Danell Merren

It's been pretty common knowledge for the past 18 months that the stated income, no document, no income, and low document loans are gone. However, I think that a lot of great customers with really high credit scores- say 740 and up, don't know that in the past they probably got through the mortgage process easier because of something called alternate doc. I will list below the difference between a truly full document loan and alternate doc. (the norm of two years ago):

Full Document :

• 2 years W2s
• 2 years tax returns if you have any self employment income (even if we aren't using it b/c they want to prove you don't have a loss or anything adversely impacting your income)
• 30 days paystubs, current
• 2 months current bank statements, all pages; if your bank statements are business accounts, you will need the bank or credit union to put in writing that withdrawing the money does not adversely impact your business.
• Most recent retirement statement, all pages
• Full Verifications of Rent/Mortgage (if you do not rent from an apartment complex you will most of the time need to show cancelled checks), Deposits, and Employment. We must prove where the money came from, if gifts, that the gift giver had funds to give, and that you are employed, in writing by the employer- not just pay stubs. A verbal verification of employment will also be done right before closing to prove you did not lose your job between the time your employment was verified and closing date.

Alternate doc (no longer available):

• W2s rather than tax returns
• Paystubs rather than verification of employment
• Bank statements only rather than verification of deposit from bank
• Most often no verification of rent or mortgage per the computer approval

The all pages issue is a pretty big one- often people don't understand that if there is no significant info. on a page, we still need it! If it has a page # on it and if you exclude it because you know there's no info. on it, the underwriter doesn't know this- they will wonder what you're hiding! And you must explain all large deposits. This, too, is a pretty big one that people often don't understand. Even if you don't need the money in your account for your transaction, once it's disclosed we need to source where it came from- i.e.- even an inheritance. The banks want to know that your money is legitimate, that no one is incenting you to buy them a home, etc.

The paystubs need to be the most recent. If they aren't recent, the underwriter will NOT assume that because you're salaried your pay hasn't changed or that you still have your job. These days, good people are getting laid off left and right. They'll want the most recent paystubs, and they'll do a verbal VOE (verification of employment) right before close to make sure you're still working.

So in general, believe us that we share in the frustration. We share this information to help expedite the process as much as possible and to help set expectations from the beginning, keeping in mind that underwriters will often "condition" for information.

We know you are great borrowers, but now we have to prove it!

I recently learned that the MI congress passed a law stating that home owners who buy an owner occupied home and retain their previous primary residence while they attempt to sell can keep the homestead exemption for up to three years on both properties. This is a huge benefit to move up buyers who are having a tough time selling.

We are seeing another Fannie and Freddie change, this time when it comes to condo coverage that the condo associations and/or management companies must have. It's regarding dishonesty coverage. Fannie and Freddie used to only require $10,000 dishonesty coverage. This is related to liability insurance. Horror stories are popping up all over the county where employees of the associations or management companies were embezzling the dues that was coming in.

See a related story below about what happened near Chicago.

http://www.nbcchicago.com/news/local-beat/willow-springs-condo-van-witz-management-complaints-56662742.html

There's a lot of buzz that the first time home buyer credit of $8,000 may be extended. So far it's passed the Senate and now must pass through the House.

Some are saying it's helped the economy, some are saying it hasn't. I specialize in working with first time home buyers, and I can definitely say that business picked up for me personally all summer and this fall.

I found this article online that spells out who the repeat homebuyer credit may work for. Basically, a repeat home owner would need to have owned their existing home for five years in order to qualify.

http://www.christianpf.com/6500-home-buyer-tax-credit-extended/

I see several pros and cons to extending this credit for repeat homebuyers.

Pros:

• May lessen the blow of the inevitable loss many homeowners are facing when selling
• Can help replenish down payment current homeowners are saving to trade up whereas repeat homeowners used to rely the proceeds from the sale of their homes to buy the next home
• Can help replenish an Emergency Fund for the repeat homeowner so that if the unexpected happens, they haven't depleted their resources to buy the next home
• Stimulates the housing economy
• With more competition for homes, hopefully values will stop falling, start to go up a little

Cons:

• Increases deficit
• Perhaps a repayable tax credit that wouldn't burden our tax payers would have the same impact?

What do you think?

Edit:

The Senate voted Thursday, November 5th to pass the legislation!

In the Greater Grand Rapids Area we are in a very depressed area with one of the highest foreclosure rates in the country. For us, it's mostly because of manufacturing job loss rather than due to exotic loans. Regardless, there are a lot of HUD REO properties. But we also have a lot of FHA borrowers. Recently, we've seen a trend changing where HUD has priced the homes so aggressively low that it's caused a competition situation where people are over-bidding. One might think this is a good sign that the market is changing. Perhaps, but in the short-term, what is happening is this is causing a problem where FHA buyers can't typically buy the HUD homes. This is because FHA requires we use the existing appraisal from HUD when buying HUD homes. This existing appraisal is good for six months. Then HUD usually orders another one. HUD usually appraises the home right around the selling price. If someone overbids and wants to use FHA financing, HUD requires the borrower to pay the difference between the overbid price and the appraised value. Most FHA buyers aren't sitting on that kind of cash. So, the deal goes south. It creates a situation where Conventional buyers and Cash buyers are the ones usually being able to purchase HUD homes. It's a little ironic as HUD states that they try to sell first to owner occupants.

When someone is overbidding on a HUD home, we try to explore and exhaust Conventional options as much as possible. This is often not realistic for the buyer due to a lack of assets. In this case, the MSHDA 80/20 Acquisition Rehab. loan might be a great way for a first time buyer to buy with little down and still go Conventional. See my previous blog at: http://activerain.com/blogsview/1266825/new-80-20-conventional-purchase-loan-including-costs-of-repairs-

To learn more, feel free to give me a call at (616) 719-4513.