Rey Gallegos Home Loan Consultant Las Vegas, NV

Hello...and Welcome to a Full Doc World!

Over the course of the last couple of months, I have witnessed changes to the lending process that have been more severe than all of the other changes since I have been in the business. This is in part due to fear...but let's face it, this is mostly due to money. When financial entities lose money...things change! When they lose large amounts of money...things change quickly!

I want to introduce you to the new world we live in...The Full Doc World. We as a Mortgage and Real Estate Professionals have a choice to make at this very moment, learn to live in our new world or find another career. You see in a Full Doc World, everything is on the table. Just when you think your done, something else may come up. Is it convenient, NO! Is it reality, YES! If you choose not to face this reality, you will be doing a great disservice to your clients and yourselves!

Below I have outlined what a Full Doc World really means. Many of the items that I outline below are not going to sound very fair. Please understand that these are not specific to my company, this is an industrywide tsunami that is mowing us down as we sleep! Consider this post as the high rise hotel that may help keep you dry. If there is a broker or bank that is not currently playing by the following rules, they will start VERY SOON! Unfortunately, it may be at the tail end of one of your transactions which may cost you a closing or a client. Prepare yourselves folks because if you thought it was tough before, it is about to get a whole lot tougher!

I myself had to come to a realization recently. This change was going to happen whether I wanted it to happen or not. When I had my epiphany, a great big smile came over my face. I GET IT!...and because I GET IT, I will be better prepared to move forward in this world from here on out. My buyers and the Real Estate Agents that I work with will stand a better chance of getting their transactions closed. Some of these buyers and agents may walk away in the near term, but when their realization comes, they will understand and hopefully come back. Below are the dark and gruesome truths as I am finding them out. Read with caution and understanding...and welcome to The Full Doc World!

Buyer's Income and Asset Documentation:

These are the two most important pieces to a Full Doc loan. Please don't get these confused with the income and asset documentation from 1 year ago or even 3 months ago. A simple Verification of Employment and 1 paystub WILL NOT work in our new world. This documentation is required and must undoubtedly support the buyers income. If there is a discrepancy, the err will be on the side of caution. If a guideline states that overtime income must be supported by twelve months on the job, it needs to be twelve months, not 11 months and 25 days. There are FEW if any income exceptions in this world. For assets, we need to see them and they will be verified. There are no letters of explanations as to why a buyer's name only appeared on the most recent statement or exceptions for reserve accounts being a dollar short. In addition to these unnerving requirements, when these documents are provided to underwriting, EVERYTHING INCLUDED IN THESE DOCUMENTS IS FAIR GAME. Underwriters will not look the other way, if there is a large deposit that they can not identify, it will be conditioned to be explained AND supporting documentation provided.

Stated Income and Reduced Doc Loans:

These loans are all but gone. The FBI has reported that misrepresentation of income has been the most prevalent form of mortgage fraud over the last couple of years. Mortgage Banks and Lenders have seen their stated income portfolios deteriorate in terms of performance. Mortgage Insurance companies will no longer insure stated income loans in Clark County. In a Full Doc World, these loans exist but are rarely used!

Prior to Closing Conditions:

Expect quite a few of these conditions, prepare your buyers that they will be coming. If we catch these items on the front side, the conditions will be fewer on the back side. Before we could "wait to see if the underwriter will request it", now we must expect for it to be a need to close the transaction. If they don't catch it in the beginning, the second set of eyes will catch it in the middle. Should both miss it, rest assured the third, fourth or fifth set of eyes WILL NOT! Does it sound daunting, well it is! Some buyers may feel like they are being "singled out" and are continually being asked for more and more conditions. Please let them know that while they are special, they are not unique! All buyers will be going through the same level of scrutiny that they are.

Appraisals, Inspections, and Re-Inspections:

All are on the table and will be requested. "As is" is not an acceptable answer to an FHA inspector. "We don't do repairs on our foreclosed properties" is the mantra of an asset manager that does not want to sell his clients properties. If there is a safety, security, or collateral issue on the appraisal or any inspection involved in the transaction, expect the underwriter to request it to be corrected. This was not the norm 1 month ago today, but it is the new norm in a Full Doc World!

Closing Times:

What all of these things add up to is increased closing times. Before, 30 days was considered an eternity for a closing to occur. The new reality is that closing will best be determined by the work that Mortgage and Real Estate Professionals do in advance. Docs will be held for the i to be dotted, and funding will be postponed until the t is crossed. In a Full Doc World, don't worry about how quickly you are going to get paid just be grateful that you are receiving a check.

Our positions as Mortgage Professionals have just become astronomically more difficult. Your career as a Real Estate Agent has now become increasingly more dependant on aligning yourself with a true Mortgage Professional. Experience and knowledge will once again be King! Those that choose not to conform WILL FAIL. The ability to successfully identify landmines, hurdles, and challenges before they come to be is the most important factor in closing a successful transaction. This WILL inevitably separate the best from the rest! Welcome to a Full Doc World!

Rey Gallegos

Mortgage Professional

The Las Vegas REDC Lender Foreclosed Public Home Auction is coming up this weekend. The previous REDC Auction last year was hugely successful. There are over 280 Properties slated to be auctioned at this event!

I have been named an Auction Home Loan Consultant for the Preferred Auction Lender and am able to issue pre-qualification passes to enter the auction. If you are interested in attending, or if you are a Real Estate Agent and have a client that is interested in attending please contact me directly so that I can pre-qualify you or your client.

You can also use my secure online Quick Pre-Qualification Form. In the comments section of the form, be sure to note that you would like to attend the auction. Keep in mind because it is a secure form, it takes about 30 seconds to load so please be patient.

Once qualified, you will receive an auction pre-qualification form that serves as your entry, as well as an auction guide that was assembled by my team from the last public auction. This guide was developed based on the events that transpired from the last public foreclosure auction. It has been designed to help you and your clients navigate the controlled chaos that is a public auction and will help you avoid common pitfalls.

I will also be at the auction pre-qualifying late comers and once properties are auctioned off, I will be submitting the mortgage loans for those that have won properties.

Auction Dates and Locations are as follows:

LAS VEGAS 1
SATURDAY, MARCH 22nd
Cashman Field Center

LAS VEGAS 2
MONDAY, MARCH 24th
Plaza Hotel & Casino

For more information about the auction or to view properties, register, and more please visit the US Home Auction website. You can also call 1.800.690.REDC. When asked about pre-qualification just say you have already been pre-qualified by an auction lender and contact me right away!

Your Mortgage Partner for Life,

Rey Gallegos

Home Loan Consultant

I spend a large part of my day analyzing my business and the Las Vegas Real Estate and Mortgage Industry in general. I keep my eye on trends and attempt to figure out why the trends are happening. One trends that has particular intrigued me is Reverse Mortgages.

Today, Reverse mortgages are likely the only segment of the mortgage industry trending upward. This upward trend doesn't show any signs of slowing anytime soon as:

• 15 million senior households meeting eligibility requirements
• More than 50% of senior's net worth is in home, an illiquid asset
• There is $4.3 trillion of senior home equity in the nation today
• Estimated 78 Million babyboomers begin turning 62 this year and will continue for next 17 years

Based on these figures, this will soon become a large market for Mortgage Originators especially in Las Vegas. As always, when there is a new trend you can rest assured that there will be unscrupulous originators trying to exploit the trend and make a quick buck.

In my previous post, Reverse Mortgages in Las Vegas, a Great Option for Some, I outline some of the features of Reverse Mortgages and how they pertain to the Las Vegas market.

I can not stress enough that if you or some one you know are in the market for a Reverse Mortgage, seek out an expert in the field with a reputable company. If you are unsure where to find one, feel free to contact me directly and I can assist you.

Your Mortgage Partner for Life,

Rey Gallegos
Home Loan Consultant

Many Las Vegas residents that fit into the Jumbo Loan category, loan amounts greater than $417,000, know the woes of high Jumbo Loan rates. Since the beginning of the Mortgage Crises, Jumbo Loans were hit hard as Wall Street all but stopped buying these loans on the secondary market. This led to a quick increase in Jumbo Loan Rates which has remained to this day and does not seem to have an end in sight.

Unfortunately, because of the higher cost of housing in the Las Vegas Valley many potential homeowners that would like to purchase are faced with a dilemma. Should they buy a less expensive home or put down a larger down payment to keep their loan amount below $417,000 and avoid the steep increase in interest rate? This is a tough decision, especially because of looming economic concerns. There may be a solution that could help.

It's no secret that in our current market, Sellers and Builders are giving major incentives to Buyers. Buyers should take advantage of this current phenomenon and use it to minimize their interest rates and payments for a short period of time. It is called a 3-2-1 buydown and here is how it works:

If your Jumbo Note Rate on a 30 Year Fixed Rate Mortgage is 7.25%. A 3-2-1 buydown would reduce that rate by 3% the first year, 2% the second year, and 1% the third year. The cost to the buyer is dollar for dollar equal to the savings for those three years. Are you confused yet, me too, I will illustrate:

30 Year Fixed Rate Jumbo Loan = 7.25% Loan Amount = $500,000

• Year One (Rate = 4.25%) Payment = $2,459.70 (Savings of $11,414.18)
• Year Two (Rate = 5.25%) Payment = $2,761.02 (Savings of $7,798.35)
• Year One (Rate = 6.25%) Payment = $3,078.59 (Savings of $3,987.54)
• Year One (Rate = 7.25%) Payment = $3,410.88 for the remaining 26 Years

The total savings to the Buyer equals $23,200.08 over three years. The total cost to the Seller/Builder equals $23,200.08. Now-a-days with the amount of incentives that Las Vegas Builders are giving out they should be more than happy to give this as an incentive if it means selling a home and not having to reduce their prices any more than they already have. As far as people selling a home in Las Vegas, this could be a great way to entice prospective buyers to make an offer considering the amount of savings that they would see over the first couple of years.

Finally, I have saved the best for last. YOU QUALIFY AT THE BOUGHT DOWN RATE! Yes, you qualify at the bought down note rate. So in the above scenario, you would qualify at a payment of $2,459.70 instead of $3,410.88. This is perfect for the people that are expecting annual pay increases or will use the savings to pay off other debt. Once the fourth year comes around they will have the income to make the payment.

I want to stress that if you can not afford the payment in the fourth year this loan enhancement is not for you. It is designed to give buyers the benefit of having for the first couple of years that they own their home.

If you have questions about a 3-2-1 buydown for the purchase or refinance of a Las Vegas Property , please feel free to contact me directly.

Your Mortgage Partner for Life,

Rey Gallegos
Home Loan Consultant

I like to research loan programs and scenarios I am not familiar with. One of those programs happens to be Reverse Mortgages. For those of you that do not know, Reverse Mortgages sometimes carry a very negative connotation with them.

What is a Reverse Mortgage?

A reverse mortgage enables homeowners aged 62 and over to convert part of their home equity into tax-free income without having to sell the home, give up title, or take on a new monthly mortgage payment. The reverse mortgage is aptly named because the payment stream is reversed. Instead of making monthly payments to your Mortgage Bank, as with a regular mortgage, your Mortgage Bank makes payments to the you.

Types of Reverse Mortgages:

• Single-purpose: Offered by some state and local government agencies and nonprofit organizations.
• Federally-insured: Backed by HUD and known as Home Equity Conversion Mortgages (HECMs).
• Proprietary: Private loans that are backed by the lenders that develop them (SimpleEquity).

Key Features of a Reverse Mortgage

• All borrowers on title must be at least 62 years of age.
• Property must be the borrower's primary residence.
• No income requirements and no monthly mortgage payments.
• The loan accrues interest as long as borrowers live in the house. Borrowers make no payments on the loan, but are obligated to pay taxes and insurance (T&I).
• Borrowers can take funds in a line of credit (LOC) or a fixed monthly payment.
  • 70% of borrowers take the LOC and 50% of those take all available funds at closing.
  • 65% of borrowers pay off an existing mortgage.
• Note rates are based on an index plus a margin.
• Loan is due and repaid upon permanent move out of borrower. This includes any of the following:
  • Sale of property
  • Consecutive period of twelve months away from residence
  • Death
• Principal, interest and service fees are repaid upon loan maturity.
• Loan is non-recourse; borrower or heirs can never owe more than the appraised market value at time of repayment.

There are two types of Reverse Mortgages, the Line of Credit (LOC) and the traditional Reverse Mortgage. The LOC allows you to draw money when you choose to. The standard Reverse Mortgage pays monthly based on the set up of the original loan.

Is It a Good Loan?

As with ANY loan program, if the borrower can benefit from the loan, it is a terrific product. If you are on a fixed income and paying $700 per month for your mortgage, that can take a big dent. If you set up a reverse mortgage, you can not only eliminate your monthly mortgage payment but also get a monthly payment from the bank to you! You can see how that would benefit a lot of 62+ homeowners.

This Sounds Right for My Scenario, Now What?

The most important thing to do is to contact a REVERSE MORTGAGE SPECIALIST. Do not just contact the first name you see in the phone book. The Mortgage Professional that you contact should be specially trained and have experience writing these mortgages.

If you have any questions or need the recommendation of a good Reverse Mortgage Specialist in your area, please feel free to contact me directly.

Your Mortgage Partner for Life,

Rey Gallegos
Home Loan Consultant