Mortgage Stuff Every Realtor Better Know…Or Else!

OK, you know that I first got in the mortgage business in 1995, so I’ve been doing this for a while, but for the last few years I’ve focused more on the real estate side.  But my husband, Tim is very active in the industry, and since I share an office with him and Eric, I get to hear all of their ranting and raving about the silly things that Realtors do in connection with their deals.
 
So, I figured I’d share some of their pet peeves AND some tips to be more effective in your success: (and whoever you’re using for your loans, they’ll thank you for these tips too!)
 
First:  Unreadable contracts.  In the old days (before fax and email) agents had to run all over town or mail contracts all over the place to get everyone’s signature.  The result?  All signatures on the original contract, nice and neat and very readable.  Nowadays, they are faxed and emailed back and forth so many times that they are usually unreadable by the time they get to the lender.  Many underwriters are asking for cleaner/readable copies of the contract as an approval condition, so go ahead and work on getting it. (fax what you have to your lender to get started, but then work on getting a cleaner copy).
 
Second:  Incomplete contracts.  Most standard contracts at the bottom say “page __ of __”.  If it says there are 4 pages, your lender will need all 4 pages.  Also, they will need ALL addendums to the contract.  One of the ones that is usually missing is the FHA/VA addendum and the amendatory clause.  Such a large percentage of deals these days are FHA, it is probably better just to get it up front just in case.  Also, believe it or not, we often get over contracts with major information missing, such as the sellers name or the address!  Yeah, seriously!
 
Third:  Get your client PRE-APPROVED before showing them houses, otherwise you may be showing them properties that are WAY out of their league.  And once they’ve seen $300,000 houses, a $175,000 is going to look like a DUMP in comparison.  The other reason that this is so important is you will also know if you need to ask for seller paid closing costs and how much.  And yes, you CAN ask for closing costs to be paid even on short sales and REO properties!
 
Fourth:  When you get the pre-approval information from you lender, Stick To It!  One of the big variances we see right now is in the property taxes.  There are many properties that a buyer can pick up very inexpensively right now, but the property taxes are so exorbitant that they don’t qualify for that particular home.  Don’t just ask your lender what price range to shop in, also ask them what property tax figure they used in the pre-approval.
 
Fourth and a half:  Stick to the property type that the buyer was preapproved for, or run it by the mortgage lender.  If they were approved for a single family home, switching them over to a townhouse or condo could jeopardize their approval in 2 ways:  1) the HOA/Condo dues makes their payment higher and they now might not qualify and 2)  Townhouses and Condos are different underwriting guidelines with many lenders, especially if the Condo is not on the FHA/VA approved project list.  BIG difference in the approval here!
 
Next: Don’t put unrealistic closing dates on your contracts.  There is nothing more frustrating than getting over a contract that you only have 2 weeks to close and the property is a shortsale that isn’t even approved yet!  You will just end up with an unhappy client.
 
Along those lines…make sure you are very clear with the property condition with your lender.  If you are doing an FHA/VA contract on a property that needs work, it is most likely NOT going to pass the appraisal.  If your buyer is FHA, you have 2 choices:  1) find them a house that is in good condition (minor cosmetic stuff is ok, but missing kitchens, A/C units, etc. are most likely going to be a problem) or 2) use an FHA 203K streamline loan where some of the repair costs can be rolled into their loan (watch a future column for details on this loan program).  If it is a VA buyer, you have one choice:  find a house that is in good condition. 
 
Next week I’ll share with you how the new FHA guidelines will affect your buyer’s when they go into effect on January 1st (and some lenders are already implementing now!)