For this issue’s Ask a Lender, Jeff Baker, a vice president of mortgage lending with Guaranteed Rate, answers questions posed by Chicagoland Realtors.
In today’s world, rules and regulations have proliferated through the mortgage lending industry. The last couple of years have seen unprecedented change, as the business recovers from the hangover of easy money and lenient underwriting standards. For Realtors, it has become more important than ever to make sure buyers know and understand the new rules of residential lending.
Where can I turn for reliable information about buyer qualifications? With lending rules and guidelines still in a constant state of flux, it is challenging for even the most dedicated loan officer to keep on top of it all. Fortunately, gone are the days where you have to consider whether your buyer’s pre-approval is worth the cocktail napkin it was written on. The market has forced the weakest out of the industry, and recently enacted legislation (the S.A.F.E. Act) that ensures today’s loan officers are educated, properly licensed and monitored. Lender and loan officers licensed by this act now have a National Mortgage Licensing System (NMLS) ID and can be investigated at nmlsconsumeraccess.org. You should always check the references of a buyer’s lender if you are not familiar with them, and it never hurts to have a fallback lender you can count on and trust.
What can I discuss with my buyer about financing? There really are no rules that prevent you from discussing mortgages with a buyer. Remember that your buyer’s satisfaction will hinge on the advice you provide, and usually the best advice when it comes to mortgages is to seek out a professional. You are better off guiding them to the right questions to ask their mortgage professional, rather than providing outdated answers or misleading them about the advantages of one product over another.
Are buyers that choose FHA financing less qualified or less likely to close? There seems to be a lingering stigma that FHA loans and the borrowers that choose them are underqualified and tough to get to the closing table. If you are working with a reputable FHA lender, this could not be further from the truth. In today’s market there are many scenarios in which the process to close an FHA loan is easier than conventional financing. With FHA loans now accounting for roughly 30 percent of purchase financing, advising a seller or buyer against it could cost them real dollars. FHA rates are less sensitive to credit scores and down payments, allowing a buyer to see a significant savings over conventional financing payments. For a single-family residence or townhome, the only difference the seller is likely to see is a few additional signatures on contract disclosures. Getting a condominium project FHA-approved may require some additional documentation over a conventional approval; however, an FHA eligible project opens the sale to thousands of additional buyers. HUD now permits approved lenders to complete a project review and approval in-house, with lenders often able to complete the review process within a couple weeks. Your assistance in coordinating the review can even generate additional leads in the building.
How do I get my project approved for FHA financing? The easiest way is to contact your preferred lender and ask if they are a Direct Endorsement Lender for FHA. If this is the case, they can provide you with a list of documentation and requirements they need to review and approve the project. Once a project is FHA-approved, it is published to HUD’s approved condominium list for two years and eligible for financing with any FHA lender. For full details of FHA’s condominium project approval process, see HUD Mortgagee Letter 2009-19.