Houston Heritage - Diego Jaramillo, Realtor®

Buyers are often misinformed or unaware of the difference between being prequalified and being preapproved.  As the mortgage industry changes, you hear about new lending and appraisal practices that add to the confusion.  Credit score requirements and interest rates have seem to be on the rise which of course seems to make things more confusing. 

Prequalified vs Preapproved

1. Prequalified – review of credit, income and assets
2. Preapproval – run through Automated Underwriting and review of credit, income and assets.

Is it a real approval?

Is the prequalification or preapproval worth the paper it’s written on and what should my agent check?  We call the loan officer to confirm a few things including:

1. Are we able to reach him/her in a timely manner?
2. What is there opinion of the quality of the applicant?
3. Did they actually review the income, assets and credit?
4. Get a feel for the situation….never assume!

FHA – Easiest to qualify

1. Credit – 620 Minimum
2. Income – higher DTI’s (Debt to Income)
3. Assets – all money can come from gift
4. MI (Mortgage Insurance) – automatic if approved

Conventional – If less that 20% down, most difficult to qualify for

1. Mortgage insurance is required if less than 20% down payment is made.
2. Credit score must be 680+
3. DTI must be 41% or lower
4. 2 Months reserves
5. Tradeline requirements (4 trades 12-24 month review on credit report)
6. Appraisal torn to shreds by MI Underwriting
7. All these requirements go away if you put 20% down payment

Appraisals

1. Home Valuation Code of Conduct (HVCC)
   1. Became effective May 1st, 2009
   2. Loan originators have no contact or control of their appraisals anymore
   3. Large banks having issues – no control, no flexibility
   4. Who we protect our listings:
      • We remove from showing service
      • Meet the appraiser and present comparables
      • We advocate for the seller
   5. FHA – No issues in changes but watch out for safety issues
      • Missing appliances, no flooring, badly ripped carpet, exposed wires, security bars, badly peeling paint (is it lead based paint?), roof damaged or end of life, structural concerns, badly rotted wood.
      • Is it liveable?
      • Red Flag for FHA – “Fixer Upper”

HERA

1. HERA stands for Housing and Economic Recovery Act
2. Became effective July 30, 2009.
3. Upfront fees cannot be collected until the disclosures are received.
4. After contract we must wait 8 days prior to closing after initial disclosures.
5. If rate changes by .125% or more, must re-disclose and wait 3 days to close.
6. No Big Deal if you are working with a professional!

A special thanks to:

Roger Ryman
Certifed Mortgage Planner
Prime Lending
550 Post Oak Blvd Ste. 350
Houston, TX  77027
713-446-9666 Cell
rryman@primelending.com

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Sincerely,

Diego E. Jaramillo
Realtor, ABR, e-Pro
Keller Williams Houston Metropolitan
Cell: 832-282-2069 
Online at www.HoustonHeritage.com 

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