It is crazy to see that mortgage lending here in Phoenix is starting to get much more agressive, we are seeing loan programs to qualify borrowers a day after their foreclosures and short sales and now the credit score overlays for FHA loans have completely disappeared.
The thing is, FHA loans always required a minimum credit score of a 580, it has been this way for a while however many lenders/investors who were buying a funding these loans slapped on an overlay of 620 or 640. The investors we are working with now have removed that overlay completely and are doing FHA loans with 580 credit scores or better.
I can’t tell you how many people we have had to decline due to their credit score not meeting the minimum requirements, we have free in house credit services but sometimes they just couldn’t get the scores to where they needed to be to qualify at 620 and 640. It is a great thing that we have kept a pretty good database as it sounds like I have my work cutoff for me in regards to calling everyone who previously applied and we couldn’t get financed.
So what else is on the horizon as far as potentially “niche” type products? We have seen a couple investors out there offering stated income loans in which we thought that we would never see again although you will not find and 100% financing type products for stated income as they now require the borrowers to have a lot more skin in the game… By that I mean investing a much larger down payment, I guess they got smart and decided this is the only way to get the client from walking away from the house if they are in financing distress.
My bet is that with the market flattening out and home prices stabilizing, the investors that are buying these mortgages have made a decision that it is safe to come out and test the waters with innovative new programs. As long as they have all learned their last time from the last housing bubble and don’t come out with any of these ridiculous products like the negative am option arms I think we will maintain some consistency within the market place and it will continue to be a safe bet for homeowners.
But back to FHA loans with 580 credit scores, because Phoenix, Az was one of the places that got hit pretty hard with the housing collapse I think this is a great product to be able to offer as there are many qualified candidates who have great job history, a down payment and can afford a housing payment but are unable to meet the current credit score guidelines of 620. As far as overlays the only two things I can think of here is that we will have to follow FHA’s manual debt to income ratio max of 31/43 (contact me and I will calculate yours for you) and we do not allow any of the down payment assistance products.
As long as you meet the FHA 36months from foreclosure or delinquent short sale and 24 months from a bankruptcy seasoning periods you should be good to go to pursue a pre-approval with us, reach out now and let’s get you rolling!
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I know I have been slacking about writing this article, I have thought long and hard on how to present this or maybe I am making excuses because business has picked up and juggling being a father and the leader of a successful mortgage practice has my plate full? Well, either way here it is. So back in say mid December I told my coach that I didn’t feel as if my business was aligned properly with our current platform, in other words I wasn’t quite the right fit at Cobalt Mortgage, Inc. There are ALOT of great loan officers in Phoenix that run successful businesses within Cobalt’s platform, and I must say that I love them and I learned a ton from them and I will be forever grateful…. but something just didn’t work the way I wanted it to.
What was the problem? That was just it, I couldn’t really pin it down, but one day on a coaching call with Coach James from Building Champions who has been mentoring me for the last two years came an extensive homework assignment. At first, I threw a fit, if you could imagine that as I already had plenty of work to get done and never enough time to do it. And so it goes like this…
The assignment: I was told to come up with a list of my 5 non-negotiables, in other words what are the 5 things that a mortgage company must have in order for me to operate the way I would like. I sat there puzzled for a few minutes not even knowing where to begin but then Coach James told me to go out and interview companies as it would help me build my list. After a few weeks time and interviewing great companies here in the valley I made it happen. These are the things that are important to me, like it or not, here is my list.
- Arizona Based Company – This was the number one thing I needed, really I needed 90% of a company’s business to come from the market I operate in. What does it matter? Well it’s simple actually, some markets are so completely different from the Arizona market for example the financial profile for the average borrower, you need your whole company to understand how to work with that. They need to be familiar with underwriting and structuring those types of deals. If your company is used to seeing $500k purchases for salaried software developers who put 20% down with 810 ficos, throw an FHA borrower with a 620 Fico 3 years out of foreclosure with patchy job history on their plate and SEE HOW BIG THEIR EYES GET!
- Non-Producing Branch Manager – This is HUGE to me, in my opinion having a manager that runs a successful mortgage practice will keep them focused on their own production/clients, don’t get me wrong here I would do the same thing. For me, I needed an advocate who was in the trenches fighting the fights with me, helping me serve more clients and that is always a battle best won when management is there with you to the end.
- All processing and operation staff in my office – The game of phone tag with underwriters and processors is not something I believe in personally, I believe that if you need to get a decision on something you should be able to walk back and get it right from the proverbial “horses mouth”. Having my processor, underwriter and underwriting manager 25 feet from my desk will give me the potential to be more efficient.
- A well engineered platform – It’s a funny thing that when you do a great job for your clients and referral partners you get more referrals, as we grow/scale our team I don’t want to be the one to have to design/pioneer a system to allow that to happen effortlessly, quite frankly I have enough on my plate. So finding a company that has the systems that have already been tried and true to sustain this growth is key.
- Pick a margin platform – I STRONGLY believe that a loan officer should be able to offer the rates he would like to a client, I don’t believe that a company should get to set the margin. Every loan officer serves a different base of clients, I believe they should be the ones in control of their margins to appropriately serve their clients financial needs. A blanket rate-sheet for every loan officer in their market just doesn’t sit right for me…
So let’s get back to it, here was my list. It wasn’t easy, I drank a lot of black coffee and thought long and hard and I came to the decision. While Cobalt was great and offered a FEW of these things, along with the 5 other companies I interviewed this list was after all my 5 Non-Negotiables and I must operate my team within a platform to allow me to serve the needs of my clients to my fullest capability and that my friends brought me back home to NOVA Home Loans. The word is out, shout it from the rooftops we are back home to NOVA after a 13month hiatus with Cobalt Mortgage, Inc.
We are now up and running, contact information is the same 602-492-3602 and Justin@electricloanofficer.com
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