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Beware of the rules of Lending, 5 of 12 Overdrafting
May 17, 2012 by Elise Groves · Leave a Comment
DON’T OVERDRAFT — I’m not talking about drafting Ryan Tannehill with the 8th overall pick either. Let’s talk about nasty little subject that we call BTDs or Bank Transmitted Diseases. As much as we don’t want to admit, we have all gotten lazy, had 1 too many drinks at the bar… BAM! The next morning you check your account and there is a fresh overdraft… Before you know it, you have shamed yourself into transferring money from your savings or other banks to cover it up… a real downward spiral, but I digress.
Mel Kiper Jr. Hates Overdrafting!!
During the loan process is NOT the time to miscalculate how much money you have in your account and use your overdraft protection (OP). The underwriter does NOT look kindly on people who can’t balance their checking account. You’re trying to convince the lender that you are a low credit risk and worthy of borrowing hundreds of thousands of dollars and paying it back on time.
Imagine how the underwriter would view your ability to manage your money if that $5 footlong from Subway showed up under OVERDRAFT PROTECTION. Worse yet, your checking account statement shows you have a history of using your OP in months past, and might even give a dollar amount that you have racked up in those fees. That alone could deny you the loan, please practice safe banking and protect yourself.
Beware of the rules of Lending, 4 of 12 Shredding
May 14, 2012 by Elise Groves · Leave a Comment
DON’T SHRED YOUR PAY-STUBS & BANK STATEMENTS— I run into clients all the time who get their bank statements and pay-stubs in the mail, then they verify the information and balance their own accounts, and promptly shred the statements. There is absolutely nothing wrong with this… unless you are in the process of getting a mortgage!
Please hang on to them during the entire loan process. The underwriter is going to want at least one actual bank statement and 30 days worth of pay stubs, so keep them on hand.
But wait, I can hear it now,”Elise I don’t get paper statements or pay-stubs in the mail ever since I opted for E-Statements” well good for you… I hope you know how to print and scan or email those to us, and if you don’t you better learn fast.
Kidding aside, we all work in an electronically dominated world now a days and it is very important to be able to protect ourselves from identity theft. The Groves Team takes any and all sensitive material seriously and have all non-record keeping papers shredded after the completion of your deal.
Beware of the rules of Lending, 3 of 12 New Credit
May 10, 2012 by Elise Groves · Leave a Comment
DON’T APPLY FOR ANY NEW CREDIT—Resist that new set of knives or the 15% discount you will get if you open a new account!! The lender will refresh your credit report right before they fund the loan and Lord help you if new credit inquiries show up on that report! 
You are going to have to jump through hoop after hoop to convince the lender you didn’t just take on a whole new monthly debt that will disqualify you. Even if you are well qualified the lender will want to know why you are trying to aquire new credit durring perhaps the largest financial process of your life.
Just wait…. It’s the credit inquiry that could kill your deal, so stay out of Best Buy, Home Depot and the car dealers’ showroom please… IT’s A TRAP!!!
Beware of the rules of Lending, 2 of 12 Moving Money
May 8, 2012 by Elise Groves · Leave a Comment
DON’T TRANSFER MONEY FROM ACCOUNT TO ACCOUNT— Please put your money for your down payment and closing costs in ONE account and leave it there, and the sooner the better please. DO NOT keep transferring back and forth between checking and savings, this is especially true if it is two separate banks.
The lender is going to make you verify every single deposit, transfer, wire, etc. over a two month or longer period, so just be prepared to fully document every little financial detail going in and out of those accounts. The lender really is going to turn over every rock and make sure you don’t have money just ‘show up’ that can’t be properly accounted for and ‘papertrailed’… and no, we can not use the old “we had a garage sale” deposit excuse any more.
If you are going to be getting a Gift from family or cashing out various investments to help build your asset account for this transaction, please consult with us before you even think about it!
both of these scenarios are very common, completely within the rules of lending and totally botched all the time because of poor Lender to Client education. Help me help you… we don’t want to chew up valuable time half way through the loan process.
Heed my warning on this, please. You can do transfers, but they better be backed up with the correct paperwork, including DNA and blood samples, or else. (No, you won’t really have to give blood, but seriously… its crazy out there). Keep copies of every check, every deposit and be prepared to produce them quickly. If you don’t know how to do online banking, now would be a good time to learn that as you may periodically have to update information between statements.
Beware of the rules of Lending, 1 of 12 Jobs.
May 3, 2012 by Elise Groves · Leave a Comment
They may be ridiculous, irritating and challenging,
but if you don’t heed these warnings and you break the rules,
your loan could be DENIED AT THE LAST MINUTE!
Check in every Tuesday and Thursday for this 12 part series geared towards the
DOs and DON’Ts During The Loan Process
1. DON’T CHANGE JOBS …or even worse…QUIT!! The lender is going to verbally verify your employment about a day before they fund your loan and if you have changed or quit you might be screwed. So stay at the same job throughout the loan process. Your loan is based on your ability to make the payments, and your job stability is a big factor. So hold on a little longer… and don’t you dare consider quitting and starting your own business until AFTER the escrow closes and you have moved into your new home. That could be a deal killer right there.
Speaking of jobs… PLEASE deposit your ENTIRE paycheck, THEN take a cash draw. DON’T go cash your check, keep your spending money for the week, then deposit the rest. It creates a paper trailing nightmare you don’t want to be a part of.
Do I Need To Sell My Home Before I Can Qualify For A New Mortgage On Another Property?
April 1, 2010 by Elise Groves · Leave a Comment
Although every situation is unique, it is not uncommon for homebuyers to qualify for a mortgage on a new home while still living in their primary residence.
Perhaps you are outgrowing your current house, or have been forced to relocate due to a job transfer? Regardless of the motivation for keeping one property while purchasing another, let’s address this question with the mortgage approval in mind:
So, Do I Have To Sell?
Yes. No. Maybe. It depends.
Welcome to the wonderful world of mortgage lending. Only in this industry can one simple question elicit four answers…and all of them may be right.
If you are in a financial position where you qualify to afford both your current residence and the proposed payment on your new house, then the simple answer is No!
Qualifying based on your Debt-to-Income Ratio is one thing, but remember to budget for the additional expenses of maintaining multiple properties. Everything from mortgage payments, increased property taxes and hazard insurance to unexpected repairs should be factored into your final decision.
What If I Rent My Current Property?
This scenario presents the “maybe” and the “it depends” answers to the question.
If you’re not quite qualified to carry both mortgages, you may have to rent the other property in order to offset the mortgage payment.
In that scenario, the lender will typically only count 75% of the monthly rent you are proposing to receive.
So if you are going to receive $1000 a month in rent and your current payment is $1500, the lender is going to factor in an additional $750 of monthly liabilities in your overall Debt-to-Income Ratios.
Another detail that can present a huge hurdle is the reserve requirement and equity ratio most lenders have. In some cases, if you are going to rent out your current home, you will need to have at least 25% equity in order to offset your payment with the proposed rent you will receive.
Without that hefty amount of equity, you will have to qualify to afford BOTH mortgage payments. You will also need some significant cash in the bank.
Generally, lenders will require six months reserve on the old property, as well as six month reserves on the new property.
For example, if you have a $1500 payment on your old house and are buying a home with a $2000 monthly payment, you will need over $21,000 in the bank.
Keep in mind, this reserve requirement is incremental to your down payment on the new property.
What If I Can’t Qualify Based On Both Mortgage Payments?
This answer is pretty straightforward, and doesn’t require a financial calculator to figure out.
If you are in this situation, then you will have to sell your current home before buying a new one.
If you aren’t sure of the value of the home or how your local market is performing, give us a ring and we’ll happily refer you to a great real estate agent that is in tune with property values in your neighborhood.
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As you can tell, purchasing one home while living in another can be a very complicated transaction. Please feel free to contact us anytime so we can review your specific situation and suggest the proper action plan.
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Related Articles – Mortgage Approval Process:
- Basic Mortgage Terms
- How Much Can I Afford?
- Common Documents Required For A Mortgage Pre-Approval
- Top 8 Questions To Ask Your Lender During Application Process
- What’s The Difference Between An Investment Property, Second Home and Primary Residence?
- Seven Items Real Estate Agents Need To Know About Your Mortgage Approval
Wine Country First Mortgage Tip: How To Protect Your Identity
March 28, 2010 by Elise Groves · Leave a Comment
Facts About Identity Theft:
It’s estimated that there were 10 million victims of identity theft in 2008, and 1 in every 10 U.S. consumers have reported having their identity stolen.
The U.S. Department of Justice reported in 2005 that 1.6 million households experienced fraud not related to credit cards (i.e. their bank accounts or debit cards were compromised).
And, the U.S. DOJ also reported that those households with incomes higher than $70,000 were twice as likely to experience identity theft than those with salaries under $50,000.
What Is Identity Theft?
According to the United States Department of Justice, identity theft and identity fraud “are terms used to refer to all types of crime in which someone wrongfully obtains and uses another person’s personal data in some way that involves fraud or deception, typically for economic gain.”
Such personal information may include your name, address, driver’s license number, Social Security number, date of birth, credit card number or banking information.
Victims of identity theft can spend months trying to restore their good name. And most victims do not realize it has happened until they get denied for a mortgage or a credit card.
Ten Ways to Protect Your Identity:
1. Dumpster Diving –
Avoid “dumpster diving” by shredding all papers that contain any personal information.
Criminals sift through trash looking for the following:
-Bank Statements
-ATM Receipts
-Canceled Checks
-Credit Card Statements
-Credit Card Purchase Receipts
-Credit Card Solicitations (unopened “pre-approval” solicitations)
-Pay Stubs
-Tax Documents
-Utility Bills
-Expired Identification Cards (Drivers License, Passports…)
-Expired Credit Cards
-Medical Statements
-Insurance Documents
2. Personal Info / Phone Calls -
Never provide personal information, including your Social Security number, passwords or account numbers over the phone or internet if you did not initiate the call.
If you are asked for any type of personal information, before giving any information, ask the caller for their name, telephone number and the organization that they are representing.
You should then call the company using the customer service number the company provides with your account statement. Do NOT call the number you were given by the caller.
To reduce the number of solicitations you receive, you can sign up at the do not call registry:
web: http://www.donotcall.gov
call: (888) 382-1222
3. Look Over Your Shoulder –
Avoid “Skimming and shoulder surfing” (Never let your credit card out of your sight).
Pay with cash. Try never to let your credit card out of your sight to avoid a fraud scheme known as “skimming”.
According to Wikipedia:
“Skimming is the theft of credit card information used in an otherwise legitimate transaction. It is typically an “inside job” by a dishonest employee of a legitimate merchant. The thief can procure a victim’s credit card number using basic methods such as photocopying receipts or more advanced methods such as using a small electronic device (skimmer) to swipe and store hundreds of victims’ credit card numbers.”
Be aware of people “shoulder surfing”. This is when they are looking over your shoulder or standing too close trying to obtain your PIN number when making purchases with your debit card. They may also be listening for your credit card number.
4. Secure Your Mail –
Always mail your outgoing bill payments and checks from the post office or a neighborhood blue postal box and never from home.
Pick up your incoming mail as soon as it is delivered. The longer it sits the better chance a criminal has of stealing it.
-Get a P.O. Box.
-Lock Your Mail Box
Contact your creditors if a bill doesn’t arrive when expected or includes charges you don’t recognize. It may indicate that it was stolen.
5. Read Credit Card Statements -
Review account statements to make sure you recognize the purchases listed before paying the bill.
If your credit card holder offers electronic account access, take advantage and periodically review the activity that is posted to your account.
The quicker you spot any unauthorized activity, the sooner you can notify the creditor.
6. Monitor Credit Report -
Review your credit report at least once a year to look for suspicious activity. If you do spot something, alert your card company or the creditor immediately.
7. Email Links –
Never click on a link provided in an email if you believe it to be fraudulent.
Keep in mind, no financial institution will ask you to verify your information via email.
Criminals may link you to phony “official-looking” web site to confirm your personal information. This is known as “phishing”.
According to Wikipedia:
“Phishing” is the criminally fraudulent process of attempting to acquire sensitive information such as usernames, passwords and credit card details by masquerading as a trustworthy entity in an electronic communication.
8. Opt Out –
Opt out of credit card solicitations. (Take your name off marketers’ hit lists)
You can opt out of credit card solicitations by calling 1-888-567-8688 to have your name removed from direct marketing lists.
You can do this online at OptOutPrescreen.com, which is the official consumer credit reporting industry opt-out website for the three credit companies:
9. Safeguard Your Social Security Number -
Protect your Social Security number.
Never carry your Social Security card or anything else with your social security number on it in your wallet or purse, along with your driver’s license.
Do not put your Social Security number or driver’s license number on any checks you may write.
Only give out your Social Security number when absolutely necessary.
10. Read Privacy Policies –
Find out what company privacy policies are (know who you are dealing with).
When being asked for your Social Security number or driver’s license number, find out what the company’s privacy policy is.
Inquire as to why it is being asked for.
Ask who has access to your number.
Ask if you can arrange for them not to share your information with anyone else.
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Related Credit / Identity Articles:
Wine Country First Mortgage FAQ: How Many Credit Trade Lines Do I Need?
March 28, 2010 by Elise Groves · 1 Comment
While the actual credit score has a big impact on a loan approval, it’s not the only component of the credit scenario that underwriters consider for a mortgage approval.
Since loan programs, individual lenders and mortgage insurance companies all have their own credit report restrictions, it’s difficult to define a standard Rule-of-Thumb to follow.
However, the number of “Open and Active Trade Lines” seems to be the common denominator in most approvals.
A trade line is basically a credit card, installment loan or other credit liability that is reported to the credit bureaus and displayed on a credit report.
Credit Trade Line / Approval Bullets:
- Banks usually won’t count a trade line that is less than 12 months old.
- The minimum number of trade lines most lenders find acceptable is 4 open and active trade lines.
- Lenders like to see at least one credit line of $5,000, or all credit lines to total $1,000 or more.
Exceptions to Trade Line Rules:
Interestingly enough, a recent list of Mortgage Insurance requirements included a favorable trade line requirement, which read:
Min 3 trade lines @ 12 mo reporting. Cannot be ‘authorized user’
Basically, this means as long as the lender, and the loan program allow for less than 4 trade lines, this mortgage insurance company will accept only 3 trade lines that are in the borrower’s name.
Another exception to this rule is if you have no FICO score, and no negative trade lines.
In this case you may qualify for an “alternative credit” loan. The most common loan of this type is insured by FHA, but there are select programs that are usually targeted to assist people whose culture does not trust or use banks.
Borrowers applying for a non-traditional credit loan will still need to prove they have successfully paid their bills on time for 12 months by clearly documenting at least four creditors. A verification of rent from a property management company, power, utilities, cell phone… are alternative sources of credit that can be used.
*A letter from a landlord or creditor stating that the bills were paid on time is not acceptable forms of proof. Lenders will need canceled checks and / or copies of bank statements to start out with.
Since not all companies report to credit bureaus, it’s possible to get a free credit report at AnnualCreditReport.com to verify your total reported trade lines.
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Related Credit / Identity Articles:
Wine Country First Mortgage Tip: How To Establish ‘Alternate’ Credit
March 28, 2010 by Elise Groves · Leave a Comment
While the basic Rule-of-Thumb for acceptable credit history is a minimum of four trade lines documented on a credit report, there are alternative methods of building a credit picture that an underwriter can use to make a decision for a loan approval.
For potential home buyers with little or no credit history, keeping records for 12 months of paying bills on time is essential for mortgage loan approval. In fact, loan officers will appreciate receiving proof that you have paid a variety of accounts regularly and on time. Even if you do not have a credit history, or your credit report isn’t as good as it could be, this may enable you to get a mortgage.
The industry term for this is “thin credit.”
Some loan types, namely FHA and USDA, will accept alternative credit sources in order to establish proof of financial responsibility.
Alternative credit is unreported to the bureaus, but will still be verified and can be instrumental in a home loan approval.
Those with thin credit don’t usually have bad credit, but have just not had an opportunity to build enough traditional credit, such as bank/store credit cards, auto loans, etc.
Alternative Sources for Building Credit:
- Rental History – Canceled checks and letter from property management company
- Medical Bills – 12 months of statements from medical billing company showing paid as agreed
- Utilities – power, gas, water, cable, cell phone
- Auto Insurance
- Health / Life Insurance – as long as it’s not auto-deducted from pay check
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Related Credit / Identity Articles:
Wine Country Property Types: Single Family, Second Homes, Investment Properties & The Difference
March 28, 2010 by Elise Groves · Leave a Comment
When applying for a mortgage, a borrower’s “Occupancy Type” is a major factor in the amount of down payment required, loan program available and mortgage interest rate.
Whether you are purchasing, doing a rate/term refinance or taking equity out of your property through a cash out refinance, occupancy type is always considered by the underwriter.
Three Types of Occupancy:
Owner Occupied / Primary Residence -
According to HUD, a principal residence is a property that will be occupied by the borrower for the majority of the calendar year.
At least one borrower must occupy the property and sign the security instrument and the mortgage note for the property to be considered owner-occupied.
Second Home -
To qualify as a second home, the property typically must be at least 50 miles from the primary residence, and it cannot appear that the real estate is being purchased for rental investment purposes.
Investment Property -
A property that is not occupied by the owner and is typically utilized for rental income purposes.
Down Payment Requirements:
Owner Occupied / Primary Residence -
Purchases for VA and USDA can go up to 100% financing, while FHA requires 3.5% of the purchase price as a down payment. Conventional financing may require anywhere from 5% – 25% depending on the credit score, county, property type and loan amount.
Second Home -
Average 10% down for a purchase, and 25% equity for a refinance.
Investment Property -
Down payment requirements will range from 20-25% depending on the number of units. When doing a cash-out refinance on an investment property with 2-4 units, the required loan to value will need to be 70% or lower to qualify.
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*It should be noted that on any high balance loan amount the above mentioned Loan-to-Value (LTV) requirements will change. Credit score requirements also apply.
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