The Housechick Blog

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)

When a buyer makes an offer to buy a home in Tucson, they must include a form called a Loan Status Report, or LSR for short.  The LSR, among other things, says that the Buyer must lock their interest rate and points by separate written agreement during their inspection period, or the interest rate provision of the loan contingency is waived.

Basically, in the LSR, we set upper limits to the interest rate a Buyer will pay for their loan.  If the Buyer doesn’t lock their rate in their inspection period, and rates go above our stated upper limits, then they can’t walk away from the home purchase with their earnest money, on the basis of the interest rate being to high.

I was writing an offer last night with a Buyer, who was balking at that provision, which I didn’t understand at first.  Then I learn that the last time he got a home loan, six separate loan officers told him that he would have to pay to lock his rate, that the rate he got wasn’t set until the day the loan closed.

Say what?

I talked to a couple of lenders that I use frequently, as a sanity check for myself, to see if they charge a buyer for a 30 day lock.  We’re talking about conventional loans, a 30 day escrow, no buy-down points.  Here’s the responses:

Phaedra Wilson’s office of First Magnus says absolutely not, and asked, incredulously, “People charge for that?”

Mary Maza-Abihai at Long Mortgage says they do not charge for locks up to 45 days, but that in previous loan markets, lenders sometimes charged a fee upfront to keep their customers from jumping ship mid-loan, and then refunded the fee back to them at closing.

Steve Kirkpatrick of Select Mortgage says they will lock for free for 30 days, with a contract and an address.

Tony Whitaker at Wemmer Mortgage says that if my Buyer wants to pay to lock his rate, then he’s got some land in Florida he’s be happy to sell him (that Tony’s a kidder)… and that they don’t charge to lock rates at a 30 day lock.

What can I say?  There’s some crazy lenders out there actually getting away with this stuff.  Shop carefully. 

The Good Ladies at Long Mortage bring us an explanation of Good Faith Estimates, and how to compare apples to apples using GFEs.

Comparing good faith estimates is a very important step in the mortgage selection process. Knowing a little bit about Good Faith Estimates, or GFEs, can be very beneficial to your success at saving money when purchasing a home.

So what’s a Good Faith Estimate?

The Good Faith Estimate is simple - it shows you how much it is it going to cost you up-front and long term for this mortgage. Sound simple? Well read on. 

I would recommend comparing at least 2-3 Good Faith Estimates. The Lender should be able to ask you a few questions to determine what programs would fit your needs and provide you with a good faith estimate without pulling your credit. These estimates will provide a pretty good average of what it will cost you for your new mortgage.

Some basic principles are that your loan consists of a mortgage program, rate, term, and fees that go along with getting the mortgage.  The mortgage rates, terms and fees may be negotiable.  Keep in mind that when you try to save money in one area than another area could be affected. For example, every thousand dollars you save in costs at the closing could ultimately raise the interest rate you negotiate.  Discuss with your lender to see what works best for you. A good faith estimate should be provided free as well as advice to help you make the right choice for you and your family.

So how do you compare Good Faith Estimates?

Let’s start with the loan program, loan terms and interest rate.  After you have determined what loan program is right for you, (30 or 15 year mortgage, Fixed/Adjustable rate, Full Doc, stated income, etc.) then a rate can be determined.  Each lender, knowing these facts, should provide you with their interest rate, fees and costs. Now you have something to compare.

The fees are where mortgage lenders and mortgage brokers become creative.  If you are dealing with an honest and reputable mortgage company, then your comparison job is very easy.  Honest companies follow guidelines when they create Good Faith Estimates, so if everyone follows the guidelines, comparing fees side by side is simple and quick.

Each section of a Good Faith Estimate is numbered. Looking closely at the 800 section of the good faith estimate, it’s a great starting place to compare.  This section is at the top and is called “Items payable in connection with loan”.  These fees can and sometimes should be negotiated.  When comparing good faith estimates, add up what you see in this section and compare them against others, because this is about the only area you have after the interest rate is determined.   

The rest of the good faith estimates are fees that will be the same no matter what financial institution you use. Section 1100 includes Title charges and Section 900 & 1000 includes Items required by lender to be paid in advance and Escrow reserve deposited with lender.

Just beware, apply this bit of knowledge and good luck comparing Good Faith Estimates. AND don’t ever hesitate to ask questions. 

If your income doesn’t come from a paycheck or you don’t want to reveal all to a mortgage lender, you can still get a home loan. Here’s how.

Ethical mortgage lenders generally try to talk customers out of getting low-doc and no-doc loans because they cost more. Before applying for one, talk to a qualified mortgage lender and verbally give them all your information first. Most people who ask for stated or no doc mortgages don’t need it. A good mortgage lender can help you work through and document what you think is undocumentable.

Most homebuyers work for a steady paycheck and are willing to divulge details of their finances in exchange for the best available mortgage loan.

But a lot of buyers don’t draw a steady paycheck from a boss. They own businesses, make commissions, live off investments or get their income in cash. Others don’t want to give up their financial privacy. Limited-documentation mortgages are available for these people.

Depending on the mortgage product best for you the lender will still require at least a credit report and a property appraisal. Borrowers who require flexibility and privacy of these types of mortgages generally carry higher interest rates than conventional mortgages. Lenders want these borrowers to make down payments and to have excellent credit.

There are three main types of low-doc/no-doc mortgages.
• Stated-income mortgages tend to be for people who work but don’t draw regular wages or salary from an employer. That includes self-employed people or those who make a living off commissions or tips.
• No-ratio loans are often the right call for wealthy people with complex financial lives, retirees who live off investments and people whose lives are in flux because of divorce, recent death of a spouse, or career change.
• No-doc or NINA (no income/no asset verification) mortgages are for creditworthy people who want maximum privacy and can afford to pay for it.

The Housechick Blog is proud to announce a new contributor, representing the lending side of Real Estate in Tucson.

Mary Maza-Abihai and Cindy Powers will be weighing in occasionally, answering loan questions, presenting opinions on the current lending environment, and adding clear explanations of various loan types and for whom they are appropriate.  We’ll be adding short bios for them in a bit, but I’m too excited to wait to announce their arrival.

In the meantime, you can find Mary and Cindy at www.longmortgage.com/ceteam, via phone at (520) 918-1634, or via email by clicking here: Cindy and Mary.

Welcome!