r.e.a.l
TRANSCRIPT
R.E.A.L. TrainingR.E.A.L. Training
Real Estate Agent Loan Training
Purpose of ClassPurpose of Class
Changing Times – Credit standards tighter– Difficulties with Underwriting
Education is Vital for Clients– Understand basic loan concepts– Learn questions to ask– Grasp value of enhanced team concept
Crazy StatisticsCrazy Statistics
During Boom (2002- 2006)
2005 ARM’s accounted for 31% of all loans originated
# of Interest Only loans shot up from 1.5% in 2001 to 31% in 2004
Mortgage Brokers originated 70% of Sub-prime loans
Sub-prime loans totaled 26% of the loans in 2005
After Boom (2007-Present)
Conventional loans account for 61% of the originations in 2007
Sub-prime loans dropped by 17% from 2006 to 2007
Sub-prime ARM defaults are 20x higher than fixed rate prime
Sub-prime MBS issuance down from $465B in ’05 to $2B YTD ‘08
Loan Options Loan Options
Conventional (Fannie Mae, Freddie Mac)– Loan Limits, Programs
Jumbo, ARM’s– Caps, Margin, Index
FHA, HUD $100, VA– DTI, Down Payment, Credit Score, Gifts
General Consumer Profiles:General Consumer Profiles:Where do they fit?Where do they fit?
FTHB – First Time Home Buyers
Move-Up Buyers
Self-Employed Borrowers
Working Professionals
Pre-Qualification vs. Pre-ApprovalPre-Qualification vs. Pre-Approval
Directly or indirectly provide potential buyer with a few lender options.– For Example:
Have you spoken with a lender regarding the price range of home you can afford?
Do you know your credit qualifications?
These questions are very important in starting the process.
Prior to “Credit Crisis and Market Crunch” not as important.
Pre-Qualification Pre-Qualification
Lender Covers Basics – Income (Salaried, W-2, Hourly, Bonus, Commission)– Debts (Car Loans, Student Loans, CC, etc.)– Assets (Checking, Savings, MMA’s, etc.)– Credit
late payments, high credit balances, deferred loans
What you get?– Rough estimate of house price range and payment– No LSR
(Difficult to get approval without LSR on short sales and REO properties)
Pre-ApprovalPre-Approval
Three C’s (Collateral, Credit Reputation, and Capacity)– Collateral
House Value (appraisal), Down Payment, Property Type– Capacity
Income, Debt, Assets/Cash Reserves are to be verified– Credit Reputation
Order Credit Report (tri-merge for Equifax, Experian, TransUnion)
AUS– Automated Underwriting System – used to give rating to file for
approval processes. What you get?
– Fully executed LSR– Actual amount of approval for purchase price
Income vs. DebtIncome vs. Debt
Income– Payment Stream
Hourly Bi-weekly Salary W-2 Self-Employed Bonus/Commission/OT
– Monthly Gross Amount you make before
taxes
Debt– Three Kinds
Mortgage– Loan on current
residence– HELOC/ Term 2nd
Installment– Car Loans– Student Loans
Revolving– Credit Cards
Other
DTI Ratios DTI Ratios (Debt to Income)(Debt to Income)
Standard Ratios are 28/36 (Conventional Financing)
– 28 = Front end ratio (Housing expense)– 36 = Back end ratio (Total monthly expenses)
Calculating Ratios– Total Debt divided by Monthly Gross Income
Example: $25 C/C, $325 I, $125 C/C, proposed mortgage $1375 / $5500 Income) = 33.6% DTI back end ratio.
FHA Ratios = 31/43 (Front End/Back End)
Assets and Down PaymentAssets and Down Payment
Verify Checking/Savings/MMA – Proves DP and CC requirement will be met– Seasoning Requirements
Minimum Down Payment in this market– 3% with FHA (min. cash contribution)
Gift Funds– No more Ameridream and Nehemiah– Can receive gifts from…
Non-profit organizations (Church, Charity, etc.) Family and Relatives Employer
Credit MattersCredit Matters
Make payments on time Balance on Credit Cards should not exceed 30-35% of
available balance Pay-off debt – don’t move it around Don’t close unused cards and don’t open new cards not needed # of Inquiries (too many…too often) Scoring Model
35% = payment history 30% = amount you owe 15% = length of credit history 10% = type of credit (i.e. installment, mortgage, revolving) 10% = new credit recently obtained
Risk Based Pricing and RatesRisk Based Pricing and Rates
FNMA and FHLMC – introduced this model in late April 2008.– Basics
Negatives (High LTV, Low Credit Score) Positives (Low LTV, High Credit Score)
Rates– Constantly changing– Rate Shoppers (request GFE within the same hour or so
from all lenders you are shopping)– Variable factors now with RBP.
Things to ConsiderThings to Consider
Timeline– Pre-Qualification (5-10 Minutes)– Pre-Approval (0-1 Days)– Application and Closing ( 10-60 Days)
Underwriting– Goal: Present a clean file to the UW’s– Tighter standards = strange requests.
What Should I Know?What Should I Know?
Five Questions to Ask Potential Clients– 1) What do you do for a living? How long have you
been __________?– 2) Are you renting or do you need to sell your current
home before you move? How long have you lived there?
– 3) Most loan programs require a Down Payment on the purchase. What were you considering?
– 4) As far as you know, how’s your credit?– 5) What is your time frame?
What should I expect from my What should I expect from my Mortgage Consultant?Mortgage Consultant?
CommunicationProfessionalismTimelinessHonestyIntegrityWork for you and your client
References and ResourcesReferences and Resources
www.emurriettalending.blogspot.com
http://epic.org/privacy/creditscoring/
http://www.freddiemac.com/
http://www.mortgageratesreport.com/