I had a conversation over the weekend with a fellow mortgage professional and I wanted to post some thoughts I had coming away from it. The conversation came about with this loan officer about the types of loans that we typically do. This loan officer said that she was primarily into the sub prime loans and that her office had someone that they referred out conforming loans to because most of them were shoppers and there isn't any money in it. Purchases in particular were the mainstay of her business and getting people qualified into a home was something that she hung her hat on so to say. I told her that the majority of refinances that I do now are for people that "got into" homes with a sub prime loan and now 6 months later realized that they can't afford the high payments or weren't ready to make the plunge. Her response was that people come to her to get homes and not to get advice so she just does what she is asked to do and makes a good living doing it so why change. I spent the rest of the conversation trying to explain credit with her and how sometimes getting a home right now isn't the best thing for people��she wasn't interested and just couldn't grasp the concept. I have seen so many people come on to various forums and talk about how angry they are with their current loan officer because they don't return calls, added fees, and closing is extended for the umpteenth time. After a week or so these same people come back as happy as can be when their loan gets approved and they are going to sign papers. My question to all of the hard working people on all of these boards (I am multiple posting this so I am not pointing anyone out) is WHY is it so important for you to get into the home TODAY? If you don't fit into the debt to income ratio guidelines of 99% of the lenders out there why do you go for that obscure lender in the 1% and then praise your loan officer as if they had the magic to do this? I have personally put three people into loans this year that I wish somehow I couldn't have. Do you know that there are some loan officers out there that won't approve you because they fear that there will be a default in the first 6 months and don't want any part of it? Some of the "idiot" loan officers that you go to and don't submit you to a certain lender may not be idiots after all��.they may have a genuine concern for their clients. I have seen some loan officers that want to include all of your debt, pay off your cards, your car, and I have even seen first hand the aftermath of a loan officer that put light bills and cell bills into the loan as well. Why do they do this? Have they looked at what it will do financially to you in the long run or are they trying to get to that magical "monthly savings" that will get you to bite on their high rate sub prime garbage? Now don't get me wrong, there is a place for sub prime. I use sub prime for band aide loans and 90% of them are refinances to save a home. It takes a lot of convincing to get me to sign on for a sub prime purchase. I know from experience that I can get them a sub prime loan, then have them work on their credit, and then in a year or so I can re do their loan and make good money OR I can wait the 6 months to get MY paycheck and have them clean it up right now. Once you get a home your desire for better credit will go away for the most part until you want that cash out loan or a vehicle..and by then it may be too late. What I am trying to say is that for all of the hard work that most of you put into your credit repair, don't stop at the first "approved" and just get into a home. Work on your credit and get that conforming loan. There is almost NO excuse for people not being able to get a conforming loan within a year of working on their credit. 580 is the magical score for a bunch of programs and if you need the 100% sub prime loan because you have absolutely NO money down, what makes you think that you will somehow be able to afford the home you want to buy and get ahead in life. I apologize if I offend anyone , that is NOT my intention. I just want people to take a little more time with working on your credit and not buying into these "miracle workers". There is nothing that they do that any other loan officer can't do�..it is just a question of whether or not some loan officers are willing to do it to you and risk their own paycheck by saying no.
I'll let you in a bit of background on DH and I. We were doing very well, our credit was good, bills all paid on time, then after 9/11, I lost my 43,000/yr job. What a blow. Then the economy went down hill fast, there were no jobs. Yeah, I got my unemployment and the federal extension, but I was making less than half the money I made a month on unemployment. We couldn't pay our bills, and ended up filing BK. Now we have a tax lien as well, because of a error on DH's W-2 form. Because he still makes a decent living (thank God), we owe tons of taxes every year. We feel that if we could get into a house, we could lose some of those taxes, which would help so very much, and why do we wanna continue to give our landlord equity? Unfortunately our credit is too sub prime for a sub prime loan. Unbelievable huh? So, I'm getting our credit as clean as possible. (without CN I couldn't have done what I've done). We've invested our Christmas bonus in a secured credit card, and hope and pray our scores will somehow get to 600, which is the majik number around here for an 80/20 loan. That's our story, maybe it will shed some light on why some of us would like to get into a house. Byteme
If this didnt apply to you.........then it didn't apply to you. In your situation you ARE going to see your credit repair through and a 600 is a conforming level. In CA, the amount of equity that people are earnign right now in most places make some sub prime loans (with a plan) a good idea. This commentary that I wrote is not meant for the people that it makes angry or upset...this is for the people that read it......understand it.....and then make sure they stay the course and follow through. On a side note, I get calls all the time from folks that are so embarrased about losign a job or something happening in their lives in the last two years......for you and any that are reading this I can say that you aren't alone and many of your fellow American's are hurting. Your parents, your brother or sister, your next door neighbor, many of them are hurting and you'd never know of it. I think we will all be out of it in the coming years but (and I don't mean that you do) don't feel one bit ashamed of anythign that happened to you or think that this is just YOUR problem....you're one of the many.
Re: Re: Sub Prime Mortgages But the point of my story is if we could find a lender to make a home loan now, we would. And I wasn't offended by anything you said, just giving you a reason why some people want a loan now. Byteme
wiltygart I'm in complete agreement with you on establishing solid credit and a responsible debt/income ratio. At the same time, this phenomenon of median home prices far exceeding the "allowable" ratio with regard to the median income, is an interesting one. In my part of the country, the median priced home is about $350,000. The median income is about $62,000. If responsible homebuyers and many of today's homeowners adhered to the "allowable" debt/income ratios, there would be very few people in homes today. It's an interesting delimna.
We read somewhere the following: 'Buy a reliable car but the most expensive house you can afford." We took that to heart and did just that. We sat down and figured out the most we could afford for a house and the payment came in at exactly ($3 under) what we figured we could afford for a house payment. We did an 80/20 loan exactly one year post BK. We can't refi for three years but plan to do so when the three years are up. We bought for a couple of reason: One, after looking for weeks, we fell in love with this one house and believe it's our dream home. Two, we were afraid if we waited one more year, those houses would be gone and so would the price of them. Three, we figured if we could get the loan at the price we could afford to pay for it, we'd do it.
i do mortgages too and i completely agree w/the OP. I grew up in a generation where people believed they had to have it all RIGHT NOW and sometimes right out of college. there have been times when a customer has qualified for a loan, but i have refused because it isn't the best move for them. and i know i may future clients because of that, but i cannot - in my heart - allow a customer to do something that isn't right. i have to be able to sleep at night.
Re: Re: Sub Prime Mortgages one thing to think about is that you may not get a tax break from your house - i don't and i have lived in mine for 10 years. the standard deduction is higher than my itemized. so i lose $4k per year in deductions. i would recommend changing your w-4 to take out as many taxes as humanly possible to avoid future tax bills. (i believe there is a calculator out there). and i would talk to your banker you plan to mortgage through - the magic number for me to do an 80/20 is 660.
Re: Re: Sub Prime Mortgages willtygart , I also agree with you. And I agree there is a place for subprime mortgages. I was in one of those places once. I think that I was the kind of person you say you service. I lived in a house with a conforming mortgage. I had bought below market value, because it was an FHA repo. I had owned it for about 5 years. Values had gone up. I had a low payment and a LOT of equity. We had two decent incomes. Then my (now ex) husband "got a better offer" and moved on. I was left with the house and about $77K of unsecured debt. He made payments for a while and then threatened bankruptcy. I was in a situation where a BK would have cost me my job, so I took on all the debt by myself. I soon started missing payments, etc. Finally, I decided to refi to take out equity and pay off bills. But I had waited too long, my credit was trashed. I got a loan through a subprime lender at like 12%. It had a balloon in 5 or 7 years, I forget which. So I had to be able to refi by then. But, the mortgage broker also told me to make sure I paid all of my bills on time for one year and then come back, and he'd get me something better. I wish I had known about credit repair then, it might have helped some. Anyway, about a year later I called him again. Good to his word, he got me into an FHA loan. Still not the greatest, but at least it was a better rate and no balloon payment. It was an ARM. They told me a year of on-time payments and I could "streamline" to a fixed rate. Well, in another year, I started looking at streamlining, and sure enough, I could qualify for a conforming loan. I've refied once since that to get my rate even lower, and I'm thinking about doing it again. I guess the fact that I was motivated to get to a better loan kept me on course. I still didn't know anything about repairing credit until the last refi when a bogus chargeoff showed up on my husband's reports. Then I did some research on the CA and found sites like this. Most of my "repair" to that point was improving scores by paying on time. No, you didn't offend me either. I just wanted to share when I think subprime loans are useful. Fortunately, I never had to borrow more than the value of my house. But I cringe when I think of all the credit cards I am now paying over 30 years. The situation you describe is different. If I hadn't already owned a house, I probably won't have tried to buy one. I've suggested to several people on this board that they wait. But most of them think that prices will continue to skyrocket and they can't afford it in the future. Prices are already dropping some places. And when they do, and these folks need repairs, etc, they will have no equity to fall back on. But, as someone else said, there is a whole generation who feels they are entitled to instant gratification.
Re: Re: Re: Sub Prime Mortgages No worries the flub with the DH's W-2's is now fixed, but we still have the damage done with a tax lien. He even has $50.00 extra taken out of his check every two weeks to help us out when April rolls around. We have been working with a lender, that (1. Got me in the mode of getting our credit reports straightened out, and (2. Is helping us toward our goal of a score of 600, where we can get an 80/20 loan. On another note, our medium house prices are also anywhere from 250K to 350K. Which makes it difficult for some to come up with sizable down payments. Most would require us at our present scores to have 20 to 25% down. DH makes a good living, but with our rent prices over 1300 / per month, it's hard to save for a down payment. Byteme
Re: Re: Re: Re: Sub Prime Mortgages ouch - those are some hefty prices. i'm buying new this year and im betting we will buy somewhere in that range. to imagine when i bought my house a decade ago in the same area i paid $100k. i really don't like 80/20 mortgages, but i do understand peoples situations - like yours. look for high rate savings like ING - i use them and i am a huge advocate. right now their interest rate is 2%. every little bit helps when trying to save!
