I like to blog about things that are actually happening in the Phoenix Real Estate market, and as a Phoenix Loan Officer there is never a dull moment in my job. At any given time I have about 30 to 40 pre qualified buyers who are out shopping for homes, and if you have read my past blogs you would know that the low housing inventory level is making it tough for home buyers to get an offer accepted, that is if you are NOT paying cash.

I want to focus a bit on short sales, and the short sale approval that most buyers with accepted contracts are waiting on. A short sale unlike a bank owned property/ foreclosure, is a bit different. The seller on the contract is NOT a bank at all, it’s the homeowner who currently lives in the property. It’s dubbed the short sale because the homeowner is usually in some type of financial distress and they are underwater so they must sell the home “short” of what they owe. The contracts on the short sales have a contingency, and this contingency has to do with the mortgage company that financed home, and whether or not they are even going to take the offer that was accepted by the seller.

We call this the “short sale approval” and sometimes this can take months to get from the bank, and this is what can cause problems with your transaction. I want to elaborate a bit on this, there are a handful of agents out there who are very “green” on this subject but I will tell you what I see from the many short sale transactions me and my team close every month. The contract presents the offer you and your agent came up with and the distressed seller can choose to accept your offer right away, but this to me means nothing other than you are first in line and your offer will be the offer that gets presented to the bank.

As soon as a few weeks and sometimes as long as a few months go by and then we get the short sale approval back from the short sale lender. Hallelujah, we are ready to move forward and close your transaction in the next 30 days. Or are we? Just because you offered “x” purchase price and requested “y” closing cost concessions and the “seller” accepted doesn’t mean that’s what you’re getting. I can’t stress this enough to read these approval letters forwards and backwards. Recently I had a client who was excited when the short sale approval came back from the bank, come to find out she was getting everything she asked for but they required her to pay a $3500 attorney negotiation fee to the law firm handling the transaction. Whoa what? This is a single mom buying her first home and they are expecting her to pay this? Ridiculous I know, and hence the reason I wrote this blog. You need to protect yourself!

All I can say is that even though your offer was accepted by the seller doesn’t mean that these will be the terms on your short sale approval, so please make sure to read these approvals cover to cover to make sure you are not missing anything.

As always forward this to anyone who can benefit via the share tool to the left.

Justin, The Electric Loan Officer

I had an encounter the other day with a client that inspired me, so much that I decided to have a cup of coffee this morning and write this blog. Some background on the situation so that you can get the full context of the story, I was referred a borrower from one of my real estate agents I do a lot of business with. The borrower currently lives in another state and is selling her business and moving out to Arizona. Not sure if they have family here as our conversation had been quite brief and I hadn’t gotten that far, but that’s neither here nor there and is an irrelevant piece of my story.

Anyways, the borrower was “shopping for a home loan” as she told me, I immediately started thinking to myself “maybe she doesn’t trust her Real Estate Agent to refer her to a good loan officer when she asked” or maybe this is me over analyzing the situation and people are always shopping for a home loan when they call me, I don’t know. Either way, I proceeded to ask her the question “what exactly are you shopping for?” and I sensed a bit of hesitation so either I put her on a slight defense or she didn’t really know. I proceeded to help her fill in the blanks, I asked her “are you looking for the lowest possible interest rates and fees or are you looking for the best service?” I even decided to take it a step further and ask her “or are you looking for a fine balance of both”? I think that this really put her in a tough spot. None the less I will let you know what her answer was at this end of this blog, but let me just get to the point of why I was so inspired.

There are TONS of companies out there, and by companies I mean mortgage companies, that are advertising via google on pay per click campaigns, banner ads, and even Facebook (lending tree even put a deceptive ad up that was even mentioned today on http://thinkbigworksmall.com/ ). The advertisements contain really low rates that the mass population can’t even qualify for without paying an arm and a leg in origination points, yes you will see this magically low interest rate but lenders are not required to disclose the amount of points or fees it cost to get to that rate just a simple APR in fine print in which nobody even understands. But nonetheless, people click the banners fill out the information and BOOM, their information is sold and you have telemarketers calling you telling you that “oh yea, we can do your loan quick and at the lowest interest rate, oh yea and you’re approved no problem”.

What’s the problem with this you ask? Go to any 10 educated producing full time realtors in the market in which you are buying a home and ask them what the most important thing is when shopping for a home loan and they will answer you, “a lender who is reputable in the market and that can actually close the deal”. Actually close the deal? What are you talking about don’t all lenders close the deal? You may be asking yourself this and my answer is NO, they don’t! Most lenders who have to “buy” your business and give away the farm or at least pretend they are giving away the farm up front usually have a reason they have to buy the business in the first place.

So when I ask my clients are you looking for a fine balance of competitive interest rates and service this is where I shine, I will tell you I am not the “discount loan officer”, you will NEVER see me advertising the lowest seemingly un-obtainable interest rates to “buy” business. However, you will have the most reputable real estate agents in the Phoenix Real Estate market referring me. Oh and I forgot to add, you will have a company that has been in the Arizona market for 30+ years and understands how to save YOU a few gray hairs on your loan transaction.

To sum this all up as it is getting about that time for me to jump in the shower and head to the office, I will let you know that this client finished her approval with me and sent her tax returns and all of her personal information without even asking what the interest rate was.
Happy house hunting people and if you are shopping for a home loan, give me a call, I may not be the best fit and I am ok with that, but I may also be exactly what you are looking for, and that’s ok too!

-Justin, The Electric Loan Officer – Saving you a few extra gray hairs since 2006

Let’s admit it, we as consumers watch the news, read articles on Yahoo Real Estate and hear all of our friends talk about how the real estate market here in Phoenix, Arizona is changing. As a buyer with financing it is sometimes even difficult to get your offer accepted due to the low inventory levels we are experiencing. Yes, the market is absolutely changing out here. I have always wanted to use the phrase “the proof is in the pudding” however I do not know how pudding would be a great analogy or have anything to do with investors taking an interest in our real estate market. But nonetheless I am trying to emphasize the fact that the market is changing and in reference to the investors, we are in fact seeing more financing options open up. Oh ya, and when I say investors I mean banks who see potential in the market and potential in the specific borrowers they are trying to target in attempt to fill their portfolios with mortgages.

The Canadian financing or foreign national home loan is now a part of our arsenal. I have to say that this product was very few and far between not too long ago however it makes me happy that I can now provide Canadian financing via our new foreign national home loan. Of course there are guidelines that we must abide by however this new product seems to be very aggressive.

The foreign national home loan caters to Canadian residents who want to purchase homes here in Arizona as either a primary residence or a second home. Unfortunately the product is not friendly to the real estate investors. The down payment will depend on the borrower’s financial profile, the interest rates are quite competitive and the turn time for the Canadian financing program is only about 30 days. This certainly beats what some of the other hole in the wall banks are offering in my opinion.

Remember the first step in purchasing a home in a market like this is to get pre approved, once I have you approved we can see what the required down payment and interest rates would be.

-Justin, The Electric Loan Officer

I have to say that this sounds completely ridiculous but the name of the loan officer and the mortgage company you choose can dictate whether your offer gets accepted or declined. I want to tell you about a real-life story about how important it is to have a pre qualification letter from a company whose reputation is solid within the real estate community in which you are shopping for a home.

Months back I was working with a first-time home buyer in which I approved for a home loan, and she then began to shop with one of the real estate agents I work with frequently. With a pre qualification letter that I had provided to her in hand she landed a contract on a beautiful home that suited all of her needs. For personal reasons the client and I decided to no longer work together on the transaction, but that is besides the point I am trying to make with this blog. Weeks later I get a phone call from the listing agent for the property the borrower was purchasing. The listing agent called me to ask about the loan status and whether or not the appraisal had come in. I mentioned to the real estate agent that the borrower and I had decided not to work together as we were not a good fit, I also went on to tell her that the borrower was working with her bank which happened to be Bank of America.

The listing agent, in a bit of a frustrated tone, expressed to me that the only reason she accepted the offer was the fact that Nova Home Loans had a fantastic reputation in the Phoenix real estate community and that she had successfully closed many transactions with us (Nova) in the past. I went on to say that I apologize and that I hope that Bank of America can get the job done and we hung up.

Let’s dig a bit deeper on why the listing agent even cares what lender is on the pre qualification letter. The listing agent’s job is to protect the seller’s (their client) bottom line, and what I mean by this is to sell the home for the highest amount possible in the quickest amount of time. With that being said if a listing agent has two offers of the same exact offer price, one being from a lender who they have had a terrible experience with in the past, and the other being from a lender they have had nothing but wonderfully smooth closings 10 times out of 10 the lender with a better reputation with the listing agent will win the clients contract.

I have heard horror stories about clients shopping for homes and writing offer after offer after offer, and much to their disappointments they have all been rejected. I have heard of people losing hope that they will ever become a homeowner and live the American dream. It almost has a negative impact on one’s self-esteem, but maybe this could all be prevented?

I strongly believe that shopping for a home loan should not be limited to competitive interest rates and fees, I believe that you must find a loan officer and a company who has a solid reputation of closing loans efficiently and effectively because without a accepted contract the best interest rates in the world aren’t going to make any difference. In my opinion the name on the pre qualification letter matters, what’s the name on yours? I hope that you can factor this into the equation when you decide to buy a home. Get Pre Approved now!

-Justin, The Electric Loan Officer

As a Phoenix Loan Officer I have to say that I have seen it ALL, my clients range from the first time employee working at McDonalds for $8/hr to the seasoned real estate investor who earns $4.5million per year in rental income. No joke, literally $4.5million per year in rental income but I guess the point that I am trying to get across is that the message is CONSISTENT. The message is this, buy real estate, and for the seasoned real estate investors their philosophy is slightly different, more like buy as much real estate as possible!

I wanted to use these examples to lead into what woke me up at 430am this morning to write this blog, a topic that came from question after question from clients and referral partners. Bottom of the market, people ask me “do you think we are in the bottom of the market”? I am guessing my answer will help them make the decision as to buy or not to buy, but none the less I proceed with answering their question based on my personal opinion coupled with factual data as well as what my clients are facing on the front lines while home shopping.

My answer in my opinion is yes, we are in the bottom of the market based on the data that I have seen and the fact that it’s an all out frenzy. A multiple offer situation meaning when there is more than one offer on most homes that are listed for sale tells me that there is a light at the end of the tunnel. I strongly advise not watching the media on their opinion and speak with a well known real estate agent (if you don’t have one I can refer you to one) but the days of coming in below the sales price with your offer are long gone. And as far as the “data” I am referring to that supports my belief that this is the bottom of the market, well here it is.
Since the housing market crash a few years back we have seen values consistently plummet and now over the past few months we have seen a slight increase in home prices. Supply and demand which we learned in economics class states that when demand exceeds supply prices go up, I think we are in some of the lowest inventory levels we have seen in a long time. This is great news tell all your friends and family the time is now and to buy buy buy.

Again, to sum this all up I feel we hit the market bottom a couple months ago and remember the smart investors on Wall Street do not buy when stocks are up! If you are looking to invest in real estate rates are phenomenal and the rental market is strong and cash flows to investors are at an all time high. If you want to purchase via financing you can Get Pre Approved now! As always feel free to share!

-Justin, The Electric Loan Officer

Right now here in the Phoenix Arizona Real Estate market I am getting this question quite often due to the low sale prices on homes. I wanted to add clarification here as there seems to be quite a bit of confusion. The issue that gets brought up from my clients is that they were working with a loan officer from a different company and they were unable to provide home loan financing to the person because they did not meet the minimum loan amount set forth by the mortgage company.
Let’s dig in deeper and find out exactly why a mortgage company would have a minimum loan amount to begin with.

HPML, or Higher Priced Mortgage Loan is a specific mortgage loan regulation that puts a damper on making a loan that would be considered high cost. I know as a potential homeowner the first thing that you are thinking is, wow my loan officer is trying to charge me an unfair amount to do my mortgage loan. This is not the case however, when the annual percentage rate or (APR) 1.5% above the average prime offered rate (APOR) set forth by the (FFIEC) Federal Financial Institutions Examination Council the loan is considered high cost and the lender is unable to fund it. WOW, now that was a lot of acronyms I apologize. What happens is that a lot of fees are fixed fees meaning they do not fluctuate up and down in relation to the size of the loan. For example an appraisal, this fee is pretty consistent whether you get a $20,000 mortgage or a $400,000 mortgage. Let’s say the appraisal costs $400, on a $20,000 mortgage just the appraisal fee alone is 2% of the loan amount however on the $400,000 mortgage loan the appraisal makes up 1/10 of 1% and has a significantly smaller impact on the APR or annual percentage rate.

The appraisal is just one of many fees associated with doing a mortgage loan, and when all of these are added up they make an impact on the APR. Again on a smaller loan amount the APR is too high and the loan is considered high cost. This is exactly the reason some mortgage companies have a minimum loan amount that they will fund, it’s not because they don’t want to work with you it’s because the government has put so many regulations on our industry and a lot of them end up hurting the consumer, or the person who needs the mortgage loan.

There are a couple ways that you can help lower your APR, when you write a purchase contract with your real estate agent you can ask for seller concessions to help pay your closing costs. If the closing costs are paid by the seller they are not factored into your APR. I would suggest speaking with a licensed phoenix loan officer before writing an offer to make sure you are in fact able to obtain a loan amount under $40,000.

I hope that this has shed some light on the topic and helped you as the consumer to realize that it’s not the fact that the loan officer does not want to help you, it’s the fact that the government regulations over the mortgage lending industry do not allow us to lend. If you would like to get pre-approved for home loan financing you can contact me now.

-Justin, Electric Loan Officer

I must say I am completly appalled right now, I had a client who I started working with to help them purchase a home about 8 months ago. I go through my normal routine with them, employment, addresses, income assets etc etc you get the picture. Well then we get to the fun part and thats pulling the credit, as we take a look at the credit we realize we are quite a few points away from having the required credit score for an FHA loan. The borrowers had all pieces of the puzzle; 17 years on the job, low debt to income ratios and enough assets for the down payment however the required credit score was going to hold up the approval.

The borrowers reached a conclusion after our meeting and decided they wanted to go ahead and proceed with a “credit repair” company in Phoenix, Az (whose name I will leave as anonymous for now) in hopes that they would provide the results that are needed to obtain the approval. The credit repair company then schedules the client and gladly meets for a consultation and accepts the borrowers payment. Today I get a phone call from the credit repair company and they say hello “Justin we have completed the credit repair for your client and you client should be ready for financing”. I call the borrower and tell her the great news, or not so great news as we are soon to find out, and we proceed to pull a new copy of the borrowers credit report. I see the end result, which is somewhere along the lines of what we had expected. The borrowers scores had jumped 50+ points from all three bureaus which is fantastic news as they now have the scores they need to qualify.

Upon further investigation I go through the credit report in detail and find out that the credit repair company really didnt do anything at all. The way they had improved the scores was by calling each collection company and “disputing” the collection account. If you recall from a previous blog I wrote it clarified that when you “dispute” an account this OMITS or excludes the account from the credit scoring model causing you to have an in-accurate score. I then asked the borrower how much they had paid for this, she replied “7 months later my total bill came to about $800″. I could not believe what had happened, unfortunately she will not get any of her money back and this is a lesson learned for everyone.

I guess what you can take from this is that if you have credit issues I think that its a great big waste of time and money to work with a credit repair company in Phoenix, Az. If you want know more about this story you can contact me now, and if you are facing credit issues my team and I are here to help.
-Justin, Electric Loan Officer

Primary residence, principal residence, but this is the first home that I will own. About 77% of the loan applications I take are for the borrower’s primary residence, or are they? See here lies all of the confusion and what it boils down to in the lending world is occupancy. About a week ago I get a call from a borrower in California who is currently working for a drug manufacturing company and renting a condo in the city. We spent a few minutes on the phone talking about the real estate market and then he tells me that he wants to purchase a primary residence out here in Phoenix, Arizona.
Immediately a red flag pops up, maybe this is my loan officer intuition from years of taking loan applications, but nonetheless I see a potential issue and decide to question the situation further. The first question I ask is “when is your employer going to transfer you to Phoenix, Arizona”? The borrower then replies “well, they are not”? I immediately replied “okay, so we’re getting you qualified for a second home right”? The borrower then replies “no, I do not own a home yet and this will be my primary residence”.

Aahhhh now I get it, a bright light bulb turn on in my head and my wheels start turning (thinking). What this borrower is saying is that they are confusing primary residence with being the first home that they own. This is a pretty easy thing to get confused and I figure he is probably not the only one which led to me blogging about it. Moving on with the conversation to the potential homeowner, I then explained to the borrower the confusion is this; a primary residence has nothing to do with being your first loan/home and everything to do with occupancy. The borrower pauses and takes a second to think about this. I explain in a primary residence closing you will sign a document that states you must occupy the property within 60 days and for the next 12 months thereafter. Now in this case since the borrower is not getting a job transfer they are not going to occupy this house. I conclude with him that this house must then be considered a second home or an investment property, we finally see eye to eye and proceed with getting him a pre-approved to purchase out here.

Remember, from the risk standpoint is the way the lender views the transaction, and because second-home and investment properties pose a larger risk not only do they require a larger down payment but have other qualifications to meet. If you are looking to purchase a primary residence, second-home, or investment property contact me now to get preapproved and we can run through all of your options.

-Justin, Electric Loan Officer

I would have to say being on the front lines of the Phoenix Real Estate Market I am starting to see more and more listing agents afraid of offers made by buyers who are utilizing FHA financing. I thought to myself that this made no sense but I wanted to dig a little bit deeper and started asking some questions. The general consensus (from what I gathered) pointed towards value more specifically the fact that the listing agents thought the value would come in lower on an FHA appraisal versus a conventional appraisal.

If we look at today’s market where inventory is a bit scarce and a multiple offer situation is ever so common, the listing agents seem to turn their nose up to an offer made by an FHA buyer. The truth to all of this is that the value derived on an FHA appraisal is no different than that of a conventional appraisal. In other words they both utilize the same formulas to calculate the appraised value. Plain and simple right? In my opinion if the listing agent is going to accept an offer where the buyer is utilizing financing it should make no difference to the seller’s bottom line, the values should be the same.

Now, where the appraisals are different; the HUD minimum property standards for an FHA appraisal are much more stringent or strict and require the property be in much better condition versus Fannie Mae’s minimum property standards for a conventional appraisal. Could this be the deciding factor? If the property needs a bit of work and may not meet HUD minimum property standards I can see an educated listing agent being very hesitant to accept an offer from a buyer utilizing FHA financing. To reiterate my point again if the property is in “tip top” shape there should be no difference in what financed offer the listing agent and seller accept as the value will be calculated the same. Comparable sales are comparable sales. If the property does have issues and the buyer only qualifies for FHA financing I do have some tricks up my sleeve to still make that FHA loan happen, but that folks is a story for another time so stay tuned.

Another way that the appraisals are different is the fact that an FHA appraisal will stick to the property for six months. An example would be if an FHA buyer orders an appraisal and decides to cancel his/her offer that value and appraisal will stick to the property for six months. This means that if the seller accepts another offer from an FHA buyer within this six-month time frame the current appraised value will be that of the appraisal that was already completed. Again this has nothing to do with the FHA appraised value being different from any other type of appraisal but in my opinion if the property is in great shape there should be no discrimination between an FHA or conventional buyer.

-Justin, Electric Loan Officer

Right now we are in a very interesting time in the real estate market; inventory is so low right now that buyers are scrambling to get offers accepted on properties. If you are a bit behind the times you may be under the impression it is a buyer’s market; however I will reassure you that it is definitely a seller’s market. The days of coming well below list price or long gone and you must come in strong with your offer for the seller to even give it a second glance.

There are however properties that do not meet minimum property standards for financing via a mortgage. Because these fixer-upper type properties do not meet minimum standards and no buyer in their right mind would put their own money into a house that is not yet theirs buyers tend to just shy away. Loan officers I tell you do have a solution however most are afraid to even utilize that tool. The tool that I am referring to is the FHA rehab loan its technical name is the FHA 203K loan.

So why is it you ask that loan officers don’t offer this up front? Fantastic question I will tell you it is because they are afraid. Years ago when I worked for a small mom-and-pop shop mortgage broker I did everything that I could to stay away from this type of loan. I can tell you that it is very complex and the process is extremely complicated. Due to the complexity of this loan there are many ways for the loan officer to make a mistake and in turn jeopardize the closing of the entire transaction. I can tell you that to this day the FHA rehab loan is still very complex and loan officers try to avoid this at all costs.

Let’s talk about why it is so complex, well of course there are many moving pieces, but on top of that most loan officers must send the loan to an outside lender for processing and underwriting. Because they are unable to keep the loan “in-house” or under one roof they lose all control over the transaction, and since this was a complex loan to begin with losing control can be a recipe for complete disaster.
I will tell you that I have the answer, plain and simple the “in-house” FHA rehab loan. We are one of the only companies who can offer this complex program and keep it under one roof. I can maintain complete control of this monster to ensure a successful smooth closing. These transactions can take upwards of 60 days to complete but by keeping it in-house I am able to close within 30 to 45 days.

You now have the best of both worlds go ahead and find that fixer-upper house and finance a little bit of your own personal touch. Go ahead and add new cabinets and countertops, go ahead and put in travertine floors and brand-new carpet, while you’re at it let’s add new paint for every single wall in the house while you are busy turning your house into a home I will be working on financing all of that into the loan.
Some basics about the loan itself you will need 3.5% down a minimum of a 640 credit score and the interest rates are in the low 4% range. Yes I said a minimum of a 640 credit score if you are not quite there well I’ve got you covered with that as well our in house credit services department will work to get your fico score up free of charge. I am here to get you qualified at no charge for the FHA rehab loan go ahead and contact me now to get preapproved.

-Justin, Electric Loan Officer