With over 30 years of combined experience in the mortgage business, especially processing and underwriting, The Aramco Group would like to point out a few misconceptions about underwriters, and the loan process. One misconception that surrounds underwriters is a general belief that their main responsibility is to find problems with the loan application and look for reasons to deny the loan.
If that was the case the underwriters and their lending company would be out of business fairly quickly. In fact, underwriters are trying to do the exact opposite of that. Their main responsibility is to find ways to approve the loan with all the necessary complete documentation. In other words, their action whether it be an approval or denial of a loan should be supported by legitimate documents.
It is true that some underwriters might be more lenient than others; however, almost all of them are following some form of basic standard underwriting rules. They have to understand and evaluate your financial situation for the applied loan program.
In the beginning of the loan process, the underwriter asks for the necessary documents or legitimate copies of provided ones. The initial request and each time thereafter add a minimum of 7 to 10 days to the process of the loan. In general, borrowers still are not providing the complete set of requested documents. They send in what they think should be good enough to satisfy the underwriter’s request.
This back and forth request of information and forwarded documents goes on for a few times and meanwhile the borrower feels that they are providing substantial and official documents that should suffice for the loan process. The borrower can feel a sense of discouragement and be under the impression that the underwriter is trying to find excuses to deny the loan otherwise. It is important that an open and clear line of communication be set between the borrower and underwriter so that the loan process can move forward as seamless as possible.
To ease any frustration and facilitate and expedite the process, the borrower will be given a checklist of all required documents that are necessary for the loan packet. It is imperative that the borrower return the packet with all the required materials on the checklist, failing to do so will slow the application process down tremendously.
This misconception comes from incomplete information and documents in the file. Receiving the initial documents, then submitting the loan to the underwriter and a few times back and forth of requesting additional documents, we get to a point that the underwriter has enough information to make a decision and support it with the information they have on hand. This is a risky process because if the proper information is not disclosed the loan may be denied, that is why it is absolutely necessary that a borrower disclose any and all information that the underwriter may need to complete the loan.
The Aramco Group has a dedicated team of professional loan processors willing and able to help you through your loan process. Feel free to call one of them to discuss the process and how they can help you close your loan as efficiently as possible.
Starting today, The Aramco Group Loan Processors will be giving weekly tips to help borrowers speed up their loan process.
Getting started is very simple. First, PROVIDE COMPLETE DOCUMENTATION. When we receive a file and the basic documentation is missing, we are not able to submit the file to the lender for an approval.
When our Loan Officers send out an application package they include a list of required items, so make sure to complete the paperwork in its entirety and don’t forget to read the list. You will be able to tell which documentation is applicable to you.
Here is a list of the most common items that we have found borrowers overlook providing to us:
- Complete bank statements that are not older than 60 days. Complete also refers to any blank pages within the statement as well.
- Copies of your tax returns from the previous 2 years. Again, we’d like to stress that complete copies of your tax returns need to include any blank pages as well. If you have K1’s for an S Corporation or Partnership the lender will need copies of those as well. If you own more than 25% of the S Corporation or Partnership the lender will require returns from the previous 2 years.
*Helpful Hint* - California tax returns are not required; lenders are only interested in the Federal tax returns.
Some of the other necessary items we need to promptly process your loan are:
- Copies of 1 full month of paystubs.
- A copy of your monthly coupon Homeowner’s Association dues or you can provide us a letter on the Homeowners Association’s letterhead showing the monthly dues as well.
- A copy of your mortgage statement if the loan is a refinance. Your lender will also want to see your current interest rate as well and what the term of your loan is (30 yr., 15. yr. etc) to confirm that it makes sense for the borrower.
- If you are divorced and have children a complete copy of the divorce decree will be required showing if there are any child support or alimony payments required.
Here is a list of the most common items NOT disclosed to us that can expedite the loan process:
- Property owned
- Any new debt recently incurred
- Judgments and liens that have been recorded against the borrower.
The Loan Processor’s job is to try to anticipate what documentation the lender will require to approve the borrower’s loan. It is important to disclose all information to us.
Taking this little bit of extra time at the beginning of the process could save you not only time, but alleviate any stress and hassle in receiving your loan.
The Aramco Group considers our Loan Officers, Loan Processors and Borrowers a team, our common goal is to get the loan approved and closed in a timely manner. It is imperative to keep the lines of communication open as to avoid any mistakes that can slow the loan process down. If you have any concerns or questions regarding the loan process, please feel free to call one of our Loan Professionals, they will be more than happy to assist you.
Chances are you may already qualify for a reverse mortgage and you don’t know it yet. The requirements are as follows:
• Both you and your spouse must be 62 years of age or older
• Live in your home and have sufficient equity in it
• Must continue to pay your property taxes and homeowners insurance and the up-keep of your home.
If you meet the eligibility requirements mentioned above, then you are ready to begin the process of applying for a reverse mortgage. It is a eight-step process and each step will be discussed in detail below.
1. Examination of Financial Situation – The beginning of the process will have you meet with a reverse mortgage professional, a member of the National Reverse Mortgage Lenders Association. They will review your current financial situation and make sure you fulfill all the requirements needed to proceed with the reverse mortgage process and will benefit from it.
2. You will be Provided a Reverse Mortgage Analysis – Once you provide your basic information, you will be provided with different options of receiving payments from the loan. Your options are:
a. Fixed monthly payments
b. Lump sum payment
c. Line of credit
or a combination of the above.
3. Counseling with a HUD (Housing and Urban Development) Representative – Counseling is a required step in the reverse mortgage process. You will meet with an independent counselor in your community to receive a better understanding of the details that are associated with a reverse mortgage and fulfill the Government requirements.
4. Sign you Loan Application and Disclosures
5. Home Appraisal – This process is necessary as well since the home will be used as collateral and it must meet specific Federal Housing Association guidelines. If repairs are needed then a portion of the loan is set aside to fix those repairs. Items which involve health and safety are required to be completed prior to the close of escrow.
6. Loan Processing – When all of the above have met the required criteria the loan goes through the underwriting process. In this process all pertinent information if verified to be correct such as property ownership and title insurance, allows the loan to move into the closing stage of the process.
7. Closing – The closing requires the signature of a notary or an attorney for verification of the documents. Once this is complete the applicant has a 3 –day period to cancel should some concern arise. This is called the “3-day right of rescission.” If the applicant is satisfied, then the loan process is complete and the applicant can begin receiving payments.
8. Receive Your Money!!
It might seem like an intimidating process, but having the right professionals with you every step of the way makes all the difference. Feel free to contact us here at The Aramco Group. A reverse mortgage professional will be more than glad to answer any questions you might have about beginning the process of a reverse mortgage.
Recent numbers are stating that the housing industry is seeing a substantial increase in the price of homes. New home sales in San Diego County are up 17% from last year, the highest for this period of the year since April of 2007. As appealing as this is to home owners, some analysts believe the Federal Reserve policy of lowering interest rates is creating a temporary jolt especially now that the spring buying season is in effect. This is leading home buyers to adopt a “get in while I can” mentality. Housing supply is close to a 20 year low with new construction limited, and investors are buying homes and converting them into rentals. Demand, on the other hand, is growing because of the purchasing power that is allotted to home buyers from the Federal Reserve’s low interest rates thus boosting the price of homes. Before 2008, a 30-year fixed mortgage was around 6%, in today’s market the 30-year fixed is hovering around 3.5%. With interest rates being so low people are realizing that the price they are currently paying in rent can be better used as a mortgage payment and adding an asset to their name. What happens though, when median wages do not keep pace with rapid housing increases? The answer is the market will be left with homes too expensive to buy because of the illusion of the low monthly payments brought on by low interest rates. The fact is that interest rates will begin to rise again and when they do, home buyers will have to spend more of their income to buy a home. This will lead to homes prices becoming stagnant so income can catch up and those areas that see a rapid appreciation in value might see it fall eventually.
So as the expression goes, “strike while the iron is hot.” Now is the time to lock in those low interest rates and put yourself in the dream home you have always wanted. Contact one of our real estate or mortgage specialists for details; they will be more than willing to talk to you about your options. With absolutely amazing weather year-round how could you not take advantage of buying and investing in San Diego? It’s the right call to make.
Early retirement can have a dramatic effect on the amount of Social Security payments an individual may receive. However, deferring Social Security benefits can be a very appealing idea for those that are in a position to do so. By delaying retirement benefits until the age of 70, deferred payments can grow by an additional 8% a year, greatly surpassing the rate of inflation which has averaged approximately 3% over the past 5 years. If delaying retirement benefits seems like a suitable option, one point to consider is to sign up ONLY for Medicare at age 65. It is important to note that not opting to sign up for Medicare within 3 months of eligibility can delay coverage and become more costly. A good way to supplement your income in retirement is with a reverse mortgage. With a reverse mortgage you can access the equity in your home and receive monthly payments allowing your social security benefit to grow. Listed below are a few payment distribution options to supplement your retirement income with a reverse mortgage:
- Lump Sum – the full amount at closing.
- Tenure – fixed monthly payments for as long as the homeowner resides in the current residence.
- Term –equal monthly payments for a fixed number of years.
- Line of credit – taking out any amount necessary until the credit line is depleted.
- Any combination of the above for even more flexible options.
Please feel free to contact our CRMP (Certified Reverse Mortgage Professional), Mehran Aram or any one of us at The Aramco Group with any questions you may have regarding reverse mortgages. One of our specialists will be more than happy to assist you.
News yesterday from the desk of acting FHA commissioner, Carol Galante, illustrated some drastic changes to come for the reverse mortgage product. Due to the FHA’s $16.3 billion deficit as evidenced from the latest annual audit, the FHA is attempting to shore up its accounts by implementing changes to the reverse mortgage product as early as January 31st. These changes will be extremely significant and are as follows:
- Elimination of the standard fixed rate reverse mortgage
- Capping the loan amount, leaving borrowers with 20%-30% less cash back
- Increased mortgage insurance
- New credit and income qualifications
If these changes occur on January 31st it will mark the end of the reverse mortgage’s most popular product, the fixed rate lump sum HECM. Americans have selected this product overwhelmingly since its introduction in 2008 due to the large lump sum of cash it provides as well as the security a fixed rate brings to a person’s retirement. The good news is that any reverse mortgage started before January 31st will not be affected by these new rules, but unfortunately it seems as though the standard fixed rate reverse mortgage’s days are numbered.
In addition to the elimination of the fixed rate reverse mortgage, many Americans will be affected by the new credit and income qualifications. Currently qualification is solely based on age and equity, but with these changes occurring, lower income and lower credit score borrowers might experience difficulty qualifying for a reverse mortgage. The proposed increase in mortgage insurance and cap on loan amounts will also leave you with less cash back, as the FHA endeavors to cure its $16.3 billion budget deficit.
If you have any questions regarding these changes or if you would like to begin a reverse mortgage for yourself before these changes take place on January 31st, please feel free to give us a call as we are more than happy to help you decide if a reverse mortgage is right for you.
The financial world has grown accustomed to the reverse mortgage as an effective method of converting the equity in a senior’s home into much-needed cash. But for years, due to the steep price tag, this retirement product simply hasn’t made sense for many affluent seniors who rather than coveting a large amount of cash, could simply benefit from a reserve of funds. These factors have influenced many well-to-do retirees away from the reverse mortgage, and into conventional lines of credit. The recent introduction of the HECM Saver line of credit though, has presented seniors with an extremely viable retirement strategy which has perked the ears of some of the most prominent financial planners in the country.
After learning of this novel reverse mortgage option, Harold Evensky, CFP and Research Professor at Texas Tech University, and Dr. John Salter, CFP, Texas Tech Professor and Vice-President of Evenksky & Katz Wealth Management, set out to determine if in fact this new HECM Saver line of credit would aid their clients in retirement. After thousands of retirement simulations and a publication in the prestigious Journal of Financial Planning, their question was answered with a resounding, YES. In particular, their results focused on the benefit of having access to a HECM Saver line of credit so that it could be tapped into during down years instead of depleting other portfolio assets when cash was needed.
This “insurance-type strategy” which utilizes the equity in a senior’s home only when necessary and then is paid off when excess funds are available, was shown to be statistically significant in increasing the probability of retirement portfolio sustainability. Due to the positive results discovered by Evensky and Salter, and other intensive research projects such as the study released by Boston College’s Center for Retirement Research, our country’s most forward-thinking financial minds are now recommending the HECM Saver line of credit not as a “loan of last resort,” but as a wealth preservation strategy.
The HECM Saver is simply a lower cost reverse mortgage, with savings arrived at by eliminating up to $12,000 in upfront FHA mortgage insurance premium, and up to $6,000 in origination fees in some cases. Due to the lower amount of cash disbursed, lenders expose themselves to less risk and are able to offer affluent seniors the benefit of a reverse mortgage with fees similar to most refinances. Most importantly, the HECM Saver line of credit requires no monthly payments, the line of credit can’t be frozen by the bank, and stringent credit and income qualifications simply don’t exist; making it a fabulous alternative to a conventional line of credit.
Even with many luminaries in the financial advising community increasingly turning to the reverse mortgage as a viable retirement strategy, the HECM Saver line of credit is still underutilized. But with the latest evidence supporting this fantastic product I believe over the upcoming months and years the industry’s most prominent financial advisors will increasingly familiarize themselves with the HECM Saver, so that they can continue to offer the soundest options for their client’s retirement in a rapidly changing world, where they are commissioned with the most difficult task of preserving a client’s declining wealth over an ever-increasing lifespan.
Mehran Aram CRMP, President/CEO
The Aramco Group
It begins with receiving AARP brochures in the mail, continues by discussing Medicare benefits, and sadly includes the inability to read your own watch. The aging process as I’m learning very quickly is something none of us are immune too. And while I’ve yet to find a way to prevent it from occurring there are many steps which our society has been trained to take in order to make these golden years of our life a little more golden.
The problem is the steps we took back in our most productive years don’t seem to be getting the job done these days. IRA’s are depleted, home values are deflated, and our investment portfolios are depressed.
Americans, both wealthy and in financial hardship have searched long and hard for a 21st century tool that can enable them to constitute a safety net for the rainy days to come, to secure their homes and lifestyle, or even garner disposable income to invest in their futures. Since 2006 over half a million scrupulous Americans have realized immense benefit from the Reverse Mortgage product. And why do over 80% of all Americans with a reserve mortgage proclaim that they would recommend the product to a friend?
Because it works.
Americans over 62 years of age with equity in their homes are not only eliminating their monthly mortgage payments if they have one, but scores of individuals are benefiting from hundreds of thousands of dollars of cash. It’s a perfect scenario for any retired individual on a fixed income, or even an experienced investor who values cash in an economy where “cash is king.”
And no, you do not give up ownership of your home, there are no stringent income or credit qualifications, the bank can never kick you out of your home, the fees can be less than normal financing, you can still leave your home to your surviving family members, and a reverse mortgage is not a loan of last resort. Instead, it is a viable, responsible, and extremely lucrative retirement strategy.
But how does it work?
Countless educated Americans have simply shunned the Reverse Mortgage product because it seems like something just too good to be true. But in reality it’s a simple yet dynamic product. The FHA insurance assures the borrower against any bank default, while simultaneously insuring the bank that at the maturation of the loan the entire loan amount will be paid whether or not the home value covers it. Thus, banks see this as a guaranteed investment and have your best interest in mind, as their benefit increases the longer you live in your home due to accruing interest.
We are currently in a significant metamorphosis of America’s mindset toward the reverse mortgage. Due to improvements in regulations, credentials, and historically low interest rates, the reverse mortgage has never been a more secure financial instrument. Over the next few years we will see the reverse mortgage evolve into a vital part of the fabric of the American retirement, and when sitting at the dinner table with our nation’s most seasoned citizens the question will not be if, but who they trusted their reverse mortgage to.
Mehran Aram CRMP, President/CEO
The Aramco Group
Being so deeply entrenched in California real estate finance, I am asked daily if now is a good time to buy a home or investment property. And whether this question arises on a TV or radio interview or a one-on-one meeting with a client in the office, I have the same response for everyone, “I’ve never in all my life seen a better time to buy as much real estate as possible.” With a combination of low sales prices (down 42% since their peak in 2006), high inventory, record-low home loan rates, and a strong rental market, it is a fabulous time to grow your real estate portfolio or buy your first home.
After numerous reports from multiple sources including a recent California Association of Realtors report which showed a 6% increase in single family home sales since June 2011, it’s safe to say the housing market has begun a rebound, however sluggish it may be. Will home prices return to the levels seen in 2006 and 2007? Yes, but probably not as quickly as we would all like. One major factor which will be driving up home prices though is future inventory. While today’s high inventory due to unemployment, underemployment, uncertainty and the shock of the Great Recession is lending to low home prices, I believe we will see a major shift in inventory within a few years.
Since 2008, housing permits for both single and multi-family homes have been nearly stagnant as one might expect, due to the economic downturn we've experienced over the last few years. But while the economy has slowed down,the number of college studnets graduating and getting jobs, families moving to California and first-time home buyers continue to rise at extremely high levels. Thus, the simple economic laws of supply and demand should take over, in which construction will be a couple years behind the demand for homes and a fairly serious shortage of homes will occur due to low supply. This lack of supply should boost home prices, and incentivize home builders to increase home devoloping, until the demand and supply are once again balanced.
But even if you wanted to take an ultra-conservative prospective on the housing market and assume 0% appreciation over the next few years, now is still one of the best times in our nation’s history to purchase real estate. The Housing Affordability Index which measures the affordability of home ownership based on median home prices, median income, and average mortgage interest rates, is currently at its highest level since record keeping began in 1970. Record-low long term interest rates are one of the catalysts driving this rebound, making homeownership extremely affordable. But in addition to rock bottom rates and low prices, the current rental market should attract many more investors into real estate. Due to uncertainty and a depressed level of income, many families have elected to rent instead of buy. Apartment vacancies are falling monthly, while effective rent has been rising in most parts of the state for 10 consecutive quarters. This combination of low interest rates and high rents are allowing many investors to make a monthly profit even if their properties show zero appreciation.
As you can see, barring any major double-dip recession, or shock to the economy, it seems as though the California housing market is poised for a slow but much anticipated recovery. The perfect combination of low interest rates, deflated prices, and high rents lends to an extremely favorable home buying environment. My final word of advice is to avoid waiting for home prices or interest rates to creep down even lower, as it is much more likely that both rates and prices spike rather than go down any further.
President/CEO The Aramco Group
Mehran Aram, advises refinance-seeking borrowers to act fast:
“Apply for a refinance with a trusted local mortgage professional ASAP. Gather all your income, credit and asset related documents and be prepared to provide more documents, as lenders may ask for more in today’s market. With fixed mortgage rates at all time lows, lenders are overwhelmed with loan volume and the process is slower because of that heavy volume. So the sooner you begin the process the better.
These rates will not stay this low. Better economic data, higher stock prices and some promising news out of Europe regarding a possible solution to their fiscal crisis have already pushed rates up by about .125 to .25%, depending on the loan program, over the past two weeks. If the election results in more pro-business policies and an economic rebound with Romney or Obama, there could be more upward pressure on mortgage rates, especially if we see any hint of inflation. I am watching the election very closely. What’s good for America and for the overall economy is often bad for interest rates, which are at record lows because of all the bad news. As the economic news improves and the situation in Europe stabilizes, the window of opportunity for home buyers and home owners taking advantage of record low mortgage rates will begin to close as interest rates begin to rise.”
Click Here to read more from the article: "I keep hearing mortgage rates are the lowest they’ve ever been. Why can’t I get a refinance at a rock-bottom rate?" By AMELIA with www.nerdwallet.com
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