Working Together
Real Estate Agent & Mortgage Originator,
Creating a Successful Real Estate Transaction
Presented By Mike Elwell
All American Title Company
Working Together The Role of the Mortgage Originator and
Realtor®
The Past
Low Credit Scores / O % Down payment
Stated / No Doc
Appraisal Standards
Traditional owner / seller
Routine / Cookie Cutter PA
Working Together The Role of the Mortgage Originator and
Realtor®
The Present
Changes, Changes, Changes.
But…
By working together, the Real Estate process today can be manageable.
The Origination Landscape has Changed!
August 1st 2007 New Laws went into effect for Mortgage Originators in Minnesota Reasonable Ability to Pay Agency Tangible Net Benefit
Churning
Escrow Disclosure 27 Standards of Conduct
The Origination Landscape has Changed! Appraisal Requirements
Underwriting Guidelines Change on a weekly or daily basis! Have questions? Check with your mortgage
professional.
Private Mortgage Insurance Changes the type of transactions we can do
Products & Programs – Back to the Basics
HVCC - Home Value Code of Conduct Effective May 1st 2009 (Excludes FHA)
Appraiser independence, valuation protections, and enhance the overall integrity of the valuation process.
The lender shall ensure that the borrower is provided, free of charge, a copy of any appraisal report concerning the borrower’s subject property immediately upon completion, and in any event no less than three days prior to the closing of the loan. The borrower may waive this three-day requirement. The lender may require the borrower to reimburse the lender for the cost of the appraisal.
Realtor can have contact and communicate with the appraiser Rescission period does not count as 3 business days.
The Origination Landscape has Changed!
HOEPA- Home Ownership and Equity Protection Act HERA- Housing and Economic Recovery Act
MDIA- Mortgage Disclosure Improvement Act (Effective July 30th ) No more quick closings! 7 business days for disclosures. Collection of fees up front.
Regulation Z: changes to Truth in Lending .125% Change to initial APR, must re-disclose
Homebuyer must receive Truth in Lending disclosure 3 business days before closing.
The Origination Landscape has Changed!
4 Steps to Creating A Successful Real Estate Transaction
Pre-qualification
Full Application
Processing and Underwriting
Closing the Transaction
Pre-qualifying Home Buyers - Step #1 Communication
Realtor ® and Loan Originator working for the common goal!
Building a Plan and a Strategy that best fit the needs for the client. Over Communicate and Allow sufficient time!
Working together. Efficiency.
Gathering all the information!!!! When in doubt, check it out!
Pre-qualifying home buyers - Step #1 The Four C’s: The Foundation of Prequalifying
First C: CHARACTER – Defined through the credit history, business status, employment history, and reputation of the applicant‘s
The credit history helps assess the applicant's financial obligation, current and past as well as the applicant's willingness to pay.
Pre-qualifying Home Buyers - Step #1
Credit Scores and how they effect the mortgage transaction today. Credit scores range from 300 – 850 Ideal score today is 740 + for conventional mortgage
transactions. FHA / Lenders now have a minimum credit score. Not like the old days of lending. Watch out for the pit falls of credit.
BK, Judgments, Liens, Collections, Etc……
Pre-qualifying home buyers - Step #1 The Four C’s
Second C: CAPACITY – The ability to earn a living. This is based on the applicant's education received, field of study, reputation and professional training & skills.
Can the applicant's generate enough income to be able to support the debt over a period of time? Will the applicant's professional training & skills provide a job that will allow them to support the debt over a period of time?
Pre-qualifying home buyers - Step #1 The Four C’s
Third C: CAPITAL - The financial scenario at this time and financial history for the past 2 years of the applicant's.
Cash on hand, what is available for down payments, closing cost and the ability to make payments to be incurred?
Assets vs. Liabilities? What type of assets are they? Are they quality, stable, and liquid?
Stocks, Bonds, Checking and Savings Accounts, 401K, Life Insurance, Owe vs. Own.
Pre-qualifying Home Buyers - Step #1 The Four C’s
Fourth C: Collateral – The valuable property of the applicant's and the value of the property to be purchased.
Value of the property vs. loan amount to secure the loan. Does the property meet the lender’s standards and those of the secondary market.
Loan To Value
Pre-qualifying Home Buyers - Step #1
Floor of Prequalification
FHA 31% / 43%
Fannie & Freddie 28% / 36%
Budget
Pre-qualifying Home Buyers - Step #1 Pre qualification Results
Communicate borrower needs. Property type Minimum down payment Down payment assistance FHA Seller Paid Closing Cost
Now Let’s go Shopping!
Pre-qualifying Home Buyers - Step #1 Mortgage Programs
Fixed Rates Mortgages Adjustable Rate
Mortgages Interest Only Government Programs
FHA & VA Specialty Programs
USDA Rural Programs
MHFA CASA
Back by Popular Demand: FHA! 3.5% Down Payment 1.75% Up Front Mortgage Insurance Safe & Secure Low Monthly Mortgage Insurance Gift Money HOP Program Administered Through MHFA FHA Excluded from HVCC Conventional Appraisal Standards Seller Paid Closing Costs – 6%
Back by Popular Demand: FHA!
When in Doubt, Ask your mortgage Professional 203K Program.
Do I need a “Certificate of Occupancy?”
FHA Anti-flipping Statutes. Good Neighbor Next Door Program-GNND Collateral: Is a town home really a condo? Credit Standards for FHA: lender driven Non occupant co borrower.
Conventional Mortgage Freddie Mac or Fannie Mae
Underwriting guidelines are strict. Comply under HOPEA, HERA etc… HVCC compliance Larger Down Payment Private Mortgage Insurance Allow Enough Time
Pre-Qualification to Pre-Approval What is the difference between Pre-Qualification
and Pre-Approval??
The Subject Property
Pre-Qualification to Pre-Approval Pre-Approval Letter
Pre-Approval letter is good as the Loan Originator writing it!
Ask for Credentials.
Full Application – Step #2 Purchase Agreement : what we
need to know! Earnest Money Subject Property Purchase Price Closing Date Financing Contingency Seller Paid Closing costs Buyers Financial Disclosure
Statement Great Tip: Proof of Funds!
Full Application – Step #2Full Application: Gather all the information
Uniform Residential Loan Application
Disclosures Who we are What we do What we cannot do
Good Faith Estimate & Truth In Lending RESPA Reform!! Effective January 1st 2010!
Collect ALL documentation.
Processing / Underwriting – Step #3 How we get the Approval
Desktop Underwriter
Loan Prospector
Back to Manual Underwriting!
Processing / Underwriting – Step #3
Role of the Title Company Quarterbacking the Transaction Coordinating & Scheduling Being Proactive and Managing
the Closing Process Communication Efficiency REO & Short Sales
Managing both sides of the transaction!
Maintaining Communication
Throughout the Transaction.
Processing / Underwriting – Step #3
Appraisal Process Include the Purchase
Agreement
HVCC- Allow enough time!
Meet the appraiser at the home!
Processing / Underwriting – Step #3
Clear to close. Full Underwriting
approval!
Processing / Underwriting – Step #3
Closing the Transaction – Step #4 10 office Locations
New Hudson Office Direct Connect Full Production Center Flexibility Value Added Services Experience Leadership Active Ownership
Partnering in Your Success! Value Added Services and Seminars
“The Eight Hundred Pound Gorilla in the Room” A Workshop on Short Sales, Potential Realtor Liability, and Developing listings
“1031” Exchanges” “Commercial Real Estate 101” “RESPA Reform” And more………