The most common question that I was asked this past week was "What are the consequences of co-signing for someone else’s mortgage"?
In 2010, if a someone looking to buy a home and they do not qualify because their income is too low, a non occupying co-borrower is a great solution, but it does come with serious responsibilities for the co-borrower and serious concerns for the home purchaser.
The first thing to address is the term "co-signor" vs. "Co-borrower". When you sign for someone else you are co-borrower with equal ownership and equal responsibility to repay the loan. It is not like the traditional co-signor relationship where if the loan were to default then you have to step up to the plate and pay it back, you are equally responsible. That means that the loan is on your credit report, if it is late, then you will be reported as late.
Let us answer the questions that come up:
How will this affect my credit?
This loan will be listed on your credit along with all of your other debts. If it is paid on time it will build your score. If it is paid late, it will harm your score.
Will only 1/2 the loan be my responsibility and only that portion be on my credit report?
Since you are an equal; partner in this mortgage debt, your credit report will reflect the entire liability, just like the primary borrower.
If I want to buy a house in the future, Will I be able to qualify for another mortgage if this mortgage is on my credit report?
If the loan is being paid on time, and the other party’s check is paying the loan and you can prove 12 months canceled checks from the other party, then this debt is excluded from the debt ratio. Now this is a current mortgage qualification guideline. As we have seen in the last 18 months there have been tougher restrictions on qualifications for a mortgage, so this may change, although I haven’t heard anything yet.
For how many years am I responsible
You are responsible for as long as the loan lasts.
If I have a co borrower, what happens if something happens to me, will they now "inherit" or "own" my house?
This is a great question. My answer is to speak to your attorney. There can be issues and they should be addressed up front. Your attorney should advise you on these sensitive issues.
How will this debt affect my debt-to-income ratio on other credit that I may have?
This debt will be on your credit report and can affect your ability to get credit.
Will I be considered a “First Time Home Buyer” if I am a co-borrower?
Some First time home-buyers programs only check to see if you have claimed the mortgage interest deduction on your tax return. So if you aren’t paying the mortgage and you do not claim the interest, you may still qualify. I would say that you should go into this assuming that you wouldn’t qualify and if you want to buy a home down the road, look into each available program at that time.
If I have poor credit, will a co-borrower with great credit help me?
We qualify customers based on the lower middle score of all the borrowers. So while a co-borrower with great credit is great, it won’t mitigate the fact that your credit is poor.
Who is the best candidate to be a non-occupying co-borrower?
In my opinion, someone who is very close to you, preferably a close family member like a parent or grandparent.
If you have any questions regarding any mortgage issue, contact Ann Zeilingold, Branch Manager of First Meridian Mortgage Corp. Licensed Mortgage Banker NY, NJ, CT, PA banking departments. 1609 Route 202, Pomona NY 10970. 845-354-9700 or azeilingold@yahoo.com.
Sunday, June 6, 2010
Friday, May 21, 2010
Here's a handy list of 10 things you can do to kill your chances of getting a loan today. And the 1 strategy that you need, to insure a smooth closing
1. The house just needs too much work.
This applies to REO's, foreclosures, and short sales... sure they're good deal, but the financing can be rough. Any broken windows, bad appliances, leaking roof, water damage, obvious mold, health or safety issues, structural problems and of course any liens.
2. Low Appraisal
Appraisal used to be a "rubber stamp"... those days are long gone and best forgotten. Today, appraisers are trying hard to "prove up" your purchase price... and standards have become tougher (good!). If the appraiser can't, in good faith, shore up your purchase price... they're just not gonna. Re-negotiations (post appraisal) are becoming much more common.
3. Borrower has too much debt.
Back in the day, large debt/income ratios were given a "blind eye"... no more. 35-40% debt ratios are the top end... the guidelines have become very tight... and if your buyer does qualify... make sure they don't make any large purchases just prior to closing, as many lenders are pulling credit just before closing... and if something has changed.... weee doggies, lookout!
4. Buyer is self-employed.
Lenders today are looking for 2 years of tax returns for those who are self employed. And they look at you cross-eyed if your income is declining. Real income will not be used (such as a Waiter who doesn't report all his tips)... they're going to be based on the income shown on your tax return.
5. Borrower has just started being paid by commission only.
In an effort to save money, some companies have switched their long term employees to commission. Lenders will not count commissions unless they can show a history of at least 2 years.
6. Your tax return doesn't match your IRS transcript.
Oh, this is a fun one. Used to be that you submitted a printout of your tax return, and the lenders just "believed" you. Sometimes they would pull a copy of the return for their files, but only after closing. Today, they are pulling transcripts prior to closing, and if they don't match up.. .(in other words, you "doctored" your printout)... that's fraud, and the deal is off, the loan is dead. (And keep in mind that lying on a mortgage application is a federal offense, punishable by time in your local penitentiary!!)
7. You can't get PMI.
Again, PMI (Private Mortgage Insurance) used to be a "given"... no more. There are only two or three PMI companies nationwide, and they are picky, picky, picky. It is possible, today, to be approved for your loan, and yet denied PMI. Your credit needs to be good... you need to have low debt, and the better your down-payment, the happier they are.
8. The condominium has issues.
Lenders are looking closer and closer at condo budgets, reserves and their general financial health. They're concerned about any pending litigation, and upcoming special assessments. Lenders have recently been pushing condo boards to increase their Fidelity bond... enough to cover at least 3 months of residents not paying their assessments. And they're taking a hard look at any owners (other than the developer) who owns more than 10% of the units.
9. You haven't allowed enough time for your loan processing.
All of these tighter guidelines are causing long approval times. The loan papers are often only good for 90 days or so... and if you get to that deadline, and have to rework the papers, that could cause a delay. If you're purchasing a HUD property... a delay could cost you the property entirely. Allow plenty of time for short-sale approvals, and even for standard mortgages. Realtors need to be hands-on with the lender and loan officers.
10. You don't have all the necessary financial paperwork.
Lenders are looking for more documentation than ever. They want to see Bank Statements, verification of large deposits or gifts, earnest money and rent checks. They may ask for letters of explanation on credit inquiries, missed or late payments, income fluctuations. Make sure to have all your ducks in a row.
The one good defensive strategy to insure a smooth closing is to work with a good mortgage banker.
Here are 10 reasons why and to whom:
1. A mortgage banker that is preferably local or understands your local market
2. A mortgage banker that is small enough to have a localized AMC (Appraisal Management Company)
3. A mortgage banker that is experienced and therefore capable of structuring your mortgage loan
4. A mortgage professional that is not on a salary, and therefore they have a vested interest in their own success as opposed to just doing their current job with the sole intent to climb the corporate ladder
5. A mortgage professional that invests in the community at large
6. A mortgage professional that understands the markets and is educated, SELF educated!
7. A mortgage banker that has choices; they don't just sell to one bank so they are more flexible in their underwriting
8. A mortgage professional that is connected to national resources in regard to training, industry news, education and other like professionals
9. A mortgage professional that educates their clients in advance so that the necessary financial paperwork is in order
10.A proactive mortgage professional who thinks of solutions before the problem occurs.
This applies to REO's, foreclosures, and short sales... sure they're good deal, but the financing can be rough. Any broken windows, bad appliances, leaking roof, water damage, obvious mold, health or safety issues, structural problems and of course any liens.
2. Low Appraisal
Appraisal used to be a "rubber stamp"... those days are long gone and best forgotten. Today, appraisers are trying hard to "prove up" your purchase price... and standards have become tougher (good!). If the appraiser can't, in good faith, shore up your purchase price... they're just not gonna. Re-negotiations (post appraisal) are becoming much more common.
3. Borrower has too much debt.
Back in the day, large debt/income ratios were given a "blind eye"... no more. 35-40% debt ratios are the top end... the guidelines have become very tight... and if your buyer does qualify... make sure they don't make any large purchases just prior to closing, as many lenders are pulling credit just before closing... and if something has changed.... weee doggies, lookout!
4. Buyer is self-employed.
Lenders today are looking for 2 years of tax returns for those who are self employed. And they look at you cross-eyed if your income is declining. Real income will not be used (such as a Waiter who doesn't report all his tips)... they're going to be based on the income shown on your tax return.
5. Borrower has just started being paid by commission only.
In an effort to save money, some companies have switched their long term employees to commission. Lenders will not count commissions unless they can show a history of at least 2 years.
6. Your tax return doesn't match your IRS transcript.
Oh, this is a fun one. Used to be that you submitted a printout of your tax return, and the lenders just "believed" you. Sometimes they would pull a copy of the return for their files, but only after closing. Today, they are pulling transcripts prior to closing, and if they don't match up.. .(in other words, you "doctored" your printout)... that's fraud, and the deal is off, the loan is dead. (And keep in mind that lying on a mortgage application is a federal offense, punishable by time in your local penitentiary!!)
7. You can't get PMI.
Again, PMI (Private Mortgage Insurance) used to be a "given"... no more. There are only two or three PMI companies nationwide, and they are picky, picky, picky. It is possible, today, to be approved for your loan, and yet denied PMI. Your credit needs to be good... you need to have low debt, and the better your down-payment, the happier they are.
8. The condominium has issues.
Lenders are looking closer and closer at condo budgets, reserves and their general financial health. They're concerned about any pending litigation, and upcoming special assessments. Lenders have recently been pushing condo boards to increase their Fidelity bond... enough to cover at least 3 months of residents not paying their assessments. And they're taking a hard look at any owners (other than the developer) who owns more than 10% of the units.
9. You haven't allowed enough time for your loan processing.
All of these tighter guidelines are causing long approval times. The loan papers are often only good for 90 days or so... and if you get to that deadline, and have to rework the papers, that could cause a delay. If you're purchasing a HUD property... a delay could cost you the property entirely. Allow plenty of time for short-sale approvals, and even for standard mortgages. Realtors need to be hands-on with the lender and loan officers.
10. You don't have all the necessary financial paperwork.
Lenders are looking for more documentation than ever. They want to see Bank Statements, verification of large deposits or gifts, earnest money and rent checks. They may ask for letters of explanation on credit inquiries, missed or late payments, income fluctuations. Make sure to have all your ducks in a row.
The one good defensive strategy to insure a smooth closing is to work with a good mortgage banker.
Here are 10 reasons why and to whom:
1. A mortgage banker that is preferably local or understands your local market
2. A mortgage banker that is small enough to have a localized AMC (Appraisal Management Company)
3. A mortgage banker that is experienced and therefore capable of structuring your mortgage loan
4. A mortgage professional that is not on a salary, and therefore they have a vested interest in their own success as opposed to just doing their current job with the sole intent to climb the corporate ladder
5. A mortgage professional that invests in the community at large
6. A mortgage professional that understands the markets and is educated, SELF educated!
7. A mortgage banker that has choices; they don't just sell to one bank so they are more flexible in their underwriting
8. A mortgage professional that is connected to national resources in regard to training, industry news, education and other like professionals
9. A mortgage professional that educates their clients in advance so that the necessary financial paperwork is in order
10.A proactive mortgage professional who thinks of solutions before the problem occurs.
Thursday, May 20, 2010
Reality Mortgage Episode: The Appraisal that Baffled the Realtors and Confused the Buyers
This story unfortunately is typical in 2010.The perfect home, the perfect buyer, anxious sellers and friendly realtors.The clients signed contract, were putting 20% down and then they applied for their mortgage. They applied at a bank branch of a well-known bank.An appraisal was ordered and guess what: it came in 100,000 short.The realtors called a very respected local appraiser who told them that the value was clearly there and the other appraisal was off the mark.All my stories have happy endings.Since my AMC (Appraisal management Company) only uses LOCAL appraisers, the deal came to me and I was able to appraise it, commit it and lock the rate at 4.75%!! I can’t tell you how important it is to apply to a local mortgage professional, who has a vested interest in their reputation.I have built my reputation for the past 22 years as a professional who gets the job done right, efficiently, timely and with great rates and service to my clients. Unlike the employee of a local bank branch that is taking mortgage applications now because that is his/her job description until they climb the next rung on the corporate ladder, I am here to stay.
Wednesday, May 12, 2010
Reality Mortgage Episode: The Mortgage Broker Who Couldn’t
This client signed contract in February. It was 9:30 in the evening on April 21, when I got the frantic call. It was from desperate Realtor, with a frantic client on the other line. The client went to a mortgage broker who was referred to them by a family member. He was working on their loan, requesting documents and more documents, but they never got a commitment or even ordered their appraisal. Well, the closing date on the contract was supposed to be in 2 days April 23rd, and this Broker said, I don’t think that you can get a loan. Well I met this couple at 2:00 the next afternoon. It took me 5 days and I was able to get an extension on their closing date, order an appraisal, get a commitment and the closing is scheduled for this Friday!!!
Tuesday, May 11, 2010
Education, the Key to a succesful Home Buying Experience
The second week of May has brought once again record low interest rates. Getting a mortgage in 2010 is different than in prior years. It takes expertise to navigate the mortgage process. The key to a successful and great mortgage experience is EDUCATION. When I meet with a potential client I take the time to educate them on what to expect and I review all of their paperwork so that we can prepare for whatever would come up. Home buying, especially the first time home-buyer is the foundation to the healing of the economy. When someone buys a home, they move, they fix the home and garden, etc. They use the services of contractors, gardeners, and movers. They shop at hardware stores, furniture stores and the vast and sundry retail and discount stores that sell household items. This causes an economic ripple affect that’s stimulates the economy. Buying a home, though, can be real scary especially today with all the negative news. A first time home-buyer may be scared to take themselves this huge step.
There are so many things to consider. That’s why a home-buyer seminar in our area is so crucial. Education is key and valuable information is priceless.
What you will learn at the First Time Home-buyer’s Seminar:
1. Credit. The importance of a good credit score. The components of your credit score and multiple strategies on how you can boost your credit score. A difference between one point on your credit score can cost you on a $400,000 mortgage an additional $4,000 up front and over $90,000 over the life of the loan!!
2. Processes and Procedures: What do you do first? What steps do you need to take when you decide to explore the possibility of purchasing a home? How do you choose a Realtor? A mortgage Professional? Who else do you need to contact?
3. The Mortgage: What is a pre-approval? What is a Pre-qualification? What information do you need to obtain this document? What paperwork do you need to save and how much money should you be prepared to spend on this purchase? All these questions will be answered
4. Budgeting: When you buy a home it is very important to learn how do budget. Doing a simple budget will make it very clear if you are ready to buy.
5. The benefits of home-ownership. Understanding the tax deductibility factor of mortgage interest.
I am please to announce that I am holding another Home Buyers Seminar, to be held on June1, at the Finkelstein Memorial Library, 7:00 pm at 24 Chestnut Street, Spring Valley, NY 10977. Please RSVP 845-354-9700 or azeilingold@fmm.com.
There are so many things to consider. That’s why a home-buyer seminar in our area is so crucial. Education is key and valuable information is priceless.
What you will learn at the First Time Home-buyer’s Seminar:
1. Credit. The importance of a good credit score. The components of your credit score and multiple strategies on how you can boost your credit score. A difference between one point on your credit score can cost you on a $400,000 mortgage an additional $4,000 up front and over $90,000 over the life of the loan!!
2. Processes and Procedures: What do you do first? What steps do you need to take when you decide to explore the possibility of purchasing a home? How do you choose a Realtor? A mortgage Professional? Who else do you need to contact?
3. The Mortgage: What is a pre-approval? What is a Pre-qualification? What information do you need to obtain this document? What paperwork do you need to save and how much money should you be prepared to spend on this purchase? All these questions will be answered
4. Budgeting: When you buy a home it is very important to learn how do budget. Doing a simple budget will make it very clear if you are ready to buy.
5. The benefits of home-ownership. Understanding the tax deductibility factor of mortgage interest.
I am please to announce that I am holding another Home Buyers Seminar, to be held on June1, at the Finkelstein Memorial Library, 7:00 pm at 24 Chestnut Street, Spring Valley, NY 10977. Please RSVP 845-354-9700 or azeilingold@fmm.com.
Friday, April 30, 2010
Announcing First Time Home-Buyers Seminar
The governments tax credit incentive is over today. April 30 is the deadline to have a fully signed contract. This doesn’t mean that the purchasing of homes is over. The first time homebuyer is the foundation to the healing of the economy. When someone buys a home, they move, they fix the home and garden, etc. They use the services of contractors, gardeners, and movers. They shop at hardware stores, furniture stores and the vast and sundry retail and discount stores that sell household items. This causes an economic ripple affect that’s stimulates the economy. Buying a home, though, can be real scary especially today with all the negative news. A first time homebuyer may be scared to take themselves this huge step.
There are so many things to consider. That’s why a homebuyer seminar in our area is so crucial. Education is key and valuable information is priceless.
What you will learn at the First Time Home-buyer’s Seminar:
1. Credit. The importance of a good credit score. The components of your credit score and multiple strategies on how you can boost your credit score. A difference between one point on your credit score can cost you on a $400,000 mortgage an additional $4,000 up front and over $90,000 over the life of the loan!!
2. Processes and Procedures: What do you do first? What steps do you need to take when you decide to explore the possibility of purchasing a home? How do you choose a Realtor? A mortgage Professional? Who else do you need to contact?
3. The Mortgage: What is a pre-approval? What is a Pre-qualification? What information do you need to obtain this document? What paperwork do you need to save and how much money should you be prepared to spend on this purchase? All these questions will be answered
4. Budgeting: When you buy a home it is very important to learn how do budget. Doing a simple budget will make it very clear if you are ready to buy.
5. The benefits of homeownership. Understanding the tax deductibility factor of mortgage interest.
I am please to announce that I am holding two First Time Home Buyers seminars. One on Tuesday evening, May 11 at my office, 7:00pm at 1609 Route 202, Pomona NY 10970 and the second on June1, at the Finkelstein Memorial Library, 7:00 pm at 24 Chestnut Street, Spring Valley, NY 10977. Please RSVP 845-354-9700 or azeilingold@yahoo.com.
There are so many things to consider. That’s why a homebuyer seminar in our area is so crucial. Education is key and valuable information is priceless.
What you will learn at the First Time Home-buyer’s Seminar:
1. Credit. The importance of a good credit score. The components of your credit score and multiple strategies on how you can boost your credit score. A difference between one point on your credit score can cost you on a $400,000 mortgage an additional $4,000 up front and over $90,000 over the life of the loan!!
2. Processes and Procedures: What do you do first? What steps do you need to take when you decide to explore the possibility of purchasing a home? How do you choose a Realtor? A mortgage Professional? Who else do you need to contact?
3. The Mortgage: What is a pre-approval? What is a Pre-qualification? What information do you need to obtain this document? What paperwork do you need to save and how much money should you be prepared to spend on this purchase? All these questions will be answered
4. Budgeting: When you buy a home it is very important to learn how do budget. Doing a simple budget will make it very clear if you are ready to buy.
5. The benefits of homeownership. Understanding the tax deductibility factor of mortgage interest.
I am please to announce that I am holding two First Time Home Buyers seminars. One on Tuesday evening, May 11 at my office, 7:00pm at 1609 Route 202, Pomona NY 10970 and the second on June1, at the Finkelstein Memorial Library, 7:00 pm at 24 Chestnut Street, Spring Valley, NY 10977. Please RSVP 845-354-9700 or azeilingold@yahoo.com.
Tuesday, April 13, 2010
The 11th Hour Closing Miracle! Reality Mortgage Episode
I have mentioned in the past that the 60 day credit expiration date is just NOT enough time to close a mortgage. Well we had a loan that closed literally by the skin of it's teeth!!
Client wanted to do a cash-out for home improvement, new deck, bathroom etc. We ran his credit, told him he could get a loan and then he looked for contractors, tiles, fixtures etc. Being that I run a pro-active office I checked his credit 15 days before the expiration date and guess what: his score had dropped 70 points!! Yikes!! He no longer would be able to get a loan...and so...the race was on!!! Quickly we rushed an appraisal which in HVCC time is 3 days. We submit the file with a few days to spare subject to the appraisal coming in. The underwriter is okay with the file and then, a double whammy! The appraiser says that there is mold in the basement and the roof may have a soft spot! It is Friday. D-Day is Wednesday. We get a contractor, a mold inspector and a roofer in over the weekend. Monday, The underwriter requests a re inspection from the appraiser. We order a rush!! Tuesday, appraiser (HVCC) doesn't go to the house. After hollering at the Appraisal management company, whose employees don't take any personal responsibility, the appraiser goes to the home Wednesday at 2PM. We have to close that day or else!! The appraiser sends us his paperwork at 6 pm. The underwriter cleared the file at 6:15. Docs were done at 6:45pm and we closed 8pm!!
This one really went down to the wire!!
Client wanted to do a cash-out for home improvement, new deck, bathroom etc. We ran his credit, told him he could get a loan and then he looked for contractors, tiles, fixtures etc. Being that I run a pro-active office I checked his credit 15 days before the expiration date and guess what: his score had dropped 70 points!! Yikes!! He no longer would be able to get a loan...and so...the race was on!!! Quickly we rushed an appraisal which in HVCC time is 3 days. We submit the file with a few days to spare subject to the appraisal coming in. The underwriter is okay with the file and then, a double whammy! The appraiser says that there is mold in the basement and the roof may have a soft spot! It is Friday. D-Day is Wednesday. We get a contractor, a mold inspector and a roofer in over the weekend. Monday, The underwriter requests a re inspection from the appraiser. We order a rush!! Tuesday, appraiser (HVCC) doesn't go to the house. After hollering at the Appraisal management company, whose employees don't take any personal responsibility, the appraiser goes to the home Wednesday at 2PM. We have to close that day or else!! The appraiser sends us his paperwork at 6 pm. The underwriter cleared the file at 6:15. Docs were done at 6:45pm and we closed 8pm!!
This one really went down to the wire!!
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