Are you getting a mortgage in 2012? Our guest post is from Tamie Platts, Certified Mortgage Planning Specialists. She shares some helpful advice on how to navigate through the mortgage process given the current economic environment and increased government regulation of the industry.
How to Successfully Get a Mortgage in 2012 by Tamie Platts, CMPS®
Getting a mortgage in 2012 is a little more complicated than it has been in the past due to the challenging economy and increased government regulation of the mortgage industry. Here are a few of the challenges that we will tackle together as we navigate the 2012 mortgage process.
New Good Faith Estimate
The US government has created a new version of the disclosure form known as the Good Faith Estimate (GFE). The old GFE itemized all your closing costs and illustrated your “cash-to-close” – the amount of cash you would need to bring to the closing if you are buying a home, or the net proceeds you would receive at the closing from a cash-out refinance. The new GFE lumps in your closing costs under certain categories instead of itemizing them, and does not illustrate your cash-to-close. Also, if the seller is paying closing costs or points on your behalf, this is not reflected on the new GFE. In other words, it will look as though you are paying these fees even though the seller is paying them.
New Appraisal Guidelines
Most mortgage loans these days are either insured by the Federal Housing Administration (FHA) or sold to Fannie Mae or Freddie Mac. This means that mortgage banks and brokers need to follow the rules set by Fannie, Freddie, and the FHA. In 2009, Fannie and Freddie adopted new rules surrounding the home appraisal process. In 2012, the FHA followed suit and implemented many of the same guidelines. What this means for you is that the appraisal process is going to be more stringent and inflexible, costly, and time consuming than it has been in the past.
In fact, many appraisals now go through multiple layers of screening and are handled by Appraisal Management Companies, resulting in higher costs and fees. Also, loan originators are prohibited in most cases from ordering appraisals or communicating directly with appraisers. Even so, it is important to keep in mind that an appraisal is simply somebody’s opinion of what your home would sell for in today’s market. Appraisers are required to consider the selling prices of short sales and foreclosures in the local market when determining the current market value of your home. This may result in a value estimate that may not agree with your own opinion of what your home may be worth. You and I are entitled to disagree with the appraiser and have a different opinion, but the lending guidelines that we need to follow require us to use the appraiser’s opinion when calculating your loan amount and strategy.
New Disclosure Rules
The US Congress has enacted some new laws, and the Federal Reserve Board has issued some new guidelines that could delay the loan process. For example, if the APR on your loan changes by more than 0.125% before the closing, the lender needs to issue new disclosure forms and give you time to review the new forms.
Here are just a few examples of what could cause the APR to change:
You decide to lock in your interest rate or get a rate lock extension
You decide to reduce your loan amount
You are getting an adjustable rate mortgage and the index value changes
Your credit score changes before closing, resulting in a higher rate or higher fees
You decide to pay more or less points than what you initially requested
Higher Credit Score Guidelines
As stated above, most mortgage loans these days are either insured by the Federal Housing Administration (FHA) or sold to Fannie Mae or Freddie Mac. This means that mortgage banks and brokers need to follow the rules set by Fannie, Freddie, and the FHA – all of whom have issued stricter credit scoring guidelines. I know it sounds ridiculous, but if your credit score is less than 740 (gasp!) you may get hit with higher fees if your loan is being sold to Fannie or Freddie! Most of my clients are responsible individuals who take pride in paying their bills on time and maintaining a good credit rating. However, many Americans have recently been hit with unexpected financial difficulties due to the challenging economy.
In fact, many credit card companies have reduced the credit limits on accounts that have never even been late. This is causing credit scores to go down across the board for people who have never been late on any payments in their life! If you fall into this category, or if you have some challenges with your credit score, you may get hit with higher costs when it comes to getting a mortgage. As your Certified Mortgage Planning Specialist, I will work with you to evaluate your options and point out strategies and ideas for increasing your credit score and getting a great deal on your mortgage.
Please contact me for more information on any of these items and how they may impact your situation. As always, I am here for you every step of the way. Together, we will make getting a mortgage in 2012 a very rewarding experience for you and your family!
As a Senior Loan Officer with 10 years experience and a Certified Mortgage Planning Specialist since February 2006, my goal is to help people achieve their goal of home ownership while integrating their mortgage into a financial plan. Whether you are buying your first home, vacation home or an investment property the structure of your loan is an important part of your overall financial success. My experience and advanced training as a CMPS provides my clients with advanced insight into their best mortgage options.
Did you know that less than 2% of the mortgage lenders and brokers in the U.S. are CMPS certified? By working with a CMPS professional in you will have the opportunity of working with the “cream of the crop” among all the mortgage professionals in the country!