San Antonio's Rockstar Turned Realtor®

Scott Cummins of Cornertston Mortgage

I recently worked on a transaction with Scott Cummins of Cornerstone Mortgage and it went smoothly - closing two weeks early!  I've had the pleasure of working with Scott before and have always found him to be a knowledgeable, honest, and reliable lender in San Antonio.  He's become one of my favorite resources when I have mortgage questions.  He takes great care of his clients and helps them understand the sometimes confusing world of home loans...he's especially great with first time home buyers - both of the times I worked with him, it was with first time home buyers and they walked away with a much better understanding of the loan process than I've seen with some other lenders.

Scott is also great with his Realtors® - we all have horror stories of chasing after a lender, trying to get information from them and banging our head against the wall as we wait on hold.  Not so with Scott Cummins and Cornerstone Mortgage.  Fast, efficient, and always ready to provide the answers and information we need.  That's a huge bonus to agents, there is nothing more frustrating than not having answers from the lender when you need them.

So next time you're thinking about home loans in San Antonio, give Scott Cummins of Cornerstone Mortgage a call at (210) 340-4994.

Disclosure: CMP.ly - 0

FHA Loan Changes - Good Idea?

Yesterday, I re-blogged a post about FHA loans, originally written by Ken Cook, one of the lenders I really trust when it comes to FHA information and advice.  I had read his article with great interest, as any change in any lender's rules, regulations, or requirements - directly affects me and my clients.

I'm not a mortgage wizard, which is why I surround myself with the best lenders I can find - so that when I do have questions or my clients need more explanation of a mortgage issue, I can get them the answers or at least have them chat with the lenders I know.  I do try and stay up to speed on all the issues though and the new ideas about what to do with FHA loans in order to refill the coffers of the Department of Housing and Urban Development's FHA funds were the subject of Ken's post.

The problem is simple; with foreclosure rates skyrocketing, the FHA has had to pay out more and more insurance claims to the mortgage companies.  Part of every FHA loan is the mortgage insurance premium (both upfront and monthly).  The upfront mortgage insurance premium is paid (who would have guessed?) upfront at closing.  However, it is possible to roll that premium into your financing (so many people don't actually bring that cash to the closing table).  The monthly mortgage insurance premium is a monthly fee tacked onto your your mortgage payment.  Like other insurances, you're paying today, in case something goes wrong tomorrow.  In the event a home buyer defaults on their loan and the house is foreclosed on, the lender gets paid out of the FHA funds that are built up through the collected of these mortgage insurance premiums.

Now that we have that FHA primer out of the way (there's a lot more to it, but I didn't want to write a full post on how FHA works - we have other issues to discuss today).  On December 3, 2009, HUD Secretary Shaun Donovan appeared before the House Committee on Financial Services and announced that FHA's funds were getting uncomfortably low (they had dropped to 0.53% of outstanding loans, well below the 2% required by federal law).  After looking at some of the ideas that have been tossed around to cure the problem, I spent some time thinking about what's good and bad about those suggestions.

I would write it all out here, but the fact is, it's a rather long post (something you should be used to by now).  I think it might be one of my top 5 posts of all time.  I hope you'll take the time to read it and weigh in with your opinions.  I just spoke with a friend of mine who disagrees with me completely, so this could be interesting.  So, here you go...enjoy:

"An Open Letter To HUD About FHA Loans" at RErockstar.com

photo courtesy of Caitlinator

Thanks Ken!

As usual, Ken Cook, does a great job breaking down some of the latest expected changes to FHA loans.  I find it shocking that everyone ran around saying we need to help clear the inventory by extending and expanding the First Time Home Buyer Tax Credit and now they're thinking about making it tougher to buy a home.  So which is it?  I thought it was odd when they raised FHA down payment requirements from 3% to 3.5% while saying they needed to get the housing market moving again.  A jump from 3.5% to 5% will most certainly eliminate a larger pool of ready, willing, and able buyers.

Although the theory of "having some skin in the game" is a commonly accepted idea, this reeks of an attempt by Secretary Donovan to save himself at the expense of home buyers and possibly the housing market recovery.  When the federally mandated reserves started to slip, we should have been talking about solutions, not when they are 1.47% below where they should (the law requires the FHA insurance pool to be maintained at 2%, Secretary Donovan reported it was at 0.53%).  Maybe we should have learned a lesson from the banks that didn't notice how low their reserves were getting before then announced (seemingly overnight in many cases) that they were broke.

How does someone not notice these things?  Ugh.

Thanks again Ken!

Ken Cook does it again.

Ken Cook comes through again and answers the question of when you should get pre-approved for you loan when buying a home.  I think this post goes great with my post Realtor® Speak 101: Pre-Approval.  I think pre-approval is one of the most misunderstood and most important steps in the process of buying a home.

If you need help finding a lender in San Antonio who will help you better understand the process and guide you through it without talking circles around your head, contact me by phone or email and I'd be glad to send you a few recommendations.

Ever wondered what "approval" means?

Mortgage guy Ken Cook breaks down the stages of approval for a mortgage and shows you life on his side of the fence.  Ken's no-nonsense look at the value of the various stages of the loan process is refreshing and straight on.  Then again, Ken's never been known to mince words either.

As I asked him in my comment on his post though, I don't want anyone to think "well since pre-approval is worthless, I don't need one."  The fact is they are still necessary, even though he's right - they guarantee nothing.

If you're looking for a great mortgage blog, look no further than Ken's blog.

photo courtesy of aimeesblog

Like a ticking time bomb.

The First Time Home Buyer Tax Credit is set to expire on November 30, 2009.  If you haven't closed on your new home by then, you're out of luck and will miss out on the (up to) $8,000 tax credit.  People are beginning to panic a bit and the government has floated a few ideas about extension and even possibly expansion of the program.

We've all been watching the news, opinions, rumors, and thoughts on the First Time Home Buyer Tax Credit with baited breath.  From agents to lenders to consumers to concerned citizens; we all want to know what's going to happen next.  Some are for an extension, some are against it.  Some have even floated ideas about a modification to the theory of the tax credit.  So what to do about it?

"Death to the Tax Credit!"

Recently, a growing number of agents have said "let's kill it now."  Of course, some people immediately paint those real estate agents as uncaring and unkind.  Who doesn't like the idea of buying a home and getting a little help?  I for one would love to be a first time home buyer and receive a check in the mail.  The question becomes "at what cost?"  Obviously, the money comes from somewhere and we all know that (like it or not) we are currently spending a lot of money to get our economy back on track (even though the First Time Home Buyer Tax Credit is but a small part of it, it all adds up).

My views tend to lean towards this idea.  We've given buyers a chance to get into these homes.  Some have, some have not.  We still can't change the fact that many have lost their jobs or had other issues affect their credit in such a way that they can not qualify for loans.  No one dares float the idea of loosening credit standards (a huge part of what got us here), but in reality - that is the big stumbling block we face.  We can give money out like candy, but if people can't qualify for a loan it doesn't matter.  Offer me a million dollars to buy a new home and I still will sit on the sidelines if my credit score is too low.

Over at AgentGenius, Greg Cooper made a video about his thoughts on the First Time Home Buyer Tax Credit and I asked his permission to repost the video, instead, I decided to send you straight to AgentGenius, because you should be there anyway - to read the article and watch the video, head over to "First Time Homebuyer’s Credit- Should It Stay Or Should It Go? AG Politics."

"We need to extend and expand the Tax Credit!"

This idea has been out there since the original $7,500 tax credit - as you can see by the current First Time Home Buyer Tax Credit, this was extended, modified, and expanded.  There is no doubt in anyone's mind that the tax credit has helped clear up some of the inventory we had as well as get people back into the housing market.  I love the tax credit for what it does, don't get me wrong.  Incentives are always a good thing for the people receiving them.

I love the theory of the tax credit, I'm just not so sure on its long term effects.  Right now, agents and buyers are having a great time.  Sellers too.  We're doing what we need to buy: agents are working, buyers are getting new homes, and sellers are moving out (and let's not forget the consequences of buyers with a pocket filled with $8,000 that they didn't have yesterday).  This is the way we like to see things.  If you watched Greg Cooper's video though, in the back of your mind you must wonder - what happens when the end finally comes?

I fear we may be pushing ourselves towards a new artificially created housing market.  What happens when the push behind it does finally go away?  I'm not an economist, so don't quote me, but the fact is I fear the long term consequences of pushing it out further than it has already run.

As for the public, I wonder what this does to our collective psychology.  Are we perhaps creating a nation of "waiters" - people who will wait out everything, because there may be a better deal tomorrow?  This kind of thinking will do us no good at all.  We see it everyday with people who wait for interest rates to drop, homes prices to come down, and homes to hit the foreclosure market.  The worst is when they wait...and miss out on it.  And when the First Time Home Buyer Tax Credit truly ends (whenever it may be), what will the repercussions be on those that weren't able to get into a home because of job losses, credit, etc.  Will they just be sent the bill for helping those who were able to take advantage of it?  Seems a little lopsided when you think of it that way.

"Let's change the rules!"

Some have suggested expanding the tax credit to include everyone - not just first time home buyers.  Now, I know this contradicts much of what I'm saying, but if we are to continue with the tax credit, I do think it should be offered to everyone.  I also think the people who received the $7,500 tax credit should be given amnesty on the re-payment.  Why do we punish the first batch of people to jump at the chance to get a new home and take advantage of this program?  Instead we reward the latecomers?  Just doesn't make sense to me to reward one and not the other.

Making the tax credit available to all, probably would have opened up the markets quicker the first time around.  So if we are going to toy with the idea - let's give it a shot and see how it pans out.  It will still cost us a fortune, which I'm not a huge fan of, but I'd rather see it on a wide scale than still limited to a select group to test the theory of how well it really works.

Over on Jeanna Martinez's post, "Fence riding the tax refund wave all the way to shore...," Jeanna talks about a slow degradation of the total amount of the tax credit over time.  So the next one might be $5,000, then $4,000, then $2,500...you get the picture.  This would allow us to wean ourselves off of the theory that we get something in return for buying a house.  We always have received something in return - a home.

"It's not over yet!"

Congress currently has several proposals to extend and expand the First Time Home Buyer Tax Credit and obviously it will be a boom to buyers, sellers, and agents if they continue it.  I still fear the long term effects of it, both in psychological terms and financial terms.  I also worry for those that start the buying process now, but don't make it to the November 30th deadline - something needs to be done to deal with that.  When a closing slows down by a day and someone loses that tax credit, expect the lawsuits to start popping up.

No matter what direction it goes, I will follow, but I do hope we consider the long term vs. the short term.  Many people thought of their houses as ATMs during the run up to the housing market slow-to-a-crawl.  Today, many people are viewing their houses as a tax credit.  I worry about both mentalities.  A house should be thought of as what it is - a home.  First and foremost it is a place to hang your hat and live your life.  A place to build memories and enjoy time with your family.  It does have appreciation which builds equity as a great benefit, but once we start looking for that in the short term rather than the long term, we are dooming ourselves to another round down the road.

Check out the conversation between Will Ellis and I about the First Time Home Buyer Tax Credit on Twitter.

Will is a local San Antonio follower, so it was great to speak with him about the issue.  Are you from San Antonio and want to join the conversation?  Come say hello to me on Twitter - @rerockstar.

What's next?  No Santa Claus?

I was over at Steve Shatsky's blog and saw his post "Building Good Credit: Getting the Word Out."  The video above was produced by the Ad Council and attempts to help people learn a bit about credit and get them to visit www.creditfairy.org.  Good information on credit can sometimes be hard to find - not because it's not out there, but it because it's drowned out by bad and often misleading information.  This site is chock full of quality information on credit basics, understanding your credit report, how to dispute your credit report, bankruptcy, and improving your credit score.

Credit scores are often the most misunderstood thing in our lives.  I've had someone with a 800 credit score tell me they had bad credit and they thought no one would give them a loan.  I've had people with 440 scores tell me they had excellent credit.  As you can guess, both parties were wrong.  Credit scores control everything in our lives - housing, cars, insurance, loans, credit cards...you get the picture.  Having good credit will make it easier for you to get better deals on the credit you do need (many loans are based off of risk assessment - the worse your credit score, the higher you are as a risk to the lender...and therefore the higher your interest rates or down payments will be).

If you haven't seen your credit report lately, don't wait for the Credit Fairy to bring it to you - you are entitled to one from each of three main credit bureaus (Equifax, Experian, and TransUnion) once a year.  I suggest you request one every four months from a different bureau on a rotating basis - this will keep you updated over time to any inconsistencies on your report.

Visit www.annualcreditreport.com to get your free credit report.  Don't pay for them.

photo courtesy of d70focus

Here I go again...

With everything that's going on lately, I find myself reading more blogs than ever to see what's happening.  I was over at Ken Cook's blog, reading "FALSE Info Flying Around About First Time Tax Credit as Down Payment" and came across his latest post.  I thought it was great food for thought for everyone involved in the industry and might just help a few consumers who might be feeling the pinch and getting the calls from these mortgage modification companies.

Consumers - I understand the fear and confusion that comes with being near or in foreclosure.  To reveal more than I like to about my personal life, I've been there.  I've received the letters, the phone calls, and sat and cried looking at my bank statement vs. my mortgage payment book.  It's not fun.  It's life or death in many ways.  No one wants to lose their home and when it all starts, it can be so frustrating that it's easy to just shut down and stop caring or fall for one of the many scams out there.  Don't think for a second that everyone calling you is your best friend and there to help.  (So that the story is complete, I sold the house and made a whopping profit on it - I got lucky to be in a hot real estate market at the time and was able to prevent any real problems.)

Of course, that flies in the face of much of what we as Realtors® say.  "We are here to help."  "We want to help you avoid foreclosure."  I know a lot of agents who mean it when they say it.  Does that mean all of them do?  Unfortunately not.  There will always be some out there that aren't who they say they are.  I wish there was an easy litmus test for you to figure it out.  My advice, get to know them.  Your own gut instincts will prove better than any sort of measurable data.

Realtors® - What more can I say than what Ken has already said?  We need to learn to sniff out fraud in all its forms before it ever gets to the stage where we are implicit in it.  It's easy enough to get caught up in something without even realizing it.  With everyone looking to us to provide solutions and everyone calling us to offer them, we're surrounded by choices.  And each choice we make affects more than just us.  It affects us, our clients, the title companies, lenders, inspectors, appraisers, the industry as a whole - it's not just a simple, "Oops I made a mistake."

photo courtesy of Great Valley Center Image Bank

The Department Of Housing and Urban Development makes more changes.

I reported back on November 25, 2008 on the REPSA changes coming from The Department Of Housing and Urban Development involving builder incentives and the use of "preferred" lenders.  This morning, in my inbox, I discovered that although the change was scheduled to take effect on January 16, 2009, it will now be pushed back 90 days.

HUD's stance has been that home buyers are being penalized if they choose not to use the builder's "preferred" lenders.  The National Association Of Home Builders (NAHB) feels that these incentive programs boost competition, reduce costs and give consumers a "full range of options to explore the best possible deal to purchase a home."  I have to say, I feel like I'm missing something there, as I don't see where this would boost competition, as they are reducing competition from lenders by getting people to use one lender instead of letting them choose from multiple lenders in a free market.  What frustrates me is that those incentives are built into the pricing of the house, allowing them to shave it off the price when they want, but in this case, only if you use their lender.

If you're thinking of buying a new house.

Apply for the builder's "preferred" lender's loan as you would normally.  In the meantime, shop the loan around and see what other lenders will give you.  Sometimes the rate may be better on one or the other, but the upfront costs will be more.  You really need to weigh the differences between the loans and a good agent should be able to assist you if you find it all confusing (loans can be, you're not alone).  You need to know what matters to you more.  Do you have cash upfront or little cash and know you could afford a slightly higher monthly payement?  Does the incentive balance out in the long term with the costs associated with the loan?  These are all things you need to consider before signing on the dotted line and I encourage you to speak with an agent who can be objective (and knows their way around a loan) and/or your financial advisor.

photo courtesy of Great Valley Center Image Bank

RESPA (Real Estate Settlement Procedures Act) rewrite will affect builder's incentives.

Many builders offer additional discounts, also commonly known as incentives, (sometimes very steep) to consumers purchasing a home and financing it through their "preferred" lenders.  The preferred lenders range from mortgage companies run by the builder themselves or lenders that have made an exclusive deal through the builder to offer loans.  I have always felt that this was a bad idea and even went through some numbers with a non-builder affiliated lender once, so that they could show me how it wasn't always the best idea to take the loan the builder offered.  Although the consumer was getting the incentive and saving money, in the long run, the loan they were offering wasn't fully competitive with what the outside lender could offer.

So when I read through my emails this morning, I noticed an email from a title company that is often full of great facts and useful knowledge and here was this email about HUD changes to RESPA.  I was excited to read it.

The rule goes into effect on January 16, 2009 and builders will no longer be able to offer these great incentives for use of their preferred lenders.  Many Realtors, builders, and mortgage lenders are opposed to this idea, but I for one, welcome the change.  While I see their point of how it will affect the pricing of the homes and making them more affordable to people, my thinking leads me to believe if they can offer the discount in the first place, the room is there to lower the price.  Builders are not throwing money out the window just because.