The Importance of Assets

By Ruben Gonzalez Jr

Prudential California Realty (DBA)

            Mortgage lenders dissect the entire credit history of a potential client with strict attention to income, credit, collateral and assets. Of the four, assets are perhaps the least discussed yet may be the most important in securing credit and buying a home.

            Simply put, assets include the amount of money needed for the down payment, in addition to closing costs, pre-paid costs such as insurance and taxes, escrow fees and funds that would be available in case of an emergency.

            “Assets may be the truest reflection of a borrower’s fiscal strength,” Dean Hartman, regional vice president for Benchmark Lending, Melville, N.Y., in his post on the KCM (Keeping Current Matters) blog site. “Their ability to save and properly budget could be a significant indicator to their future paying habits.”

            Common assets considered in a mortgage loan application include stocks, bonds, mutual funds, 401K and retirement accounts, life insurance, cars, boats, antiques, jewelry and other real estate.       

            The source of the assets is also important. Anyone who has attempted to secure a loan recently knows that restrictions have tightened, and when borrowers are paying off credit cards to get their ratios in line, lenders want to know where the money came from. 

 “For instance, we can obviously see a direct deposit from your employer or a transfer from one account to the next,” says Justin Miller, a mortgage broker for FEMBi Mortgage, Fort Lauderdale, Fla. “If we cannot determine this, we will need a letter of explanation and show proof of where it came from. My suggestion is to not make any cash deposits or take any monies from someone personally unless it is going to be a gift from a relative.”  

            Large and recent savings deposits raise underwriter concerns as they can indicate loans that have yet to appear on borrowers’ credit reports. Borrowing from relatives to boost savings and creditworthiness also doesn’t help. If funds aren’t reflected on income statements and tax returns, they can’t be used to qualify for mortgages.

            Indeed, make sure your assets are in order with proper documentation. Your preparation can speed you on the road to homeownership.

Ruben Gonzalez can be reached at (562) 507-0754 or E-mail.

 Prudential (dba) is an independently owned and operated member of Prudential Real Estate Affiliates, Inc., a Prudential company. Equal Housing Opportunity.

Credit Score Requirements Ease for Some

By Ruben Gonzalez Jr

Prudential California Realty (DBA)

Tight lending guidelines have weighed on the U.S. housing market during its ongoing recovery. Most lending institutions during the past two years raised their credit score requirements to as high as 650, making it nearly impossible for many people to obtain a loan.

Wells Fargo made it a little easier for homebuyers this past year, when the lender lowered its credit score requirements on FHA mortgages.

“Under its new policy, Wells Fargo will accept borrowers with credit scores of 500 to 579 if those borrowers can make a down payment of at least 10%,” said Robert Lentini, a mortgage expert who blogs for the website thetruthaboutmortgage.com. “For borrowers with credit scores of 580 to 599, borrowers must put down 5%. Borrowers with credit scores of 600 or higher can make a 3.5% down payment.”

Quicken Loans, Inc. adapted similar policies— dropping to a minimum 580 FICO score. “There are folks who have steady incomes and a solid payment history but were temporarily affected by the economy or a life event in some way. These challenges can lower their credit score significantly,” said Quicken Loans Inc.’s Chief Economist Bob Walters in a company statement. “We believe that a credit score, on its own, is not the sole arbiter of a person’s credit worthiness. This change will open up credit to a significant group of people and allow them to again have access to purchase or refinance a home.”

Such developments have been welcome news to FHA Commissioner David Stevens, who earlier this year urged lenders to lower their minimum credit score requirements to help the real estate industry as a whole. Stevens said that stringent requirements have constrained home sales by as much as 20% over the past year.

Ruben Gonzalez can be reached at (562) 507-0754 or Email.

 Prudential (dba) is an independently owned and operated member of Prudential Real Estate Affiliates, Inc., a Prudential company. Equal Housing Opportunity.

Not Everyone Loves the New GFE Regulations

By Ruben Gonzalez Jr

Prudential California Realty (DBA)

The Department of Housing and Urban Development (HUD) instituted the new Good Faith Estimate form in an effort to make a homebuyers’ journey through the mortgage process a bit easier, but many in the mortgage industry are not happy.

The form has gone through many different looks through the years, varying from lender to lender and software platform to software platform. Now, it has expanded to three pages and includes one “lump sum” for all lender charges.

The new standardized GFE must contain the exact language specified by HUD, which HUD says “consolidates closing costs into major categories to prevent junk fees and display total settlement costs prominently on the first page so the consumer can easily compare loan offers.”

The most significant changes to the new HUD-1 Settlement Statement were made with the intention of having consumers be able to easily compare their settlement charges on the GFE with those on the HUD-1.

HUD claims that the new regulations, which went completely into effect on April 20, 2010, is saving borrowers an average of $700. However, the goal was to make things clearer and a lot of confusion still exists.

One common complaint is that the new GFE does not fully explain to the consumer some of the more vital information the consumer is looking for, such as how much money they need to take to the closing.

Another is that the Total Estimated Settlement Charges listed on the new GFE forms does not include the down payment, which inevitably results in thousands of dollars more than what is expected.

There’s also a fear that consumers cannot distinguish between mortgage brokers and correspondent lenders.

The redesigned GFE also now requires consumers who are shopping for a loan to complete multiple loan applications with multiple mortgage providers, have their credit pulled by multiple mortgage providers, and possibly pay upfront fees to each of these providers.

HUD’s goal is to help consumers become better shoppers for settlement services. After all, right on the top of the first page it reads “Only you can shop for the best loan for you. Compare this GFE with other loan offers, so you can find the best loan.”

The new GFE goes a long way in doing this by forcing people to not infer general conclusions from their observations but actually apply rules and regulations.

While the mortgage industry may have complaints, the process was designed to help those searching for the loan and HUD believes they have done so.

Ruben Gonzalez can be reached at (562) 507-0754 or E-mail. 

Prudential (dba) is an independently owned and operated member of The Prudential Real Estate Affiliates, Inc., a Prudential company. Equal Housing Opportunity.

Hamp Program Extended

HAMP Program Extended

By: Ruben Gonzalez Jr.

Prudential California Realty (DBA)

President Obama in a recent State of the Union address spoke about homeownership and how the American Dream has dissipated for many due to lingering challenges in housing and mortgage lending.

The President offered hope to more homeowners by extending the Homes Affordable Modification Program (HAMP) until Dec. 31, 2013, and widening the program’s eligibility criteria.

HAMP allows qualifying homeowners with Fannie Mae or Freddie Mac mortgages made prior to June 1, 2009 to refinance to a better rate and more favorable terms. It also provides incentives to participating mortgage lenders that reduce principle for qualifying borrowers.

Millions of additional homeowners may be eligible for HAMP to reduce their homeownership costs and avoid foreclosure. Originally, the program was designed to reduce mortgage borrowers’ debt ratio to 31% of their incomes, and those below that threshold were not eligible. These borrowers may now apply for HAMP consideration, as can borrowers struggling under the weight of other liabilities, such as medical bills.

Eligibility also has been extended to owners of rental properties – as many as 700,000 landlords may qualify for loan modification under HAMP.

Moreover, borrowers who were approved for a HAMP trial period, but did not make the payments as scheduled, would now be eligible for consideration under new guidelines. Also, homeowners who missed payments under an approved HAMP modification would be eligible to reapply under the new rules.

The Obama administration announced it would triple balance-reduction incentives to lenders, paying up to 63 cents for every dollar lenders take off mortgage principal. The administration also said it would offer incentives to Fannie Mae and Freddie Mac to reduce principal on loans. Previously, the government had only offered incentives to private lenders and banks.

If your mortgage is owned, insured or guaranteed by Fannie Mae, Freddie Mac, FHA, VA or USDA you may be eligible for HAMP consideration. Contact your mortgage servicer for details.

Ruben Gonzalez Jr. can be reached at (562) 507-0754 or E-mail. Prudential California Realty (dba) is an independently owned and operated broker member of BRER Affiliates Inc. Prudential, the Prudential logo and the Rock symbol are registered service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide. Used under license with no other affiliation with Prudential. Equal Housing Opportunity.