Success Stories

Over the past few years there has been a lot of buzz about how difficult it is to get financing for a home. Well, I am going to feed a different buzz here for the next few posts.

Just this month, we have helped some clients with some very difficult and interesting situations. Here's a quick recap of a few of them.

A single woman with limited income (as in under $1,100 per month income) wanted to buy a Fannie Mae Repo home. The cool thing about these homes is the the Fannie Mae Home Path loan program. It allows a buyer to put down only 5% and purchase a home with no Mortgage Insurance. Another side benefit is there is no appraisal required. So, we were able to qualify her for this program and get her loan closed well before the contract date. Our professional staff is totally dedicated to making loans to people who are qualified, regardless of how much effort it takes to make it happen.

We had a client who went to three lenders in town and each one only qualified the buyer for $100,000 in financing because of how they calculated income. Our dedicated team would not accept this, we put our skills to work and took the time to calculate the income correctly and helped our client buy a home. The final loan amount was nearly $160,000 and they are thrilled!

Another client had been turned down by one of the biggest lenders in town simply because they had three jobs in 12 months. This was easily overcome because we look at the whole picture with each borrower. We don't give up just because it's not easy!

Big news coming to El Paso soon. We will have our own underwriter and closer right here in our local office. This will allow us to offer even better, faster service to our clients. Come grow with us, we are the premier lender in town. Let us prove it!

Attention Realtors---Must Read Post

Attention Texas Real Estate Agents! This post is for you and I would encourage you to become familiar with the changes coming up that will affect your business. You can count on Security National Mortgage to continue to educate you about the changes as they take affect in 2014 and as they are modified in the months to come.

What is the general ATR (Ability To Repay)

standard?

Under the general ATR standard, you must make a reasonable, good-faith determination before 

or when you consummate a covered mortgage loan that the consumer has a reasonable ability to 

repay the loan. 

What are the eight ATR 

underwriting factors I must 

consider and verify under the 

rule?

A reasonable, good-faith ATR evaluation must include eight ATR underwriting factors: 

1. Current or reasonably expected income or assets (other than the value of the property that secures the loan) that the consumer will rely on to repay the loan 

2. Current employment status (if you rely on employment income when assessing the consumer’s ability to repay) 

3. Monthly mortgage payment for this loan. You calculate this using the introductory or fully-indexed rate, whichever is higher, and monthly, fully-amortizing payments that are substantially equal.

4. Monthly payment on any simultaneous loans secured by the same property 

5. Monthly payments for property taxes and insurance that you require the consumer to buy, and certain other costs related to the property such as homeowners association fees or ground rent.

6. Debts, alimony & child support payments. 

7. Monthly debt-to-income ratio or residual income, that you calculated using the total of all of the mortgage and non-mortgage obligations listed above, as a ratio of gross monthly income 

8. Credit history, the rule does not preclude you from considering additional factors, but you must consider at least these eight factors. 

How do I determine ATR?

Our organization is responsible for developing and applying its own underwriting standards and 

making changes to those standards over time in response to empirical information and changing economicand other conditions. Implementation Tip: When determining ATR, you have to verify only the income or assets used to qualify the consumer for the loan. Implementation Tip: When the consumers’ applications list debt that does not show up on their credit reports, you must consider that debt in assessing either the consumers’ 

debt-to-income ratios or residual income, but you do not need to independently verify that debt.  17 

To help your organization incorporate the ATR concepts into its operations, the Bureau has prepared some examples that illustrate how your internal policies can influence your ATR determinations. 

The list below is not a comprehensive list of all the ways your underwriting guidelines might measure ATR. 

Each of you must look at the issue of ATR in the context of the facts and circumstances relevant to your market, your organization, and your individual consumers. Given those caveats, here are some of the types of factors that may show that your ATR determination was reasonable and in good faith: 

 Underwriting standards: You used standards to underwrite the transaction that have 

historically resulted in comparatively low rates of delinquency and default during adverse 

economic conditions. 

 Payment history: The consumer paid on time for a significant time after origination or reset of an adjustable-rate mortgage. Among the types of factors that may show that your ATR determination was not reasonable and in good faith: 

 Underwriting standards: You ignored evidence that your underwriting standards are not effective at determining consumers’ repayment ability. 

 Inconsistency: You applied underwriting standards inconsistently or used underwriting 

standards different from those you used for similar loans without having a reasonable justification. 

 Payment history: The consumer defaults early in the loan, or shortly after the loan resets, 

without having experienced a significant financial challenge or life-altering event. 

The reasonableness and good faith of your determination of ATR depends on the facts and 

circumstances relevant to the particular loan. For example, a particular ATR determination may 

be reasonable and in good faith even though the consumer defaulted shortly after consummation 

if, for example, the consumer experienced a sudden and unexpected loss of income. 

If the records you review indicate there will be a change in the consumers’ repayment ability after 

consummation (for example, they plan to retire and not obtain new employment, or they plan to 

transition from full-time to part-time work) you must consider that information. 

Ok that is enough for today! I will be posting pieces of the rule between now and the end of the year. I don't expect you to remember all of this so you can refer to http://files.consumerfinance.gov/f/201310_cfpb_atr-qm-small-entity_compliance-guide.pdf for the complete rule. As ammendments come out I will try to stay on top of those here as well. 

You can expect some lenders to get even more picky and careful about accepting income verification and making exceptions on Debt Ratios. It will be wise to prepare your clients to document everything, especially if they are self employed.

NMLS #3116

Thanksgiving--The following is something to ponder . . .

• If you woke up this morning with more health than illness . . . you are more blessed than the million who will not survive this week.
• If you have never experienced the danger of battle, the loneliness of imprisonment, the agony of torture, or the pangs of starvation . . . you are ahead of 500 million people in the world.
• If you can attend a church meeting without fear of harassment, arrest, torture, or death . . . you are more blessed than three billion people in the world.
• If you have food in the refrigerator, clothes on your back, a roof overhead and a place to sleep . . . you are richer than 75% of this world.
• If you have money in the bank, in your wallet, and spare change in a dish someplace . . . you are among the top 8% of the world’s wealthy.
• If you hold up your head with a smile on your face and are truly thankful . . . you are blessed because the majority can, but most do not.
• If you can hold someone’s hand, hug them or even touch them on the
• shoulder . . . you are blessed because you can offer healing touch.
• If you can read this message, you just received a double blessing in that someone was thinking of you, and furthermore, you are more blessed than over two billion people in the world that cannot read at all.
• Have a good day, count your blessings, and pass this along
• to remind everyone else how blessed we all are.

Provided to us by  Bill Sparkman "The Coach"

Ever Changing Lending Guidelines

I want to touch on a few things regarding FHA loans. These are important to address because I have seen them come up with our local clients several times just this month.

From FHA.com website, not a governemnt sponsored site but there is a lot of good information.

"FHA Loan Facts and Fiction About Credit

Here’s a common question we get about FHA loan credit requirements--a variation on a theme that goes something like this:

“My spouse and I are looking to apply for an FHA loan. We just recently got married. He is more than qualified to apply on his own, with a good credit score and great income. I, unfortunately, have terrible credit and unresolved debts. Is it possible for him to apply on his own without factoring in my debt? We were told I had have my credit checked and my debt would also be factored into the debt to income ratio, but not my income. Is this true?”

Unfortunately there is no one single answer to questions like these due to state law, which may affect how an FHA loan application is reviewed depending on whether the state is a “community property” state--one where the law requires both borrower and spouse to be equally obligated on major financial transactions such as a home loan.

FHA loan instructions to the lender in HUD 4155.1 Chapter Four, Section A say:

“Except for obligations specifically excluded by state law, the debts of the non-purchasing spouse must be included in the borrower’s qualifying ratios, if the

• borrower resides in a community property state, or


• property being insured is located in a community property state.”

FHA loan rules add, “The non-purchasing spouse’s credit history is not considered a reason to deny a loan application. However, the non-purchasing spouse’s obligations must be considered in the debt-to-income (DTI) ratio unless excluded by state law. A credit report that complies with the requirements of HUD 4155.1 4.C.2 must be provided for the non-purchasing spouse in order to determine the debts that must be counted in the DTI ratio.

Note: This requirement is applicable if the subject property or the borrower’s principal residence is located in a community property state.”

FHA loan rules DO NOT override state or federal law, so it’s crucial to check the laws of your state to see what might apply in such cases. For more information on this issue, borrowers can also check with a legal expert or real estate expert who can advise on state law as applicable.

Some borrowers may not be affected by community property laws for the simple reason that not all states have such laws, but anyone who does live in community property states will need to carefully examine both the spouse and non-purchasing spouse’s credit during the preparation time leading up to the loan application."

It is important to begin the application process in Texas with both individuals debts calculated in the monthly payments and considered in the overall Debt Ratios. It can save all of us some headaches when it pops up late in the financing game.

Leasing out current property and buying as new home with FHA financing.

Client owns a home, they want to keep the home they own and buy a new home with an FHA loan. They intend to rent the existing home and use some of that income to qualify for the new purchase. 
Beware of a couple key things: 

1. We have to prove 25% or greater equity in the existing home before we can count any of that rental income.

2. We must have a signed lease with proof of deposit and money changing hands. It has to be a legitmate lease or we must calculate full principle, interest, taxes and insurance from this property against the total debt ratio.

I will continue this discussion and would love to hear from you about other situations that you have encountered that might be helpful for folks getting ready to apply for FHA financing.

Good Agent; Bad Agent and how to tell the difference

Choosing the right agent can make all the difference according Jorge Alvarez of Camacho Real Estate in El Paso, TX.

Jorge has been my agent and an agent for many of my friends. He is a friend, referral partner and all around great guy. I hope you enjoy the conversation I had with Jorge that inspired today's topic. Check out our interaction and feel free to wiegh in with differing opinions or other feedback from your own experiences.

Brian: What is the most important attribute of a great real estate agent?

Jorge: "You should really be focusing on one question as you intereact with your agent.  Does my agent have my best interest in mind? If the answer is clearly yes, then you are on the right track. If you are not sure, take your time deciding if you want them to exlusively represent you in your property purchase."

Brian: How can we tell if our agent is acting in our best interest?

Jorge: "Agents who continually try to show houses that don't fit the profile you have discussed or homes that are only at the top of your price range may be focused more on the commission rather than getting you the right house. Some agents will push only new homes because there can be large bonuses for selling these. When negotiating for repairs or writing initial offers, the agent should provide clear direction and professional opinion but in the end, they are working for you and should be willing to write the offer according to your wishes. Some agents will quickly settle to seller demands to save a deal and I don't think this is the best representation of the buyer."

Brian: What are some obvious signs to help me know if I have chosen the wrong agent?

Jorge: "if an agent starts the relationship with a conversation like this; you may need to find a new agent. Here is my business card, when you find the house you like just give me a call so I can show it to you. Please sign this buyers agreement so I am protected if another agent trys to sell you a house. 

A buyer can certainly keep their eyes and ears open for a house that meets their needs but the majority of the searching and leg work should be done by the agent. That's a big reason why you hire us. Don't settle for an unmotived agent who is simply trying to make easy money for writing your offer. 

One other thing that bothers me is when agents ask clients to pay them up front for services. Don't pay your agent to show you houses, we get paid well when you close on the house. The best way for us to get a deal closed and get paid is by doing our job very well."

Brian: Jorge, this is really good information and I think it can save people a lot of hassle if they follow your advice. Can you give us some tips on how to find a great agent like yourself? 

Jorge: "I always think that personal referrals are the best way to get connected to a great agent. Many of my clients come that way. The next best way is through online reviews if you don't have any personal references to rely on. You can look at real estate sites that have reviews and get a feel for who is strong in the area you are looking."

Brian:  Jorge, I really appreciate your take on this subject and the great advice. I am sure that folks will find useful tips here. To wrap this up, give us your top 5 traits to look for in a great agent.

Jorge: "They should ask good questions and pay close attention to the houses you like so they can refine your search for you. They should be accessible within a timely manner. They should do whatever it takes to get you into the house you are interested in even if it means jumping a fence and getting dog bitten (I've done this in case your wondering). They should guide you to qualified service providers such as a great lender and whatever else you need through out the process. Most importantly, focus on providing great service more than pre-screening you to see if you are worth their time.

Brian: Jorge, this has been very enlightening and it's always a pleasure doing business with you, I am linking you on this post and sharing some of your reviews for readers to check out. Thank you for your time and your referrals.

To learn more about Jorge's online reputation you can visit his profile on Zillow and see what some of his clients have to say. http://www.zillow.com/profile/Top-Rated-realtor/

SNMC El Paso
11601 Pellicano Dr. Suite A-14
El Paso, TX 79936
NMLS#3116

This post is not meant to be legal advice or meant to steer you toward using Camacho Real Estate or Jorge Alvarez. It is meant to be informational but you should always do your own due diligence before choosing an agent to represent you or signing any contracts for representation. The opinons written here do not represent Security National Mortgage Company  nor has Security National Mortgage Company made any specific recommmendation of any agent. These opinions are those of Brian Clayville, Account Executive and Jorge Alvarez, Texas Realtor and are merely opinions. 

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