Let's Celebrate the FREEDOM OF LIMITS!

susan templeton mortgage planner

It's really important to get a current review of your buyer's borrowing power before taking them out for a spin. 2009 guidelines are even tighter than we experienced in late 2008 so that September '08 letter is worthless. Buyers can be a bit like teenagers with no curfew if we don't help them set appropriate limits!

So what can you do to help improve your buyer's chances of getting funded? Besides referring them to a broker you know has fantastic work ethic, track record and resources (hint hint) you can help them best by instilling some self responsibility back into our world.

Enter The Household Budget: It should be basic math to sit down decide what you can afford to live on. Every software program has a (seldom used) household budget template. We offer a free on-line course for first time home-buyers that shows them step by step how to analyze their income in light of home ownership and it's joys.

As your mortgage planner, I quickly import your buyer's debts and income to get your magic loan prequalification number, but only they know what they can really afford to live on. We have that conversation.

Basically, we add their anticipated loan payment with principal and interest, including insurance, property taxes, and condo or development fees in addition to their regular commitments including car payments, credit cards, student loans, installment loans, etc. Their basic housing expense and debts combined should ideally be under 40 - 45 % of their gross monthly income. More or less depends on the individual and what if any savings (assets) they have to fall back on. We suggest adding a column in their budget for savings and/or retirement account ccontributions, i.e., "pay yourself first"!

Once they know what is realistic, it should be no mystery to determine how much house they can afford to buy. Today's historic low rates are helping a lot! Taking personal responsibility to borrow within your means goes a long way with underwriters. If they can afford more then we will help make their case. If they are caring for elderly parents-- perhaps less makes sense.. Making sense is what works! (Underwriters really like that.)

SHIFT IN PERSPECTIVE: (this means US)

The biggest shock is no more 100% financing (except VA and USRDA Rural Loans)

No more 80/20 Combinations (1st + 2nd) . 95% is today's top conventional Loan to Value

New FHA purchase limit is 96.5%. Your 3.5% down payment must come from your own family resources.

Underwriters may ask your employer to verify your forward career prospects.

FICO Score requirements have gone up too: 680 is the new minimum Mid FICO Score for W-2 waged earners and 700 or better for self employed people for best terms. (Government loan programs are more flexible on scores)

'Stated income' and 'no ratio' programs used are virtually non existent.

Land loans are limited to 70% purchase and 50% refinance (no cash out) terms and VERY few lenders

Construction lenders are still funding better custom projects. Owner/builders are strictly commercial these days.

Mortgage Insurance companies are limiting Loan to Value to 85-90% or less based on risk factors.

Mortgage Insurance can be paid by you, by your lender or negotiated to help you afford the extra fee.

Appraisals reviews and second appraisal are the new norm with shorter time frames for comparable sales. .

Private Investors offer 'hard money' for short term needs. Pricey but quick. Geared toward commercial.

Reality Check:

Tighter lending guidelines are designed to protect buyers and investors and ultimately the viability of the Real Estate and Lending Industry. Let's get behind them now and make this work!

Please appreciate that ALL lenders (banks and brokers) have tightened their underwriting guidelines. They are short staffed and timeframes have increased. Our folks are under a lot of pressure to manage a sudden interest in refinancing right when you want your sale to sail.....so if you have something on the table don't wait...refer your client to us early in the month if at all possible.

You may be surprised to learn that your local bank-- with whom you have been doing business for years-- is less able to lend to your buyers today. This is more of a reflection on how their investors feel than what your loan officer thinks about your business relationship. Chances are they have 'non performing loans' and are prevented from lending more which could endanger their depositors' (maybe your) funds and the banking regulations.

Whatever it takes, brokers and our lenders are committed to delivering a superior personal service.

CELEBRATE: LOWEST RATES
So in short, if your buyers are realistic about setting their own limits, their credit is good and they can document sufficient income, they will certainly get the best terms on record for the last 50 years:

We are locking 15 and 30 year fixed rates at 4.75-5.0% range today!

Practice credit wellness: www.netcredit.blogspot.com

Click this Credit Link to order your tri merge lender report on our secure site. Our agency report is about $30 compared to $50 on MyFico.com for a retail version. I'll be happy to discuss your report in person or over the phone at your convenience, no strings attached.

Don't wait! After January things tend to heat up--especially with a 'regime change: Rates usually rise with the Spring thaw.

susan templeton www.loannetter.com

washington loan officer license 510-LO-31434 branch license: 510-MB-24707-50145