MortgagesUndressed

Maybe, former friends if not careful.

First of all, most loan programs won’t let a person with bad credit use a co-signer with good credit to overcome the problem. A file with two borrowers will be underwritten with the lowest borrowers’ credit as the guide post. This is usually the case, even with the spouse having poor credit. The theory here is the lower credits habits will overpower that of the higher credit.

Co-signing can help in qualifying. FHA loans don’t require the co-signer to occupy the home, a unique benefit of FHA. Note - many lenders have dropped FHA, Washington Mutual being the most significant. FHA has become a burden to the lenders, not worth the hassle.

Co- signing by two people occupying the property is acceptable in almost all loan programs.

This however opens the pandora’s box for problems. I recommend you not do this. It is an invitation for future credit problems, legal problems, and friendship problems. You have no control of the future credit management behavior of the co-borrower. They may just run out on your joint obligation. This practice is most common in those under age 30, and this age group is most likely to be over burdened with debt.

Know this, there is a good chance that if you co-sign for another you may be totally obligated for a mortgage where there is a dispute or question as to your rights to own the property if you have to pay the entire obligation just to maintain your good credit.

Also note, I have seen many cases where the co-signer is unaware their credit is being damaged. Both signers credit is affected by late payments. It is common behavior for the person not making the payments to not tell anyone they are having problems.

Larry Cragun

Wow, you are a loan officer. What real estate agents do you work with?

None? Then your a loan sales person.

The certain test

The easiest sucker to snooker is the person that picks up the local Sunday paper and starts calling all the banks and mortgage companies for a low rate.

I worked at a bank that thrived on this. The problem is the rate they quoted in the paper was sent to the paper on Wednesday. Now it is Monday, 5 days later. So the unethical loan officer quotes a good rate. They then exhaust the client by filling out an application on line or on the phone . This takes forever and an hour. No one wants to do that again.

So an appointment is made for Tuesday. The borrower comes in expecting 6 days ago rate. Hey the rates change daily. The loan officer quotes a high rate now, they have nabbed the poor soul, worn them out, pulled them in. A bad experiece, a common one too.

So, dont pick a lender that quotes a low rate.

However, you should know the market when you are borrowing. Not so you can squeeze every last .125 out of the rate, but so you don’t get rate raped.

From time to time I will post places to get a feeling on rates. Here is Freddie Mac’s site. Larry Cragun

This article was written in May, brought forward for your review because of a recent comment by a realtor. Larry

So you want to buy a home do you? You have a what? A friend (family member - neighbor) that is a loan officer. They will cut you a deal? Oh my! Read this, an all too often real life experience for people that choose their neighbor.

Realtor: (R) Inexperienced Loan Officer (ILO)

R: My client wants to make an offer. ILO: Go ahead they qualfy.

R: I need an approval letter: ILO: I will fax it over, I’ve checked them out, they qualify.

R: The offer was accepted, we have 30 days to close: ILO: Great, I’ll be ready, they qualify.

R: The clients have to remove the financing contingency today. ILO: Do it, they qualify.

R: Closing is next Friday, where are the documents? ILO: I will check - be write back to ya on these qualified borrowers.

R: Hello, whats up, where are you? They just ordered the UHAul. ILO:Good, i just checked, no problem on these qualified folks.

R: Its Thursday, everyones panicking, where are those doc’s? ILO: They should be sent by email today. Remember, they qualify.

R: It’s Friday, we are at the Escrow company, whats the deal here? ILO: Sorry, I just found out they don’t qualify.

This almost seems like fiction. Perhaps more like a tragedy. It isn’t fiction, it is a tragedy. It’s why real estate agents don’t just let anyone do their clients loans if they can help it. Purchases are more critical than refinances. Purchases have ending dates. A lot that is serious is at stake. The seller has to close, his seller has to close, and so does his, and on and on and on it goes, where it stops one never knows.

Some sellers have remorse, want to back out, perhaps to raise the price. If closing goes beyond the contract date, they may not have to close. Even if the buyers boxes are packed and U haul ordered, they can lose the deal.

Commissions are at stake, as is credibility. Customers expect the professionals to do their job, bring the transaction in on time. There are no excuses that are good excuses.

Certainly not every missed closing date results in a cancelled transaction. However, every missed contract date brings extra stress on the many parties. Every missed closing date offers hazards unseen.

So don’t be a party to a future Saga of the wrong lender. Pick a Professional. Professionals do purchases, they have real estate agents to vouch for that. Larry Cragun

Where’s the beef fees? A play on an old Wendy’s advertisment to open an article on the no fee loan.

There is such a thing as a no fee loan, but it is going to cost you a higher rate. That isn’t necessarily a bad thing. The fees are flexible in that the rebate can pay some or all of them. As you meet with your lender, always ask them for more than one option. It might be best to come up with a little money rather than paying the rate of a no fee loan. I saw a situation last week that had a small amount of fees. It was a loan that would only be in place for a few months. If possible, this borrower should pay a higher rate for no fees. it is a special product and may not give enough rebate to cover all of the costs, but they should ask. Larry Cragun

Yesterday I spent several hours listening to panels and presentations by the top mortgage lead generators. Some are names you are familiar with some not. You are probably familiar with Lending Tree and HouseValues.com. They were on the panels. There were others who sell to other lead generators.

Guess what? You are still prey. The lead generators want to capture you. And sell you. The want to categorize you. You may be aged. You maya be fresh. You may be cold. You may be hot. You may be exclusive. You may be non exclusive. Some want you badly, some not very badly.

However they classify you it takes one person to trap you. YOU! To become a … whatever they call you, it starts with your filling out a form.

In a previous sarcastic article I suggested lead companies sell your name 15 times for 15 bucks. I learned yesterday its only 5 times. I don’t believe them. Maybe if all 5 of the 5 sold you 5 it would be your name is sold 25 times. I believe many sell you over an over and over because so many tell me they fill out a form and they are barraged with calls. Then re barraged months later.

Be aware, they are out to get you.

Larry Cragun

I could make this a long article. I won’t.

Q: What is a Custom Construction Loan?
A: A special loan product designed to protect both a builder and the party building a house. It is usually used when the land is owned by the ultimate home owner. It is sometimes used by builders with a buyer, where the builder may have a difficult time getting a loan without having the buyer firmly in place.

Comment: If you owned a lot and had a builder to build the house, how would he pay for the construction? Not many can or will pay cash. Most likely the builder would need to borrow. OK, he will need collateral. Your lot. Wait. Do you dare turn over title to your lot to him to get a loan? What if he gets into trouble financially? He won’t. He could! I know this from personal experience. Builders get into financial trouble sometimes. Mine did.

So here comes the construction loan. The builder and you have to sign off on the draws. The bank must feel OK about the builder. You must qualify for the loan. You both go through qualifying actually. The builder must provide a resume, or be familier to the bank. The bank does research. They require some equity. If the builder goes away, they pick up the pieces and see to it the home is completed

THIS IS WHY IT IS A GREAT LOAN.

Costly I say? Yep, the fees are high the rate high. You pay for this. Usually you get an adjustable rate loan and refinance it into a fixed after the home is finished. Oh, so all those fees for a few month loan? Yep.

A time waster? Yes, for the reasons I have explained so far, plus the fact it is a difficult process, almost all of you who embark on this great idea, will quit before you finish.

It is not fun folks.

Larry Cragun

Here is an article you should read: Loan officer or borrower. Thanks Christi Lundquist. CLICK HERE

Here is a part of it: As a consumer, the best protection that you can give yourself is education. Read all documentation BEFORE you sign. Don’t just trust that your mortgage broker or lender is going to be completely honest with you. Remember - their paycheck depends on the outcome of the transaction. If you feel uncomfortable, don’t give in to pressure

Does this headline mean 1% of the loans are fraudulant? Sorry, no. According to the feds, its higher than that. This is about fraud and the 1% loan.

I am going to make this a multiple part article. You may have noticed that a low, even 1% loan is often marketed. it is an attention getter since most people are rate conscious. I don’t want to condemn this product, rather undress a few facts about it. I even have a tragic, true story to share of a loan officer gone beserk with the 1% loan.

Several lenders offer this loan, so the specifics may vary from lender to lender, but it is my experience that much is in common between them.

It is of this commonality I write of. This is a topic professionals may want to join in and offer their input. They are welcome. My opinion is that it has it’s place as a good product for the right situations.

Initially I will say I had this loan myself once and that I sold it twice. All three of these had the same product characteristics so I will use them for these articles. The terrible story I will then unfold, used exactly the same product.

This loan is an ARM or adjustable rate mortgage. It has a very low initial rate, or start rate. Even 1% with some lenders. The initial rate lasts for a very short period of time; 1, 2, 3, or 6 months (usually).

What makes this loan very unique is that the very low start rate can continue as a payment, even as the interest rate the borrower is charged increases. When the payments is at 1% but the rate is 8%, how can that be? It is called neg am, or negative amortization.

I haven’t seen one advertisement use negative amortization or neg am in their advertisements. I wonder why? Do you see what we mean by undressed or exposed?

I will give you more product details later, but now explain why I sold this product twice. Both were in response to the same plea from single mother clients. Their stories were the same. “I need to keep this home. My kids are in school, I got the house in my divorce. I can’t afford the payments, but I don’t want to move my kids. I will sell the home when they are out of school. What can you do for me?

Here the neg am loan made sense. The initial low payments worked for them.

They had equity in their homes when they were at this point. This equity would be at risk if the value of the home went down. Why? Picture the difference in the required payment to the payment at the higher rate as a new second mortgage on your home. Each month the second mortgage increases by the difference between the two. The lenders will only let this go on for about 5 years and the loan must be refinanced. Five years worked for these two women.

These loans were funded years ago, way before the housing boom. Both borrowers are still in their home. One had to go into the job force for the first time in years. She started with a low pay but has seen that gradually increase. She has refinanced during the low rate period. She is fine. The second woman also refinanced. While she had a good paying career she had a lot of responsbilities. Both homes have increased in value significantly. This product helped them.

Note, they both knew exactly what they were buying.

There are times when borrowers are sold this loan withoug really understanding all they are into.

Next, why did I take out one of these loans? The answer is another reason to consider it.

Reviewing a recent post reminds me that once you are considering purchasing a home, you should do nothing that affects your financial picture without reviewing it with your loan officer. That’s in advance not after the fact as the Dr that bought a Jag.

That includes any change.