FINANCIER$ Mortgage Group
The “Approval Experts”™ since 1984!        
(817) 204-0028     Fort Worth 
(972) 644-8244             Dallas
 



I know this is going to sound crazy,
but ya can’t make this stuff up! 


One new law is responsible for everything odd you are about to read here. 


Thank you Super Majority!

MARKET UPDATE VIDEO SECTION
(mostly for those in the industry)

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  3. -Who is FINANCIER$?

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  6. -Rebuilding Credit

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  8. -Appraisals Done Right!

  9. -Why the fuss about Millennials?


FINANCIER$
Mortgage Group

S.A.F.E. Act compliant


NMLS # 236854, 225460 & 234360


  1. (817)204-0028

(972) 644-8244



718 Boling Ranch Road

Azle*, Texas 76020


(*actually we are nowhere near Azle. We are really on the edge of Fort Worth)

In a purely political move versus a well thought out & studied move looking to see what was good and what needed improving, during the Recession we got a ton of new legislation wrapped up in one big law that was designed to protect the consumer from themselves.  (?)


Yes, Congress actually said out loud where people could hear them that they thought people had bought homes and didn’t realize it.  (If you’ve ever bought a home you know how ludicrous that is.)  


You need to read every word of this page as things don’t work quite as you expect so every word could be very important to you!


Some of the new law was good, but you’ll be scratching your head over somethings such as . . .


Effective October, 2015 it became ILLEGAL for any mortgage Lender
to
ask for or imply they need any sort of income documentation such as pay stubs, tax returns, W-2s, etc. until you apply for a mortgage.


So tell me this,

#1  how are you supposed to know about this law & 

#2  how is a Lender supposed to be able to tell you how much home you can qualify for so you can write a contract to buy that house and apply for a mortgage in the first place if they don’t have that information?


Also this law decided that YOUR TAX RETURN IS YOUR INCOME!! 


For mortgage purposes your income is not what your paycheck or boss says, so if you take tax deductions you are reducing your qualifying income and you won’t be able to buy as much home. 

Dodd-Frank is the new law & it requires Lenders to “prove in writing” a borrower has the capacity to repay the loan so Fannie, Freddie, et al have decided that the only way to do this is to require tax returns on every loan.  Which means if you have any tax write offs those write offs reduce your qualifying income. 


This is doubly bad for self employed people, but it also affects people on a straight salary who have things like non-reimbursed business expenses.  Lord help the person with a poor accountant who doesn’t ask if you need to maximize income or deductions! 


In other words a Lender absolutely positively has to see your tax returns before they can give you any meaningful answer about how much home you can qualify for, and yet they are prohibited by law from asking for them.  Smart right?

This means you’ll have to VOLUNTEER that information in order to find out how much home you can afford.
  So while there IS still a way to PreQualify for a home, it is going to require a small amount of work on your part under the new laws.

So let’s look at your options so you can decide which option fits your needs at the moment.



There are 3 things a Lender is allowed to do for you.

We are going to show you how to get whichever one you need for your situation. 
This allows you to decide how much information to volunteer.


1.) A PreQualification - is a way to get some kind of idea what price home you might be able to qualify for.


For a PreQualification you don’t really need to give a Lender any information except what is in your head.


2.) A PreApproval - this is usually required before a Realtor will even show you houses.  A PreApproval requires more information than a PQ, but is much more accurate.


For a PreApproval you will need to VOLUNTEER to the Lender proof of your income by way of paystubs and tax returns/W2s, bank statements to show your assets and your credit will need to be pulled.  Remember a Lender is not allowed to ask for or imply they need these things, but without them the most you can get is a PreQualification.


3.) Loan Application - ideally this will be done before you even begin to look for a home so that you get a head start which will allow you to close more quickly AND allows you to gain an edge over any competition should more than one person decide to submit a contract on the house you want.


Read the Basics-Mortgage Application page & watch the video to see all that is needed for a loan application.



We are going to look at the first 2 options and
save the loan application for the bottom of the page.



Most Lenders answer to the new TRID laws has been to make it difficult for you to talk to a real live person until you’ve filled out an online loan application so you can “volunteer” information and that way they won’t get into any legal trouble.

Doing it this way they don’t have to worry their employees might accidentally say too much, too early in the process - but this is a very bad thing for you, as I’ll explain in a minute. 


In this way they can continue to hire uneducated loan officers, they don’t have have to spend time & money training their loan officers and they can still be reasonably safe from the CFPB (Consumer Financial Protection Bureau).


Our answer is to spend the time to not only educate & train our loan officers, but also to educate our customers so they know how get what they need for themselves.


Making you fill out an Online loan application before you’re allowed to talk to someone isn’t a very good answer for YOU since almost all fraud originates from online loan applications. Because of the fraud potential all online loan applicants are scrutinized much more closely than those who make an application the traditional way with a human involved.  


This means you begin the loan process a step behind because first you have to prove you really are who you say you are, plus online loan applications have stricter underwriting and documentation criteria.


This means if you make an online loan application you already have 2 strikes against you and your odds of getting your loan approved just dropped significantly.  It also means that if you are approved you will have significantly more loan conditions than if you’d made a traditional loan application.  So an online loan application is the last thing you’d prefer to do.


We try to do what’s best for you, not what’s the easiest for us.


We’ve chosen to tell you the law, give you your options and
then let you decide what’s best for you.


In Texas there are only 2 types of preliminary qualification a Lender is allowed to do:


#1  Pre-Qualification  (Form A)
Being Pre-Qualified means a Lender has asked you how much you make, what your bills are, do you have any money, how’s your credit (your credit may or may not be pulled), and then based upon your answers they give you some sort of an idea of how much loan and the loan type you MIGHT qualify for.  In other words it doesn’t really tell you much.

A Pre-Qualification is useless for the purposes of writing a real estate contract as Sellers want to know for sure you can qualify, but it does help you understand how close you are to being able to buy a home, so it’s a good very first step, but still leaves a lot of unanswered questions. 


#2  Pre-Approval  (Form B)
Pre-Approval sounds official and sounds like it is giving you a very definite answer.  Unfortunately a mortgage Pre-Approval isn’t really as definite as being Pre-Approved for a credit card or a car loan, but it is several orders of magnitude better than a PQ. 


Here’s a twist you’re not used to in other types of loan approvals.  For an official mortgage both you and the property have to be approved.


You actual loan approval process requires quite a bit of other documentation that isn’t normally done at Pre-Approval time which is why it’s not an absolute approval.  BUT if all the information you gave us is correct, nothing changes in your situation, all the information you gave the Lender can be verified AND you buy an approvable property, then you can secure a mortgage.  It’s not perfect, but it’s as far as any mortgage Lender is legally allowed to go.  A Pre-Approval will be required if you are going to write any kind of real estate contract.



This means that if you decide you really want or need a Pre-Approval you have
to know to
VOLUNTEER your income data & documentation
or the most a Lender can give you is a Pre-Qualification. 


Let me stress this again - unless you very clearly VOLUNTEER this additional

information a Lender is forbidden by law from giving you a Pre-Approval

and they aren’t even allowed to tell you that they can’t tell you.


So look very carefully at the top of any “commitment letter” you may get to see if it says it’s a Form A or a Form B.





NOW LET’S TALK A LITTLE MORE ABOUT THE HUGE PROBLEM
WITH ONLINE LOAN APPLICATIONS


(And this applies to PreApprovals as well as your real loan application)


Almost every online loan application system takes your initial, and probably incomplete, loan application and runs it through the automated underwriting systems before it sends your data back to the lender - AND THAT’S BAD!


Most lenders aren’t aware of this, but because of all the tomfoolery that many tried during the recent recession the AUS (Automated Underwriting Systems) were changed to include a “memory” of the initial way your information was entered into the system and any subsequent changes made over the life of processing.


Any change in the data has the potential to cause your file to be flagged for “possible fraud” and require more careful scrutiny of all your data and consequently require much more documentation which will give you a more complicated loan process and a higher chance of a turndown. 


Too many or the wrong changes can also cause your loan to be flagged for Quality Control procedures after approval which can delay your closing. 


But it gets worse because it can also cause you & your loan to be investigated by the FBI after closing.  Nope, an online loan app is not the way you’d like to go!


As both representatives of Fannie Mae & Freddie Mac explained the history footprint (as they call it) to us,  they used the seemingly positive example of a loan officer discovering money in a retirement account that you hadn’t entered or had entered incorrectly & we had to enter or correct the data on your application later.  More money seems like a positive, right?  More money means you have a stronger loan application, right? 


WRONG, because now your loan would be automatically flagged for further scrutiny because the system wants to know all about this money that suddenly appeared. 


So how bad is this?  For the past several years just about half our loan applications had already been turned down by at least one other lender (in 2017 loan turndowns nationwide are up a whopping 60%) but because when an applicant goes to a new lender it starts a new file within the system, most of the time we can get an approval simply by re-entering your information correctly without all the changes and get an approval. 


This means the poor processing skills by the first lender or the fact that you filled out an online application is what caused the initial turndown.  So if you’ve been turned down, don’t give up, it might have been the Lender’s fault.


Because you don’t understand the importance of the information you are entering into the system this means you can innocently enter your data incorrectly or leave something out so that has to be added or changed later.  This means you could be flagged for possible fraud and possibly turned down for your loan.  This is why we give you a video of exactly how to fill out a loan application, the importance of each line item, and ways you can strengthen your loan application.


Consequently we make sure that none of your data enters the system before we’ve had time to talk to you and ask questions so that we can be sure we are entering accurate numbers.  It is a lot more work on our end, but our job is to give your loan the best chance of being approved, not to make things easier on us.


We’ve even gone so far as to prepare a video that takes you through the loan application process step by step and shows you WHAT information is needed, WHY it’s needed and HOW you can improve your odds of a simple & easy approval.


If you’ll go watch the video at (Making a loan application) not only will you learn how to properly fill out a loan application but you’ll also see the problem with trying to make buying & moving plans based upon unverified information.  The loan application requires very specific information and the numbers used on it can be quite different than the information you might first give a Lender in a PQ.



So now let’s talk about what constitutes a Loan Application for a bit since
many time frames & legal items are now tied to loan application dates!



  1. 1)It’s now super easy to make an accidental loan application.  If you give the lender 6 pieces of information it’s a loan application whether you want it to be or not!

    Let me repeat that because it’s not something you’d expect.  If you give the lender 6 pieces of information it’s a loan application whether you want it to be or not!

    Lenders don’t want things to develop into an accidental loan application nearly as much as you don’t want because it’s a lot of unnecessary work for them.  Let me explain.

    If you tell the Lender these 6 things you have made a loan application even if pen has never touched paper and you’ve only spoken over the phone or exchanged a few texts or emails.  So be sure you tell a Lender no more than 5 of these things!

    a) name
    b) income
    c) Social Security number
    d) Property address
    e) An estimate of property value or sales price
    f) And the loan amount

    If you haven’t bought a house but are still in the looking stage you won’t have a property address which makes things simpler for you because you can’t give all 6 items.


Why doesn’t the lender want this to happen?  Under the new laws once your conversation becomes a loan application several things are set into motion & the Lender has to:

a) issue you a binding Loan Estimate - LE (which used to be known as a Good Faith Estimate of closing costs);

b) they have to officially enter you into the government system of record keeping which pretty well guarantees there will be lots of changes to your full app later and thereby will trigger the harsher underwriting.

LOAN ESTIMATE NUMBERS ARE NOW CAST INTO CONCRETE AND CANNOT BE CHANGED!  Which means certain of your closing costs are locked before it’s possible to know what they will be.  If there are any changes the Lender
doesn’t have any option except to redo a lot of information to institute a “Changed Circumstances” or turn you down and begin all over again.   So as you can see an accidental loan application isn’t good for anyone!

If an exploratory phone call early in your looking process generated the accidental loan app then you probably wouldn’t be delayed, but if you are calling on a real house that you end up buying, this can make it take even longer to get to closing.

Because of this new law
Lenders didn’t want to take a loan application until you had a fully negotiated contract because changes in the contract trigger the exact same requirements to the Lender.


So for over 2 years Lenders have been prohibited from taking a loan application prior to you finding a home which has lengthened the approval process.  BUT . . . under Trump’s term he has already made some changes in enforcement that now allows us to once again take a full loan application prior to you finding a house which will reduce loan processing time, allow a quicker close date & give you an edge over all those other Buyers out there running around with only PQs or PreApprovals.  This could come in real handy if you should get into a bidding situation with multiple buyers for the same property.

There will be a couple of extra paperwork steps if you make loan application prior to finding a house over making application only after you find a home, but the steps aren’t huge, time consuming and don’t cost you any money so it’s nothing to be afraid of.  This is something you definitely want to consider as it could be the difference in getting the house you want and being able to close on time!  But regardless of which way you choose to go . . .


  1. 2) Now the ONLY solution a lender has for most problems that might arise during the purchase & loan processing is to turn you down and begin again. So don’t take it personally and think you aren’t going to be able to buy a home.  It’s simply the way the Government has chosen to “fix” a nonexistent problem.


Now you know all you need to know to ensure you get the proper type of Qualification & the information needed to keep you out of trouble which can delay things.  If you’ve ever got any questions about any aspect of the buying and financing process don’t hesitate to give us a call.  We don’t work Banker’s hours we work when you need us.  So even if it’s after hours, weekends or a holiday, if you have a question call us!  If we can’t get to the phone instantly we will get back to you very shortly.


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