PHOENIX HOME BUYER FOUNDATION PROGRAM

Helping families rebuild the foundation after suffering from a foreclosure or short sale.

What is Phoenix Home Buyer Foundation Program?

Phoenix Home Buyer Foundation Program was founded on the idea to assist people in purchasing a home again and help stabilize home prices in the Phoenix community at the same time.  Phoenix suffered significant losses to property values and home equity.  Bringing qualified homebuyers back into the Phoenix real estate market will enable the values to steady. The Foundation Program helps people with a previous foreclosure or short sale interested in purchasing, do so, in the shortest amount of time required.   

How does the program work?

We will analyze your credit and develop a strategic program to put you in the best position to purchase a home in the least amount of time.  We will help you in determining your first eligible date of purchase.  We will also review your debts and develop a financial budget to help keep you on track. 

What is the cost?

There is no cost for this program.

How will I know when I can purchase a home?

Our program provides a personal countdown clock that you will always have access so you will know the exact amount of time before you can purchase. 

How often will I hear from you?

We will communicate with you quarterly until you are 12 months away from purchasing.  Once you are 12 months away from purchasing, we will communicate with you monthly.  60 days prior to your first eligible purchase date, we will review your current financial position.  One month prior, we will request updated financial information for your prequalification and refer you to one of our preferred real estate partners.  On the day you are eligible to enter into a purchase contract, we will send you and your real estate agent the prequalification letter. 

How do I get started?

Getting started is easy.  You can email david@dkhomeloans.com and request the form to get started.

If you know someone with a previous foreclosure or short sale that would like to purchase a home, please have them give me a call.

After signing your closing documents, the title company will send the signed documents back to AmeriFirst.  If our funding department receives the closing documents before noon, AmeriFirst will fund your loan and send the title company the wire the following day.  If the documents are received after 12 pm, then your loan will fund two days after receiving documents.  Example – closing documents received on Monday at 4pm will follow with funds sent on Wednesday morning to the title company. 

Once the title company receives the funds, they will record your deed with Maricopa County and you will receive the keys.  Typically, the deed is recorded around 4:30 in the afternoon.

 * This scenario is barring any unforeseen delays and only applicable with loans originated with David Krushinsky.  Certain transactions may require more time.

Hi Dave!  You remember those clients I referred to you that where moving from Texas to Arizona?  You spoke with them and took their information over the phone.  You also asked them to send you paystubs, so you could verify their income.  I had one of my agents take them out to look at homes.  They didn’t want to send their paystubs, so she referred them to another lender that did not require them to issue an pre-approval. 

I didn’t have a chance to do the loan….. because I asked for paystubs to verify they were qualified???  Why would any agent not want to know that their clients were in fact qualified? 

Well Dave.. they put an offer on a home and it was accepted.  We ordered the termite report and it came back 4 weeks ago.  Now we are ready to fund, but the lender is telling me she can not fund because they do not have a clear termite report.  It has “water damage” listed as being on the property.  Have you ever had this problem? 

Yes!  Yes, I have and I would have prevented this from being an issue about 3 weeks and 6 days ago by simply reviewing the report when it was originally completed.  So, I tell her how we worked around this issue on a transaction we had the same problem on a year ago.  

It’s a double edge sword…….Ask for too much documentation and your buyers go to someone else.  Don’t ask for enough and your transaction falls apart at the 11^th hour.  I would prefer to lose the buyers and keep my integrity.

As consumers, we’ve all been taught that shopping around for a mortgage to get the best deal is critical. When shopping for your Phoenix home mortgage, it’s fairly easy to check online or make some phone calls to determine rates.

Once you have had an opportunity to narrow down your search for the right lender, it will also be important to ask some essential questions to make sure they’re educated regarding mortgage rates. With Phoenix mortgage interest rates changing quite frequently, sometimes several times during the day, it’s important to make sure your lender can answer basic questions. The following questions and answers will allow you to determine if your lender can provide you with an affordable loan and, most importantly, have the expertise to get you the lowest rate.

•1. Who determines mortgage rates and what are they tied to?

Mortgage interest rates are determined by the pricing of Mortgage Backed Securities or Mortgage Bonds. The media often implies mortgage rates are based off the 10-year Treasury Note, which is incorrect. While the 10-year Treasury Note typically trends in the same direction as Mortgage Bonds, it is not unusual to see them move in completely opposite directions.

•2. How often do mortgage rates change?

Mortgage rates constantly change throughout the day; however, since mortgage rates are based on Mortgage Bond prices, they only change on days when the Bond markets are trading securities. Think of a Mortgage Bond’s sales price similar to that of a Stock. It trades up and down during the course of a day. For example, the FNMA 30-Year 4.50% coupon is selling for $100.50. The price is 50 basis points lower from the previous day’s closing price of $101.00. In simple terms, the consumer would have to pay an additional .50% of their loan amount to have the same rate today that they could have locked in the previous day. Alternatively, the consumer would also have the option of increasing their rate by .125%.

•3. What causes mortgage rates to change?

Mortgage Bonds are largely affected by various economic forces that influence the ever changing demand for bonds within the market. Each week various economic reports are released that influence the movement within the bond markets. Some of the key economic factors that have the greatest impact are unemployment percentages, inflationary fears, economic strength and the overall movement of money in and out of the markets. Like stocks, most fluctuation is caused by consumer and investor emotions.

•4. What do you use to monitor mortgage rates?

There are several great subscription based services available to monitor Mortgage Bond pricing. The key is to make sure the lender is aware they should be monitoring Mortgage Bond pricing, such as the Fannie Mae 30-Year 4.50% coupon, and not the 10-Year Treasury Note.

•5. When the Fed changes rates, why do mortgage rates move in the opposite direction?

It is a common misconception that when the Federal Reserve implements a rate cut that it is immediately correlated to a reduction in mortgage rates. The Federal Reserve policy influences short term rates known as the Fed Funds Rate (“FFR”). Lowering the FFR helps to stimulate the economy and increasing the FFR helps to slow the economy down. Effectively, cutting interest rates (FFR specifically) will cause the stock market to rally, driving money out of bonds and creating potential for inflation. Mortgage Bond holders need to obtain a higher rate of return on their money if inflation is increasing, thus driving up mortgage rates. With the Federal Reserve Board meeting every six weeks, this is an important question to ask. If your lender does not have a firm understanding of this relationship, they may leave your rate unprotected costing you thousands of dollars over the life of your mortgage.

•6. Do different programs have different interest rates?

Conventional, FHA and VA loans can all carry different rates on a 30-Year fixed mortgage. FHA and VA loans are insured by the Federal Government in the event of defaults. Conventional mortgages are insured by private mortgage insurance companies, if insurance is required. Typically, FHA and VA loans carry a lower rate because the investor views the government backing as less of a risk. While rates are usually different for each program, it may be more important to compare the monthly and overall cost during the life of the loan to determine which program best suits your needs.

•7. Why is an Adjustable Rate Mortgage (ARM) rate lower than a fixed rate mortgage?

An Adjustable Rate Mortgage (ARM) is usually fixed for a specific period of time. The period is typically 6 months, 1 year, 3 years, 5 years or 7 years. The shorter time period the rate is fixed, the lower the interest rate tends to be initially. This is due to the borrower taking the future risk of increasing interest rates. The only instance where this would not be true is when there is an inverted yield curve where short-term rates are higher than long-term rates.

•8. Why are rates higher for different factors such as investment property?

Mortgage interest rates are based on risk-based pricing. Risk-based pricing allows adjustments to par pricing for risk factors such as; FICO scores, loan-to-value percentages, property type(SFR, Condo, 2-4 Units), occupancy (Primary, Vacation or Investment) and mortgage type (Interest Only, Adjustable Rate etc). This allows the investors who lend their money for mortgages to receive additional compensation for taking additional risk. An example is if the borrower encounters a financial hardship, are they more likely to make the payment on the home they live in or the one they rent?

The following policy change was announced from U.S. Bank Home Mortgage, specifically relating to the Correspondent Lending Division’s Underwriting policy for all loan products including FHA, VA and Conventional loans.

Collections, Charge-Offs, Judgments, Garnishments and Liens:

Delinquent credit must be paid off at or prior to closing. This includes taxes, judgments, collections, charged-off accounts, tax liens, mechanics’ liens, and liens that have the potential to affect US Bank’s lien position or diminish the borrower’s equity.

Documentation of the satisfaction of these liabilities, along with verification that there were funds sufficient to satisfy these obligations, must be included in the underwriting file.

Per the US Bank memo, this policy will be effective Monday, October 4, 2010, for all loans submitted for underwriting to a USBHM Underwriting Center, for MI Contact Underwriting and loans submitted for purchase by their Delegated Correspondents.

All collection accounts (including medical collections) and charged-off accounts do not have to be paid off at or prior to closing if the total balance of all accounts combined is $1,000 or less. No minimum monthly payment has to be included in monthly debt unless one has been set up and the borrower has been paying a set amount.

Collection accounts or charged-off accounts that exceed the above $1,000 limit in combined balances do not have to be paid off at or prior to closing, provided all of the following are documented:

1. A strong credit profile
2. Meaningful financial reserves
3. Evidence that the accounts pose no threat to our first mortgage lien

This announcement is not industry wide, but specifically relates to loans delivered to US Bank Home Mortgage through Correspondent Lending. US Bank Home Mortgage is known as one of the more conservative residential lenders, sometimes coming out with guideline changes up to 6 months before other lenders. This memo also doesn’t insinuate that all lenders will change the guidelines they use to underwrite, rather with the tightening of the market, there is possiblility. However, if this does become more prevalent your clients will become frustrated that they didn’t have adequate time to prepare additional cash reserves, you will have to cancel your Phoenix home purchase contracts and your real estate career will suck.

I’ve personally seen a borrower’s credit report reflect a 700+ credit rating after having a foreclosure less than 6 months prior. Unfortunately, this person was told by a mortgage lender that they would qualify for a home loan. Once the file was sent to an underwriter, their loan application was denied. Even though this borrower had a great credit score, they were unable to obtain a mortgage loan because of their previous mortgage disposition or disposition of property. The guidelines for a FHA loan require a 3 year seasoning period after a foreclosure before utilizing FHA financing to purchase a new home.

So what is disposition of the mortgage? Per the IRS, the disposition of a property or mortgage includes the following transactions:

• You sell property for cash or other property.
• You exchange property for other property.
• You receive money as a tenant for the cancellation of a lease.
• You receive money for granting the exclusive use of a copyright throughout its life in a particular medium.
• You transfer property to satisfy a debt.
• You abandon property.
• Your bank or other financial institution forecloses on your mortgage or repossesses your property.
• Your property is damaged, destroyed, or stolen, and you receive property or money in payment.
• Your property is condemned, or disposed of under the threat of condemnation, and you receive property or money in payment.

While underwriting a file, an underwriter looks for reasons the loan may be ineligible to finance. If there are multiple late payments on a mortgage loan, the underwriter will probably request a letter of explanation as to why there were late payments. A short sale transaction isn’t always reported with full disclosure on the credit report. A veteran Mortgage Loan Officer will probably notice the lates and request a reasonable explanation. However, if you’re working with someone who lacks experience that merely runs the file through Automated Underwriting and assumes the borrower qualifies – your transaction will fall apart. The reason being once the underwriter asks about the disposition of the property and finds out it was sold for less than owed, the borrower will have to wait the required time period to purchase.

Be careful, as this will be more common in the next few years. Working with trusted professionals benefits everyone involved.

If you’re married and your spouse has recently had a short sale, you may still be able to purchase a home.

For the majority of married couples, their homes are purchased together using joint credit, income and assets. This article will address the following situations; the spouse purchased a home before the couple was married in his/her name, or the spouse purchased a home, qualified on his/her own qualifications and the other spouse disclaimed their interest in the property.

Let’s take a look at an example of what a typical scenario might look like for a typical borrower.

Mr. Smith bought a home in 2002. He was forced to do a short sale in 2008 because he lost his job and could only find employment that paid 50 percent of his previous income. When Mr. Smith purchased his home, he was able to qualify on his own and Mrs. Smith was not included on the loan. Mrs. Smith signed a disclaimer deed at the closing. Mrs. Smith has since graduated from medical school and returned to the workforce. Mr. Smith and Mrs. Smith would like to purchase a new home together. Unfortunately, Mr. Smith’s credit will not allow him to be part of the loan due to the short sale. Even if Mr. Smith’s credit score has rebounded from the effects of the short sale, Mr. Smith still must wait 2-3 years before he can buy using most traditional financing.

Mrs. Smith can qualify for a home on her own even though Mr. Smith had a short sale less than 2 years ago, provided she meets the standard qualification standards. Mrs. Smith would like to purchase the home with a FHA loan. In community property states, such as Arizona, Mrs. Smith can still purchase the home even though the lender will review Mr. Smith’s credit history. However, any additional debts which appear on Mr. Smith’s credit report will have to be included in her qualifying ratios. As long as she can qualify on her income alone, she will be able to purchase a home. Mr. Smith will have to sign a disclaimer deed, relinquishing all of his rights to the property.

Please note: This article was written per Arizona State laws and other states may differ. Please consult your mortgage consultant to discuss the laws and regulations applicable to your state.

Perhaps you are outgrowing your current house, or have been forced to relocate due to a job transfer? Regardless of the motivation for keeping one property while purchasing another, let’s address this question with the Phoenix home mortgage approval in mind:

So, Do I Have To Sell?

Yes. No. Maybe. It depends.

Today’s mortgage guidelines are based on the past few years of rising defaults and risky lending practices. So one simple question can no longer be answered with one simple answer…and all of them may be right.

If you are in a financial position where you qualify to afford both your current residence and the proposed payment on your new house, then the simple answer is Yes!

Qualifying based on your Debt-to-Income Ratio is one thing, but remember to budget for the additional expenses of maintaining multiple properties. Everything from mortgage payments, increased property taxes and hazard insurance to unexpected repairs should be factored into your final decision.

What If I Rent My Current Property?

This scenario presents the “maybe” and the “it depends” answers to the question.

If you’re not quite qualified to carry both mortgages, you may have to rent the other property in order to offset the mortgage payment.

In that scenario, the lender will typically only count 75% of the monthly rent you are proposing to receive. So if you are going to receive $1000 a month in rent and your current payment is $1500, the lender is going to factor in an additional $750 of monthly liabilities in your overall Debt-to-Income Ratios.

Another detail that can present a huge hurdle is the reserve requirement and equity ratio most lenders have. In some cases, if you are going to rent out your current home, you will need to have at least 30% equity in order to offset your payment with the proposed rent you will receive. Without a sufficient amount of equity, you will have to qualify to afford BOTH mortgage payments. You should also plan on showing some significant cash in the bank. Generally, lenders will require six months reserve on the old property, as well as six month reserves on the new property.

For example, if you have a $1500 payment on your old house and are buying a home with a $2000 monthly payment, you will need over $21,000 in the bank.

Keep in mind, this reserve requirement is incremental to your down payment on the new property.

What If I Can’t Qualify Based On Both Mortgage Payments?

This answer is pretty straightforward, and doesn’t require a financial calculator to figure out.

If you are in this situation, then you will have to sell your current home before buying a new one.

If you aren’t sure of the value of the home or how your local market is performing, please contact us and we’ll refer you to a great real estate agent that can assess values in your neighborhood.

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As you can tell, purchasing one home while living in another can be a very complicated transaction. Please feel free to contact us anytime so we can review your specific situation and suggest the proper action.

Simple, the underwriter pulls an updated credit report to verify that there hasn’t been any new activity since original approval was issued, and the new findings kill the loan.

In the past, this generally wouldn’t happen.  However, after June 01, 2010, borrowers should anticipate a new credit report being pulled before funding.  This is a result of the new Loan Quality Initiative from Fannie Mae.

Purchase transactions involving short sales or foreclosures tend to drag on for several months, so this approval / denial scenario is more common.

It’s An Ugly Cycle:

1. First-Time Home Buyer receives loan approval call from their loan professional
2. Buyer assumes everything is set for purchase to be complete
3. Buyer makes a credit impacting decision (new car, furniture, run up credit card balance)
4. Funder pulls new credit report and denies the loan

In the hopes of preventing the collapse of a perfectly acceptable approval, we’ve developed a “Ten credit do’s and don’ts” list to help ensure a smoother loan process for our clients purchasing a home in Phoenix.

These tips don’t encompass everything a borrower can do prior to and after the Pre-Approval process, however they’re a good representation of the things most likely to help and hurt an approval.

Ten Credit Do’s and Don’ts:

DO continue making your mortgage or rent payments

Remember, you’re trying to buy or refinance your home – one of the first things a lender looks for is responsible payment patterns on your current housing situation.

Even if you plan on closing in the middle of the month, or if you’ve already given notice, continue paying that rent until you’ve signed your final loan documents.

Unless your lender otherwise instructs you, it’s always better to be safe than sorry.

DO stay current on all accounts

Much like the first item, the same goes for your other types of accounts (student loans, credit cards, etc).

Nothing can blow up a loan approval faster than a late payment showing up in the middle of the loan process.

DON’T make a major purchase (car, boat, big-screen TV, etc…)

This one gets borrowers in trouble more than any other item.

A simple tip: wait until the loan is closed and you have your keys in-hand before buying that new car, boat, or TV.

DON’T buy any furniture

This is similar to the previous, but deserves it’s own category as it gets many borrowers in trouble (especially First-Time Homebuyers).

Remember, you’ll have plenty of time to decorate your new home (or spend on your line of credit) AFTER the loan closes.

DON’T open a new credit card

Opening a new credit card dings your credit by adding an additional inquiry to your score, and it may change the mix of credit types within your report (i.e. credit cards, student loans, etc).

Both of these can have a negative impact on your score, and could result in a denial if things are already tight.

DON’T close any credit card accounts

The reverse of the previous item is also true. Closing accounts can have a negative impact on your score (for one – it decreases your capacity which accounts for 30% of your score).

DON’T open a new cell phone account

Cell phone companies pull your credit when you open a new account. If you’re on the border credit-wise, that inquiry could drop your score enough to impact your rate or cause a denial.

DON’T consolidate your debt onto 1 or 2 cards

We’ve already established that additional credit inquiries will hurt your score, but consolidating your credit will also diminish your capacity (the amount of credit you have available), resulting in another hit to your credit.

DON’T pay off collections

Sometimes a lender will require you to pay of a collection prior to closing your loan; other times they will not.

The best rule of thumb is to only pay off collections if absolutely necessary to ensure a loan approval. Otherwise, needlessly paying off collections could have a negative impact on your score.

Consult your loan professional prior to paying off any accounts.

DON’T take out a new loan

This goes for car loans, student loans, additional credit cards, lines of credit, and any other type of loan.

Taking out a new loan can have a negative impact on your credit, but also looks bad to underwriters and investors alike.

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Follow these Do’s and Don’ts for a smoother mortgage approval and funding process.

Just remember the simple tip: wait until AFTER the loan closes for any major purchases, loans, consolidations, and new accounts.

Many experienced real estate agents in the Phoenix metropolitan are have a general understanding of the mortgage approval process, but there are a few important details that frequently get overlooked which may cause your loan to be delayed or denied when you’re buying your new home.

New Federal and State regulation, updated disclosure policies, appraisal guidelines, interest rate pricing premiums, credit score, secondary investor approval guideline layering, property type, HOA insurance requirements, title and property flipping rules are just a few of the many recent changes that can have a major impact on a borrower’s home loan financing.

With today’s volatile lending environment, it’s extremely important for home buyers to get a full loan approval, which clearly defines all contingencies that pertain to each unique home buyer’s scenario, prior to spending time searching for a new home with a real estate professional.

Here is a list of a few of the most important topics your Phoenix real estate agent should keep in mind while showing you homes:

Caution – Agents Beware:

Property Type –

High-Rise, Condo, Town House, Single Family Residence, Dome Home or Shoe House… all have specific lending guidelines that can influence down payment, credit score and mortgage insurance requirements.

Residence Type –

Need to sell one home before moving into another? Is a property considered a second home if it’s in the same city? What if I’m buying a home for my children to live in, it is still considered an investment property?

These are just a few of several possible residence related questions that should be addressed by your real estate agent and mortgage professional at the initial loan application.

Rates / Locks –

Mortgage Rates are typically locked for a 30 day period. Rates also have adjustments for property/residence type, credit score and down payment. Most of these could have a big impact on your monthly payment. An increased monthly payment could also have an adverse affect on your loan approval.

A 1% increase in rate could be the difference between getting an approval or denial.

Headline News / Employment –

Underwriters are human and watch the news just like you. Borrowers who work in a volatile industry during hard economic times may have to jump through a few extra hoops to prove that their employment and income is secure.

Job changes, periods of unemployment or property location in relation to the subject property are other things to consider that may cause a speed bump in the approval process.

Title / Property Flip –

A Flip is considered a property that has been purchased by an investor and quickly sold to a new buyer within a 30-90 day period. Generally, an investor will do a little rehab work, fresh paint, landscaping…. and try to re-sell the property for a profit.

While it seems like a perfectly fair transaction, many lenders have strict guidelines in place that prevent borrowers from obtaining financing on properties that have a previous owner with less than 90 days of documented ownership.

These rules change frequently, and are specific to particular property types, so make sure your agent is aware of any changes in title in the last 90 days.

Homeowner’s Association Insurance –

Some lenders require Condos and Townhome communities to have sufficient insurance and reserves coverage pertaining to specific ratios on units that are owner occupied vs rented.

It may also take a few weeks and cost up to $300 to receive an HOA Certification, so make sure your Due-Diligence period is set accordingly in the purchase contract.

Appraisal Ordering Procedures –

Appraisal ordering guidelines are changing quite frequently as regulators implement many new consumer protection laws created to prevent future foreclosure epidemics.

Unfortunately, some of the new appraisal regulations have proven to slow the home buying process down, as well as confuse lenders about the true estimate of neighborhood values.

VA, FHA and Conventional loan programs all have separate appraisal ordering policies, so make sure your agent is aware of which loan you’re approved for so that they document any anticipated delays in the purchase contract.

For example, if an appraisal takes three weeks and the average time for an approval is two weeks, then it probably isn’t smart to write a purchase contract with a four week close of escrow.