it being a huge loss, they will do it. Lenders know that they could loose a lot more money if it were to go to auction. There are so many fees involved if the property goes to auction, that they would be better off taking the discount beforehand and be finished with the headache of it all.

Sometimes this is the only way out for a home owner rather than the home going to foreclosure. Chances are you may have to wait a few months before obtaining a mortgage but with today’s Subprime lenders just about anyone can get a mortgage.

Other sites: Loan Officer | Delinquency | How To Choose A Real Estate Agent | VA| Pay Option Arm Calculator

A home seller may be able to loan a portion of the selling price to the buyer and secure it with a mortgage or trust deed against the home. The seller would not get his portion of the sale immediately in cash but would get income in the form of the payments made by the buyer.

This is a popular form of financing, when borrowers cannot otherwise qualify for a traditional piggy back loan, or are unable to come up with an otherwise required down payment.

The lender will want to see the terms and agreement of the seller held second. The lender will figure in the payments of the seller held second when qualifying the borrower for the first mortgage.

Other sites: Mortgage Broker | Conforming Loans| Pay Option Arm Calculator

In the mortgage business, the word “reserves” has more than one meaning. It can refer to the monies (assets) required by the lending bank - to be on hand in the borrowers deposit accounts at the time the loan closes.

The other form of “reserves” in a mortgage transaction are those monies required by the lender to go in escrow, if one is created.

Although proceeds from the sale of your previous home are not technically “seasoned”, they may be used for the down payment of a new purchase, as well as the necessary closing reserves.

Many banks do not consider state controlled retirement funds when using borrowers deposit records to determine how much cash reserves they have. This is because many state controlled retirement funds are inaccessible to their contributors.

Reserves are assets that a home buyer has after settlement. It is one of four underwriting criteria, as with credit, income, and loan-to-value ratio. Most banks require borrowers to have 3 to 6 months worth of housing expenses in reserve after closing. Reserves do not have to be liquid. They can be in the form non-liquid investments such as stock securities, bonds, retirement funds, etc.

A Verification of Deposits (VOD) is often used to show both source and seasoning of reserves or assets. This is a form that is filled out and signed by an official of the depositing institution that verifies such things as the current balance, daily deposit average, account numbers and other information.

When a lender is asking for seasoning or reserves on assets, this usually is referring to liquid assets such as checking and savings. The lender uses the borrower’s assets as a indicator for measuring the borrower’s ability to repay a loan. The assets also show the borrowers pattern of savings and ability to support financial obligations.

Most lenders want a borrower’s reserves to be seasoned for a minimum of 60 days. Seasoned means that they must show proof that they have had this money for at least 60 days. A lender doesn’t want to see that a borrower just had a large amount of money deposited into their account just recently, or they will require proof of where the money came from along with a letter of explanation. This safeguards the lender that the borrower has not incurred a new debt or loan that needs to be calculated into their debt to income ratio.

Many wonder why reserves are sometimes required. This gives the lender more sense of security when lending you the money for your home. If any life changing situations should occur, and you have 6-12 months of “reserves” available, you are likely to use these funds to make your payments in order to keep your house. This makes you less of a risk in the lenders eyes.

With retirement accounts you may be required to contact your human resource department to get a statement explaining how readily available these accounts would be and what the process for taking any money out would be.

Though a borrowers 401k accounts are used to show these reserves, the money in the 401k account is not actually drawn out it is simply shown to be available.

Fannie Mae continues to tighten up approval guidelines. By putting accurate reserves on your 1003, you actually will receive LESS DOCUMENTATION requirements! Most often, Fannie will only require verification of some of the funds listed, not all (for example, borrowers may have checking, savings, and retirement totaling $12,500, but D.U. findings may need NONE verified, or perhaps only $500 verified…then you do not need to send in all asset verifications, just the $500)Remember - every little bit helps! Checking Accounts count at 100% of balance (recent large deposits may need to be explained)Savings Accounts count at 100% of balance (recent large deposits may need to be explained)Stocks / Mutual Funds count at 100% of balance401k / IRA count at 70% of vested balance Cash balance for life insurance policies count at 100% of cash balance Most other retirement accounts may not count, including pensions, PERA accounts, etc.

You can usually count the cash value of a life insurance policy as well.

Other sites: Mortgage Broker | Negative Amortization | Fixed-rate mortgage | Delinquency | Increasing your homes value | MIP | Stated Income Loan | What not to do after you apply for a Mortgage | Quick Closing | Tips for lowering your homeowners insurance| Pay Option Arm Calculator

When remodeling your home it is recommended to get a licensed contractor, depending on the size of the job. There are many DIY (Do It Yourself) things that you can do around your house to improve and remodel your home but if you plan on adding an addition, rewiring the whole house or doing other large projects a licensed contractor is usually the way to go. Some tips to remember when remodeling: Always get an estimate before the contractor begins work. Never pay the contractor before the work is complete. Check references and ask to see pictures of work the contractor has done. Don’t over improve your house so much that it is by far the nicest, biggest and best house in your neighborhood. This can cause problems if you ever needed or wanted to sell the home and may make it hard to get back the money you put into it. Last get a timeline from the contractor of the work being done so that you can plan accordingly. Consult a mortgage professional to assist with the financing of your home improvement.

If you want to remodel to sell faster and are working on a limited budget when remodeling your home, the areas you will want to spend your money, time and effort will be the kitchen and the bathrooms. Although these 2 areas will make your home sell faster than any other there is one more area you will want to some effort into - Curb appeal! Some potential buyers will not even get out to look at the inside of a home if they don’t like the way the home looks when they drive up.

When remodeling your home you cannot not expect to get out what you put in. In most instances If you spend $30K remodeling you will not increase the value of your home by $30k.

A second mortgage or a home equity line of credit are two great ways to get the cash you need to remodel your home. Generally you will get a much lower rate than you would with a credit card and the interest on the 2nd mortgage and home equity line of credit will be tax deductible. You also have the option of refinancing your first mortgage to take extra cash out to pay to remodel your home. Talk to a licenses mortgage agent today to find out which option will be best for you.

If you don’t have the cash to pay for these improvements, you may qualify for a renovation loan. The lender will loan an amount based on what your home will be worth after your improvements are made.

Remodeling your home is a great way to increase the marketability of your home as well as the value.

Other sites: Mortgage Broker | VA | Why should I refinance | MIP | Increasing your homes value | Investor Loans| Pay Option Arm Calculator

If your mortgage has been denied, there are many reasons why. Here are some of the most common reasons.

You could be denied because of residency status. While some lenders will not lend to you if you are not a US citizen, there are other lenders who will. Also if you are unable to produce sufficient documentation for your income and have lower credit scores you might be denied without the possibility of a stated income program.

Your loan could be denied if you did not provide accurate information during the initial loan application. Underwriters verify nearly all information so you may as well provide accurate info up front!

Sometimes applications have been denied because the loan officer did not ask for the proper information or submitted too much information (ex Submitting a W-2 on a stated income deal). If your mortgage application has been denied please call and we may have a program for you.

A mortgage application can be denied if the property being bought is not acceptable on the secondary market. For instance, a condominium or cooperative project that is not Fannie Mae eligible, or a house that, based on the survey, has a part of a structure built on a neighbor’s land. While no banks would lend on a property with title or survey issues, some lenders thrive on making mortgage financing available to condos and coops that are non-conforming.

Your loan could be denied if you have not been in the same line of work over the past two years. Your loan could also be denied if you have huge gaps when switching jobs.

Your mortgage can be denied for many credit reasons. Your credit score may not fit the guidelines of the program that you are trying to qualify for. You may have too much derogatory credit listed on your credit report or you may have open collection accounts that you are unable to pay and the lender requires them to be paid to obtain the loan you are looking for. Lack of credit tradelines or lack of a credit history are other big credit reasons as to why people are denied a loan. Credit tradelines are open credit accounts reporting on your credit report. If you do not have enough open active tradelines a underwriter may not have enough information to make a decision on whether you are credit worthy of obtaining a loan from them.

Your loan can be denied because income is not sufficient to support the monthly payments according to the lender guidelines.

Loans are sometimes denied because of things that happen after the application is taken. Some of the more common are:

• termination of employment, such as quitting a job to find one closer to the new home, or getting fired for missing too much work while planning the big move to the new home
• increased debt, such as buying things on credit to go in or with the new home, like furniture or a new car, or spending that anticipated refinance money a little early
• late payments, because the borrowers assumes they can make the payment after their refinance closes or the refinance will pay it off.

Lenders are required to send you a form stating the reason for your loan denial.

Other sites: Mortgage Broker | VA | Stated Income Loan | Closing Costs | Fixed-rate mortgage | Why should I refinance | MIP | Protect Yourself from the Real Estate Bubble | Selling your home with a real estate agent | FSBO| Pay Option Arm Calculator

A Rate-Improvement Mortgage is basically a fixed-rate mortgage that includes a provision which gives borrowers a one-time option to reduce the interest rate (without refinancing) during the very early years of the mortgage term.

Other sites: Mortgage Broker| Pay Option Arm Calculator

A real estate “bubble” occurs when housing prices increase at a rate much faster than the rate of inflation and median incomes. Initially, the bubble is fueled falling interest rates which make higher priced homes generally more affordable through a lower monthly payment.

Don’t buy more house than you can afford. Keep payments at a low level, if you have to pay more than you want take advantage of loans that offer low payments for long periods of time such as interest only or pay option arms.

Real Estate Bubbles affect homeowners who depend on cashing out the equity of their properties periodically to make mortgage payments the most. With the value of their properties declining, these homeowners would have no equity left in their homes to cash out. A good way to protect against housing bubbles is to get a mortgage with affordable payments, either by way of a longer term or a lower loan amount. With an affordable monthly payment, one can easily ride out temporary declines in real estate values.

Don’t buy a house whose price seems unnaturally high just because you are afraid you will miss the chance before prices go up again.

Don’t buy a home you normally couldn’t afford just because you think it is a good investment. If prices fall you may decide the home wasn’t a good investment at all.

If housing prices fall, those who bought their homes with little or no money down may find they owe more than their home is worth, making them unable to sell. Some will have no choice but to walk away from their home, losing it to foreclosure and damaging their credit for many years.

Don’t assume your neighborhood will always continue to appreciate as quickly as it has recently. Avoid buying a home in a neighborhood that has recently appreciated well above the average a few years prior to the bubble. Ask your Mortgage Professional or a Realtor for tips on determining a “safe” rate of appreciation for your neighborhood.

The people most at risk are those with Adjustable Rate Mortgages (ARMs). As interest rates increase, so do their monthly payments. Many may find themselves unable to afford their new, higher payment.

Don’t get trapped by cash-out refinancing. Home equity should be used for home improvement. Only use cash-out refinancing to consolidate debt if you are certain you are now committed to avoiding the spending habits that accumulated the debt to start with.

Choose a modest home in a good neighborhood rather than a large, fancy home in a less desirable neighborhood. Good neighborhoods tend hold their value and appreciate better regardless of the bubble.

Other sites: Mortgage Broker | Quick Closing | Fixed-rate mortgage | Reasons Loan Applications Are Rejected| Pay Option Arm Calculator

You may be offered a lower rate if you choose to take a pre-payment on your mortgage loan. Companies will have a couple options as far as the pre-payment penalty in which you can choose from. The most common being a hard pre-payment penalty which will require you to pay a certain amount of money if you pay your mortgage off in a set period of time. A soft pre-payment penalty usually allows you to sell your loan during the pre-payment term and not have to pay a penalty. There are many different pre-payment penalty set-ups in regards to them being hard and soft, with some being a combination of the two.

Lenders that have pre-payment penalty features on their loans generally do not like to have their pre-payment penalties bought out. The number one reason for taking a considerably higher rate to avoid a pre-payment penalty is because you are planning to sell the house quickly or refinance to a new loan quickly. Lenders prefer for you to stay in your mortgage with them for long periods of time so that they can earn more money. By applying prepayment penalties to loans, the lenders can keep their borrowers for longer periods of time on average. Some people will still sell or refinance again before their prepayment penalty period is up, however the lender will make their money then from the prepayment penalty.

If you plan on moving or refinancing before the prepayment penalty expires, it’s a good idea to avoid getting one. The advantage to a prepayment penalty is that you will receive a lower interest rate. If you don’t plan on moving or refinancing, it may be in your best interest to consider having a prepayment penalty on your mortgage.

Make sure you ask and are completely aware of any pre-payment penalties on your loan before you get to closing. If you are choosing to go ahead with an adjustable rate mortgage (ARM) you should make sure that your pre-payment penalty does not exceed your fixed rate portion or your loan. An example would be if you choose a 2/28 ARM (rate is fixed for 2 years and then adjusts every year thereafter for the next 28 years) you probably do not want to have a 3, 4, or 5 year pre-payment penalty on your loan. Many times after your fixed portion of your ARM is up you will choose to refinance to either another ARM loan or a fixed rate loan and you don’t want to get stuck still having a pre-payment penalty.

If you are taking an adjustable rate mortgage (ARM) with a prepayment penalty make sure that the penalty is not longer than the fixed period of the ARM because some arms may go up between 5 and 6% after the initial adjustment and at that point it would be in your best interest to be able to refinance without penalty after the initial fixed period.

Other sites: Mortgage Broker | MIP | 1003 The Loan Application | Closing Costs| Pay Option Arm Calculator

There are some basic financial things you can do to get prepared for buying your first home. This will make it easier for you and your mortgage broker. Start to collect and organize documentation:

• You should start to save and organize your pay stubs. You will often need the past 30 days worth of stubs.
• Go through your old tax returns and sort out your W-2s or 1099 forms. You will need the past two years W-2s/1099 and may need the past years complete returns
• Organize and gather your old bank statements. You may need these to show money to cover down payment and closing costs (last 2 months). These may also be used in lieu of other income documentation (12 months)
• If you have other assets, 401(k), Mutual Funds, Stocks, Life Insurance, etc. you may also need the past 2 months statements from those accounts.
• Check your credit. If you haven’t checked it yet, now is a good time. You can get one for free once a year. If you are working with a mortgage broker they may be able to sit down with you and go over your credit report. Start to clean it up if you can. If you have charge offs, or collections that you can pay off, or have already paid off, make sure they are accurately reporting.
• Save or get copies of your canceled rent checks. Most banks have an online check viewer. Print out or get copies from your bank of your rent checks for the past 12 months.
• If you have any student loans that are still in deferment, contact them and get a letter of deferment.

If you have experienced a major legal event that affects your finances such as a divorce or bankruptcy - keep all documents in a orderly and safe manner. There is a very good chance that some or all of the documentation from these proceedings will be needed in order to get you approved for the best possible mortgage loan. Borrowers with incomplete or missing documentation often get less favorable terms on their mortgage than ones who have such documents.

Congratulations! We would be happy to assist you on your pursuit of the American Dream.

Start saving. Having savings can help with approval in many ways. Additional funds strengthen your ability to be approved. It helps to show that you have reserves. The savings can also be used for a down payment and closing costs. There are also several out of pocket expenses you should expect to have such as the Earnest Money and Appraisal and/or Inspections. Ways to start saving:

• Pay your self first: This is a common savings technique. Pay your self first means the first thing you do on payday is put some money aside for your savings. This is a fine line you need to walk, don’t jeopardize your credit by missing payments.
• Direct Deposit: if your employer allows you to have multiple direct deposit accounts set one up for your savings account. You will miss the money less if you never see it to begin with in your checking account.
• Clip Coupons: If you don’t now, start. Every little bit of savings can help.
• Cut back on non-essential activities: Home cooking is always cheaper than going out, rent a movie rather than go to the theater, the rental is cheaper and so it the popcorn if you microwave it your self.
• Bring a bag lunch to work. If you go out to lunch or to a cafeteria every day that money can add up quickly.
• Quit or cut back on your vices. Quit smoking, besides being a healthy decision it is a smart financial decision. Do you like playing the power ball or those little scratch off tickets, put that little enjoyment aside until after you have the home.
• Cut back on your current bills. Can you do with out the full cable package for a couple months until you are in the new home? Can you do something to lower your other utility bills, lower the heat or air conditioning, or cut back on electricity and water use?

Pack a first night survival kit. Use one of your moving boxes and pack if full of things you may need your first night. Set this box aside or better yet put it in your car before you even go to closing. Your Survival Kit:

• Tools: Phillips and flat head screw driver, flashlight, pliers or wrench, utility scissors, straight edge razors (simple small tool kits can be bought for cheap at dollar stores, Ikea, and other general home stores)
• Home Essentials: Paper Towels, paper plates, plastic cups, plastic utensils, napkins, toilet paper, light bulb(s)
• Linens: towel(s), sheets, pillows, washcloths.
• Toiletries: soap, shampoo, toothbrush, hairbrush, toothpaste
• Misc: favorite board game, inflatable bed (or pool raft), reading material, deck or cards, not pad, pen, pencil, all purpose cleaner and sponge.
• Complete change of clothes or at least a change of underwear (remember what your mother always told you)

When buying your first home, or any home, please keep in mind that you will not always get the keys to your new house until the mortgage has been recorded with the county and the funding of all money has taken place. Read your purchase agreements carefully because sometimes there may be a specific date or time given that you will receive the keys after the closing (example: the buyer will receive the keys to the property 3 days after closing).

It’s possible you might not need all of the information above because some programs call for different documentation. Your Mortgage Broker’s task of find a mortgage for you will be much easier with this documentation close at hand and could mean the difference of closing on time or not closing on time. The more efficient you are the faster your loan process will be.

Determine how much mortgage you can afford. Start by analyzing you monthly spending. You should collect your current monthly spending data to see what portion of your income goes to necessary living expenses and what you can cut down on. Stop taking on new debt and trim your non-essential spending. Buying a big-ticket item or a new car can only hamper your dream of homeownership. Determine how much of your income can be allocated towards housing expenses, then consult a mortgage professional or use the mortgage calculators on this or other websites to determine how much mortgage can you afford. Be realistic, when estimating housing expenses, in addition to monthly mortgage payments, do not neglect other inevitable expenses such as property tax, homeowner insurance, maintenance and the occasional home improvement costs.

Other sites: Loan Officer | Delinquency | What not to do after you apply for a Mortgage | Why is my credit bad | MIP | VA | Fixed-rate mortgage| Pay Option Arm Calculator

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