4 Tips To Present a Stronger Mortgage Application

As underwriting guidelines for lenders become more stringent, it becomes clearer what a good mortgage application looks like. As prospective home buyers begin their search, there are a few things they can do to help get their loans approved (and with the best possible terms), and, at the same time, lessen some of the stress that goes along with the mortgage process.



1.) Income Documents


Most lenders want to see a full month of pay stubs and two year’s complete Federal Tax Returns. Assembling them ahead of time and holding on to every pay stub you get is a good idea that will save you time later. Moreover, looking at those documents and being prepared to explain any deductions that show up is crucial. Child support, alimony, garnishments, and Unreimbursed Employee Expense are often crippling factors that, if explained and dealt with upfront, can make your loan approval smoother.


2.) Asset Documents


Most lenders will scour your bank accounts for the two months prior to going to contract. They are looking for large deposits because they can signal a new loan that wouldn’t show up on your credit report yet. What’s a “large deposit”? Typically, any deposit that would represent more than your representative income. If you make $5000 a month, after taxes you likely net $3800 (or $1900 a bi-weekly pay period); therefore, deposits in excess of that will need to be explained and documented. Sold a motorcycle? Have a paid receipt and motor vehicle documents in place. Got a gift? You will need a Gift Affidavit, proof of the donor’s ability, and transfer of the funds. Any and all questions should be discussed with your loan officer.


3.) Credit Score Optimization


Do your best to curtail your use of credit as it relates to your available credit lines. Target a cap of 30% of usage of available lines to get the best scores. Do NOT cancel credit card, as that will lower your amount of available credit, thereby raising your percentage of usage. That will damage your score. Do NOT shop for a car, explore life insurance, look to get a new credit card, or increase the limits on your current cards because the running of your credit by people in other industries will also lower your credit score. Most importantly, don’t do anything that will require having your credit run without first discussing it with a mortgage professional who knows the impact it could have.


4.) Appraisal Concerns


It’s unlikely you will make an offer to purchase without checking out comparable home sales. It’s also likely you received that type of data from the real estate agent you are working with. Make sure your agent prepares the same information for the appraiser. Data about similar sales, similar homes currently available, and maybe even cost estimates for any repairs or improvements anticipated can preempt future problems with appraised values and conditions.

Overall, it is recommended that you hold onto copies of everything financial, think before allowing your credit to be run, and you work with an agent and loan officer who can use their experience to put your loan application in its best possible light…as soon as you start thinking about buying a home.  Call Lisa Bear


Compliments of KM BLOG

Locking in on Interest Rates.... Don't fall victim to lender games. Three Steps

Locking the rate on a mortgage means obtaining a lender's commitment that it will make the specified loan at the specified rate, points and other fees within a specified future period. It used to be quite easy. In 2005, I guided a friend through the entire process at an online site and we locked his refinance within an hour.



No more. My e-mail register is clogged with complaints about the rate-locking process. Most complaints arise out of lock delays -- the borrower requests a lock today but it isn't provided until days or weeks later. Such delays involve risk to the borrower that the market rate will increase, or that the lender will claim that it has.


Delays are more frequent today than before the financial crisis, and the delay periods are longer. Before the crisis, income and asset documentation as well as appraisal requirements were often waived, facilitating the locking process. There are no waivers today.


Underwriting requirements also tightened significantly after the crisis. More time is spent in assuring that the requirements are met, and more loans are being rejected. Lenders don't want to incur the costs of locking loans that they subsequently are forced to reject. To minimize the likelihood of this happening, they require more information before they lock, which takes time. In addition, lenders impose more conditions that must be satisfied for a lock to be valid.


For example, the value of the property has a major bearing on the terms of a loan. Before the crisis, they would lock based on the borrower's or broker's estimate of value if it was a refinance, or the sale price if it was a purchase, confident that in the great majority of cases the appraisal would confirm the value. Appraisals in buoyant markets generally did.


Today, lenders cannot have this confidence because appraisals are very conservative, and they also take longer. So lenders do one of two things. Either they require an appraisal before they lock, or they lock without it but require that the appraisal, when it materializes, show a value above some level for the lock to remain valid.

The problem is that borrowers don't know beforehand what a lender will want to check before locking, or how long it will take. Policies differ between lenders, and at any one lender the rules may differ for different categories of customers.

For example, a lender may not require that a borrower reporting W-2 income document it before they will lock, but they will almost always require it for a self-employed borrower for whom documentation is more likely to be problematic.


The following may or may not be required before a borrower can lock: application completed and submitted; required disclosures such as Truth in Lending signed and returned; required income documentation provided; required asset documentation provided; required information about homeowners insurance, homeowners association and existing lender on a refinance, provided; appraisal completed; and title report completed indicating no title issues.


A lender may lock without a particular requirement being fulfilled but make that requirement a condition for the lock being retained. Hence, the list of conditions for retaining a lock is the same as the list of requirements to lock enumerated above.


Lenders are not very good at disclosing their requirements to lock, and there are no mandatory disclosures. The problem is compounded by an ambiguity in the Good Faith Estimate (GFE), which is a required disclosure of rates, fees and other loan characteristics that must be provided to the borrower within three business days of the submission of a loan application.


At the time the GFE is issued, the loan may or may not be locked. If it is not locked, the rates and fees shown on the GFE are of value only as a history of what might have been. But not all borrowers understand this because nowhere on the GFE does it say: "The rate on your loan is not locked."

Instead of saying that, the GFE states that "the interest rate for this GFE is available through (a specified date)," and if the loan is not locked the lender indicates that by entering the date the GFE was prepared rather than some future date. It is understandable why a borrower may not grasp this roundabout way of stating that a loan is not locked.

What is a borrower to do?

Step one is to get the lender to clarify its ground rules for locking, preferably in writing They should provide a set of general rules upfront, which might become more precise after you have submitted an application.

Step two is to take charge. All of the requirements to lock listed above except the appraisal and title report apply to documents that you provide. If the lender is willing to make the two exceptions conditions for retaining the lock rather than requirements to lock, which most of them will, you have control over when you can lock. Alert borrowers will submit the required documentation with the application.

Step three is to protect yourself. The prices you lock are those quoted by your lender after you have been cleared to lock, not the prices quoted to you when you selected him. The initial price quotes probably compared favorably to the prices quoted by other lenders, but the lock prices may be a different story. If you have no way to verify that they are competitive, given your investment in the transaction, your lender may be tempted to game you.


The lock price should be the same as the price the lender would quote to your twin brother initiating the exact same deal on the lock day. If you can price your deal on the lender's website, you can't be gamed.


The writer is professor of finance emeritus at the Wharton School of the University of Pennsylvania.

A cow owned by a friend was recently named grand champion of the European National Holstein Show, the biggest show in Europe.

City native has top cow


A 5-year-old Holstein named Jolie was named the grand champion of the European National Holstein Show, the biggest show held in Europe. The cow is owned by Watertown native Larry Zubke, of Schweinningen, Germany.

When Larry Zubke was growing up on his parent's farm and milking cows for his neighbors in rural Watertown, he was learning exactly what makes a quality cow. Those lessons paid off. A cow he owns was recently named grand champion of the European National Holstein Show, the biggest show in Europe.

Zubke, of Schweinningen, Germany, formerly of Water-town, is a 1981 graduate of Watertown High School and the son of Barbara and the late LeRoy Zubke, of Watertown. He attended the University of Wisconsin-River Falls for three years.

Many may know Zubke as the original owner and builder of the local restaurant Settler's Bay. He moved to Germany nine years ago in 2001 after selling the restaurant to be closer to his son. During that time he started his business Holstein Store, where he buys and sells embryos and bull semen from around the world. Three years ago while at a dairy show in Switzerland he came across a 2-year-old cow named Castel James Jolie who is known as “Jolie.”

“I stumbled across this cow in Switzerland that looked like the nicest cow I had ever seen. Now she's 5 years old and she's never been beat,” Zubke said. “She's a legend in Switzerland and around the world.”

Jolie won the European National Show that was hosted this year in Cremona, Italy. It's known as the biggest Holstein show in Europe with participants from over 15 countries attending the event and over 5,000 people in attendance. Each country can bring 15 black and white Holsteins and 15 red and white Holsteins. Jolie is raised on a farm in Switzerland, so she was one of 14 cows of different ages representing Switzerland. Jolie was chosen to represent Switzerland after being named the champion of Switzerland earlier this year.

A lot of people who came from Wisconsin to watch the event this year compared it to going to the Olympics,” Zubke said. “Each country is waving their flag. When Jolie won, the Swiss National Anthem was played. The whole stadium was rocking and clapping.”

Zubke said although he lives in Germany, Jolie lives in the mountains of Switzerland on the farm where she was born. He owns about 25 cows throughout Europe. The farm Jolie lives on is run by a family who milks a total of about 40 cows in a six-cow parlor. The farmers make a special type of cheese and the cows are only fed hay and sugar beets and are on a rotational grazing system. They are given no corn whatsoever. Jolie produces an average of 144 pounds of milk a day. She's on her fourth calf and calved only six weeks before the show.

“Some of the best breeders in the United States have told me they believe she may be the best cow in the world,” Zubke said. “She is contracted for over 200 embryos and after this show the e-mails have been coming in like crazy.”

Jolie was well known prior to her recent award. In her first show in Switzerland she was named grand champion and best udder at 2 years old. Zubke visits Jolie about twice a month. The son of the owner of the farm is the person who leads her through the show ring at the big events.

Zubke said his success in the dairy industry stems from his childhood and his time spent with his neighbors Jim and Bob Weston of Westcrest Farms in rural Watertown. Today the Westons own a herd of Herefords that are well known as a top herd throughout the state.

“They really taught me what to look for to have the best quality animals. Everything about dairy character,” he said. Zubke said he started his business because at the time that he moved to Germany it was difficult for an American to find a job. He always enjoyed the hobby of the dairy industry and decided to make it into his own business. He runs his business through the Internet with his Web site:
http://www.holsteinstore.com/

This is a question anyone thinking about selling must ask.

This is a question anyone thinking about selling must ask. Should they sell now or should they wait for the spring? Most years that would be an interesting question. There is a belief that many buyers come out in the spring and, with that increase in demand for housing, prices may appreciate. This year is unlike any year in recent memory. Most experts believe there will be continuing depreciation of home values throughout the next 18 months.



As we posted on recently, there may be a window of opportunity throughout the rest of 2010 as the banks try to straighten out the paperwork on thousands of foreclosures. Once that paperwork is corrected, the flow of distressed properties coming to the market at discounted prices will begin again.


This was mentioned in the latest Home Price Expectation Survey. Robert Shiller, MacroMarkets co-founder and chief economist said this:


“Over the past month, the average projection for 2010 nationwide home price performance improved slightly among our experts, but for each year thereafter it deteriorated. One plausible explanation for this month’s more negative overall sentiment is recent news concerning foreclosure processing questions and the related possibility of extending the supply pipeline.”


Other experts are also reporting that prices will soften next year


In October’s RPX Monthly Housing Market Report, CEO Michael Feder commented:


“We are at a flex point in housing valuation. With record supply, already paltry demand and systemic threats to a possible correction, we remain terribly concerned about forward home prices.”


The very next day, in a special release, Clear Capital reported a “sudden and dramatic” drop in U.S. home prices:


Most recent data shows a two-month 5.9% price decline representing a magnitude and speed of decline not seen since March 2009; similar declines for September and October expected to appear in other industry indices in coming months.

Bottom Line

If you plan to sell within the next year, you shouldn’t wait for the spring market. Price the home at a compelling price to make sure it sells in the next sixty days.

Election Day is about privilege and duty

Tuesday is Election Day across the nation -- a central exercise in democracy in which the people decide who will lead, legislate and litigate.


Government is a creature of the people. The elected officials who run it on all levels -- local, state and federal -- have that authority only because the people have given it to them. And it is the people who can enforce the ultimate in term-limiting power -- through the basic act of voting.


You play a crucial role in deciding what kind of government you get. And polls and speculation aside, the outcomes won't be decided until all the votes are counted. Make sure yours is one of them.

Vote for the candidates of your choice -- but vote. It's important.

Voting made easy --- http://www.wisconsinvote.org/faq.cfm

Mortgage Interest Rate Tracker -- We are at 4.00% again today

Perhaps for the first time in American real estate history, you must buy now and you must sell now.

If you know a great real estate professional, you might be questioning them right now. They may tell a friend of yours in the afternoon that this is a great time to buy a home and in the evening tell another friend that they have to lower their price in order to sell their home.

Wait a minute. 

How can it be a great time to buy if prices are falling? Is the real estate agent just saying this to make a sale? Actually, the agent is 100% correct.   Perhaps for the first time in American real estate history, you must buy now and you must sell now. How can this be? Because what is important to the buyer is different than what is important to the seller. Let us explain.


The most important thing to the seller: PRICE

Every seller is most concerned with trying to get the best price possible for their home. In order to do that, they must sell now. Banks repossessed the highest number of foreclosed homes in history last month. These houses will come to market at dramatically discounted prices. This is the main reason analysts are calling for another dip in prices over the next eighteen months. The best advice a seller can receive is to sell their home now before these foreclosures come to market.

The most important thing to the buyer: COST

Price plays a part in the buyer’s decision. However, the most important thing to most buyers is the cost – the mortgage payment they must pay every month. That payment is determined by the price of the home AND THE INTEREST RATE ON THE MORTGAGE. Rates are artificial low because of government intervention. That will not last forever.

The National Association of Realtors (NAR) has projected that rates will rise over the next seven quarters. What will that do to the cost? Here are NAR’s projections and what impact it will have on a $100,000 mortgage:


As we can see, the interest rate has a major impact on the COST of the home. Even if prices continue to fall, the cost may not go down if interest increase.

Bottom Line

Your real estate agent is trying to give the best advice they can to every family they work with – even if that advice seems to be counter intuitive.