FHA loan – Trevor Curran

How I Bought My First Home – Part 3

My first day in the mortgage business was very exciting. I learned I could buy a home with an FHA mortgage with only 2.25% down payment! Average prices were $125,000 so I thought I could easily save up the money for that down payment.

Day 2 in the mortgage business wasn’t as exciting, in fact, it was a bit of a letdown. I learned that closing costs here in New York would be approximately 6% of the purchase price!

First day calculations to become a homeowner quickly went from saving $3,000 for a down payment to realizing I would need more than $10,000 for the down payment and closing costs! Back in 1989, beginning a new career after losing a good job, I knew this would be a real challenge, especially with the high cost of living here in New York City.

But then I learned about “Seller’s concessions.” When I made an Offer to buy a home, my real estate agent could negotiate to include some of my closing costs (up to 6%) into the purchase price of the home.

I translated my education into something I could use for my clients.

And I’ve been helping many of them the same way ever since: with different loan programs including the FHA program and its low down payment (today it’s 3.5%) and a Seller’s concession to help out with the closing costs.

I hit the streets in earnest, travelling to different towns in Long Island to survey property types and price ranges so that I could make the best decision possible as to where I would buy my first home. It was hard work, I will tell you! But it was an investment well worth the time because I knew I made the right decision when I finally bought my first home.

Next week: How I bought my first home in 15 minutes.

Take a look around and fine more great advice on buying your first home.

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How I Bought My First Home – Part 2

Last week I told you of the real estate agent who laughed me out of his office in 1987. I was dejected yet determined that one day I would own a home. Today I want to share with you the nasty surprise I received on my birthday and how that led to my becoming a homeowner.

It was my birthday!!!

It was October, 1989 and I was unwrapping a beautiful red Fender Stratocaster guitar for my birthday. We had a few friends and family over to my apartment in Astoria.

The phone rang; it was my boss, Rich.

“Trevor I have some bad news. The company is out of business; don’t come back to work tomorrow. Human Resources will be in touch about any s

everance you might be owed.”

I was shocked because I thought we had been working for months to save the company from disaster. I was obviously wrong. I had a great position as Regional Manager in Customer Service and I had worked my way up from lowly Customer Service Rep at the company.

“Happy Birthday to me, by the way.”

Three weeks later I had an invitation for an interview with a mortgage company on Long Island. Someone in the family knew someone whose brother owned a mortgage bank. I met the man and soon thereafter began my career as a Mortgage Banker just 30 days after losing my job in electronics.

I was determined to accomplish three things:

1. Work on commission and never work in the corporate world again

2. Buy my first home

3. Help my Mom and Dad buy their first home.

I’m happy to report that I have accomplished all three goals thanks to that nasty birthday surprise.

Stay Tuned: Next week, my mortgage education and house hunting

Take a look around here and find more great advice on buying your first home.

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Do you have questions? Click on ASK TREVOR and I’ll respond to any and all inquiries, even if you’re not buying a home in
New York State.

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Happy House Hunting!

Why Buyers are Obstructed from Using FHA Financing

There are several reasons why Buyers can’t use FHA Financing for their home purchases. You would think that Homebuyers should have the full range of loan programs options available to them when making their financing decisions. They DO! But Buyers are too often getting discouraged and diverted from using FHA Financing by realtors, home sellers, and, yes, mortgage professionals.

And many of those Buyers don’t qualify for other types of financing, which makes these reasons all the more insidious and dastardly.

REASON 1: Inexperienced FHA Appraisers. Unfortunately, the FHA program has an incorrect reputation for “difficult” appraisals, i.e., appraisals requiring lots and lots of repair items prior to closing. I hear often from real estate agents of the terrible experiences they had with FHA loans, specifically the appraisals. Thanks to the radical changes in our mortgage business since 2010, many very experienced Appraisers left the business. This deficit was eventually filled, especially as the economy improved, by new appraisers.

These Appraisers simply don’t have the necessary understanding of FHA appraisal standards. I reviewed once such appraisal yesterday. The Buyer found me after an intensive Google search for an expert mortgage professional on FHA 203k Renovation financing. She’s been trying to buy a bank-owned foreclosure property (REO) since last July! The Lender she was working with simply couldn’t figure out how to make the financing work with the renovation financing. When I reviewed the documents she submitted, I realized the main problem with her file was the appraisal.

First, this was a terrible appraisal all around: Incorrect purchase price, comments skewed all over the report instead of properly situated in the addendum, crazy comments on, and use of, comparable sales, and I mean CRAZY. Secondly, and most importantly for this poor Homebuyer, the appraiser demonstrated a crystal clear LACK of understanding of FHA “health and safety” and property condition guidelines. This appraisal is for a property in Westchester County, an area where I often hear the objection from realtors about their bad experiences with FHA appraisals.

REASON 2: Realtors’ bad experiences. First and foremost, let me state this radical idea: NO ONE gets to tell a Home Buyer what type of financing they can or can not use to complete a home purchase. But too often, that’s exactly what happens.

Because Realtors have had a bad experience with an FHA transaction—or worse, they’ve “heard” of people having bad experiences—they strongly discourage Home Buyers from using this option. I have personally had Realtors tell me on the phone, “Oh, no, they can’t use an FHA loan for this house.” No kidding! When I inquire as to the reasons why, there ensues a litany of false information embedded in the Realtor’s mind about how the FHA program works. I will then explain that, since I work for the Lender, and have extensive experience with FHA financing, these ideas in their heads are, ummm…WRONG!

Let’s be clear: if a Realtor, or a home Seller, by extension, has had a bad experience with an FHA loan, that does NOT prevent a Buyer from going ahead with the financing of their choice. I mean, what if these people once had a bad experience with home buyers who showed up driving silver four-door cars? Would they be prevented from buying the home? Of course not because that is just absurd! Well, so is the idea that a Buyer cannot use their preferred (or ONLY) method of financing a home purchase.

REASON 3: Inexperienced or misinformed mortgage professionals. The answers given to home buyers by mortgage professionals range from, “Oh, you cannot buy a home with FHA financing over $417,000 with less than 10% down.” FALSE. To, “You know, FHA financing is only for people with bad credit.” FALSE. To, “That program is only for First Time Buyers.” FALSE. To the all-time doozy, “My bank does not Offer FHA financing.” From the depository lender with the HUD Eagle on the front door!

Make no mistake, the lack of understanding of the FHA program and/or lack of experience/education by these professionals is probably the biggest reason why so many Buyers have difficulty using FHA financing (and why Realtors and Sellers have so many bad experiences).

What to do?

If you are buying a home using FHA financing, let NO ONE discourage you from using the loan program. It’s an excellent program and has been available to home buyers for more than 80 years! And, when selecting a mortgage professional, do your background research on that person’s experience in general (HERE on the NMLS Consumer Access website by clicking “Self-Reported Employment History” on an individual’s licensing profile) and for FHA financing specifically. GOOGLE is your friend!

Do you have questions? Click on ASK TREVOR and I’ll respond to any and all inquiries, even if you’re not buying a home in New York State.

Check out my Trulia profile HERE

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Find me on TWITTER: @tcurranmortgage

Happy House Hunting!

2016 NAR Report: Existing Home Inventory Record LOW

The National Association of Realtors (NAR) released their 2016 annual report. The good news: sales of existing Single Family homes (including Condos and Co-Ops) are the best in a decade. The bad news: Inventory of homes for sale hit a record low.

I’ve experienced this low inventory trend anecdotally through my experiences working with First Time Home Buyers here in New York.

Lawrence Yun, NAR chief economist, said, “Solid job creation throughout 2016 and exceptionally low mortgage rates translated into a good year for the housing market,he said. However, higher mortgage rates and home prices combined with record low inventory levels stunted sales in much of the country in December.”

Here’s my advice to you First Time Buyers out there:

First, you must be prepared before you hit the streets looking for homes. If there are not enough homes available, but lots of Buyers walking around competing with you for that limited supply of houses, then being well-prepared can put you ahead of the crowd. One of the best ways to beat out another Buyer when competing for a house is to have “all your ducks in a row” even if your Offering price is LOWER! I’ve seen it happen, time and time again.

Second, you must strike while the iron is hot. If you see a home which comes close to your “Wish List” for location, features and price, present your OFFER the same day! The early bird gets the worm!

With homes inventory at record low I have also seen in my travels lots of homes that have no business being on the market! Yes, there are homes out there which you actually cannot or should not buy. The reasons are many and varied but they range from unrealistic Sellers with over-priced homes and a stubborn refusal to negotiate price to bad Listing Agents who tell you that your financing package won’t work for their Seller if it’s an FHA or VA loan to homes with serious physical or legal problems (mold in the basement; ancient and leaking roof; an extension without permits/certificates; a deceased owner with improperly filed estate documents, and etc., and etc.).

If you are prepared with a solid team of professionals they will guide you away from potentially harmful or crazy deals. Which brings me back to being prepared!

I have seen it time and again when existing home inventory is low: the Buyer who is clear-eyed and prepared wins and accomplishes their goal of homeownership!

Do you have questions? Click on ASK TREVOR and I’ll respond to any and all inquiries, even if you’re not buying a home in New York State.

Check out my Trulia profile HERE

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Find me on TWITTER: @tcurranmortgage

Happy House Hunting!

NEGOTIATE Your Offer: Hit Them Like a Freight Train!

I have a client making an Offer tomorrow on a multi-family house in The Bronx. This client—a First Time Buyer and a Veteran of the Armed Forces using VA financing—has been working very hard to find the right house.

Three weeks ago he was moments away from signing a contract to buy a home. He had done the home inspection and there were serious concerns about the property. He presented these concerns to the Seller through the Seller’s Agent, notably, a very bad roof and a serious water and mold problem in the basement. The Seller’s response: not gonna fix it. Have a nice day. Home inspection fee of $550 out the window; in the garbage; down the drain. Not really. “Money well spent,” I told my client. “You found out for minimal cost the potential money-pit-nightmare this house could become for you. Walk away.”

And walk away he did. Yesterday he saw another house he really likes. This time, I suggested we go at the Seller like a freight train bearing down on him.

Hit ’em hard. Provide a clear and concise layout of the price and terms of your Offer. Let me, the Mortgage Banker, speak to the Realtor about how well-qualified you are and the rapid timeline for an approval and closing. Put it all in writing. Have all your “ducks in a row” with the Offer spelled out with price and closing timeline, Attorney information, date for the home inspection, and your Prequalification Letter for VA mortgage financing.

As if that isn’t enough of a speeding train on the tracks, give the Seller a deadline: just over 24 hours to respond. Present your Offer mid-day Thursday; require a response by 3pm Friday. Tell the Seller’s Realtor you have appointments to look at other houses starting Saturday morning.

WOW. FREIGHT TRAIN!

Listen, anyone, any Buyer anywhere can do this. You need two things to see this through. One, have your Prequalification letter and your “team” lined up: Attorney, Home Inspector, Mortgage professional. Two, just DO IT. You have nothing to lose and everything to gain. You’ll find out if the Seller is serious; if they really want to have a constructive dialogue with a Buyer; if the Realtor is a serious professional.

Line ’em up on the tracks, make your Offer, run at them like a freight train and hit ’em hard. I promise you, this method WORKS.

Do you have questions? Click on ASK TREVOR and I’ll respond to any and all inquiries, even if you’re not buying a home in New York State.

Check out my Trulia profile HERE

Check out my Zillow profile HERE

Find me on TWITTER: @tcurranmortgage

Happy House Hunting!

About Your Home Inspection

You definitely want to be present at the inspection; budget anywhere from 2 to 5 hours for the inspection. Dress as if you might get dirty; bring a flashlight. You’ll go through the house side by side with your Inspector. After the inspection, your Inspector will discuss with you any major issues you need be aware of to discuss with your Attorney. You’ll get a written report shortly after the inspection day.

Typically your Home Inspection will alert you to problems in five key areas, and these key areas directly relate to the contract of sale in a New York home purchase:

1. Foundation: sound and solid
2. Roof free of leaks
3. Plumbing working and leak-free
4. Heating system sufficient and operating
5. Electrical system sufficient and up to code

If there is a serious problem with any of these five items, typically the Seller has a responsibility under the terms of the contract of sale to repair the problem at their expense, not the Purchaser’s expense. Sometimes a Purchaser will receive a credit at closing to repair one of these items (assuming the home and the defective issue has not compromised the Lender’s appraisal). When the Purchaser receives a credit at closing, the amount of the credit is based upon legitimate estimates for repair and negotiations between the Attorneys representing each party.

Other items you discover are in need of repair/upgrade (i.e. dishwasher not operating properly; air conditioner on second floor inoperable, etc.) can be negotiated for a repair credit or replacement at the Seller’s expense. Again, these negotiations are typically handled by the Attorneys.

It is not as common as you might think that a purchase price is reduced due to repairs from a Home Inspection. Best to consult with your Attorney for more detailed information in this area.

Do you have questions? Click on ASK TREVOR and I’ll respond to any and all inquiries, even if you’re not buying a home in New York State.

Check out my Trulia profile HERE

Check out my Zillow profile HERE

Find me on TWITTER: @tcurranmortgage

Happy House Hunting!

The document ‘drip’

I once lost a client because he was annoyed with me for asking him to provide documents for his loan application. He felt that my request for ALL the pages of his bank statement (he only provide page 2 of a 6 page statement), various W2 forms and 1099 forms (he had varying income streams) and the complete contact information for his wife’s employer was “too much.” He cancelled his loan application, and I was happy to see him go.

I believe my role as someone’s Loan Originator is to help them have a positive and tranquil experience with their Loan Application and approval process. I believe I should use my extensive knowledge garnered from nearly 24 years in the industry to know most-all the documents an Underwriter will require in order to approve someone’s loan request. So, I ask for a lot of documentation up front at the time of application.

Then there’s my childhood friend Bill who moved out west after retiring here in New York.

He found a house and applied for his loan. I recommended a fantastic national mortgage banking company (I’m not Licensed in Bill’s state). Instead, Bill chose his bank, where he’d had his money parked for many years. A few weeks into the loan process he called me one evening ranting and raving. It seems the bank kept calling him and asking him for more documents every day. He said they were “papering” him to death! We reviewed the requested documents together and I told him they were all reasonable requests. What was unreasonable was the fact his Loan Originator should have gathered these documents with the initial loan application.

As to my former client—the real estate agent who referred him to me told me after he closed how he was complaining during the many weeks it took to get his loan approved how the Loan Originator kept asking him for more and more documents every day. The real estate agent said the guy was pretty stressed over those requests.

When you apply for your mortgage, your Loan Originator can either gather all your documents up front—the mark, IMHO, of a true and experienced PRO—or document “drip” you through to closing.

Here’s what you should be prepared to submit at Loan Application:

__Paystubs: most recent four weeks consecutive

__W-2’s: most recent two years

__Tax returns: Federal Tax returns for most recent two years including all schedules

__Bank Statements: most recent three months consecutive statements, all pages

__Other assets: proof of other cash assets: 401k, IRA, Employer Pension Plan, Retirement funds, Mutual Funds, Stock accounts: Most recent three month statement, all pages

__Photo ID

__Fully signed Purchase Agreement (Contract of Sale)

__Proof of your Earnest Money Deposit

Do you have questions? Click on ASK TREVOR and I’ll respond to any and all inquiries, even if you’re not buying a home in New York State.

Check out my Trulia profile HERE

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Ask Trevor A Question

Using Gift Money

Often First Time Buyers rely on family to provide extra money for the purchase of a home in the form of a Gift.

In general, before using Gift money from family, I recommend you have a discussion with the Mortgage Loan Originator (MLO) who prequalified you. Depending on the Loan Program she used to qualify you, there may be restrictions on using Gift funds or there may be other requirements.

Gift funds, like all monies used in the purchase of a home, must be “sourced.” That is, your Lender will need to see the source of the Gift money from your family member. In most instances the Lender will also need to track the transfer of those funds from your family member into your bank account.

Again I caution: Speak with your MLO before using Gift monies for the purchase of a home.

A question that often comes up when Gift monies are involved is:

“What are the tax consequences of using

Gift money when buying a home?”

I’m happy to refer you to the website for my good friends at Burns & Rodriguez for professional guidance in this area from tax professionals:

http://www.brodtax.com/newsletter.php#6

Do you have questions? Click on ASK TREVOR and I’ll respond to any and all inquiries, even if you’re not buying a home in New York State.

Check out my Trulia profile HERE

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Find me on TWITTER: @tcurranmortgage

Ask Trevor A Question

Experience COUNTS! Work with an experienced Mortgage Loan Originator

If you’re a First Time Buyer you MUST begin your search for a home with a Prequalification AND a Licensed Mortgage Loan Originator with at least 15 years experience.

Why 15 years? This is a person who worked in the mortgage business before the “Boom and Bust” years. During those toxic times all that was needed for a mortgage approval was a credit report and verification the Applicant had a heartbeat. Access to becoming a Loan Originator was ridiculously easy and it attracted all sorts of the wrong people. Those of us with real careers in mind often struggled to succeed competing against the amateurs.

In the “old days” of mortage lending we old-timers approved mortgage loans the same way we do now in 2013: with FULL DOCUMENTATION. That’s 2 years income tax returns and W2’s, 30 days recent paystubs and 3 months recent bank statements. It’s not enough, either, to have the documents. Those docs must be reviewed with a critical eye to anticipate obstacles to a loan approval.

For example: you took a loan against your pension two years ago. Your paystub indicates a repayment of that pension loan. If you’re qualifying for a Conventional, FannieMae type loan then the monthly payment of that loan is counted against your income much as a car payment, credit card payment or other monthly obligation. The pension loan payment is counted into the Debt-To-Income Ratio for qualifying purposes. And for some folks, they might not qualify with that payment.

The experienced Loan Originator knows about this guideline and

seeks out these stumbling blocks in the prequalification process.

What to do?

Interview the Loan Originator: How long in the business? Do you focus primarily on Purchase loans or Refinance Loans? Do you review ALL required documents before you issue the Prequalification or do you simply run a credit report and ask me a few questions?
Check NMLS: The National Mortgage Licensing System was created to provide professional standards for Loan Originators and to protect consumers. You can see the Licensing/Registration status of any Loan Originator on the NMLS Consumer Access website. Open up the “Self-reported Employment History” tab to verify that your Loan Originator wasn’t managing a fast food restaurant three years ago before getting into the mortgage business. http://www.nmlsconsumeraccess.org/
Switch Loan Originators: when you called the Lender/Bank you weren’t “assigned” the Loan Originator. YES, you can switch to a different professional!

For the biggest financial decision of your life
work with an experienced professional.

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Hope that helps!

5 Steps To Making An Offer To Buy A Home

When you take these formal steps you are demonstrating to everyone involved in the transaction just how serious a Buyer you are. You will set yourself apart from “the crowd” when you follow my method.

There is a deliberate process to making an offer. I include step-by-step instructions on how this works. My instructions will help you get the house you want, even if you are dealing with a difficult Seller, a Bank-Owned property, or if you are competing against another Buyer for the same house.

I have seen these methods work many times over with my clients over my almost 28 year career as a mortgage professional.

My basic methodology here is one of making your Offer a very formal proceeding. When you take these formal steps you are demonstrating to everyone involved in the transaction just how serious a Buyer you are. You will set yourself apart from the crowd. I have seen this method work time and time again for my Homebuyer clients.

5 Steps To Making An Offer:

STEP 1. Always make offers in writing. Yes, it is absolutely true that offers can be presented verbally. Don’t do that. Put your offer in writing every time. Even if you are in a situation where you and the Seller are sending counter offers back and forth, every new offer should be in writing.

When your offer is in writing, you come across to the Seller as serious. Think about it, anyone who is taking the time to go in to the real estate office and sign the form is serious about buying a home.

Include the following into your written offer:

* The amount of your “earnest money deposit” or “good faith deposit.” That is the amount of money you’ll put into escrow with the Seller’s attorney upon signing the contract of sale.
* The amount of your mortgage financing. Of course you’ll back this up with a prequalification letter, but you must include the amount of your mortgage in the offer.
* Items included in the sale. If the appliances and the chandelier in the dining room are to be included in the sale, make sure they are written in to the offer. This shows the homeowner you were paying attention when you inspected the home and asked, “What’s included in the sale?”
* Attorney Information: the name and complete contact information for your attorney.
* Anticipated contract date. Always make this date within 48 hours of your offer. Present the assumption the Seller will accept your offer and immediately forward a contract to your attorney.

Again, this demonstrates to the Seller how serious you are. You are in effect saying, “I am so serious about buying this home I want to sign the contract immediately!” Imagine how many other Buyers out there are delaying things like signing the contract (and potentially changing their minds).

* Anticipated closing date. This is an interesting point for the offer. I always recommend putting the closing date for an offer within thirty days of the contract. The fact is most closings take place within 60 days of contract, and your attorney will most likely change that date in the contract, but if your offer says “thirty days,” once again you demonstrate how serious you are about buying the home.

STEP 2. Prequalification letter. Your mortgage professional should be available to fax a prequalification letter within hours of your making your offer; even on Saturdays or Thursday evenings.

STEP 3. Mortgage pro phone call. I think a phone call from your mortgage professional to the Listing Agent is a home run. When the Listing Agent hears from the mortgage person directly how eminently qualified you are, imagine how that raises your profile in the mind of the agent and the Seller!

STEP 4. Home Inspection ready to go. When you sign your offer, be sure to tell your Realtor that you’ve already spoken with your Home Inspector and you can have the inspection done tomorrow. Whoa, that’s really the mark of a serious Buyer!

STEP 5. Get ready with your counteroffer. If you offered less than the asking price, then you need be prepared with your counter offer if the Seller either declines or counters your opening offer. All of the steps above should be repeated with the new price replacing the original number. Organization and swift responses rule the day! Oh, you may not want to counter offer. That’s okay, too.

Close-up shot of keys in the lock of open door. One key is in lock another hanging on the ring — Unlock the door to homeownership with this method

Do you have questions? Click on ASK TREVOR and I’ll respond to any and all inquiries, even if you’re not buying a home in New York State.

Check out my Trulia profile HERE

Check out my Zillow profile HERE

Find me on TWITTER: @tcurranmortgage

I welcome Comments for all my blog entries. I will be happy to review and approve all legitimate comments provided by readers of tcurranmortgage.com. If you wish to Comment on any entry, please do so and I will quickly review and approve.

Good luck and Happy House Hunting!