Everything listed under: Lender requirements

  • 8 Places To Go If Your Mortgage Lender Says No

    New mortgage rules draw specific lines as to whom should and shouldn't get a mortgage.  If your lender says no or you know you fall outside the new lines for obtaining a mortgage, here are 8 alternative sources.  HouseLogic.com came up with this list, and also provides links to the criteria lenders use to evaluate whether you qualify for a mortgage loan.  NAR predicts that the new mortgage rules may cut out 5-7 percent of borrowers from the market, and the rules have eliminated balloon loans and interest-only loans.

    In a nutshell, here is HouseLogic.com's list of alternative options for obtaining financing for the home buyer:

    1.  Your State Housing Finance Authority

    State Housing Authorities often give you a below-market interest rate or the option of putting down as little as 3%.  However, you’ll likely have to agree to complete a financial education course and provide a detailed breakdown of your income.

    2.  A Small Bank

    Banks and credit unions that have less than $2 billion in assets and make 500 or fewer first mortgages don’t have to follow the same rules as larger lenders.  But, small lenders can charge higher fees and interest rates than big banks, which they need to do if you have a tiny loan amount, because some fees, like a title search, cost the same no matter how big or small your loan is.  

    3.  A Government-Guaranteed Loan

    The new rules set a clear line for how much of your income, max, you should be using for debt: 43%. If you’re above that limit because you have too much debt or not enough income, there’s a work-around.

    You can go over the 43% limit if your loan is guaranteed by Fannie Mae, Freddie Mac, the Federal Housing Administration, the VA, or the U.S. Department of Agriculture’s rural housing loan program.

    4.  Community Development Non-Profits

    Nonprofit lenders who work with low-and moderate-income borrowers don’t have to follow the new mortgage rules. As long as they don’t make more than 200 loans a year, they can create special loan programs to help the people in their community.

    5.  Homeownership Preservation and Foreclosure Prevention Programs

    If you’re underwater on your mortgage, meaning you owe more than your home is worth, you can get still a loan from a foreclosure prevention program or a homeownership stabilization organization. Because these groups have a history of knowing how to help troubled homeowners, they don’t have to follow the new mortgage rules.

    6.  A Safer Loan

    If you’re in a dangerous, unfair loan right now and you want to refinance into a safer loan, your lender doesn’t have to follow the eight standards when it gives you a better loan. There’s an exemption from the ability to repay standards when a lender is moving a borrower out of:

    • An adjustable-rate mortgage that’s about to adjust to a much higher payment.
    • An interest-only loan.
    • A loan with negative amortization (meaning the amount you owe can go up even if you make all your payments).

    Your new standard loan:

    • Has to have a fixed rate for the first five years.
    • Must lower your monthly payment.
    • Can’t have fees of more than 3% of the amount you’re borrowing.

    7.  A Work-Around

    If you have enough money such that your bank has assigned you a personal wealth manager, that’s the person to talk to when it’s time to refinance. Your bank will want to keep you as a customer and will find a work-around to fund your loan.

    For example, if you’re using more than 43% of your income for debt but you can show you have a lot of money in assets, your personal banker will make the case that you’re quite able to repay your mortgage even though you don’t meet the debt-to-income rule.

    8.  Another Kind of Loan

    The new mortgage rules don’t apply to all loans. It specifically doesn’t include:

    • Open-ended loans.
    • Timeshare loans.
    • Reverse mortgages and others.
    If one of those types of loans will work instead of a mortgage, you won’t have to meet the new mortgage rules.

  • The Lowdown On Your Appraisal Report

    In order for you to get a loan to buy or refinance a home, your lender will first require an appraisal of the property.  Why?  The appraisal will help your lender determine how much your property is worth, and in turn, how much collateral they will have after granting you a loan.  Zillow's blog recently featured a very helpful guide to interpreting an appraisal report.  

    Page 1 - Home Facts

    The first page of the appraisal report will contain basic facts about your house.  It will include any improvements/additions to your home and any neighborhood/community it is located in.  It is important to scan this page and verify its accuracy.  The appraiser will use this information to obtain comparable properties in the area for determining your property's market value.

    Page 2 - Comparable Homes

    The second page of the appraisal report will contain comparables in a chart/table format.  The first column will list your property, then each additional column will contain other properties that the appraiser deems worthy of comparison.  These are referred to as "comps."

    The appraiser will include comparable homes sold within the last 6 months, most likely in the same neighborhood or area as yours to minimize differences in value.  The price that each comparable property recently sold for will be under each comparable property's column.  It is very difficult to compare even properties that are similar to yours due to the uniqueness of each property.  It often becomes a point of contention between the homebuyer and the appraiser, when the homebuyer believes comparable properties don't take into account features that his/her own property may or may not have.  However, the appraiser makes adjustments to each comparable property's sale price based on its differences to your property...thereby, negating differences and making the final arrival at a market value of your property more accurate.

    In addition, it may be noted that not all adjustments reduce the estimated market value of the subject property. Zillow's blog notes that "if the best comps available are smaller homes, for instance, it could lead the appraiser to make a net positive adjustment to the estimated value on the report. All of the adjustments are then combined into a gross adjustment, which is used in the estimate but also serves as a gage of the confidence the lender should have in the final value. The higher the gross adjustment, the less reliable the report should be considered."

    Finally - Estimated Market Value

    At the bottom of the second or last comparables page, the appraiser will reveal his/her estimated market value of your property based on the comps in the above chart.  The lender will use this value (estimated market value) to determine how much the lender will loan you.  The estimated market value is also the basis of the loan-to-value ratio that is important in the home finance process.

    The appraiser may also include an estimated cost value, which is the cost of replacement of the home. This is often used to obtain home insurance for the homeowner and lender over the life of the loan.

    Other pages included may expand on comparable properties or features of your home.

    If you have any questions about the appraisal process or would like to discuss the home buying or selling process further, please contact us and we would be happy to assist you in your real estate endeavors.  

    Email us at  contactus@alandrealty.com or call us at 207-251-4762.  You can also visit our Facebook page at www.facebook.com/alandrealtygroup or Tweet us @AlandRealty!  

    Happy New Year!

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