Portland Mortgage News

The number one most common question I am asked when a customer wants to apply for a mortgage isn’t what is your rate or how much does it cost.  The most common question is “how does all of this work?”

Considering how many times I have answered this question over the years, I felt like it was time to put this into writing so that, after I explain to them, I can refer them to this article.  That way they have it to refer to any time they have a question.  It’s uncommon that I provide a mortgage for a customer who is in the mortgage business already (although it does happen from time-to-time).  And even when I do, it is so different when you are the applicant.  So, for anyone who doesn’t work in mortgage lending even if they have purchased several homes over the years, the process can be a mystery for several reasons:

  1. The process is constantly changing and evolving to keep up with the changing world around us
  2. Unless you do this every day, it’s easy to forget all of the pieces that are involved in the process
  3. Each situation and each loan request are a little different, which is why we have so many options for borrowers to choose from

In order to explain this properly, I think it would be best to break it down in the steps of the process chronologically and explain each step.  Keep in mind however that the time line for each piece of the process is subject to change with respect to when and/or if it even occurs in the process, as again, each mortgage loan request is just a little different.  So, with that, here are the steps:

  1. Initial consultation – This is the first step of trying to determine which direction we will go. Consider this the foundation of the home you’re going to build. If the foundation isn’t right, the building will not be structurally sound. It is so important to have all of the necessary facts up front. Because, believe me when I say, if you think it’s relevant, it probably is, and if you don’t say it now, it will likely come up later during the process and potentially sabotage your purchase or refinance. The vast majority of my initial consultations are done over the phone without cost or obligation. Remember, this is information gathering at this point. Some of the things we look at during the initial consultation are:
    1. Credit history
    2. Work and employment
    3. Discussing the down payment (if a purchase)
    4. Looking at strategies to decide which direction to go
    5. Gathering all of the information for the initial loan application for approval
    6. Explaining what to expect in the loan process (thus the purpose of the article)
  2. Pre-approval – During the initial consultation, I will ask for permission to check your credit. Then, after our phone conversation, one of the first things I will do is electronically submit the loan request to Fannie Mae (largest mortgage loan insurer in the country). Loan approvals come back within minutes. After the request is approved, the borrower is notified and, if a purchase, a pre-approval letter is sent via email.
  3. Request documents – There is a standard set of supporting documents that we gather for each loan qualifying. Not every loan requires all of these, but most require at least some of these:
    1. Paycheck stubs
    2. W2s for 2 years
    3. Tax returns for 2 years
    4. Recent 2-month bank account statements
    5. Recent retirement account statement
    6. Current mortgage statement (if a refinance)
    7. Explanations for any derogatory credit evens in the last 7 years
    8. Explanations for any gaps in employment over the last two years
    9. Explanations for any large deposits in the last few months
    10. Purchase and sale agreement (if purchase)
  4. Prepare initial loan application and disclosure package for signatures – In the past, the loan application package and initial disclosures were either executed in person or by mail. Today however, most documents are electronically signed, which saves paper and speeds up the process.
  5. Lock-in the rate of interest for the loan (if requested)
  6. Open title and escrow – A third party company that handles all of the funds for the transaction, guarantees clear title and provides signing service for all final documents for loan closing.
  7. Order the appraisal – Appraisers are also a third-party entity whose job is to provide an unbiased opinion of value. In order to ensure that their valuation is unbiased, law prohibits any interested parties to the transaction to discuss details of the transaction with the appraiser directly. Lenders are required to use an appraisal management company as a liaison between the lender and the appraiser. The appraisal typically takes 2-3 weeks to complete depending on how busy the housing market is. In a very busy housing market, I’ve seen them take as long as 10-12 weeks.
  8. Submit loan to underwriting – once all of the documents are gathered, the title report for the property is acquired and the appraisal is completed, everything is packaged and submitted to an underwriter for review. The underwriter’s job is to determine if all of the documentation is complete and that the supporting documentation matches the information completed on the application. The underwriter is essentially a fact-checker, since back in step 2, we already obtain a pre-approval. The are just confirming that everything the pre-approval was based upon is indeed supported.
  9. Initial underwriter approval issued with conditions – This approval again is confirming at all required documentation has been provided. If the underwriter feels that they need to further supporting documents based on the initial approval, they will request it at this time. There is no typical documentation that they will ask for as it is all transaction dependent. Typically, things like explanation letter are required because they see something that may not make sense to them.
  10. Final approval – Once any conditions are submitted to the underwriter, if the conditions meet the requirements of what the underwriter requested, then a final approval is issued.
  11. Pre-closing – The loan file is passed on to the closing department from underwriting at this time. The closing department double checks to make sure all the information needed for final closing is in the file.
  12. Doc request and doc draw – Once the loan passes quality control, the file is given to the loan closer who draws the final loan closing package for signing at the escrow company.
  13. Signing of closing documents – The escrow officer will schedule an appointment with the borrowers to sign the final loan documents. The typical closing package is about 150 pages, so they allow one hour for review and signing. This is usually done at the title/escrow company.
  14. Final review and funding – The fully executed documents are sent back to the lender’s funding agent for final review to make sure everything is properly executed, then funds are balanced and wired to the escrow company. After the funds are wired and usually the same day, the documents are recorded with the county and your loan request is officially closed!
  15. If this is a purchase, then now you would get your key and move into your home!

That’s about it in a nutshell.  There are a number of steps in the loan process, but keep in mind, a lot of this is done behind the scenes.  Usually, a process takes between 30-45 day.  Most purchase transactions allow for 45 days with the option to close earlier if needed.  With refinance transactions, they take a little longer because of a mandatory 3 day waiting period at the end before funding.

If you have any further questions about the loan process or anything else in relation the mortgage loan, please click here to contact me.  I have been in the mortgage industry since 1986 and have seen about every possible scenario imaginable.  If there is a way to help you get the mortgage you need, you can be sure I will provide it for you.

Thanks for taking the time to read this.

Bill McInerny NMLS #5077
Agape Home Mortgage NMLS #4986
(503) 243-5626

Posted by Bill McInerny on January 15th, 2018 2:40 PM
I am excited to discuss with you today, our new Within Reach Grant down payment assistance program.  Please watch this 4 minute video to learn how you can receive a grant for your home purchase down payment:


Posted by Bill McInerny on January 10th, 2018 10:21 AM

I got this from a friend and wanted to share it...

Empathy:  is the ability to understand and share the feelings of another.  This is not a bad thing.

Sympathy:  is having feelings of pity and sorrow for someone or an understanding between people. This is not a bad thing either.

Empathy and sympathy equal apathy. They can relate with pain and identify with grief, but they are never change agents.

Compassion:  is a consuming fire of tender mercies, kindness AND a desire for change. Compassion not only weeps with those that weep but is also convicted by the truth of what can be. Compassion is the reformation that brings life altering transformation.  It’s active instead of idle.

Faith does not deny the current situation but sees the beauty that lies beyond it.

Imagine if Jesus had just sat with the man at the pool of Bethesda and felt sorry for him.  The poor guy would have been there another 38 years. Jesus had compassion on him and said, “Arise, take up your bed and walk”!

Empathy and Sympathy are not bad character traits but BEWARE! Do not confuse empathy and sympathy with compassion.  Empathy plus sympathy never moves. But Jesus was “moved with compassion.”

Let 2018 be a year where you are moved to transformation by the King of Compassion!

Posted by Bill McInerny on January 9th, 2018 5:36 PM



It’s no secret that over the last few years, home values have risen at nearly unprecedented levels.  Perhaps you’ve wondered at times how you could benefit from the increased equity position in your home, thus the purpose of this article.

 

Many don’t know, unless someone can point it out them, the ways in which this equity growth could benefit them.  And with mortgage rates presently very low, the options for smart financial planning abound.  Outlined below are some of the ways this increased equity position could be helpful.

 

  1. If you took out your last home loan with mortgage insurance because a) You had less than 20% down, or b) You took out an FHA or USDA type loan, you may find that refinancing to remove this mortgage insurance and also potentially lower your rate could save you hundreds of dollars every month. And in many cases, mortgage insurance is like rent, not tax deductible, so this is money that is going out the window every single month.
  2. With your home being one of your largest investments you’ll ever make, it pays to take care of that investment. It would be nice if homes never needed maintenance, but unfortunately they do. Most financial planners would agree that using equity for home improvements in many cases, increases the value of your home. For instance, just updating your kitchen with cabinets, appliances, countertops and flooring could have the largest impact on value, especially if you are considering selling in the near future.
  3. Consolidation of debt can be a smart way to use your equity in some circumstances. Many customers come to me asking if they can consolidate their debt so they can improve their monthly cash flow. But one question I always ask is, what will you do with the extra money you save each month? If you are in a position where you are barely making it and refinancing your debt saves you hundreds of dollars a month, that’s a good thing. However, I always recommend either going to a shorter term loan, where you can build up equity faster and still save some money per month could be a more responsible way to preserve your equity for the future. Or if a shorter term loan is just not feasible, at least take a prescribed amount each month from the savings you realize and apply it to the principal balance. This needs to be a consistent amount to be effective. That way, you can still shorten the life of your loan, building back up your equity faster. Another option some use is to take the savings or a part of it each month to invest in another financial vehicle such as retirement. Any way you look at it, it comes out a win.
  4. If you’ve ever wanted to build your own little real estate empire or just have a rental property or two, using the cash-out from a refinance is a good way to realize the down payment for such purchases. Having two or three properties multiplies the real estate equity you are building over time. Some have found that when retirement rolls around, having all of that extra equity can be quite helpful.

 

Of course there are a number of other ways you could effectively use the equity in your home.  These are just a few.  Call me or click below to respond to this article with your questions and let’s discuss your ideas and how your equity might better your financial position today while rates are still low.  Contact us today to find out more, click here.


Bill McInerny, CFO
Agape Home Mortgage LLC
NMLS #5077

Posted by Bill McInerny on January 8th, 2018 12:21 PM
Often, I find that customers call me wanting to buy a home or refinance their existing home, but they have lower credit scores. Sometimes they are surprised and sometimes not. The general consensus about credit scoring is this; if you have a habit of not paying your credit on time, you won’t have good credit scores. That is partly true, but there are a number of other factors that affect credit score that aren’t as well known.

When I first started in the mortgage industry in 1986, there was no such thing as a credit score. We analyzed the credit based on factors as they presented themselves on the report. Several years later, when scoring first appeared, it turned the mortgage industry upside down. None of us knew really what to make of it and we kind of hoped it would just go away. Now I’m glad it didn’t. At first, the credit scoring models were not very accurate and didn’t really present a completely true picture of what the credit history reported. But over time, the models have gotten better and better. Today, they have improved it enough so that many other industries use this scoring other than mortgage lenders to determine risk factors for extending credit. And with respect to mortgages, they present a more accurate picture of credit worthiness than any other qualifying factors for approval. This is confirmed by the default rate on mortgages based on the applicant’s credit score at the time of the closing of the loan.

Two constants with credit scoring over the years have been 1) credit scoring is different for each bureau, and 2) none of the bureaus will tell us exactly how they arrive at your credit score, but only a general idea. This is a big reason why for almost everyone, none of the 3 major bureaus report the same score for you. Sometimes a customer will have a score that is as much as 100 points different than the other scores. How can this be? Again, I want to show you some of the factors that go into a credit score. Because if you are applying for a mortgage, a 100 point lower score can make a very significant different in what you pay for a mortgage or could determine whether you even qualify at all. But before that, one important piece of information you will need to know is this; the qualifying score for your mortgage is going to be your middle score. If you have one score that is 100 points off, it may not affect your ability to qualify. Now knowing that, here are some of the factors that affect your credit score:

  • Serious delinquency – Such as late payments, especially more recent ones, for example, within the last 12-24 months. Mortgage late payment carry much more weight than revolving credit late payments since it is a mortgage you are qualifying for.
  • Too many accounts with delinquency – If you only have one account with late payments, but all of your other accounts show a clean payment history, it is expected that this was an isolated case and would have less impact on your score.
  • Collections, liens and judgment – These are other examples of delinquent credit, but pretty much next level. Accounts don’t typically get to this point without the creditor having made repeated attempts first to collect the debt. Now, there is a difference between paid and unpaid accounts. For instance, if you have a paid collection, it fares better on your score than if it’s unpaid since you did ultimately make the debt good.
  • Bankruptcy, short sale and foreclosures – These would be the highest level of delinquent credit. Mortgage companies will take a much closer look at these, especially if they are more recent in determining if and what you could qualify for. The good thing is, most of these do disappear from your credit after seven years of being closed/paid. However, it is important to note that these, as well as collections, judgments and liens that are left open/unpaid can carry over longer until they are taken care of.
  • Balances owed on revolving credit is high – This is a lesser known factor affecting credit scores. And this can be a significant factor affecting your credit score, especially if you are close to or over the limit on your credit cards. But this may be one of the easier thing to remediate in the shorter term. For instance, you were to pay down the credit cards to even 50% of the limit, it could have a significant affect on your credit score that could save you thousands of dollars.
  • Length of time accounts have been open – If you only started just recently establishing or re-establishing credit, it could take some time to build up your score. The longer the good credit paying history you have, the more likely your scores would be higher. Another important thing to remember is that most mortgage loan types require that you have a minimum length of time of established credit before they will give you a mortgage.
  • To many recent credit inquiries – Every time you apply for credit, the creditor who requests your report will show up as an “inquiry” on your credit report. For mortgage credit reporting, the last 120 days are reported. So, if you are applying for a mortgage with a few companies, it could have a small effect on your score. On the other hand, if you have applied for a number of credit cards in the last 120 days, it will have a bigger impact on your score.
Though there are some other factors that affect credit score, these are the most common. In the process of speaking with a customer who wants to purchase or refinance their home, one of the first questions I will ask is “do you know your credit score?” Then, in the process of pre- qualifying, I will ask for permission to check their credit. If their scores are lower in respect to affecting the qualifying or price of the mortgage I would offer them, I will examine the report to look for the factors that are causing the lower scores. Then, I will discuss strategies with them on how they could increase these scores both in the short and longer term. One of the very helpful tools we have, allows us to look at “what if” scenarios with your credit and pretty accurately predict what impact different strategies would have on the outcome of a person’s score. 

Many years ago, a valued colleague shared something with me that changed the way I do business. All I really knew up to that point is, if I couldn’t offer them a mortgage, I told them the reasons why and sent them on their way. But his strategy was different. He looked for every possible way to get them the mortgage they needed. And if he couldn’t help them now, he outlined a plan for them for 3, 6 or 12 months or however long it took for them to get to the point that they could qualify. Hey always left each person with hope, if not for now, at least for the future. I have taken that to heart, as every person has the right to be able to have their own home if they so desire. And I feel that this is the critical part of what I have been given to do for other.

Thanks for reading and I hope this will help you in some respect.

I wish the very best for you in 2018!


Bill McInerny, CFO Agape Home Mortgage LLC NMLS #5077
Posted by Bill McInerny on January 3rd, 2018 4:39 PM