The home buying process can seem complicated and overwhelming for the average buyer. Helping your customers better understand the different phases in the mortgage loan process early on – and what is expected of them at each step – can help make the process less intimidating and reduce frustration.
Phase 1 – Origination:
This begins the mortgage process and is actually several steps. The loan officer will help the customer learn what their mortgage financing options are through a pre-qualification process, and assist with filling out a loan application and gathering the necessary documents.
Customers should know: They’ll need to provide income, asset and debt information, and their Social Security number to allow the lender to pull their credit report.
Phase 2 – Processing:
The loan processor will then collect, verify and review all required documentation provided by the buyer, order appraisals, order a title search and send all this information in a complete package to underwriting.
Customers should know: Processors will be checking for errors, discrepancies and possible missing information, so customers need to understand how critical it is to provide accurate, complete information in a timely manner.
Phase 3 – Underwriting:
The underwriter analyzes the documentation for accuracy and evaluates the customer’s ability to repay the loan based on their credit and employment histories. An appraisal and title review is completed to ensure the loan program guidelines are met, the title is clear, and to determine risk acceptability.
Customers should know: This is “decision time” as the underwriter weighs the risk of lending money and approves or denies the loan – so customers may be asked for additional financial information even at this stage.
Phase 4 – Closing (or Escrow):
The loan processor coordinates all aspects of the closing with the buyer and the closing agent and/or attorney. The closing agent conducts the closing, ensures that all necessary documents are signed, assures closing fees and escrow payments are made, and confirms that all documents are sent out to be recorded according to state and local requirements.
Customers should know: Before closing they should receive information explaining the closing costs, including a standardized Good Faith Estimate (GFE) of how much cash they will need at closing.
With keys in hand, the process is completed for the homebuyer, but there are still a number of steps that take place behind the scenes after closing.
- Warehousing: About 10 days after closing, the lender uses their warehouse line [line of credit] to finance the new loan until it is “sold” to an investor on the secondary market.
- Secondary market: Allows lenders to sell mortgages to investors, providing them [the lender] with new funds to offer home loans to new borrowers. Your customers’ mortgage rates are influenced by the yields demanded by these investors.
Typical investors of mortgage-backed securities in the secondary market include:
- Fannie Mae and Freddie Mac for conventional loans
- Ginnie Mae for FHA and VA loans
- Insurance companies, pension funds and private investors
- Shipping and delivery: Once an investor is secured, the loan is packaged with other loans,, and applicable documentation, and becomes part of a mortgage-backed security (MBS). These mortgage-backed securities are then delivered to the investor.
- Loan administration/servicing: A loan servicer takes care of the administrative duties once the mortgage-backed securities are delivered to the investor. This includes: customer support, collection of mortgage payments, management of escrow accounts and fund recovery efforts.
Thanks to Coldwell Banker Home Loans
3 Ways a First-Time Home Buyer Can Drive You Nuts!
Working with first-time home buyers can present its own unique challenges. If their indecisiveness doesn’t drive you crazy, their meddling parents just might.
Some first-time home buyers can be your best clients—eager to learn more about the housing market and soak up every ounce of your wisdom. But others won’t let being novices at home buying get in their way, and they may send you on an endless search for that perfect house.
First-time home buyers are the largest group of buyers, making up 32 percent of the home buying market. They can generate extra business for you for years to come, too, so they may be worth the trouble.
How can you overcome some of the biggest challenges to working with first-time home buyers? Experts weigh in.
Problem No. 1: Buyers who bring in their parents.
First-time home buyers are often young and they may want to bring in some reinforcements to help find the perfect house. “There is no more dreaded phone communication from the first-time home buyer to his agent than the ‘I’d like my parents to stop by and take a look’ call or e-mail,” says Richard Courtney, a real estate broker with French, Christianson, Patterson and Associates in Nashville and author of Buyers are Liars & Sellers Are Too (Fireside, 2006). “At that point, regardless of any and all conditions, the deal is most likely dead. While the buyers have not heeded a word of advice from their parents since they were 11 years old, now they want the folks to share in the biggest decision of their lives.”
And you’re stuck in the middle.
When the parents enter the picture, they often play the game of “see who can find the most wrong” with a property. As Courtney notes, parents are great at spotting a “nail hole from 70 feet and through two sets of windows” or they can “hear a floor squeak at a noise level otherwise audible only to bats.” [You think he’s kidding! =SA]
What You Can Do:
- Don’t argue. Resist the urge to blurt out: “Your father’s an idiot; you shouldn’t listen to him!” Nor do you want to argue with ma and pa. Instead, let the parents meddle and involve them in the process as much as your client wants them in, Courtney says. Thank the parents for their extra insights. And if the parents misstate something, correct them gently when they are wrong, but do it respectfully.
- Educate the parents too. Share comparable sales, financial information, and inspection reports with the parents too — assuming your client approves. Share all your accumulated knowledge and data with the parents so that they feel involved in the process and aren’t advising their child when they’re uninformed about the realities. [Please note, the Parents may well have a different agenda than seeing that their child makes a good decision. They may not want the child to yet purchase anything. It will become clear by the second showing. When this happens, kindly tell your client that you think they may want to take some time to determine what they wish to do and you will be available when they are ready. Do not look for them to get back with you. Move on. =SA]
Problem 2: The uninformed buyer who doesn’t realize it.
Some first-time home buyers know they’re novices with real estate and defer to you as their expert. But some will take on the know-it-all role, even though they don’t have a clue about the real estate market.
Maybe the buyer wants a move-in-ready beachside home, with every upgrade money can buy — and they want it all for a fraction of what it really costs. Or they may find a home they love and want to submit a ridiculously lowball offer.
Educating buyers about the market may take some extra time, but it’s worth it. After all, educated buyers tend to make better offers with fewer contingencies, agents say.
What you can do:
- Talk about the home buying process. Counsel your client about the process of buying a home before anything else. “They need to understand how the home buying process works from beginning to end,” says Leroy Houser, a real estate coach and trainer who leads seminars and courses.Discuss home inspections, appraisals, and some of the terminology in the business (such as HUD, short sales, easements, surveys, and so on). Include up-front discussions about common stumbling blocks, like when does their lease expire if they’re renting, and will they be prepared to break their lease? Talk about market conditions: Are prices going up or down?
- Make sure they get a financial reality check. Have the buyers get prequalified for a loan so they know what they can afford before they start falling in love with homes that aren’t in their budget. Use a mortgage calculator to determine monthly mortgage payments plus estimated utility costs, property taxes, and maintenance costs.
- Let them make a mistake. With some stubborn buyers, you sometimes have to let them make a mistake before they get in the right psychological mind-frame, Courtney says. Against your advice, they may insist on doing too many counteroffers in a deal or submitting too low an offer. As a result, they may end up losing a house they really wanted. “Let them experience the loss of something they wanted,” Courtney says. Next time, they’ll listen more closely to your advice.
Problem 3: The indecisive buyer.
Some buyers just can’t seem to commit. The search for that perfect house is endless, and after about the 15th home you’ve shown them, you may lose hope that they’ll ever choose one!
First-time home buyers love to search for homes, and “they know how to find houses,” Houser says. “But their problem is they don’t know how to buy them. The more you look, the more confused you can get. They want to do more looking because they don’t have enough information to make an informed decision.”
What you can do:
- Have them complete a questionnaire. Do this at the very beginning of the home search to learn what they’re looking for and to get them to more carefully consider their “must haves,” “nice to haves,” and “avoidables” too. Get a sense of the house styles they prefer, the number of bedrooms, home designs, neighborhoods, and so on. What are their main motivations for finding a home? Do they want to have a shorter commute, be in a certain school district, or have increased security?“The questionnaire is much like a doctor would do for a new patient,” Houser explains. “A doctor uses a questionnaire before you even meet. The doctor then looks it over to talk about what the issues are. In real estate, it should be the same thing.”
- Use “preframing” to guide the search. Get the buyer to focus on part of the market rather than the entire market. For example, say something like, “There are two distinct groups of homes in the marketplace that fit your criteria. One group we call ‘opportunities,’ which include some new homes and resales we consider good values because they are priced to sell, in excellent condition, and move-in ready. They are close to perfect, and I have four of those to show you,” Houser explains at his Web site about using “preframing” with first-time home buyers. “In addition, we have three homes we call ‘Deal Homes’ because they are outstanding deals. They need some repair, so they are priced below the market.” You narrow the market for them to seven homes and carefully frame and prepare them for what they’re going to view.
- Create urgency. Mortgage rates and housing prices won’t stay this low forever. Your buyers may need more drive to buy now rather than wait until later. Show them what home prices have been doing in your area. Mortgage rates are at ultra-lows right now, but what can your clients afford if rates return to the 6 percent range, as they were a few years ago?
- Be frank. You want to encourage buyers to be open and straightforward with you about what they want, and you also may need to heed your own advice. After the millionth house showing, you may need to confront your buyer point-blank on his or her indecisiveness. As Courtney says, you may need to say: “If you want to buy a house, I can help you do that. If not, we can’t look at houses forever.”First-time home buyers require plenty of patience, but if you’re able to help them successfully navigate the process, you may not have just produced one sale, but a bunch of future sales, such as:
“The buyer may have been single when you sold him that first house. After marriage, he wants to move again,” Courtney says. “Then he and his wife have children, and they need to move. First-time home buyers could easily produce five sales in a short period. They’re a good market to work with and cultivate. But just remember, you’ll need to educate and nurture them through the process.”
Melissa Dittmann Tracey is a contributing editor for REALTOR® magazine.
Like so many things in life, setting money aside as savings is a habit that needs to be developed. If you want to see your nest egg grow, you need to do what you can to encourage a savings habit. Setting money aside needs to become a way of life, instead of some sort of burden. If you are having trouble getting into the habit of saving, you should try these 5 ways to keep you motivated:
1. Set Achievable Savings Goals .One of the biggest issues is that you may not have a goal. You just have an idea that you need to save money, but there is no true purpose for your money. It’s hard to stay motivated when you have no clear idea of what the money is for. So it is much easier just to spend it.
Instead of pointlessly saving, create achievable savings goals that give purpose to your money. Whether you want to save $5,000 in the next six months for a vacation, or whether you want to save up five months of expenses by the end of the year for your emergency fund, having a realistic goal gives you something to work toward — and progress you can see.
2. Reward Yourself for Reaching Small Milestones .Depending on the length of your goal, you can reward yourself at certain milestones. This helps you track your progress, and also helps keep you motivated to continue saving. These rewards should be fun things that you might not normally do, but that are still small and within reason. It might be a day off (if you can take a personal day at work), a picnic in the park, dinner at a nicer restaurant than usual, or some other enjoyable activity. Just don’t blow all your savings while enjoying your small reward.
3. Automate Your Savings . One of the easiest ways to get into the habit of saving is to set up some automatic method of moving your money around. Whether you have money from your paycheck automatically deposited into a savings account (including a retirement account), or whether you do an automatic transfer each month, automatically having your savings moved around can help you adjust your lifestyle to what you end up as “take home” pay. Soon you won’t miss the money, but it will still grow and work for you.
4. Don’t Sweat the Small Stuff .Always denying yourself the small treats you enjoy, and focusing on penny pinching, can bring you to hate saving. While you can cut back on some of those small expenses that eventually add up, you might actually feel better about saving if you focus on cutting back on the big expenses. Forgoing the big TV is an one time thing that can save you $700 to $2,000. And you can still get good entertainment on your current TV, or use the Internet. You will probably find that you will get over the TV pretty quickly and move on. However, constantly telling yourself that you can’t get that delicious $2 bagel you love can start to create resentful feelings toward saving. It’s a daily litany of denial that can start to make saving a chore.
5. Look for High Yield Accounts .One of the most depressing things about savings is how slowly the money grows. You can increase your satisfaction with savings by looking for high yield accounts. While yields are still generally low, you can still do better than the less than 1% offered by a traditional savings account. You can also look for alternative products like money market accounts and funds, high-yield CDs and bonds. However, be aware that some of these options may not be FDIC-insured, and come with greater risk.
Bottom line: Setting aside money for the future is important, but you need to find ways to keep yourself motivated. Do any of these things work for you? What keeps you motivated to save?
The power of setting realistic goals are [is] not to be underestimated. When you are encouraged by the results (in other words, when you always hit your goals), the increased motivation will allow you to achieve pass your wildest dreams.
If a messy garage is driving you crazy, here’s how to steer things back on course.
Let’s face it. For most of us, the garage serves as a dumping ground for old paint, broken toys, and boxes of clothes awaiting a ride to the local thrift store. No wonder our vehicles feel the squeeze—provided they can fit inside the garage at all.
If the thought of organizing your garage fills you with dread, take courage. Here’s how to break the task into three steps, so you can curb the chaos once and for all:
1. CLEAR THE CLUTTER. Begin with a serious cleaning, if possible hauling everything onto the driveway. Group items you’re eliminating into four piles: toss, recycle, donate or sell. “Be brutal when you are sorting,” advises Erin Gentry, Associate Public Relations and Consumer Engagement Manager at Rubbermaid. “Get rid of anything you haven’t used in the past year.” If parting with perfectly good items proves paralyzing, find motivation in a moneymaking garage sale or gain satisfaction from helping a favorite charity.
Here are additional sources to get you started:
• 1-800-GOT-JUNK: This national franchise will remove everything from appliances to tires to trash, donating and recycling whatever is possible. (Ask the hauler to obtain a tax receipt if you are donating to a charity.)
• earth911.org: Check here to find local recycling centers where you can safely dispose of paint and chemicals.
• donationtown.org: Use this site to match your items with a local charity and arrange pickup.
2. MAKE A PLAN. Now that the garage is empty, avoid the common mistake of hastily rushing out to buy organizational products. First consider whether the space could benefit from a fresh coat of paint. Then begin grouping items by task or interest. “Your pots, fertilizer, and garden hose should be grouped together for a gardening zone,” says Tim Keaton, Head of Brand and Product Marketing for Gladiator/GarageWorks. “And your golf clubs, soccer balls, and baseball bats should be kept together for a sporting zone.” Other logical zone groupings include holiday decorations, kids stuff, and a workshop area with space for a sturdy bench, plus pegboard or cabinets.
Once you’ve determined what zones you’ll need, work logically to fit them in where they’ll be easiest to access. For instance, it makes sense to keep garden equipment and the lawn mower by the door leading to the yard. Plan to store frequently used items close at hand. Stash seasonal items like holiday lights in higher, harder-to-reach spaces [such as using this overhead storage bin system – SA]:
3. CHOOSE TAILORED SOLUTIONS. Now that you have a plan, put it into action with smart organizational products that require minimal effort to use. The good news is there are plenty of options, from inexpensive DIY hooks and chrome racks to customized, professionally installed systems priced in the thousands. Here are key categories worth considering (and be sure to see the video at the end);
Wall systems, such as those from GarageTek, Rubbermaid, Schulte and Gladiator/GarageWorks, wrap any or all sides of your garage with panels that can be outfitted with your choice of accessories, including ball holders, bins, cabinets and hooks. Though some systems can be priced in the thousands, they do offer excellent flexibility and get everything organized and off the floor. Models that use tracks or rails are easiest to install.
Storage cabinets range from freestanding units to modular wall-hung models. Locked cabinets are ideal for storing toxic items, while tall cabinets make great use of vertical space. Look for the versatility of adjustable shelves to ensure you can store everything from camping gear to automotive parts.
Workbenches provide an ideal spot for home improvement projects, repairs, and woodworking. Models may be wood or steel and might include cabinets, lighting, or pegboard backs.
Racks help get all kinds of items off the floor. Specialty racks include space-saving corner models and overhead platforms that attach to the ceiling. The latter is ideal for holding memorabilia or off-season sports equipment.
Consider the following very helpful storage systems:
Shelves are among the most common and versatile storage solutions, providing “see, grab, and go” functionality that keeps frequently used items at the ready. Choose from metal, plastic, wire and wood models in freestanding or wall-mounted options. Invest in deep shelves for larger items like snow tires.
Hooks are easy to use and inexpensive, and in different sizes they are tremendously versatile. Small hooks can hang keys, twine, and hand tools, while larger hooks can get bikes, cords, and equipment off the ground.
Bins and tubs stash toys, holiday decorations, craft supplies and more. Choose stackable ones with lids to eliminate dust, and be sure to label each clearly to avoid having to dig around.
Perforated hardboard offers an easy DIY solution for hanging tools. Pre-drilled holes accept pegs or hooks. Look for options in wood fiber, wood, or metal.
Wall Solutions Pack A storage solution with built-in flexibility, this wall system includes eight pieces of GearTrack® Channels (more than 21′), assorted hooks and bins, plus a 2′ gearbox you can arrange any way you wish. Available at Gladiator GarageWorks, $429.99
Overhead Storage Rack This industrial-strength rack attaches to the ceiling, maximizing unused vertical space. Ideal for stashing off-season and other infrequently used items, the racks come in a range of sizes, from 2′ x 6′ to 4′ x 8′. Available at SafeRacks, $139-$269
Ceiling Bike Hoist Raise and store your bike, kayak, or extension ladder using the same principles you would to raise and lower a mini blind. The smooth pulley system has an automatic mechanism to prevent accidental release. Available from OrganizeIt.com, $34.99
The Bench Solution If you want a functional workspace but only have limited room, this wall-mounted workbench conveniently folds down when not in use. Measuring 60″ x 24″ on the surface, the solid butcher-block bench can hold up to 400 pounds. Available from BenchSolution.com, $399.99 for workbench and IdealWall kit.
Power Tool Holder A handy addition to Rubbermaid’s popular FastTrack storage system, this power tool holder gets bulky equipment off the floor. The soft grip coating protects stored items from scratches. Available from Rubbermaid, $10.99
Many thanks to Bob Vila, The Dean of Home Renovation & Repair Advice www.bobvila.com How to install the Rubbermaid Fast-track system (video):
For homebuyers today, the paperwork involved in securing a loan is often more painstaking than actually qualifying for a mortgage.
In an effort to avoid substandard loans and underwriting practices, Fannie Mae and Freddie Mac have cracked down on “bad,” or poorly documented and underwritten loans of the past. As a result, most mortgage lenders began greater enforcement of thorough underwriting guidelines and procedures, understanding that the key to avoiding future loan repurchase or buyback losses is to create the “perfect” loan file, as discussed by Mark Greene of Forbes.
Proper documentation is vital to developing a borrower loan file that meets today’s stringent credit and underwriting guidelines. Providing all required documentation requested will help facilitate a smoother mortgage process and help avoid unwelcome surprises.
Borrowers will have to disclose everything about their financial lives, from how much money they have in checking, savings, investments and retirement accounts, to gifts received to help with the purchase of the home. Full disclosure of credit as well as previous home ownership must also be captured to eliminate any potential obstacles to closing.
The mortgage approval process is rigorous for a reason – to avoid defaults and loan buybacks for lenders. [And consequently, should protect the buyers.-SA] These higher standards and strict guidelines are required by mortgage investors (e.g. Fannie Mae and Freddie Mac). Not having a “perfect” loan file can ultimately result in the lender having to buy back the loans at a loss from the investor – a scenario all lenders strive to avoid.
Courtesy of Coldwell Banker Home Loans
Please take the time to read these tips. It could help save your life one day.
Help! Fire! The words terrify, particularly if you’re at home, and unprepared to put out a fire.
Sadly, the numbers add up: Last year, there were 370,000 home fires, causing $6.9 billion in property damage, according to the National Fire Protection Association.
Yet, it’s easy and inexpensive to follow safety measures to avoid the causes of most home fires. Fire Safety Week, which runs through Oct. 13, sends a loud message about the importance of understanding major causes, and heeding NFPA’s preventive measures:
MAJOR CAUSES OF HOME FIRES
Cooking fires. Kitchens are the hub of family life, with at-home cooking grabbing a starring role. Yet, it’s also the leading reason for home fires and injuries. The greatest number start when ingredients ignite (frying poses a particular risk), or a cook leaves a flame unattended.
To avoid a cooking fire: Avoid wearing loose-fitting clothing; keep the cooktop cleared of towels, papers or anything that can ignite; and stay in the kitchen when cooking. If you step away, turn off flames.
Never use water to extinguish a cooking oil fire. If a small grease fire develops, smother flames by sliding a lid over the pan, turn off the burner, and leave the lid on until the pan cools, suggests the NFPA. If an oven fire starts, turn off heat and keep the door closed. Never take unnecessary risks: If you’re ever in doubt, exit and call 911.
Home heating fires. Furnaces and space heaters help keep you toasty as temperatures dip, but they need an annual cleaning, according to NFPA.
NFPA suggests keeping anything that can burn at least three feet from equipment, and turning off space heaters (which account for one-third of home heating fires) when you leave a room.
Holiday fire safety risks. Holidays are festive, but not if you don’t make safety a guest. Take extra precautions around turkey day: Thanksgiving is actually the peak day for cooking fires, according to the NFPA!
The winter holidays also pose special concern: Remember to water a live Christmas tree and use nonflammable decorations, advises FEMA. And never leave a room with candles burning in a Hanukkah menorah. More tips? See this NFPA report.
FIRE SAFETY MEASURES FOR YOUR HOME
Beyond these basic preventative measures, you might also consider a three-pronged approach to fire safety:
Smoke detectors. Besides keeping smoke alarms in working order (test them monthly, and change out batteries twice a year), you need to install the right number: the NFPA advises having one outside separate sleeping areas and on every level. Alarms that flash or vibrate can be important if there’s a hearing-challenged member in the household.
Fire extinguishers. A fire extinguisher can be an important part of a fire safety kit, but you need to use the right tool for the job. It might be surprising to know that there are actually five distinct types of fire extinguishers—each designed to combat a different fire. Do a little research and outfit your home with the right extinguisher.
Automatic sprinkler systems. Common in office buildings, automatic sprinklers are increasingly being considered in private homes. They can be installed within the piping of new construction homes, but can also be retrofitted to fit in an existing home.
PRACTICE AN ESCAPE PLAN
Fires can quickly take a bad turn, spreading rapidly through your home. The NFPA says you may have as little as two minutes to escape your home safely once an alarm sounds.
Your best chance of getting out? It can depend on advance planning. So grab everyone in the household and develop a fire escape plan. Walk through your house and identify all possible escape routes (the NFPA even suggests having two ways out of every room) and choose a safe meeting point for your family outside the home. And, then, put the plan to the test. Try it out and practice it regularly.
Courtesy of Coldwell Banker Real Estate LLC Pauline Hammerbeck is a content editor for The Allstate Blog, which helps people prepare for the unpredictability of life.