Jeff Belonger -- The FHA Expert.com -- FHA Loans -- FHA mortgages - USDA loans

Good Faith Estimates

I have two major pet peeves when it comes to Good Faith Estimates. And for those that know me, I am a stickler when it comes too these 2 issues.

• For those loan officers that give a borrower a rate, fees, and a payment over the phone or in a brief e-mail, yet they don't send them the actual good faith estimate. Warning - (this is just my opinion) If a loan officer pre-qualifies you and tells you your rate and total costs, they should be sending you a good faith estimate at that time. Okay, so they are busy, but there is no reason why you shouldn't receive one in less than 24 hours.

• Pet peeve # 2 - those good faith estimates that aren't complete. Missing specific 3rd party fees or fees that are low-balled, to make their overall numbers look better.
  

Let's break down my pet peeves.....

Good faith estimates that aren't complete or accurate. I can't stress this enough. I almost lost a deal yesterday because of this. The borrowers first called me on June 23rd and they basically stopped dealing with their previous loan officer that was recommended by their current realtor. The realtor advised them to get a hold of his loan officer again, because he felt my rate and costs were a tad higher. Sure, the realtor shared my GFE with his loan officer. So the loan officer cut his rate by 1/8 of a percent and chopped the points by $1,000.

In any case, the total costs were about $7,000 less than mine, which is impossible, just because of the $1,000. After reviewing the good faith estimate from this loan officer, I found 4 critical mistakes. What did I find?

• In the state of New Jersey, taxes are paid every 3 months. But you always want to escrow 4 months, because the buyer always ends up reimbursing a month or two back to the seller. This is a difference of $708.
  
• The loan officer never had the borrower paying the homeowners insurance, which is suppose to appear on line 903. In any real estate transaction, the mortgage company is going to want the homeowners insurance paid upfront for 1 year. It doesn't matter if you pay for it prior to closing or at closing, but it has to shown on the good faith estimate. This is a $900 difference.
  
• In New Jersey, you usually have to have a property survey done. Depending on what part of NJ, the price could range from $350 to $750. In this case, $650.
• Lastly, we know that the settlement date is set for September 10th, 2009. Because of this, you have to be charged 20 days of interest. The interest per diem, what you pay daily, is $45.32 a day. This other loan officer had 15 days on the good faith estimate. Most of us put 15 days down when we give out a good faith estimate, when not knowing a settlement date. Well, there is a settlement date now. This appears on line 901 and the cost difference is $226.60.

Overall, this might seem like a small amount. But when you add up these charges, it comes to a total of $2,484.60. That difference alone could make many borrowers choose the loan officer or mortgage company over another. Even though this borrower liked me more for many different reasons, this was stuck in their heads and added doubt about going with me. But wait, there is more.

I still couldn't understand why this loan officer was still about $7,000 lower, after missing $2,500 in fees. This loan officer had a seller credit of $9,000 on the new good faith estimate. I always ask any borrower if they are getting a seller concession. They were on a previous property, but this loan officer never took this out. And they obviously never asked or reviewed the agreement of sale. Even though I asked them this question, I still had her e-mail me the contract of sale so I could verify this myself. Yes, people make mistakes, but this is a $9,000 mistake.

The overall picture on this scenario? You are talking about $11,500 in total costs. That is a lot of money for anyone to overcome, especially when this borrower had already in their mind, when shopping for homes, what they wanted to spend out of pocket.

Warning :

If you have to beg your loan officer or ask more than a few times for a good faith estimate in a 2 or 3 day period, I say don't walk, but run and find someone else. I can't be more serious than this. Sure, I might tell a borrower, "hey, give me until tomorrow", but if the loan officer doesn't offer up a good faith estimate? Small red flag. If you have to keep asking for one, major red flag. Just my opinion, but think about it. How can a loan officer give you a rate, a payment, and your total costs.... but take forever in getting it to you in writing. FYI..... they already have it in the system and it should take more than a few minutes to e-mail it or fax it to you.

In regards to missing costs or a good faith estimate that isn't accurate? Just a no-no.... It really isn't rocket science to make sure that you have the same costs listed on each and every good faith estimate for each borrower every time. Again, yes, people make mistakes, but this is more than a mistake. This is our job to be accurate and. It doesn't take me more than a few minutes to review this information twice, before I send it to my clients.

FYI... It doesn't matter if the loan is a FHA loan, a Conventional loan, a USDA loan, or a VA loan. The costs will never be exact, but they should be targeted close enough. Please keep this in mind.

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_________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!

Copyright © 2009 by Jeff Belonger of Infinity Home Mortgage Company, Inc

Dual Agency can sound like a harmless word, right? We are suppose to trust anyone in the real estate and mortgage industries, right? Sounds simple enough when the person representing you says that they have your best interests at hand. But wait, let's dig a little deeper, because not every realtor will explain it correctly to you, hoping that you truly don't understand both sides of the equation.

Let's define Dual Agency. - Is when a real estate agent is representing both the seller and the buyer at the same time in the same transaction.

Since we are on the topic of dual agency, there is also the term designated dual agency. This is where you have two different agents from the same real estate office, in which case, one agent has the seller and the other agent has the buyer.

Now, before we get started, I need to clarify something. I am not a realtor, just a loan officer of 16 1/2 years in the mortgage industry. I wanted to share this topic from an outside perspective, because this just happened to a client of mine who is purchasing a home. Some realtors will agree with me and some will disagree. Looking for any kind of opinion so we all can learn more about this.

When a listing agent agrees to sell your home, one of their spiels is that it's their job is to get you the highest offer and best terms. Sounds great, right?.

When an agent representing you, the buyer, their job is to try to get you the lowest offer and the best terms. They are called a buyers agent.

Now, I am sure many realtors will define these terms in more details. I am just trying to paint an easy picture to comprehend. Question.. how can a realtor, as a dual agent, say that they will get you the best terms, both as a seller and a buyer. Isn't the agents duty to the seller first? Yes it is.

So let's do the simple math here, which I love, since I do mortgages for a living. As a listing agent, my priority is to get the best deal for the seller. As the buyers agent, my duty is to get the best deal for the buyer. hhhhmmmm

Can we honestly say that I can accomplish both at the same time? It's almost like those individuals that claim to be both a realtor and a loan officer. A totally different subject that I will talk about later this week, but in all honesty, how can you say that you can perform both jobs to the best of your ability. In the case of my dual agency example, the ability to get a great deal for both parties. Isn't there are a conflict of interest?

And what about the agent's commission? In many cases, the dual agent will get both the commission set aside for the listing agent and the buyers agent. Food for thought.

Conclusion : I am sure there are many ways to look at this. In regards to my current client, he didn't really take my advice when I found out that he was putting an offer on a house himself without a buyers agent. I explained to him my concerns. The ending result now? Looks like he won't get the best deal. He had his own thoughts prior to my suggestion and he thought it would be cheaper if he did it himself. Not only did the agent counter with a higher offer, but has placed a contingency in the offer stating that if the house doesn't appraise for the purchase price, that he has to come up with the difference. And after doing some research, there is a 6% total commission involved and the house is being purchased for $395,000. You do the simple math. I spoke to this agent and she didn't even offer any of her commission to make this deal work.

Now, for those of you that scream, don't offer up your commissions. I agree to a certain extent. But business is business and I want more referrals. I myself would have offered giving the buyer an additional $3,000 in seller contribution. Tim Moncrief wrote that it's okay for a real estate agent to reduce their commissions. I agree and disagree, but I think his topic has more reality when it comes to an agent that is a double agent, I mean, dual agent. Please read : It's okay for clients to ask for reductions in your commissions. Deal with it.

Lastly.... I know several real estate agents who I respect, who have the sellers, who wouldn't take an offer on a property if the buyer came to them directly. They would refer it out or to their buyers agent. It's because they understand the basic concept that it would be impossible to obtain the best deal for both sides as an agent for both seller and buyer. I have even spoke to many agents about this topic and they all agreed. But there are always two sides to any story, hence why I wanted to write about this.

And keep in mind, in some states, dual agency is prohibited. And some laws regarding dual agency are different from state to state. If not sure about any of this, speak to an attorney or a buyers agent.

UPDATE - 9-8-09 @ 11:45 pm - Larry Riggs stated this... Larry's comment - Question to all dual agents out there.... When do you talk to the buyer about this?

• When the buyer first shows interest in the property?

• A few days later?

• During the buyer's first offer?

• Or when terms and price are agreed upon, and when you send them the contract of sale, the agreement of sale.

I bring this up, because an offer has been made and accepted on behalf of my buyer, and the listing agent still hasn't explained dual agency. And in NY, they are very strict on this. I did my research and think the buyer isn't getting the best deal.

My whole point to this blog post? In several states, you have to disclose this to the buyer upfront, even if you are entertaining an offer and know the buyer doesn't have a buyers agent. You don't have to have an agreement of sale for this not to be talked about.

Alan May replies with a very good, detailed comment that sheds some light. - Alan's comment -

Since we are on the subject of listing agents - Please read : Sellers, ignore what your listing agent tells you about FHA loans !!!

Update : as of 8/11/09 around 7 pm

My client called me tonight - I recommended a realtor to be his buyers agent. More things started to get out of hand. The listing agent, who never disclosed dual agency... and the fact the borrower never signed a buyers agreement or any offer, has now been told that he must either use her or someone in her office to represent him as the buyer. I told him that is illegal and not ethical. To get a lawyer and or talk to the broker of record.

Dual agency Laws in these states : (click the state) In a few states — Colorado, Florida, and Kansas — dual agency is prohibited. And these links are updates from realtors. Disclosure : Please speak to an attorney about any of this if not sure.

- Maryland -

- Florida - Florida -

- Oklahoma -

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Experience & Knowledge at its BEST !!!

_________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!

Copyright © 2009 by Jeff Belonger of Infinity Home Mortgage Company, Inc

The Belonger’s & Cleaver’s go on VACATION

Ocean City, NJ - July 25th to August 1st 2009

For the last 8 years, our family goes down to Ocean City, New Jersey for a week. I go down with my parents, my sister, her husband, and their 6 kids. Yes, 6 kids... 2 that are now 15 months old, twins, boy & girl.

Ocean City is a true family resort if you have never been.

Every year, it's a ritual to bury Uncle Jeff, aka the FHA Expert, in the sand. The kids get a kick out of it. And yes, there is actually enough sand on the beach to bury me.

(Alisha, Andrew, Katerina, and Uncle Jeff, well my head at least)

Have you every explained to a kid that you just possibly can't reach China by digging in the sand? Well, kids at least need a place to hang out in, even to get away from their parents and uncle. Here is Alisha's place away from home. Just enough room for one.

Did you all know that we had a celebrity with us? Joey Cleaver, 15 months old. Check him out in those shades. And watch for him in the coming years.

As you can see though, he still needs a little help getting around. Grampa Belonger helps Joey along.

PS... This little kid just loved the water and was so cute.

“Hey, nobody stepping in my pool. This is my vacation spot.”

And here we have Ms. Ava, the other half of the twins. She wasn't big on the ocean, but enjoyed lounging at the pool.

And watch out Michael Phelps.... Johnny Cleaver is right behind you. Actually, Johnny is a very good swimmer and has been taking swim lessons for the last 2 years. He is actually beating many that are a few ages ahead of him. The matter of fact, many of the Cleaver kids are good swimmers.

And if you weren't exactly sure, but when hanging out with the FHA Expert, if you want your privacy, sometimes you might need a few disguises. My niece Katerina and nephew Andrew, found a few that didn't stand out in the crowd. At least that's what they thought... ;o)

And who said that some of us haven't been affected in today's economy. Sometimes you must do what you have to do. Or it could just be his hobby and pleasure.

Don't forget, Ocean City has a large boardwalk with rides, shops, games, and restaurants. You have Ava on the left and Joey with Grandpa on the right, just enjoying the Merry-Go-Round.

We did play miniature golf, but we didn't do the water slides this year. There is always next year..

Lastly, every vacation must come to an end. It was fun, relaxing... and got to hang out with family...

Ocean, until next year. I will miss you… it was fun. You shared your warmth with me, refreshed my body when I was hot… allowed me to swim with you… and overall, it was a good time. Thanks

(Alisha Cleaver)

I didn't write about our vacation last year, but here is our summer fun in Ocean City in 2007.

Fun in the sun & Shore Memories in 2007

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_________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!

Copyright © 2009 by Jeff Belonger of Infinity Home Mortgage Company, Inc

BEWARE – A very boring topic below, but important to understand. (please read the whole thing before you assume what I meant by the title of my blog, about FHA loans.)

What first comes to mind when you hear the word junk?

-- Crap?

-- Old?

-- Trash?

What about the term, junk fees? Closing cost junk fees? Answer dot com gives you a definition of this and an example. - Junk Fees - Many people, even realtors and loan officers, assume that fees other than points charged by the lender are junk fees. Back in the day, this might have been partially true. But there is a cost of doing business and in today's market, it's not cheap. It all comes down to how it's explained and how it's shown on your good faith estimate.

So, how does a mortgage work? A mortgage company, the processiing, and it's fees? It really hasn't changed since I got into the mortgage business in 1992. Well, the profit margin and fee structure of a mortgage company hasn't really changed. The cost of doing business has a little.

Your typical fees are generally :

• $500 commitment fee

• $82 transfer tax fee

• Credit report fee

Other fees that you will see :

• Processing fee

• Warehouse fee

• Doc Prep Fee

• Attorney Fee

• Administration fee

Now, here is what disgusts me when so many realtors or borrowers scream junk closing fees. Until you understand on how a normal mortgage company operates, you won't truly know what is a junk fee or not. And another thing to understand, it also comes down to the rate and points that one is charging. All mortgage companies and banks have fees associated with doing a mortgage. Even your bank down the street or Bank of America or Wells Fargo charge closing costs. It just comes down to where they place these fees. Here are some real examples....

It generally costs about $1,000 for the processing of a mortgage. This is to include fees associated with the lenders warehouse line, underwriting, and closing of the loan. You might say that the lender can get this in the points and or rate. Yes, this can take place and this is how I generally do it. Why? Because you can write of a percentage of your points and interest on the loan. The fees, aka junk fees, can't be deducted on your tax returns. Please consult a CPA or an accountant when talking about this. Overall, it comes down to understanding the process and costs of a mortgage; not what you assume.

My whole point to this is that the fees have to be collected one way or another. Yes, some loan officers or lenders beef up their fees, adding to them, which gives them the name 'junk fees'. I have seen some weird names for some of these fees. But every lender has a profit margin. I have worked for large lenders and small ones, and it usually is close enough. When you borrow money, it costs money. It basically comes down to how large the profit one is willing to make. But keep in mind, it's more than just about the rate and fees. What about service? What about communication? What about timely responses? What about your loan officer educating you about the process? I'll be honest, I would be the cheapest one out there every time, that's if I didn't have to return a phone call or an e-mail or explain anything. And this happens more often once you say yes to a specific lender, in starting the application process. I know this because I hear it from borrowers all of the time. Good news or bad news, that loan officer should be somewhat easy to reach until you are finally closed on your loan.

Important Key Point to remember -

Each borrower is different. Each loan is different. Remember that I said most lenders have a specific profit margin in mind? Let's say it's $4,000 per loan. If I am borrowing $400,000, it would cost me 1 point in fees, points, or in the rate. Meaning that I could charge you no points and no fees, yet charge you a higher rate to still make my profit margin. If I am borrowing $100,000, it will now cost me a total of 4 points, no matter how this is spread out within the fees or the rate.

My whole point is that you can't compare your friends cost of a loan or sometimes the rate. Not if the lender is charging you accordingly. I just had a borrower e-mail me their HUD settlement sheet and yes, they charged $2,083 in fees. But if I look at my profit margin, I was about $2,100 cheaper than this company and a 1/4 percent lower in rate. I agree that you need to shop for your mortgage, but you should not over-shop or shop for the lowest. Just my opinion on this.

Please read : I want the same deal that my friend received on their mortgage.

Pet Peeve -

FHA loans are more expensive!! - No, they are actually cheaper in costs. I just did a cost scenario for a borrower, as I always do, and it was costing him $9,000 less on a FHA loan and the payment was $3.00 more a month. Yes, it was because I had him put 3.5% down instead of 5% down. But it was also because the points for that same rate were actually a 1/2 point less on the FHA loan, which in this case was $1,930 cheaper. Why? Because most investors and major lenders get a larger SRP (service release premium) back from those that buy these on Wall Street. The fact that many say FHA mortgages are more expensive in costs, just don't know what they are talking about in most cases.

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Experience & Knowledge at its BEST !!!

_________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!

Copyright © 2009 by Jeff Belonger of Infinity Home Mortgage Company, Inc

The day before settling on your new home, your lender tells you that you have been denied for x,y,z of a reason. You ask how this can be because your lender has had your mortgage application for over 30 days. You are furious....

Well folks, this has been a very touchy topic of lately, those loan officers that issue pre-qualification letters or pre-approval letters. There was a comment on my previous blog, Pre-Qualification letter vs Pre-Approval vs Commitment letters - Knowing the differences. The comment was written by a loan officer with 7 + years of experience. Just a FYI... I am not knocking the loan officer. This is a good topic to discuss and understand.

Comment on previous blog by a loan officer :

"The problem with lumping these two definitions under the same category is that as a Loan Officer, we are not underwriters. Our daily job requirements cover more than just approving/declining loans, not to say that's all an underwriter does but this is their main function. Our objective is GETTING loans. I don't sit down every morning and review guidelines and loan packages ALL DAY. I don't review every single page of the banks statements to look for NSF charges or large deposits etc. I don't look at the buyer's address on his pay stubs, W-2's and bank statements to make sure they all match. I am not that detailed or analytical, otherwise I would not have more than 5 loans a month or I would be an underwriter. The people on my team do perform these functions but early in my career I didn't have help. This forced me to be more detailed than I currently am, but as a Loan Officer these things are not high payoff activities. This is why, I believe, so many Loan Officers don't perform the actions of an underwriter. I am not stating every Loan Officer doesn't do these things and that they shouldn't but rather that this isn't our main role. This is why I believe there are two different definitions, PRE-QUALIFY and PRE-APPROVAL."

Here is Jeff Belonger's strong opinion about this.....

Yes, we aren't underwriters.... but what has made me very successful in closing most of my loans that I originate (writing applications) is that I look at the items that I collect from the borrower. This loan officer states that the loan officers objective is to get loans. Yes, from a sales perspective, he is 100% correct. But if you stop right there, I now classify you as an order taker. Anyone can fill out a mortgage application and collect documents. He then goes on to say that he doesn't review every single page of bank statement to look for NFS charges or large deposits. He mentions a lot of things. Here is the problem with this.

When I take a mortgage application or even when I issue a pre-approval letter, I have collected most of the documents needed to start the mortgage process. But before I hand my loan into the opener or my processor, I check these documents. Here is why....

• Bank statements- If there are large deposits, we need to explain these, if not consistent with the borrowers normal pay. If we have a large deposit that we can't prove, this can kill a deal in some cases. Why? Because you can't borrower money to buy a home. Yes, you can receive a gift, but even that paper trail has to be proven. If there are many NSF's (non sufficient funds) on the statements, this could lead to a denial. Can you be a worthy borrower if you write bogus checks?
• Pay stubs- If you don't review these carefully, there could be other debt on your pay stubs that don't show up on your credit report. You could have a wage garnishment for back taxes, child support/alimony, or another type of wage garnishment.

The list could go on and on, depending on what is needed to be collected. My point here is that as a mortgage loan officer, we need to cross the 't's and dot the 'i's more than just once. Even when I first screen a new borrower, I spend some time asking them specific questions. In my studies when speaking to other borrowers that have spoken to a few loan officers, many tend to ask the basic questions and that's it. I feel like there are about 10 major questions to ask, in making sure that this loan will close and close on time. I wrote about my specific questions... Jeff Belonger's mortgage questions when pre-qualifying...

Overall, yes, there could be other reasons to why your loan didn't close or close on time...

• appraisal
• title work
• maybe the borrower lied about something

The sad part about all of this is that the loan officer or lender can blame many different reasons to why your loan won't close now. Yes, many lenders have specific lender overlays, which means that they can add to the normal guidelines that HUD/FHA or Fannie Mae/Freddie Mac have established. But because of so many changes, this seems to be the easiest excuse out there now. Yet, in my honest opinion, the loan officer might not have done a good job up front. They were too busy stuffing their pipelines with mortgage applications. People, you need to choose wisely. Please read my blog about the questions that I ask. If your loan officer only asked you half of them, there could be major problems down the pike per se. Thanks

NEWS PRESS : This just in.... Kathleen Daniels just made this comment : Kathleen's comment : She stated that a lender should know long before if there is an issue. A few things.. if it's not an apraisal or title issue, yes, in most cases this could be correct. Just don't assume. If the application was properly taken and the correct documents were collected upfront, yes, 99% of the time the problems should be found many weeks prior to closing. It just depends on when the application was taken and when the closing date is set. The average time frame that a lender should need in today's market is almost 4 weeks. Yes, many of the lenders and brokers out there are 6 to 8 weeks, but they just took too many applications that probably won't close to begin with... maybe refinances that will have appraisal issues? Just food for thought.

Please read Jeff Dowler's comment... Jeff's comment - This could have been a mini blog and is right on, spot on...

FOLLOW ME ON FACEBOOK

- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages -

- Conventional Loans - 203 k loans -

- Mortgages -

Experience & Knowledge at its BEST !!!

_________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!

Copyright © 2009 by Jeff Belonger of Infinity Home Mortgage Company, Inc