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Developers/Builders Beware: New RESPA Limitations on Homebuilder Incentives will Require Changes to Procedures and Contracts

(Effective 1/16/2009)

For many years, it has been common for homebuilders and developers of condos and other residential real property to offer incentives to buyers to induce them to use preferred or affiliated title agencies and affiliated mortgage companies.  Sometimes, these incentives were substantial, exceeding $10,000 or more.  However, developers that offer those incentives after January 16, 2009 will violate the federal Real Estate Settlement Procedures Act (12 U.S.C. �� 2601 et seq.), commonly known as RESPA. These RESPA violations can result in civil penalties as well as criminal prosecution.

The final rule including these amendments is available online at http://www.hud.gov/offices/hsg/sfh/res/finalrule.pdf. Most of the amended rule applies to changes in the forms of the Good Faith Estimate and the HUD-1/HUD-1A settlement statements that become effective January 1, 2010. As a result, the changes to the required use provisions affecting homebuilder incentives have not received much public attention.

Required Use Changes

The changes to the definition of “required use” in the new rule will effectively eliminate the ability of homebuilders to provide incentives to buyers for using a preferred or affiliated title agency, affiliated mortgage company or other affiliated settlement service provider. The changes also prohibit the use of disincentives if a buyer does not use a preferred or affiliated settlement service provider. These changes to the required use rules take effect sooner than the other RESPA rule changes, specifically on January 16, 2009. This impending deadline will require developers and builders to quickly change their contracts and procedures to avoid violations of the new rule.

What does this mean to you, the home buyer?  If the builder is willing to pay your closing costs, he will pay them whether you use his lender or not!  Fair is Fair

 

 Understanding Credit

Understanding Credit

What are Credit Scores?
A credit score is a number that is calculated based on your credit history to aid lenders in determining your credit-worthiness. This number is intended to help a lender ascertain the level of risk they may be taking in loaning you money. The system awards points based on information in your credit report. Lenders can predict how likely someone is to repay a loan and make payments on time.

What Can I Do to Improve My Score?
 * To get the best credit score, you need a mix of different credit types including revolving accounts (credit cards, lines of credit) and installment accounts (auto loans, personal loans, mortgages).
* Reduce your balances on credit cards to 75% or less of your available credit. Don't charge more than you can pay off in a month. You don't have to pay interest on a credit card to get a good credit score, and it's a smart financial habit to pay off your credit cards in full each month.
* Pay your bills on time. (This is probably the most important of all!)
* If you don't already have established credit or you need to rebuild, get a secured credit card. Secured credit cards report your credit payment history information to the credit bureaus just like a regular credit card. They are "secured" by your money. Check with your personal banker.

Avoiding over-inquiries
There are two types of credit inquiries that can be made to your credit report: hard inquiries and soft inquiries. A hard inquiry occurs when you seek to obtain credit. This happens when you apply for a loan or credit card, for example. Each time you fill out a credit card application at a department store, the inquiry counts as a hard inquiry. Only you can authorize a creditor to perform a hard inquiry on your credit report. A prospective lender or other creditor will likely be concerned with an applicant whose credit report shows a high volume of hard inquiries. That's because it suggests a carefree attitude in applying for credit or an effort to borrow excessively. Borrowing too much -- a situation called over-leveraging -- is a potential red flag for creditors. It signals you may face more difficulty in repaying your debts in cash-strapped times than a person who judiciously applies for credit. If you're going to ping your credit report with frequent hard inquiries, it may be best to concentrate them around the time you apply for a home or auto loan.

A soft inquiry is one where the inquiry is not tallied on your credit report. A soft inquiry does not constitute a bona fide request for credit. For example, a soft inquiry occurs when you obtain a copy of your report.

There is no fast and easy way to repair damaged credit that took months or years to occur. The law allows negative information to appear on an individual's credit record from seven to 10 years. Get a copy of your credit report. If you are being turned down for credit you need to be sure the reason is valid. Many credit reports have errors. Dispute any inaccuracies you find.

Get a credit report from all three bureaus. Each one may have different information and maybe errors in your file. You can't know which bureau's data will be used to evaluate your credit application, so check them all.

Addresses / phone numbers of the three major credit bureaus:
Equifax (CBI) PO Box 740249 Atlanta, GA 30374 (800) 685-1111 

Experian (TRW) (888) 397-3742

Trans-Union 555 W. Adams Chicago, IL 60661 (800) 916-8800 (312)466-8385

Cecilia Sherrard. Top producing REALTOR in Northeast Ohio.
www.realtyone.com/c.sherrard

 Real Estate Financing

Real Estate Financing
Assisting you with all of your Real Estate Financing Needs

Pre-qualify for real estate financing - This is the first and most important step in the home buying process. You can use your lender or call one of the companies that we work with on a daily basis. 

   

    First Community Mortgage - Carol Berger  254-526-5100

    Heights Mortgage -            254-699-6900

    First State Home Loan -      254-953-3800

    Market Street Mortgage -    254-289-5626 Jimmy Alexander

 

When pre-qualifying for a home loan, I always advise that you do not call one of those on-line companies.  It appears that EVERYONE will pre-qualify, but many times they do not come through with the loan.  This delays the closing, and sometimes cancels it all together!

 

 

Applying for a Mortgage - Real Estate Financing

Your Realtor can help you locate lenders that have experience in your market, are reputable and reliable, and will work to make sure that you understand the mortgage process. You can also ask people that you know for recommendations or check with the Better Business Bureau.

These are a few things to ask when interviewing lenders:

What type of loan products do you offer for my specific situation? Do you have First-time-buyer, New Construction, Government & Military Programs, Low Income, Investment Property, and Local Grants?

What is your current interest rate and how long can you guarantee my rate?

Is it possible to “buy down” the rate, and if so, what will it cost? If I do buy down the rate, what is the “break-even” point?

Can you provide me with a “Good Faith Estimate” detailing all of the costs involved?

Once you receive the necessary documents from me how long will it be before you can close this loan? In other words, what is your processing time?

Items to discuss with your lender:

Of you will qualify for more than you actually want to spend. Have your lender discuss with you what your total monthly payments will be based on a certain loan amount, or tell your lender the amount of money you are comfortable with as a total monthly payment. They can then suggest a price range based on your budget.

If you have cash on hand, discuss with your lender where the money should be spent. Since they have looked at your financial situation they can recommend the best way to use your money to your advantage, and it might not necessarily be on a larger down payment. Perhaps they may advise you it would be more advantageous to pay off a debt or buy your rate down. A good lender will show you how your money can work BEST for YOU.

Search Homes for Sale www.FtHoodRealty.com

 First Time Home Buyer Loan Process

First Time Home Buyer Loan Process
How Purchase Loans are Made - A Step-By-Step Walkthrough

Provided by:

Jimmy Alexander
AVP/Sr. Loan Officer
Market Street Mortgage

1.  Pre-approval - Getting pre-approved for a mortgage allows borrowers to know exactly how much house they can afford. Viewed as "cash buyers", pre-approved borrowers have greater negotiating power as well.

2.  Loan Search - Buyers should seek the advice of an experienced mortgage professional, someone who will help determine which financing options best suit their needs today and in the future.

3.  Loan Application - It's crucial that consumers supply the lender with as much information as possible, as accurately as possible. All outstanding debts as well as assets and income should be included.

4.  Documentation - Buyers must submit paperwork supporting the application as well. Information commonly sought includes pay stubs, two years' tax returns, and account statements verifying the source of the down payment, funds to close and reserves.

5.  The Hunt - The buyer begins shopping for a house. When the right one is found, the terms of the sale will be negotiated, including the price and potential terms of the loan being sought.

6.  Appraisal - Lenders require an appraisal on all home sales. By knowing the true value of the home, the borrower is protected from overpaying.

7.  Title Search - This is the time when any liens against the property are discovered. A lien may have been placed on a property to ensure payment of outstanding debts by the owner. All liens must be cleared before a transaction can be completed.

8.  Termite Inspection - While most purchase loans do not require a formal inspection for termite and water damage, some loans (especially government loans) allow for the possibility. If problems are found, repairs may be necessary.

9.  Processor's Review - The mortgage professional packages all pertinent information and sends it to the lending underwriter, including any explanations that may be needed, such as reasons for derogatory credit.

10.  Underwriter's Review - Based on the information put together by both the loan executive and the processor, the underwriter makes the final decision regarding whether or not a loan is approved.

11.  Mortgage Insurance - Many lenders require private mortgage insurance when borrowers put down less than 20 percent on a loan.

12.  Approval, Denial or Counter Offer - In order to approve a loan, the lender may ask the borrowers to put more money down to improve the debt-to-income ratio. The borrower may also need a bigger down payment if the property appraises for less than the purchase price.

13.  Insurance - Lenders require fire and hazard insurance on the replacement value of the structure. Flood insurance will also be required if the property is located in a flood zone. In California, some lenders require earthquake insurance on condominiums.

14.  Signing - During this step, final loan and escrow documents are signed.

15.  Funding - At this point, the lender sends a wire or check for the amount of the loan to the title company.

16.  Confirmation of Recording - The lender authorizes the disbursements of loan proceeds.

17.  Close of Escrow - Documents transferring title will now be recorded with the County Recorder.

18.  Buyer Begins Making Mortgage Payments

Jimmy Alexander
AVP/Sr. Loan Officer
Market Street Mortgage
Phone: (254)289-5626
Fax: 254-634-2019
jimmy.alexander@msmcorp.com
www.marketstreetmortgage.com/jalexander

 

Whether you are looking for a first time home buyer loan or you are on your tenth home loan, this information should help you to understand the home buying process just a little more.

Search homes for sale www.FtHoodRealty.com

 

 

 

 

 Pre-qualification or Pre-approval?

Pre-qualification or Pre-approval?
 
 In the real estate world, the terms “pre-qualification” and “pre-approval” are often used interchangeably. But they have very different meanings.  Once you have narrowed down the lender that best meets your needs, you will need to get pre-approval for a loan.
 
 Pre-qualification is an estimate of how much you can afford in a mortgage payment. It is based on the information that you provide the lender, which is later subject to the approval process and additional information. This additional information would include a credit report, appraisal, and income verification. During the pre-qualification process this information is not routinely verified.
 
 Pre-approval is a firm commitment on behalf of the mortgage company. The process of pre-approval is more formal in that the lender includes credit check and employment verification.
 
 If you have been pre-approved for a loan, you can shop for a house with more certainty. Additionally, the seller is likely to view you as a more capable buyer. This can give you an advantage as a buyer in the marketplace, especially when the seller is considering multiple offers.
 
 If you are interested in obtaining pre-approval, the check list below may be useful to you as you compile the information needed for your lender.
 
 ● W2 Forms from the past two years
 ● Pay stubs from the most recent months
 ● Employment History
 ● Social Security number(s) for both the borrower and the co-borrower.
 ● Bank statements for checking and savings account for the past three months
 ● Credit information and be able to provide a letter of explanation for any credit problems.
 ● Tax Returns-provide two years of federal income tax returns and all schedules if you are self employed.
 ● Stocks, Bonds, and investment accounts-these are needed if you are using this in the purchase of the home
 ● IRA/Retirement Plan-know the value of these plans and be able to provided the most recent statements.
 ● Life insurance policies-cash value of each policy if you are using this for the purchase of your home.
 ● Automobiles owned-make and year of each automobile and the current market value.
 ● Gift letters-If part of your down payment or closing cost is a gift, a signed letter is needed from the donor to verify that it does not need to be repaid.
 ● Other income-documentation of other income for the last 12 months
 ● Renting-provide landlord information and rental payment history
 ● Self-employed- two years of profit and loss statement
 ● Divorce or separated-provide copy of decree and twelve month payment history of alimony and child support
 ● Student-provide school transcripts or diploma

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