Episode 8: HOW DO MORTGAGES WORK?
We have our first guest joining us on the podcast today to explain how mortgages work. Welcome Reid! Reid Clark is with Silverton Mortgage. Disclosures: Silverton Mortgage is a preferred lending partner of The Terry Burger Team. Reid is accomplished in his line of work and does a brilliant job working with our clients. We asked Reid to join in on our podcast today to answer mortgage related questions for our audience. It’s going to be very informative for all our home buyers.
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QUESTIONS AND ANSWERS with REID from Silverton Mortgage:
Q: Why would it be important to get pre approved for a mortgage…either before selling your home or before purchasing a property?
A: There may be a reason that would prohibit the client from being approved for financing that they need to know up front. As a realtor, you don’t want to drive your client around for weeks, write a contract only to learn they can’t get financing. That is a waste of time and very emotional for all parties.
No seller is going to entertain an offer without a good, strong pre approval letter. You are going to write an offer and the first question will be I need to make sure I can get financing.
Q: What is involved in a pre approval letter? What needs to happen to issue a pre approval letter?
A: There are several different levels to a pre approval letter. Much depends on a client and their level of engagement in the process.
The initial part is: If I have a realtor that calls and says “I have a client that needs an offer written this afternoon” What my team does at that point is…
Talk to the client to get enough information to pull their credit:
We ask questions like…
Where are you employed?
How long have you been employed there?
What is your annual income?
Where is your down payment money coming from?
Things we looking at:
If the client is a credit qualifier
If the debt to income ratio appears to work
We don’t stop there, we immediately send a list of other documents needed to the client – at that point we will issue a pre approval letter. We also try to get the client to go ahead and send in their documentation, let us verify it, and get it underwritten.
PRE APPROVAL VS PRE UNDERWRITTEN
Pre approval is verbally getting information from a buyer. It is a view from thirty thousand feet that a deal will be okay. If a client is self employed pre approval will not be verified until tax returns are reviewed.
Pre underwritten is treating the file like it is under contract. We gather all the information and submit to underwriting for approval. A letter will be given to the client that states this is a fully underwriting letter, not a pre approval letter and at that time their letter will be moved to the top of the offer stack.
Essentially it looks better – the odds are in your favor and you become more credible.
Q: How long does the underwriting process take?
A: If you have a diligent client, the process can happen in as little as 5-7 business days. Once the file gets to the underwriter, it is processed in 48 hours.
Q: Can sellers plan ahead to be underwritten for a loan before listing their house?
A: Yes! This is the phenomenal thing! This way the seller knows there will be no problems with their next loan. This also allows time to position themselves; to make a very attractive offer on their new house.
TIME FRAME for letter:
Underwriting is good for 60 days, but can be extended with documentation.
The people involved in helping you get your loan approved:
– You- sends in the documentation for a loan and makes loan application
– Assistant- Reviews new loan applications
– Processor- collects/verifies applicant’s personal information and financial records
– Loan Officer- Advises, recommends products to buyer/applicant
– Underwriter- analyzes the loan, evaluates the risk, issues a clear to close, letter, makes sure the loan is compliant with government guidelines.
Q: What do Underwriters do?
A: Underwriters determine the risk of offering a mortgage loan to a borrower. Our team of underwriters reviews all aspects of the loan. If you are self employed, you will have to supply a lot more documentation. Underwriters must know all government laws and guidelines. The underwriter is behind the scenes but is an important aspect of mortgage approvals. It is very rare that a loan does not close due to underwriting.
They must have the following approval:
– Fanny Mae
Q: Why do underwriters catch so much slack?
A: Number one complaint: Sending in the same document several different times. WHY?
This happens when the client has not sent exactly what the underwriter has asked for. They may have sent a portion of their bank statement, a transaction, when the underwriter needs the entire bank statement. This may also happen because the Lender was not specific in their request for documentation.
The public should understand that underwriters are working with 18+ cases at any one given time.
Financial contingencies can be extended.
WHEN THE PRE APPROVAL LETTER HAS SPECIFICS
Pre approval letter lists: purchase address – this can be revised.
Pre approval letter lists: up to the amount of – this can be revised.
NOTE: A loan offer that is responsive can make changes within as early as 30 minutes of receiving a text message.
DISCLOSURE PROCESS – GOVERNMENT REGULATIONS
TILA-RESPA Integrated Disclosure Rule
– Combining two guidelines into one
– Client has to have initial loan estimate in 3 days from making the application.
– The preliminary closing disclosure, the client has to receive it at least 3 days prior to closing. Usually we have collaborated with the attorney and the numbers on the preliminary are very close to being accurate. I call the client, let them know it is coming, they e-sign the document, and acknowledge they received it 3 days prior to closing.
– The final closing disclosure is at the closing table and the numbers should match.
Q: What would cause a closing to be delayed?
A: Documentation missing or repairs are being made.
Note: Even then, the preliminary will still be sent 3 days prior to closing.
Q: What do you see as the primary reason to delay closing?
A: At our office we have a slogan…“Time lost in the beginning cannot be regained in the end”
If a client waits 2-3 days to send in documentation in the beginning – we can’t get those 2-3 days back in the end. It’s gone. When everybody (the agent, client etc..) is getting frustrated near the end, but isn’t remembering back at day 1 when the client waited those 3 days to send end their documentation.
This is why there is a contract in place. It outlines specifics for: appraisal deadlines, financial contingencies. It is of vital importance that buyers and sellers get their paperwork to their lender as soon as possible.
Binding Contract to Closing = 30 days, unless specified as USDA, GA Dream etc.
Q: Is it a good rule of practice for the realtor to contact the lender to verify the closing time frame?
A: If you need to request a closing date less than 30 days, ALWAYS call the lender.
Homeowners buy and sell a house every five to ten years and we know the ins and outs, tips and tricks to get things done. The industry is heavily regulated and we can walk through this process with you.
If you have any questions and you would like to reach out to Reid click here or email him at ReidClark@silvertonmortgage.com or call (770) 298-3113. Silverton Mortgage has been in Atlanta since 1998. Silverton has grown from a one man shop to one of the nation’s fastest growing financial companies, all while maintaining the entire loan process in-house.
Big shout out to Janice Overbeck for letting us use her fine office today.
Big Thanks to Reid for joining us today.
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And THAT’S A WRAP!