What does a mortgage broker do for you?

By Patti LeVan, Multiline Mortgage Services, Inc.

June 20, 2017

I recently did a search on the internet for the definition of mortgage broker.  Knowing what a mortgage broker actually does, since that is what I do, I found a lot of misinformation.

For example, Zillow defined a mortgage broker as an originator that sells the loan application to the wholesale lender then gets out of the picture leaving the client to fend for themselves.  COMPLETELY AND UTTERLY FALSE!

A mortgage broker finds a client usually through referrals from other clients, attorneys, realtors and other professionals in which a relationship has been established through good work performance.  Trust me, these professionals will not risk damaging their reputations by referring clients to a broker who underperforms.  They, too, rely on a network of referrals especially from clients.

The broker takes an application from the client which includes details of the client’s financial position.  The broker helps the client determine how much they can afford to spend on a home based on income, debt to income (DTI), and a credit report.  It’s important at this juncture to note that Multiline Mortgage doesn’t just look at affordability but also looks at sustainability.  I often tell clients, “I don’t judge you for how you spend your money.  It’s your money.”  My goal is to make the client aware of their financial position from an objective point of view from what I see on paper and to help them decide what they can afford and sustain.  Once the loan amount is established, a pre-approval letter is provided to the real estate agent.

I ask the client to start gathering what is known as the loan package which consists of taxes, pay stubs, bank statements, identification, and asset statements in an effort to prepare for submitting the loan.  I will typically search for loan programs during the house hunting process so I am prepared once I receive the purchase contract.  The lender field is narrowed down to usually three that have the right loan program match.  Then it’s up to which lender offers the better rate and terms.  This allows me to move very quickly after receiving the purchase agreement.

Once the purchase agreement is received, I’m ready to move forward on the loan with the selected lender.  Throughout the loan process, the client works directly with me.  If issues arise, I am there to work them out with the underwriter or others.  Many times there are issues that the client is not aware of because I can resolve them without upsetting the client.  My goal here is to make the process as easy as possible and to take the stress for the client.

So to say that the mortgage broker simply sells an application to a wholesale lender is absurd.  I advise that clients do their homework.  The best place to start is to call Multiline Mortgage Services.  We are transparent.  We tell it to you straight.  Every time.

New DU Version Eases DTI Requirements

by: Jann Swanson

New DU Version Eases DTI Requirements

May 31 2017, 10:55AM

Fannie Mae has announced changes in underwriting for loans submitted to its Desktop Underwriter (DU), Version 10.1.  The new DU version will be implemented on or after the weekend of July 29. The changes are outlined in release notes issued on Tuesday and will apply to new loan casefiles submitted to DU on or after the weekend of July 29, 2017. Loan casefiles created in DU Version 10.0 and resubmitted after the weekend of July 29 will continue to be underwritten through DU Version 10.0.

Among the more significant changes accompanying the new version are the following.

  • The maximum allowable debt-to-income (DTI) ratio that can be submitted in DU will be 50%. For DTIs between 45 and 50 percent, certain additional compensating factors will no longer be required. Cases exceeding a 50 percent DTI will receive an “ineligible” recommendation.
  • The criteria that determines the documentation required to verify a self-employed borrower’s income will be updated and the number of DU loan casefiles eligible for the one year of personal and business tax return documentation requirements will increase.
  • The maximum allowable LTV, CLTV, and HCLTV ratios (LTV ratios) for adjustable-rate mortgages will be aligned with fixed-rate mortgage LTV ratios for all transaction, occupancy, and property types, up to a maximum of 95%. Additional information on the effective dates of this change will be available in the Selling Guide.
  • A loan casefile with a disputed tradeline that is approved with that information will no longer require further action. If such a loan casefile does not receive an Approve recommendation, the lender must determine the accuracy and completeness of the tradeline information. If the borrower is responsible and the information accurately and completely reports the account, then the lender may manually underwrite the loan if it is eligible. Tradelines reported as medical debt will continue to be excluded from the disputed tradeline identification and lenders are not required to investigate disputes.
  • DU is regularly reviewed to determine if its risk analysis is appropriate. Version 10.1 will include an update to this risk assessment and it is expected to increase the percentage of Approve/Eligible recommendations received by lenders, particularly those with DTI rations between 45 and 50 percent.

The new DU version will also contain changes in or will generate new messages about underwriting issues in the following areas:

  • Income and Employment Updates
  • Property Inspection Waivers
  • Student Loan Cash-Out Refinance
  • Employment Offers
  • Multiple Financed Properties
  • Site Condo Reviews
  • Timeshares
  • Homebuyer Education

Version 10.1 will also support the final Consumer Financial Protection Bureau rule implementing amendments to the Home Mortgage Disclosure Act (HMDA) which modified the reportable data requirements related to collection of information of borrower ethnicity, race, and gender.

Fannie Mae says that with the release of the DU Version 10.1, Version 9.3 will be retired.  Effective the weekend of July 29, resubmissions of loan casefiles to the old version will not be accepted although applications and Underwriting Findings reports will still be available for viewing. To obtain an updated underwriting recommendation after the retirement date customers must create a new loan casefile.

IMPROVING YOUR CREDIT SCORE IS POSSIBLE

Improving your credit score is possible

The FICO Score scale runs from 300 to 850. How rare is a perfect credit score of 850? According to Fair Isaac Co., the developer of the FICO Score, just one in nine Americans has a FICO Score of 800 or higher, and only 1% have a perfect credit score of 850.

A credit score of 800 or higher is actually a lot easier to achieve than you think.  There are five relatively simple, disciplined strategies to follow that will improve your score. Discipline is the key ingredient.  Spending within your means is possible.  You have to determine your goal (home ownership), plan your strategy (steps 1-5), then execute your plan.

  1. Pay on time

Paying bills on time accounts for 35% of your FICO Score. This should be a habit and is the biggest component to achieving a perfect credit score.  Discipline with your payments demonstrates to lenders that you can be trusted with future loans.  Lenders will want to see a minimum of 12 months with no late payments.

Consumers should also understand that if a late payment is more of an exception than a rule, your lender may be willing to forgive it. Late-payment forgiveness is all dependent on the lender in question, but most companies will allow a late payment once every 12 to 24 months without any negative repercussions.  You will be required to explain the late payment when applying for a mortgage loan.

  1. Mind your credit utilization rates

Credit utilization comprises 30% of your FICO Score. In other words, your credit card may have a $5,000 limit. If the balance you owe is $500, your utilization rate is 10%. That shows you are doing a really good job in being disciplined in your spending habits. The lower the utilization rate, the better.

Credit bureaus are like to see utilization rates under 30%.  Over 30% indicates that you either don’t have good money management skills, or that you may have difficulty repaying your debts.

  1. Have a good mix of accounts

Your credit mix accounts for 10% of your FICO Score. Just as creditors want to see that you can make on-time payments, and that you can keep from utilizing too much of your available credit, they also want to observe your ability to handle different types of credit accounts.

For example, credit agencies are looking for consumers that have a good mix of installment loans, such as a mortgage, car loan, or student loan, and revolving credit, like a department store credit card or bank credit card. If you can handle a good mix of debt obligations, creditors are more likely to lend to you, and your FICO Score is liable to benefit.

  1. Keep your accounts for at least 5 years

Average credit age accounts for 15% of your FICO Score and a minimum of five years should be the goal when aiming for a high score.  Your credit score should receive a big boost by keeping your good-standing accounts open for long periods of time.

Both your lenders and credit reporting agencies examine your account history as a roadmap to your credit worthiness. If you have a perfect payment history, but just six months’ worth of credit history, lenders may still have reservations about your ability to meet your debt obligations. However, if your average good-standing credit account has been open for five years, you’ve demonstrated to creditors and the credit agencies that you’re quite trustworthy.

A word to the wise here is not to close long-standing credit accounts, even if you don’t use them often, and assuming annual fees aren’t a hindrance. Long-tenured accounts can provide a big boost to your average length of credit history, which is one of the factors that affects your credit score. Make an effort to use all of your credit lines a couple of times a year in order to keep them active and in good standing.

  1. Be mindful of opening new accounts

New credit inquiries comprise 10% of your FICO Score.  While credit bureaus want to observe your ability to manage multiple types of credit accounts, you’ll also want to be careful not to open too many accounts.

The easiest thing to do is ask yourself if a credit account is necessary based on your purchase. If you’re buying a home, a car, getting a college education, or even buying a new washer and dryer for your home, opening a line of credit probably makes sense as these are large-money events.  If you’re buying an item for $20 at your local department store, you should forego opening a new account to save 10%.  The department store will do a hard pull on your credit which will knock down your score a few points.

However, if your are in the process of buying a home, DO NOT PURCHASE ANY LARGE ITEMS OR OPEN ANY LINES OF CREDIT.  Doing so could sink your loan.

If you follow these simple strategies, remain disciplined, and give it some time, you can improve your score in a relatively short amount of time.

Next steps?

Call Multiline Mortgage Services.  We can move very quickly on getting you the right loan at the best price.

The truth about credit inquiries.

When someone requests to pull your credit report, it will usually affect your credit score. Having too many inquiries of a particular type can actually have a negative effect. But the key to understanding which types of inquiries will hurt your credit score is knowing the difference between “hard” and “soft” inquiries.

Hard inquiries

When you apply for a new loan or a new line of credit (credit cards, car loan, etc.), you must first give the lender or credit card issuer permission to look at your credit report which is known as an inquiry or a “hard pull.” These inquiries are recorded on your credit report, since your desire to borrow money is considered to be an indication of your creditworthiness.

Soft inquires

There is another type of inquiry that has nothing to do with your application for a new credit cards or a new line of credit, called a soft inquiry, or “soft pull.” In fact, companies may not even need your permission to perform these types of inquiries, which are generally done for marketing purposes. Examples of soft inquiries include those made by credit card issuers who mail firm offers of credit to qualified customers, the scores pulled monthly or quarterly by lenders on their own customers for the purpose of account review and employers who choose to do background checks. In addition, when you check your own credit report, you are only performing a soft inquiry.

The most important difference

When it comes to the effect of these inquiries on your credit report and credit score, it’s important to realize that only hard inquiries can make a difference, not soft ones. The appearance of numerous hard inquiries within a short period of time is seen as an indication that you are looking to borrow money from multiple sources, which is considered to be a sign of increased financial risk. Or to put it another way, you would also probably feel uncomfortable loaning money to someone that you know has been asking many others for a loan. However, no matter how many soft inquiries are generated by banks, employers, or even yourself, your credit score should not suffer.

How much do hard inquiries affect your credit score?

In some scoring methods, it usually affects your score by 10 percent.  If you have a high score to begin with, this can be considered minor.  If your score is low, the affect could mean the difference having a qualifying score and not having a qualifying score. In contrast, your payment history and your amounts owed are likely much larger considerations—30 percent or more.  If you are applying for a home loan, rule of thumb is to limit the amount of hard pulls to protect your score.  The higher your score and creditworthiness, the lower the cost of the loan.  Minimize your risk!

A 45-day grace period

There are some times when making multiple applications for a loan is not considered to be a sign of risk. When consumers shop around for a home mortgage or a student or automobile loan, they may generate many hard inquiries, but only because they are being smart consumers and looking for the best possible rates. Thankfully, the credit scoring formulas take this rate shopping behavior into account by not penalizing you for repeated inquiries for certain types of loans. For example, often hard inquiries within a 14- to 45-day “shopping” period for a mortgage, an auto loan or a other type of loan are considered a single inquiry.  Be prepared, however, to explain the reason for so many inquiries within that 14 to 45 day period.  Your lender will want a written explanation for their file.

By knowing the difference between hard and soft inquiries, you can make the right decision when someone asks for your permission to check your credit.

Legal Disclaimer: This site is for educational purposes and is not a substitute for professional advice. The material on this site is not intended to provide legal, investment, or financial advice.

Gallup Poll Shows High Hopes For Homeownership

Gallup Poll Shows High Hopes For Homeownership

May 8 2017, 11:42AM

While the historically low homeownership rate as reported by the Census Bureau has improved only marginally over the last year, a recent survey by Gallup indicates that it may be on the edge of change.  Forty-nine percent of non-homeowners contacted by the polling company in March indicated they expect to buy a home within the next five years, with 10 percent planning on doing so in the next year.  An additional 20 percent say they plan on being homeowners within ten years.   This leaves only 28 percent with no plans to purchase a home.

Jeffrey M. Jones, who reported the story for Gallup, said these numbers have increased since the last such survey in April 2016 when 38 percent did not plan to buy in the foreseeable future.  At that point 41 percent were within the five-year window.  Gallup has conducted the survey in four of the last five years.

Mortgage Rates Fighting to Stay Near 2017 Lows

by: Matthew Graham

Mortgage Rates Fighting to Stay Near 2017 Lows
Mortgage rates moved lower today, following a policy announcement from the European Central Bank (ECB).  Some investors were concerned the ECB might begin sprinkling in clues about rate hikes or an early end to bond buying programs, but there was no such drama in the announcement or the press conference that followed.

If you’re not familiar with the ECB, it’s essentially Europe’s version of the Federal Reserve.  Both wield tremendously large balance sheets (used to control supply and demand in rates markets, and thus, rates themselves). While central banks can only truly control the shortest term rates, investors who trade the bonds that drive longer-term rates (like mortgages) are nonetheless paying very close attention.  Bottom line: with the ECB not sending any threating messages about shorter-term rates, longer-term rates were able to relax a bit.

The average lender continues offering conventional 30yr fixed rates in the 4.0-4.125% range for top tier scenarios.  While these aren’t the lowest rates seen all year, they’re still reasonably close

The importance of loan pre-approvals.

◊   April 25, 2017

I was listening to the radio recently and there was an infomercial from a national direct lender talking about mortgages.  They were talking about a scam where brokers allegedly make tons of money from giving loan pre-approvals to people who do not qualify for a loan.

The effect of giving a pre-approval letter to a client that doesn’t qualify for the loan is a serious issue and has a domino affect.  For example, Tom is selling his blue house to George.  Tom is also buying a yellow house from Martha and is relying on the proceeds from selling his blue house.  A broker gives George a loan pre-approval letter stating that he is qualified to buy Tom’s blue house when in fact, George’s finances cannot support the loan.  Tom is now relying on the fact that George is qualified to buy his blue house which is set to close in 40 days.  Tom believes everything is going to plan so he makes arrangements to close on Martha’s yellow house in 45 days.  George’s loan falls apart just before closing on the blue house.  Tom can’t close on the yellow house because he doesn’t have the proceeds from the blue house.  A disastrous chain reaction.

The infomercial stated to avoid this scam, trust Mr. Direct Lender to fully vet the loan before giving a loan pre-approval.  The infomercial had one thing right:  Loan pre-approvals should be fully vetted.  The rest of the 1/2 hour throwing brokers under the bus was so wrong and I’ll tell you why!

First – Brokers do not get paid if the loan doesn’t close.
Second – A good broker will speak with a client to get to know them and their situation, take a loan application, run numbers to make sure stated finances are sufficient in relation to the loan amount, and run a credit report to confirm information prior to giving a pre-approval letter.
Third – The negative effect on the many relationships involved in a loan is counterproductive.  The broker runs the risk of losing relationships with clients, real estate agents, title companies, and lenders when a loan does not close based on poor financial vetting.
The lesson to learn here is to make sure your broker is communicating and working for you, researching your questions and collecting information.  Email is so handy and is an effective way to communicate, however, make sure you have at least one phone conversation with your broker.  Get to know them and ask questions.  If the broker isn’t willing to satisfy you with an answer, even if the answer is to say “I don’t know, can I get back to you,” then you’re with the wrong broker.  Call Multiline Mortgage.  We’ll show you how it’s done right.
                              Throwing competition under the bus and lying makes you look like this guy.

Mortgage Rates Slightly Higher After French Election

April 24, 2017

Mortgage rates moved moderately higher today, and most of the blame goes to the presidential election in France.  If you’re wondering what European politics have to do with mortgage rates in the US, you’re not alone.  While it certainly isn’t the first thing that comes to mind when thinking about what’s motivating rates, its impact was unmistakable today.

To understand the connection, first consider that the EU economy is slightly bigger than that of the US.  Then consider France is the third biggest economy in the EU.  Germany is the biggest and the UK is the second biggest.  On that note, don’t forget that the UK is currently in the process of exiting the European Union.  Now to bring it all home, simply consider that one of the candidates in the French election (Marine Le Pen) wants France to exit the EU as well.

Investors perceive the departure of large economies from the EU to be risky for growth.  They’re then more predisposed to sell stocks and buy bonds.  When investors buy bonds, rates move lower.  In the case of the French election, when Le Pen didn’t win, investors could afford to sell some of the bonds they bought as insurance for a potential Le Pen victory.  When investors sell bonds, rates move higher.  That’s about as basic a conversation as we can have regarding the French connection to rates.  (For what it’s worth, Le Pen is still in the running, but is widely expected to lose the runoff election in early May.  The fact that she didn’t win outright yesterday is what prompted investors to move out of bonds and into stocks this morning).

In the bigger picture, rates didn’t move too terribly much.  Most lenders are back at levels seen roughly 2 weeks ago.  For many, that means they’re still quoting 4.0% on top tier conventional 30yr fixed scenarios, but with higher upfront costs.  For others, it’s meant a move back up to 4.125%.

Rates Remain Lower vs Last Week Despite Rising Today

February 10, 2017

Mortgage rates continued higher today, bringing them back in line with Monday’s levels.  Part of the rise was due to weaker trading levels in bond markets.  Just as important is the fact that many lenders didn’t raise rates yesterday afternoon as the bond weakness began (weaker bond markets imply higher rates).  In other words, unless bond markets improved overnight, this morning’s rates were already destined to be a bit higher than yesterday’s.

Even though today’s increase was far more substantial than yesterday’s, it leaves rates at levels that are still slightly better compared to last Friday.  Many lenders continue to offer 4.125% on top tier conventional 30yr fixed scenarios, though several have moved back up to 4.25% with today’s weakness.