I’ve had a number of conversations lately with my staff and other loan officers in the industry about just how invasive the loan process has become.  Our process often feels like it’s half fraud prevention, and with reason.  FBI forms, fraud forms, million dollar fines and 30 years in jail.  It’s no secret to anyone who has applied for a home loan in recent years.  Most people understand the need to verify income, bank balances, credit and property information.  Even the general public can get a good grip on those requirements because hey, the lack of verifying those things led to a good chuck of the “mortgage market meltdown”.  It makes logical sense to most that you need to actually qualify and prove the ability to make your mortgage payments long term when you’re looking at buying a home.

People are still qualifying for home loans every single day and there are a number of excellent programs for buying your first home, buying a new home, buying an investment property or refinancing your current home.  The reality is, there are simply more checks and balances.  Okay, a lot more.  This isn’t really new, it’s been this way since late 2007, early 2008 and frankly, things have leveled out a bit. Gone are the days when we were getting daily notices of the tightening of guidelines and the loss of programs or even the closure of lending companies – thank goodness!

Some programs are actually loosening their guidelines and some documentation requirements have become less arduous as well.  Other guidelines are changing, like FHA mortgage insurance premium changes, but that’s not “new” either.  FHA mortgage insurance premiums have changed many times throughout my career and I suspect they will again as time goes on.  These are more infrequent changes with plenty of warning rather than the large sweeping changes from the masses that we were seeing in years past.

That said, there are some things that are just as prominent today and it’s important to understand the process and the implications of not “following the rules”.

I recently helped a client finish his home loan.  He had started at another lender.  He was coached to omit some details about some deposits into his bank account.  Now, we can all justify our junk and say it was a “little white lie” or “it didn’t hurt anyone”, but it does and it matters.  His omission made the loan not approvable the way that it was originally set-up.  We had to start over and I had to have a conversation that went something like this:

Hi Mr. Borrower.  I really want to help you here, however, it’s obvious to me what’s going on based on the information I’ve collected from you and your explanations don’t coincide with the facts on paper.  I need you to be 100% honest with me about everything.  If I have all of the accurate information, then I can help get you a home loan.  If I don’t, I can’t.  And…I got everything and then some.  We were able to re-structure his loan and get he and his family into their new home.

Not all stories turn out that way.  Unfortunately, there are omissions that render loans impossible to complete.  Lay all of your cards clearly on the table.  We’re here to help. We need all of the facts and honest answers to all of our questions in order to serve you best.  The truth will truly set you free!

1. Knowledge of the industry

Julie explained how important it is for mortgage professionals to know what’s going on in the industry and what programs and options are available for clients in all kinds of situations.  Carrie works with MN first time homebuyers, homeowners who are moving up, downsizing and refinancing and she understands that all those actions result from different life and financial circumstances.  There’s no one-size-fits-all mortgage and Carrie helps clients find the option that’s just right.

1. Willing to do the work

When Julie said Carrie is ‘willing to do the work,’ she was actually pointing out how much more there is to the mortgage process than taking an application.   Carrie works with people from the time a consumer is ‘thinking about buying or refinancing’ all the way to closing and beyond.  Some people need time to get organized and take care of different issues before they are able to qualify for a mortgage and Carrie Guarrero and her team help with the plans that get them on track. 

1. Cares about the people 

Julie’s opinion is that Carrie’s work isn’t about the loan, it’s about the people and getting into a home.  Carrie Guarrero is passionate about helping people build healthy financial futures for themselves and their lives.  She also believes that homeownership helps neighborhoods, cities and the economy.  Helping people – even if it takes time and planning – is part of Carrie’s mission as a mortgage professional. 

It’s normal for a real estate agent or builder to refer clients to a mortgage professional.  It’s quite amazing for someone who has left the industry to actively refer Carrie to as many people as Julie does.  Carrie and her team are so grateful for Julie’s past patronage, but perhaps even more grateful for her continued, unshakeable support.

You can imagine what happened next:  My friend kept track of the dates when her 0% interest grace periods would end as she paid the debt down, and she would transfer it to another card for 0% until she paid it off.  She called it “Balance Transfer Bingo.”  I did crack a smile at the name and have to admit this did eliminate monthly interest on her credit card debt which is one of the things that keep so many people in debt for years and paying a price that was far more than they originally spent.  While that’s a good thing, it’s very tedious to monitor and it takes commitment to remain in those “interest free zones.”  There’s also concern about the number of cards a person has, acquiring additional cards and the overall effects of moving dollars around in this manner.  I know my friend wants to refinance on her home loan in the future, so we had to have “the talk.”  It went something like this: 

• How many credit cards do you have?
• How are you using credit cards? 
• How many credit cards do you use regularly?
• How many credit cards do you have that you are carrying balances on?
• How much do you owe on each credit card?

We discussed her situation and the timeframes for refinancing her home loan and we will be meeting to make a very specific plan for what she needs to do before she applies for her new home loan.  I was relieved that this subject emerged and I was able to talk to my friend about credit habits that can be damaging and how to avoid them.  As I say frequently in my blogs, it’s important to check your credit each year and to keep in touch with your trusted mortgage professional to uncover any roadblocks that could hinder your current or future plans.  While not everybody is as “creative” with their bill-paying habits, this incident reminds me of a few things everyone should be careful about and give my team and I a call before they do:

• Deciding whether to close a credit card account or credit line
• Applying for new (especially major) credit
• Choosing financing for a home loan or an auto

Keep in touch.  There are so many things that my team and I can help you advance – or avoid – when it comes to your credit.  Luckily for this friend of mine, her Balance Transfer Bingo won’t land her in the Credit Crashing Casino.

You’ll learn about the process of buying your first home from beginning to end as seasoned professionals, Carrie Guarrero and Steve Howe engage you in the MN First Time Home Buyer Process from beginning to end in this 90-minute class packed with information to help you get started right.

When:  Thursday, May 16, 2013

Time: 6:30-8PM

Location: 436 Gateway Blvd, Burnsville, MN

Cost: Free

Registration:  Online MN First Time Home Buyer Class Registration or call 952-808-0042 to Register

We will walk you through the home buying process in the same way you’ll walk through it when you start your home search and home loan pre-approval process.  You’ll start by gaining an understanding of the current Minnesota Real Estate Market and move through home loan pre-qualification, home loan options, and home loan pre-approval.  We’ll dive deep into what a mortgage lender looks at in terms of credit, income, assets and loan options.  Once we’ve completed that step, we’ll walk you through the home search process, writing offers, home inspections and home appraisals.

Nothing is off the table in this low-key, open forum MN first time home buyer class setting.  We highly encourage your questions and feedback throughout the class!  You’ll leave with a thorough understanding of what steps you need to take and what to expect throughout the process of buying your first home.

We’ll also discuss special programs available to you as a MN First Time Home Buyer.  MN has a variety of MN first time home buyer programs and incentives that could help you with down payment assistance, closing cost assistance or reduced interest rates as a MN first time home buyer.

Check out some of the newly released MN Housing MN First Time Home Buyer Program information and come to class to learn more!  If you’re interested in finding out if you qualify for one of the new MN First Time Home Buyer Programs with down payment assistance or closing cost assistance, but can’t attend the MN First Time Home Buyer Class, you can start the process now by completing our online pre-qualification worksheet.  We will assess your situation and get back to you to discuss the MN First Time Home Buyer Program options for which you may be eligible.

Our MN First Time Home Buyer Class is offered monthly.  If the March First Time Home Buyer Class doesn’t work for you and you’d like to reserve your spot for a future class, you can register for any of our upcoming classes in advance.  All classes are held on Thursday evenings from 6:30-8PM.  Future dates are below:

June 13, 2013  - MN First Time Home Buyer Class Registration 

July 18, 2013 -  MN First Time Home Buyer Class Registration

To protect her privacy, we nicknamed her “DiDi” – short for “Divorced Diva,” because her situation and the things she needs to work on stem from ending her marriage.  Unfortunately, divorce is fairly common.  If you’ve been through it or know someone who has, you’re probably familiar with how difficult a divorce can be on one’s finances.  That’s why I think DiDi’s situation now and story going forward will be helpful for a lot of people.

DiDi and her husband owned 3 Minnesota properties when they were married:  The home they lived in, a loft in the cities that she used for an office and an investment property – all with mortgages on them in DiDi and her ex’s names.  When they divorced, DiDi got the home they lived in and the loft and her ex-husband moved into the investment property.  The divorce settlement requires that all the properties be refinanced within 10 years so that DiDi and her ex can be removed from the debts on properties they no longer own.  Sounds simple right?  Divide up the properties, make sure that whoever owns the property is the one responsible for the mortgage and go on your merry way.  Well, there’s a little more to it.

When DiDi got divorced, her ex made more money than she did and for a time, she went into debt.  She has slowly been paying off the debt and increasing her income, but she is self-employed and that always adds some complexity to getting qualified for a mortgage.  To top it off, the loft property is underwater – meaning, she owes more on it than what it’s worth.  So what’s she going to do?  Enter Carrie’s Team….

DiDi will need to make a plan and in her case, it will take some time to get her in position to be able to qualify to refinance her two homes.  My team and I will meet with her and give her a “to do list” so she knows all the things she needs to do (and what not to do!) as we get her prepared to apply for her loans – and get approved.  One example of the things DiDi will not be doing is closing her credit cards.  It’s hard to believe that paying off debt can be detrimental to your credit score, but it actually can be if you CLOSE the credit accounts that you pay off.  Of course everybody has a different credit profile and one on one input from a professional is important.

My team and I will make sure DiDi knows what to pay off in what order over what period of time to preserve her credit.  If DiDi hadn’t reached out to us, she could have made some moves that would delay her ability to qualify for quite some time.  DiDi luckily understands that mortgage interest rates won’t stay at the levels we’ve become accustomed to forever and wanted to make sure she was doing the right things in order to qualify as quickly as she can to refinance her homes.

Divorce is just one example of a life event that can trigger the need to talk to your trusted mortgage professional.  You’d be surprised at how we can help and the things we can help you prevent (or achieve!).  We’ll keep you posted on DiDi’s plan and progress.  Meanwhile, what’s going on in your life?

• Have you ever been disappointed with customer service?
• Do you feel that you should be treated with respect when spending money at a business?
• Do you feel that people you trust with major transactions should be attentive and sensitive to how important it is to you?
• Do you want access to the most and best information to make the most informed decision you can?
• Do you want to feel that your business is important to people you do business with?

Carrie answered “yes” to all of those questions and her own experiences as a consumer heavily influence how she and her team conduct business.  That’s why Janice was so thrilled with her experience in working with Carrie and her team at Cornerstone Home Lending.  Don’t take our word – let Janice tell you herself:

Companies and service providers routinely design the experience they want their customer to have; however, Carrie and the MN Home Loan Partners of Cornerstone Home Lending are also aware of the experiences they don’t want customers to have.   Have you ever bought something and the sales person was really nice as you were deciding to purchase, but you couldn’t reach that person when you had a problem after the ‘deal was done?’  To Carrie and her team, a home loan – whether you’re buying a first or another home or refinancing – is not a ‘deal,’ it’s part of your daily life and financial development.  You’ll always get your questions answered and your calls returned when working with Carrie and her team from the time you begin getting in position to buy your home or refinance, throughout the process and any time you have questions after you close.   But closing isn’t really an end…your loan is just beginning!  That’s why Carrie wants you to stay in touch.  As your mortgage professional, Carrie is part of your personal finance team.  Checking in periodically to discuss how things are going and what goals and dreams you may have can be extremely valuable so that you can take advantage of every opportunity that may be available to you.

Let Carrie know what’s on your mind, no matter how far in the future you think it may be…will you eventually need a larger home?  A different school district?  Will you be downsizing?  Have you always wanted a cabin or vacation home?  Janice let Carrie know what she wanted to do and she was thrilled with the results.  Janice will stay in touch as her life progresses and will definitely work with Carrie in her ‘personal next phase.’

You’ll learn about the process of buying your first home from beginning to end as seasoned professionals, Carrie Guarrero and Steve Howe engage you in the MN First Time Home Buyer Process from beginning to end in this 90-minute class packed with information to help you get started right. 

When:  Thursday, April 18, 2013

 Time: 6:30-8PM

Location: 436 Gateway Blvd, Burnsville, MN

Cost: Free

Registration:  Online MN First Time Home Buyer Class Registration or call 952-808-0042 to Register

We will walk you through the home buying process in the same way you’ll walk through it when you start your home search and home loan pre-approval process.  You’ll start by gaining an understanding of the current Minnesota Real Estate Market and move through home loan pre-qualification, home loan options, and home loan pre-approval.  We’ll dive deep into what a mortgage lender looks at in terms of credit, income, assets and loan options.  Once we’ve completed that step, we’ll walk you through the home search process, writing offers, home inspections and home appraisals.

Nothing is off the table in this low-key, open forum MN first time home buyer class setting.  We highly encourage your questions and feedback throughout the class!  You’ll leave with a thorough understanding of what steps you need to take and what to expect throughout the process of buying your first home.

We’ll also discuss special programs available to you as a MN First Time Home Buyer.  MN has a variety of MN first time home buyer programs and incentives that could help you with down payment assistance, closing cost assistance or reduced interest rates as a MN first time home buyer.

Check out some of the newly released MN Housing MN First Time Home Buyer Program information and come to class to learn more!  If you’re interested in finding out if you qualify for one of the new MN First Time Home Buyer Programs with down payment assistance or closing cost assistance, but can’t attend the MN First Time Home Buyer Class, you can start the process now by completing our online pre-qualification worksheet.  We will assess your situation and get back to you to discuss the MN First Time Home Buyer Program options for which you may be eligible.

Our MN First Time Home Buyer Class is offered monthly.  If the March First Time Home Buyer Class doesn’t work for you and you’d like to reserve your spot for a future class, you can register for any of our upcoming classes in advance.  All classes are held on Thursday evenings from 6:30-8PM.  Future dates are below:

May 16, 2013  - MN First Time Home Buyer Class Registration 

June 20, 2013 -  MN First Time Home Buyer Class Registration

• How long have you been a mortgage professional?
• Why do you like helping people get home loans?
• Why do you think you’re good at what you do?
• Does your company offer a variety of programs? 
• Do you work with Down Payment Assistance (DPA) programs?
• Do you offer special programs for MN First Time Home Buyers?
• Are you experienced with conventional and government loans?
• Does your company offer conventional and government loans? 
• Why would one mortgage program be better than another for me?
• How many home loan programs are potentially available to me?
• May I please have the names of Realtors you regularly worked with?

The answers you get can be quite revealing and give you great insight to the person you are trusting with your personal information and whatever dream you have that a home loan will help facilitate.  A friend of mine recently told me a story about meeting a loan officer at a party.  Being curious by nature, she asked the man why he got in the business and what he liked about it.  To both questions he answered, “Money“  – but he wasn’t referring to helping borrowers get it.   In my view, this is a serious red flag and indication that the best interests of the consumers that man works with are not being served properly or professionally.  So ask questions before you answer them.  Most people don’t get mortgages very often – it’s a “few times in a lifetime” experience.  Take your time and remember you’re the customer.  Don’t be frivolous and end up furious.

We should talk.  People think the only time they should speak with a mortgage lender (even one they know) is when they want to buy or refinance a home.  THAT’S SO NOT TRUE!!  A lot of people are familiar with the concept of a financial planner who helps with investments and retirement planning.  To most, it makes sense to periodically review their investments and strategies for saving, retirement and growing money overall.  While financial planners are important parts of the bigger financial picture for people – they’re not the only part.  Skilled, experienced mortgage lenders are also important parts of your bigger financial picture and it’s just as important to keep in touch with your trusted mortgage professional as it is to keep in touch with your financial planner.   Why?

Mortgage professionals are highly skilled in basic household finances.  We work with the concept that everyone needs a roof over their head and we help consumers direct their housing dollars in the best possible way to advance their goals – from the most basic to the complicated.  The most basic household goal for most people is to get their own household.  We work with MN first time homebuyers from the time they decide they would like to start directing their monthly rent money back to their own balance sheet instead of their landlord’s until they close on their own first home and beyond.  We regularly help homeowners who are happy where they are to make sure they have the best interest rate and loan program available to them at any given time as well as those who would like to move up, buy a second home, or downsize.  There are things to be aware of and manage no matter where a person falls on the homeownership spectrum – from dreaming about it to owning a first home to maintaining value and beyond.  We recommend checking in with your mortgage professional to keep tabs on your overall financial picture with regard to your housing dollars and your ability to maintain and upgrade your situation according to how life unfolds and the goals you set for yourself and your family.

A lot of people avoid talking to financial planners because they don’t think they have enough money to plan with and a lot of people fall out of touch with their mortgage professionals because they think their business has concluded.  File both of these under “poor choices.”  So many people miss out on opportunities because they don’t realize what options – and help – are available to them.  If you’re even thinking about – much less planning – any of the following, you need to keep in touch with the professionals you choose to be on your financial team:

• Buying a first home
• Buying a bigger or different home
• Selling your home
• Downsizing
• Refinancing
• Buying a second home now, soon or sometime
• Buying a vacation property
• Buying an investment property or converting your current home into a rental property

You may even be able to consider doing some of the things on this list, and not know you are able to already – or how to get in position.  We’re here to help.  First quarters of football games are small potatoes compared to the first quarters of the years of our lives.  My team and I are here to help you make the most of what you have to work with now – and help you build resources for your future.  So…how was your first quarter 2013?  Let’s talk.  The two minute warning will come sooner than you think – and we want you to be ready.  Let’s make a game plan!

Before I break out the four elements that comprise the acronym PITI, let me explain why this term can be the source of frustration and disappointment.  There’s no shortage of mortgage payment calculators out there in cyberspace and they even pop up automatically when web browsers search real estate.  I’ve blogged before about the dangers of mortgage calculators because they can be extremely inaccurate.  Inaccurate mortgage payment information can wreak all kinds of havoc on the home and mortgage shopper’s psyche – leading them to believe they can afford more – or less – than what is actually true.  This wastes time, gets hopes up, sells folks short and never provides the full range of factors that influence what a borrower’s payment will be or all available options.  A major reason for the inaccuracy of online mortgage calculators is they don’t include all four of the PITI elements – or if they do, they are often incorrect.  We discuss PITI in our monthly MN First Time Home Buyer Class and eyes are opened by the large variances that can occur between one client and another based on their individual circumstances and the properties they choose.  It’s not uncommon for this to be misunderstood, even with non First Time Home Buyers. 

Principal and interest are the first and largest elements of PITI.  They are the amortized sum of the mortgage amount (Example:  $200,000)  and the interest rate (Example:  4%) over the life of the mortgage (Example: 30 years).  Principal and interest are frequently all that pops up on mortgage calculator results.  Taxes make up the third element of PITI and those vary according to locations.  It occurs to most people that property taxes wouldn’t be the same in different states, but the truth is, property taxes can vary within a single city.  Local information is critical when figuring the property taxes – and hence the total mortgage payment.  Insurance is the “I” in PITI and that too varies according to location and whatever policy choices the insured person makes.  The other insurance that is often left out of online calculators is Mortgage Insurance.  This insurance can vary dramatically from one client to the next depending on the type of loan, down payment, credit score, etc. Errors in payment estimation can be devastating to a person’s ability to get a loan if the actual payment is higher and those dollars make the difference between being able to qualify or not.  Furthermore, faceless calculators without detailed knowledge of your personal circumstances can cheat you out of benefits that could get you more for your money.

Mortgage professionals like my team and me are the most qualified to estimate payments (PITI!) for you and provide you with accurate information…it’s what we do!  Home shopping can be fun and homeownership very rewarding; however, the mortgage process is detailed and is not something you should “try at home” on your own.  Anyone who is thinking about buying a home or refinancing – no matter how far in the future that may be – should talk to an experienced professional.  Get an idea of what’s possible, what preparations you may need to make and how long those could take as well as what all of your options will be.  Get the right PITI so you won’t be feeling P-I-T-Y.