The Housechick Blog

I’ve been having more discussions than usual with my clients about when to order the appraisal.

Usually, once the lender orders the appraisal, you need to pay for it, somewhere around $350-$400.  That’s only fair, if the person does the work, they get paid for it, whether or not you buy the house.

A couple years ago, we wouldn’t order an appraisal until we were through inspections and repair negotiations - no sense in incurring the appraisal charge until we know if the house is in good shape and we know you’re going to buy it.

In today’s real estate market, however, sometimes appraisals are coming back marked as a declining market, which means you may have to pony up additional down payment.  This is something we might want to know sooner rather than later.

More often than not, my clients are deciding to have the appraisal done during their inspection period.  Yes, the incur that cost without having gone through repair negotiations, but at least they know sooner if the appraisal will come in fine or if it will cause problems.

Just like the cost of inspections, it’s what you pay as a home buyer, basically as risk mitigation.  Better to pay a bit up front and find out for sure if the property is sound and that you can get appropriate financing, then not pay those things and end up with a lemon.

I believe I really infuriated a lender yesterday.  It wasn’t my fault, really.  If my clients bring me a Good Faith Estimate where the lender charges are twice what is typical with an unimpressive interest rate, you’ve got to expect me to challenge that.  And when I send my clients go back to the first lender with a reasonable Good Faith Estimate from one of my lenders, and the first lender refuses to match it and insinuates my lender is going to add hidden fees at the closing table, starts using scare tactics, causing my clients leave the first lender to go to the second one… well, they didn’t like that much.

Too bad.  My duties are first to my client, not to their lender.  Don’t be charging my buyers crazy extra fees.

The news today from FHA is that loan limits were raised, potentially making financing a tad easier for some folks.

FHA is the Federal Housing Administration, a governmental body that basically insures loans.  FHA loans, in the past, had some stigma attached to them, because of the low amount of down payment needed.  They were considered loans for first time buyers, or other folks who couldn’t get a down payment together.

This has changed over the years.  FHA financing has come a long way, baby.

Before today, in Pima County, you could only get an FHA loan for up to roughly $239,000.  This is well below the average sales price in Tucson for a single family home!  Today, new temporary loan limits were announced: for Pima county, for a single unit, FHA limits are at $316,250.  This is good.  FHA buyers can now use that financing to afford the typical Tucson home.

Sweet thing about FHA is that they only require 3% down, whereas conventional loans currently require 10% in Pima county. 

From Mary Maza-Abihai of Long Mortgage on today’s new FHA limits:

For the first time since November 2004, the FHA floor limits will temporarily increase on Friday, March 7, for one-and two-unit properties.  Floor limits are the maximum loan amount allowed in a specific county area.  Floor limits are also known as the base loan amount.

Pima County has increased the maximum base loan amount to $316,250.
This should have a huge buyer impact.  FHA minimum required down payment is 3% of Sales Price.  The 3% can be a gift.

With changes daily to our market and lending guidelines, Conventional loan financing in Pima County requires a 10% down payment.  5% must be the borrowers own funds.

FHA has typically been know as a first time home buyers product.  This change should allow for more home buyers, first time or not, to purchase in this current market.

Questions?  Go to the money source.  You can call Mary at (520) 918-1634 or email her: marym@longmortgage.com.

Recently, I wrote a post about my loan officer friend moving to a new office, which prompted a question regarding what she did to get such a nice post just about her.

Let me preface this by saying that I do not recommend only one loan officer to my clients.  I’ve got four that I routinely recommend, so my clients have the freedom to compare and contrast, and select the person that will work with them best.  Whether my clients call one or call all four, they’ll have selected a competent, trustworthy, excellent loan officer.  Everyone has different personalities and different programs - I don’t subscribe to a ‘one size fits all’ approach.

So what do I want out of a loan officer?  How do they make my recommendation list?

• They communicate regularly with my client and me, without being prompted.  A good loan officer initiates calls/emails to both me and my client to let us know when an appraisal will happen, what it comes in at, when the loan is going to underwriting, when all supporting documentation has been received, and so on.  I rarely have to call a good loan officer - they’re calling or emailing me to let me know the progress.
• They take the time to listen to my client’s needs and concerns, address those issues up front, and will always make time to explain a myriad of loan programs, how they work, the implications of each, and really educate my clients so that they are comfortable with the financing side of their transaction.
• They know their business inside and out and have access to a large variety of competitive loan programs.  If one of my loan officers says my client can get a loan, I can bank on that.  If my loan officer says we’re good to go, then we’re good.  Period.
• They play well with others.  We all get angry or have bad days, but we are never rude or condescending to a client.  I expect that from my loan officers, my title and escrow people, my home inspectors, from everyone who provides a service to my clients.

My preferred loan officers aren’t the cheapest in town, neither are they the most expensive.  They deliver value, they perform to what they say they can do, and they’re nice, interesting people who are enjoyable to work with.

What kind of loan officer do you want to work with?  How do you select?

Today I got to schmooze with the good people at Sunstreet Mortgage.  When First Magnus imploded, my favorite loan officer from First Magnus, Phaedra Wilson, found a new home at Sunstreet Mortgage.  My friend and I were invited to the Sunstreet Mortgage Open House, so we made the trip up to the Tucson Foothills today to show our support for Phaedra and her new digs.

Here’s my friend (and fabulous loan officer) Phaedra Wilson, with a little surprise inside - she’s 5 months pregnant.  Congratulations Phaedra!

We had a chance to chat, and Phaedra says she’s come to love Sunstreet Mortgage, the people that work there, and the products they offer.  Plus, she says she can be more competitive now than she was at First Magnus - I’m looking forward to the opportunity to work with her again.

You can call Phaedra at (520) 977-7247, or email her: phaedra @ sunstreetmortgage.com.

Sunstreet Mortgage is located at 6340 N Campbell Ave, Suite 140.  That’s the Southeast corner of Campbell and Sunrise, over behind the Flemings Restaurant in that back row of offices.

Found this hidden in my drafts this morning. I had this set to publish the day that First Magnus announced they were closing, so this post got pushed back in favor of more pressing issues! Without further ado…

American Home Mortgage is Alive and Well in Tucson

Well, the local one anyway…

Following the implosion of the national firm named American Home Mortgage, our local American Home Mortgage has given notice that they are NOT associated with the national firm, and are alive and kicking, thankyouverymuch.

American Home Mortgage in Tucson is locally owned and operated, and has been serving Tucson and Southern Arizona for 10 years, with 5 offices and over 90 employees.

Unfortunate naming, perhaps, but local American Home Mortgage in Tucson is just fine.

Released this afternoon, from Long CEO Rosey Koberlein:

“Our thoughts and good wishes go out to our colleagues at First Magnus Financial, which announced today that it would stop writing and funding real estate loans, effective immediately. We know the shut down will affect not only First Magnus employees but their many families, as well. We will be hoping for the best for them!

Long Mortgage Company has responded to the situation at First Magnus by working closely with its parent company, HomeServices of America, an affiliate of Berkshire Hathaway, to promptly arrange alternative funding sources to fund loans currently in the pipeline and to continue accepting loan applications for any Long Realty business.
Here are the steps we have taken today:

1. Loans that are set to close within the next 48 hours will be our highest priority. Such loans will be funded through our alternative funding sources.
2. Our alternative funding sources will also honor all current loan commitments and terms for our client’s loans now in the pipeline.
3. We are reaching out to other brokers with buyers of Long Realty listings, offering to process their clients’ loans with the same care and concern as for our own buyers, if their buyers’ loans are in jeopardy.
4. We are contacting other real estate companies to assure them that our own real estate transactions on their listed properties will close in a timely manner.
5. Finally, we have secured a commitment from our funding sources to continue with Long Mortgage’s Real Deal 1% Off Program.

We believe taking these important steps will add much needed calm and stability to the local market.

Long Mortgage and Long Realty are very fortunate to have the strong backing and support of HomeSevices of America during this difficult period. As you may know, HomeServices is the second largest, full service independently owned residential real estate company in the nation. Rest assured, Long Mortgage will continue to provide loan services to southern Arizonans seeking to fulfill the dream of homeownership. “

Poop hits fan this morning, as First Magnus announces they are no longer funding loans.

First Magnus, formerly Charter Funding, is one of Southern Arizona’s largest lenders.  I have deals with buyers using First Magnus right now - or were using, I should say.

Also, Long Mortgage is basically First Magnus under a different name, so we’ll have to see if the pending Long Mortgage loans are funding or not - I’m guessing not based on the emails being hurled around this morning.

I’ll provide an update when the smoke clears.

Ought to be an interesting day…

Ah - the LSR.  Typically, the first nonsensical acronym a buyer encounters when starting to look for a home, in Tucson, and in all of Arizona.  What’s an LSR, you ask?

It’s a Loan Status Report.  Stupid name, I know: you have no loan yet so the status of the not-yet-in-existence loan is…?

Anywho.  Here’s what you really need to know:

• You need an LSR to make an offer.  Period.  Which means,
• You need a lender,
• Who has pulled your credit scores
• And taken an application
• And discussed loan programs with you
• And provided you with a Good Faith Estimate
• So that we can have them fill out the LSR form when you find a home you like,
• So that we can make a successful offer to buy that home.

Formally, the LSR is required by our AAR Residential Resale Purchase Contract, the typical contract an agent would use to write an offer on a resale home.  It’s really just a detailed pre-qualification letter, in a standardized form.

If you talk to a lender that says, “What’s an LSR?“, just stand up, turn around, and run away.  Please, for the love of all that is good, go find a lender that knows their business, and knows how to originate loans in Arizona.  I’ve got excellent recommendations, by the way, if you need them.

Go talk to a lender, and get yourself in a position where we can call your loan officer and have them send us an LSR when we’re ready to write an offer.  Some lenders will give you a couple of LSRs, with the address blank and the rest filled out at various price points in your range, so that we can make offers with those forms quickly when the right time comes.

For the nitty-gritty details, read on.

You can see the form itself by clicking on the screenshot, here.  It’s pretty easy to see the type of information we use to fill it out.  You can see it describes your loan(s): the amount, the LTV, the rate, the term, the type.  We also have to state if this will be your primary residence, what kind of home it is, if you need to sell another house in order to secure this loan.  The bottom section is filled out by the lender: all “yes” checkboxes checked is the best kind of LSR.

Can you have an LSR without the lender section filled out?  Yes.  Is it valid?  Yes.  Would a Seller ever accept an offer from someone who hasn’t talked to a lender?  That’s a big NO.

The Seller gets a copy of this form along with the offer so that they can evaluate your loan program, and decide if they think you’re a good risk or not.  High Loan to Value ratios or high stated interest rates on the form may indicate a loan that is a little more difficult to get than someone that has 20% down and is getting a great rate.  The Seller and their agent are also going to be evaluating your lender.  If my Sellers have an offer come in with an LSR from a lender that I’ve had multiple bad experiences with, I’ve got a duty to tell my Seller about that.

Fun language in the LSR: “Buyer agrees to establish the interest rate and ‘points’ by separate written agreement with the Lender during the Inspection Period or the interest rate provision of the Loan Contingency shall be waived.”

We’ll write in interest rate upper limits when we fill out an LSR: if your lender is quoting you 6.5%, then we’ll probably write in 7%, just in case rates fluctuate a little.  If rates go above 7%, then you don’t have to get the loan, and can walk away from the deal.

So, if you don’t lock your rate within your inspection period, typically the first 10-15 days of the deal, then you loose that contingency.  If rates go above 7%, you still have to get the loan, if you qualify for it.  Be aware that locking your rate may be at a cost to you, depending on the term of the lock.  Most lenders will lock 30-45 days for free.  If we’ve got a long escrow period, and you’ve got to lock your rate at the start of the deal, you may have to pay to get an extra long rate lock.

Lessons Learned

• Get your lending figured out early
• Use a reputable local lender
• Make sure you lock your rate in time to preserve your interest rate contingency

Happy Home Shopping!

(begin atypical rant from the Housechick)

There was an article in the current issue of Broker Agent magazine for the Tucson and Southern Arizona area - admittedly a pithy publication, thinly disguised ads posing as real content, for the most part, with occasional interesting articles.

The article is about a new survey that shows 90% of appraisers feel pressured to “hit the number,” meaning they feel pressured to return an appraisal for the sale price of a home.

Of course, the point of the article seems to be to get you, the home buyer, to call your lender and request an appraiser that has been accredited by the organization who wrote the article, so there’s little actual information.

The first thing that stands out is that they call appraisers the ONLY independent objective third party involved in a real estate transaction.  (If you’re neutral, then you shouldn’t respond to pressure anyway, right?)  But let’s give the writers the benefit of the doubt here - maybe this article was written for a state where they do not use an Escrow account.  By definition, escrow involves a neutral third party. 

Regardless, here’s what really bugs me.  One of parts of the article selected for the big font highlights is “Homebuyers should ask their lender for a copy of the appraisal report.  It is a consumer’s right under federal law.”

Okay, remind me again, who typically pays for the appraisal?  Oh yeah - the BUYER.

And who gets a copy of it?  Oh yeah - the lender.

And who has to make a request to receive a copy?  After they paid for it?  Is there a disconnect here or is it just me?

Some of the lenders I’ve worked with given a copy of the appraisal to my buyers without a formal request, typically mailing it out to my clients after closing or bringing a copy to the signing table.  Every once in a blue moon, my buyers receive an email copy from the lender as soon as the lender has it in hand.

Is that enough though?  If appraisers feel pressure to hit the sales price, who gets to say whether they performed in a neutral manner or not?  Our contract states that the house has to appraise for at least the sales price by an appraiser acceptable to the lender - who, as far as I’m aware, doesn’t have fiduciary duties to the buyer.  So the buyer pays… for something that has to be acceptable to the lender… and not for something or someone acceptable to them?

Who does that appraisal really protect?  The buyer or the lender?

What percentage of appraisals come back at exactly the sales price?  80%?  90%?  You know the appraiser usually has a copy of the contract in hand when they do the appraisal, right?  Is that appropriate?  Are we looking for an actual value or are we just mitigating risk for the lender at the Buyer’s expense?

Sheesh…

(end rant)