How To Survive The Home Mortgage Scandal

I probably shouldn't share this information with you because it is working so well for us. It's maybe a little off topic but if you are in the real estate/mortgage industry it may save your business as it did ours. I'm going to tell you the whole story so you will understand how sincere I am.

Jerry, my husband, is an independent mortgage broker and has been in the mortgage business for at least 35 years. His office is located in the Atlanta area and when the market was good I think at one time he had over 20 loan officers working for him. That business is his heart and soul. He loves it. He is also one of the most reputable people I have ever met. He would never ever think of doing anything even the slightest bit dishonest and I know he has fired loan officers that did not have the same standards.

I was an engineer with Northrup Aerospace Company. After Jer and I married in 1997 I went back to school and became a Certified Mortgage Specialist so I could work at his office. I was a loan officer for a while, a processor if we needed it and I even opened up a branch in Tennessee. Life was grand.

In 2001 I didn't want to do the commute thing anymore. I left Jerry's company and started my own corporation.

I had so much empathy for consumers that were being taken advantage of by other mortgage companies that I decided to build a website on mortgage guidelines. People would be able to learn and understand more about the biggest investment they would ever make.

I built mortgageunderwriters.com and fsbobasics.com. I didn't do the coding because I didn't know how then but I did the lay out and content. They were finished and up on the net in 2002.

Both of these sites are content rich and totally free to the consumer. I was going to make money by having Real Estate Industry Professionals list their company in a geographical directory on each site for a small fee of $20 bucks a year. Not a bad idea except that the sites were new and got no traffic so even if you happened to stumble on it you still wouldn't advertise your company because, ... no traffic.

Just a note here for clarification. I left Jerry's Company. I stopped originating loans. These two websites do not generate leads for me or leads I would give Jerry. The purpose of the profession directories was so Consumers would search it for professionals in their area.

Anyway, I went back to school, learned html and SEO. It wasn't long till the MU site was first on Google. I've given up on the FSBO site. But I became very busy on the MU site answering questions for consumers and locating information for underwriters, processors and loan officers. I really enjoyed working with all the people, ... but I still wasn't making any money.

The money wasn't really a big deal but I did want to make at least enough to pay for the hosting fees. So I put Google AdSense on both sites. It worked, I was making $150 a month. That paid the hosting fees, the Business license and for the accountant to do my taxes. I had a big whopping $200 left over at the end of the year.

This wasn't really a sad story, it kept me busy and up on the market. The money just wasn't really that important because Jer was doing great. I was just a house wife with an Internet hobby. I didn't feel that way but I think that's how Jer felt about it.

We all know the home mortgage market has crashed. The city of Atlanta is one of the worst hit, and companies are going out of business every day. Well, it didn't happen over night. I think it started sliding in 2003 or 2004.

Jerry's company is no different than the others. He has been struggling and downsizing for the past two and half years. The last twelve months have been really bad. He only has three loan officers now and he has his buildings are up for sale. So sad.

So now I have a sense of urgency. We really need money and if I can't get my sites making money I will have to go back to work somewhere and that's not so easy when you get to be my age.

I started searching the net because I had to find a way to make my sites develop income. I ran across this book somewhere: Google AdSense Secrets by Joel Comm. (I think this is free) I read it and applied that knowledge to my AdSense ads (AdSense was the only revenue I had on the sites). Wow, my AdSense more than tripled immediately without doing anything else. So now I'm making $600 per month on my site. That won't save the farm but I'm really impressed.

I'm excited at this point because it worked as soon as I uploaded the changes. I'm starting to think that maybe I can make these sites profitable. I continued to search the net and I specifically looked for stuff from Joel Comm because he obviously knew what he was talking about and I really trusted him. I don't know why, I just did. He seemed really honest and not out to make a quick buck.

I don't know if you have heard of him but he was doing a program on the Internet titled something like, "The Next Internet Millionaire". It was a free thing to view, sort of like a reality show on television but broadcast on the Internet. I wasn't the least bit interested and didn't watch any of them.

I wasn't interested in "Internet marketing", I was trying to find info to save my husbands mortgage business. After Joel finished that Internet reality show thing he came out with a product called the secret classroom. What it was, I thought at the time, was what he taught the people on the reality show. They were people off the street, all in different businesses and he supposedly taught them in the "classroom" how to make a fortune on the Internet. Sorry, I still wasn't really interested. Hey, I am in the mortgage industry!

Then one day Jer said I really needed to get a job or we would be living under the overpass. Now the overpass thing didn't really scare me but the JOB thing did. I'm motivated now and really depressed if you want to know the truth.

Somehow and I don't remember how, but I ended up on Joel's sales page for "The Secret Classroom". I read the whole sales page ... no one ever reads all that stuff. I guess I was desperate. Well, I bought it with my business account but I surely didn't tell Jerry. He would have had a fit. I even hid it when it was delivered.

I started watching the DVDs. It's like twelve DVDs plus a study guide and a few other things. The first DVD I wasn't overly impressed with. It was important information but at this point in my life it was a "been there, know that". I learned that when I was in my early 20s.

In one of the DVDs I was so distracted by the instructors mannerisms I couldn't focus on the message. About half of the way through that DVD I started listening and it was like "Oh MY God" and I slapped my head. He taught me why all our advertising dollars were going in the trash, totally wasted with no ROI. HE got my attention and I'll say to you that if that was the only DVD, the knowledge from it alone would have turned Jerry's company around.

As I got into the series I started taking notes. That was stupid, ... like I couldn't watch it again?? Why take notes? (old school I guess)

I guess it is partly because the Internet has changed everything in the last 5 years and the old way just either doesn't work at all anymore or is major less effective.

It's about new technology and a new consumer that wants: what they want, when they want it, and in the format they want it. You need this information and so did I.

I highly recommend that you invest in The Secrete Classroom especially if you are in a business that is struggling or if you are putting together a new business. It's not about "Internet Marketing", it's about "How to Market Any Business On the Internet".

Remember that first DVD I said was "been there, know that"? Now that I am trying to implement everything I have learned, that first DVD is really helping me stay focused and I can do twice as much in one day that I did before.

Sincerely,

Connie

CLTV

Sorry it has been so long since I posted. So many people are sending in questions we don't have time for a lot of other stuff.

I know about all the bad hype from the media about the mortgage market. And, of course I have heard each of our presidential candidates run down the economy over and over again. This happens every election year.

Unfortunately people with very busy lives hear and read all of this and begin to think it is true. We have all heard this: "If you tell a lie often enough people will believe it is true". There you go!

Is our economy a little slow right now? Yes, but it is not in the dumpster.

Are independent mortgage brokers and appraisers the cause of the mortgage scandals? Absolutely NOT. In fact, it is their integrity and concern for their client's well being that helped to fulfill the American Dream.

The real scoundrels are the large corporations, and giant lenders. Don't let me forget to mention the politicians like the New York Attorney General, Andrew Cuomo, who is using the situation to his benefit by "saving the consumer" with new laws that will only hurt the consumer by putting the independent appraiser and broker out of business. But of course he is making a name for himself. What does he care. Guess who wants to run for president in 2012?

Well, enough of that! I received a very simple question yesterday and I am putting it here for a few reasons I think you will understand afterwards.

Question: What is CLTV and LP?

Answer: CLTV stands for Combined Loan To Value. This is used when there is more than one loan on a property. As an example, if the first mortgage is 80% of the appraised value and there is a 2nd loan of 15% of the value, the CLTV is 95%. In the industry we call these Combination Loans.

LP is a term for Loan Prospector. Loan Prospector is a computerised program that reviews and approves or disapproves an FHA, VA, or Freddie Mac loan. DU, DeskTop Underwriting, is a similar program used for Fannie Mae, FHA, or VA loans. When an application is put through these programs, basically, ... sort of, the live underwriter then only has to verify the documentation because the computer has given an approval. If a loan isn't approved because of an unusual circumstance, a lender can chose to do a manual underwriting in which case the loan may still be approved.

First point for posting this is to let you know that Lenders ARE lending money. The mortgage industry is alive and well in spite of the media and presidential candidates. As a consumer you should take full advantage of these unbelievably low interest rates.

Refinancing to lower your interest rate will save you a ton of money. In this women's case, combining her 1st and 2nd mortgage is a very smart financial move and will also lower her payments.

If you are thinking about buying a home there is no better time than now. I really mean like, NOW. As soon as a new president is elected, and it doesn't matter which one, the rates will go back up. I promise you this will happen. It happens EVERY election year. Just make sure you go to a reputable broker and don't buy more house than you can afford.

My second point here is to the industry professional. I get so many questions from people just like this on my Mortgage Underwriters web site that I barely have time for anything else. When I have conversations with these people I really want to see them successful and hooked up with the right people.

Now, I don't originate mortgages or loans of any kind anymore so I try to refer them to someone. I live in Cartersville, Georgia so I do know mortgage brokers and real estate agents here. However, the people that contact me for help live all over the country. There is no way I can make sure they get connected with the right people.

To make matters worse I'm in the middle of putting together some free e-books for the site plus we are going into our busiest part of the year. I was thinking that there has to be a way to make finding professionals in their area easier and less time consuming. So, ... I have this offer.

I have a Professional Directory on my website where professionals can list their company in their geographical location. I normally charge $19.95 for an entire year and they can list in as many cities as they operate in. From now until May 1st, 2008, you can sign up for $10.95.

Do me a favor. Sign up. I get around 10,000 unique visitors a month and most of them are looking for information before they jump into the market. If you sign up, I won't have to search the web to find someone to refer them to. This will save me a lot of time and save you money if you do it today. sign up here, Real Estate Industry Directory

I've lowered the fee on my For Sale By Owner site to $10.95 too. This isn't a high traffic site but there are a few hot spots in the U.S. Texas, California, Georgia and I think Illinois are are the active areas. For Sale By Owner Professional Directory. I also allow real estate agents to list their properties here free.

In the mean time, I'll just keep searching the web.

See Ya,

Connie

Good Grief, How Long Does It Take

Up Dated February 2010

Yesterday I received the following question from K.S. who lives in Antelope, California. I want you to know I get this question over and over. It is one of my pet peeves because there is absolutely no reason for it to be such a frustrating reality to so many people applying for a mortgage. Here's the question:

"how long do i have to wait for underwriting???? i have been waiting week after week. he said completion review would be complete the 19th after last week he said 48 hrs .. last message he sent said he would know more on the 19th ...gr"

Answer:

The amount of time in underwriting depends on the lender, the type of loan, the issues that need to be resolved, and how saturated the market is. It can take 1 (one) week or up to 6 (six) weeks (worse case).

I don't know what the issues are on your loan or what type of loan you are qualifying for. However, your loan officer does!

Sometimes the problem of time is an issue of "when it was REALLY submitted" to the underwriters or what issues still need to be resolved. Your loan officer needs to be totally up front with you. If you don't think he is, ask to speak with his broker/manager.

I'm serious about this issue. You need FACTS! Ask exactly when it was submitted. If it has been more than two weeks, you have a right to know exactly why. Ask for documentation. No kidding. It is your loan and you are paying them a lot of money to broker it. You should demand, without being arrogant, real and true information.

Good Luck,
Connie

I found out during the conversation with K.S. that the Company she is doing business with is one of , if not the largest Lender in the US. That is too Sad. I also found out she is applying for an FHA loan and in all fairness these loans do take a little longer to close.

Like I said, this is one of my pet peeves so let me tell you why. I've been in the business for a long time and pretty much seen it all. I know that sometimes an incomplete package is submitted to underwriters. I know that there can be issues with appraisals or titles that can take time to correct or clear up. Sometimes a simple VOE will take longer than it should. Sometimes the borrower may be a little weak in some areas and the underwriter may ask for more or unusual documentation, they have the authority to do that.

I also know that sometime, more often than we like, the package just doesn't qualify under that lenders guidelines so the loan officer starts sending it out to numerous other lenders while he prays, and I mean literally prays that one of these lenders will approve it out of the kindness of their heart or that perhaps that their guidelines are not as tight. Well, we have all been there and every now and then it works, ... but at this point it is usually a lost cause, only that, ...we just can't let it go because we are heart broken for the borrower and we find ourselves in a state of denial.

If you are in the business you know that all these scenarios are reality and do take time. OK, so here is the issue I have with all this. This is why it angers me so: While all this is going on the borrower is left in the dark.

Most borrows don't understand all the steps we go through or the documentation process. But it is their loan be it a good one or not. They are paying a lot of money for this process. We owe it to them to keep them informed about any problems or issues that arise. They are part of the process. They have a right to know and if they don't understand then we must explain it so they do. Our avoidance of the issue and reluctance to inform the borrower puts them through a tremendous amount of stress and anxiety.

Borrowers, people, you and I, ... all expect to be treated with dignity and respect. We expect honesty from the people we do business with and we expect the people we are doing business with to have integrity and compassion. Pretty simple, huh? So why don't people get it right?

Borrowers have a right to know and the loan officer or company has an obligation to keep them informed.

Alright, I'm Done. I do hope I don't get this question again for at least a week!

Connie

P.S.

I originally made this post in 2008.  Today, in 2010, all the above still stands true.  However, the mortgage market has changed so in the past two years that there are additional factors causing delays.

The mortgage crisis and federal intervention has most lenders/underwriters being more conservative due to "fear of the feds".  Unfortunately this is a fact.  I have heard it from many underwriters.

Appraisals and property value is another big issue that causes delay.

The low down payment or no down payment programs are overloaded now that the subprime loans are gone.  They don't have enough staff to handle the volume.  This causes great delay.

As a consumer you still have a right to know the status of your loan.  Demand it!  If you have questions leave them in the comment section and we will respond.

Good Luck

Mortgage Underwriting Process

Underwriting Denial Because of CAIVRS Report

I Received this email from Mike early this morning.

I had recently applied for a loan through a major bank, and had gone through the whole process, only to have been told that the underwriter wouldn’t approve the loan unless the CAIVRS report was removed. Unfortunately, I had to file chapter 7 bankruptcy and included my house, which had been financed through an FHA loan. Upon further investigation, the mortgage loan officer said that because there was a foreclosure, that the underwriter wouldn’t approve the loan. They told me to contact HUD, who told me that the claim couldn’t be removed, and that it was just a credit alert, and that it was just up to the lender whether they pay attention to it or not.

I had told this mortgage company exactly what had happened in the past, they ran my credit, and there was no indication that there was going to be a problem. I had applied for the new loan here recently, March 2008, and the chapter 7 Bankruptcy had discharged in December 2003. I looked on the State/county auditor’s website and noticed that the property I had defaulted on had changed title to HUD in 2003, and then into someone else’s name in April 2005.

I have since reapplied with another mortgage broker, who says he doesn’t see a problem, though I’m a bit concerned that I am going to have to pay all the costs all over again for nothing. The appraisal I got originally is not an approved person for the broker I am using now, so I’m having to pay another 300.00.

What kind of stumbling block was hit with the original mortgage company, and how can I think that this new company, using a broker, can give me a better chance of financing this loan? I’ve been told that I can’t go FHA because of the CAIVRS, but the issue is well over three years, unless they’re basing their decision on some other date that I can’t see, like a mortgage insurance claim, or something like that.

I’m a bit confused, and could use your help, advice, or attention, and an explanation, if you could please!

Thank you,

Mike


Answer: (updated 2012)

First, you need to understand that a CAIVRS report is only pulled on an FHA or VA loan  pulled on almost all loans now depending on the lender. You always need a clear CAIVRS to get an FHA loan, VA loan, or a USDA loan. I don't know of any lenders that will grant a loan if they know CAIVRS is not clear. A CAIVRS should have been checked up front to save you the expense and time delay. The bank should have known this.

If you were not applying for an FHA loan the bank should not have pulled a CAIVRS at all unless they are running scared because of the industry issues. Banks are really getting paranoid and have always been cookie cutter conservative.

A reputable Broker is always the best place to get a mortgage. It is the only thing they do and they usually have 40 to 60 lenders to send your loan to and they shop the interest rates for you. A good Broker will always try to place you in the best product at the lowest rate available.

Banks specialize in checking, savings, credit cards, and small loans. Their Mortgage Department, in most banks, cherry pick the loans they want to do. I know Brokers are getting a bad rap right now but that is because the large lenders are not willing to take the heat for funding loans that didn't qualify or for lowering the standards so far that people defaulted. Trust me, the independant broker doesn't set the standards. They have to operate by them or they can't get their loan funded.

Sorry I got a little off topic but I just hate seeing people get jacked around.

Based on the discharge date, you should qualify for conventional financing if you have re-established credit and no lates since the bankruptcy. Seems to me the bank should have switched it to conventional.

This is based on the information you provided. Naturally you would still have to qualify based on other factors such as income, DTI, and down payment.

Best of Luck,

Connie


(added 2012)

The following link should help anyone with caivrs questions and it has a link to the Caivrs page near the bottom.

http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/ref/sfhp2-09

FHA Gift Programs Make FHA Mortgages A Great Option

Gifts for both the down payment and the closing expenses may come from acceptable sources such as: family member, close friend, Borrower’s employer or labor union, a charitable institution, or a governmental agency or public entity that has a FHA accepted homeownership assistance program.

100% of the funds for down payment and all closing expenses may come from an acceptable gift or grant program. These funds must be completely documented to show that no repayment is expected and the gift donor will not place a lien on the subject property. Gifts may not be used to meet the Borrower’s mandatory 3 months PITI reserves requirement for 3 and 4 unit purchases.

Gifts can not be used to increase a borrower’s asset to show reserves after closing that would alter the DU or LP findings from a Refer or Ineligible status to an Approve Eligible or Accept status. The underwriter must review the findings to determine whether or not any gift amount is considered in the reserves reviewed by the system. The gift amount must be deducted from the total reserves shown on the findings and the loan must be re-run through the system to provide the true picture of the Borrower’s assets and obtain a clear approval.

An original gift letter is required. The letter must state there is no repayment required and that no gift donor is tied to the loan transaction.

The transfer of funds from the gift donor to the borrower is required. The Lender must document the transfer of gift funds from the donor’s account to the Borrower’s bank account by obtaining a copy of the canceled check or other satisfactory withdrawal document that shows the gift is leaving the donor’s account and is being deposited into the borrower’s account. If the gift amount is being received at the closing, a certified check from the donor and a copy of the withdrawal receipt from the donor’s bank account is required. The closing agent is to make copies of these documents and forward to the Lender in the closing package.

If the gift donor borrowed funds to provide the gift, the donor must provide acceptable documentation that the funds were not borrowed from a party to the transaction or the mortgage lender. Cash on hand from the donor is not acceptable.

You can find more information at FHA Mortgage Underwriters.

Good Luck

Don't Screw Yourself By Not Checking Your Credit

I received this question from Donald in Toledo, OH., Sunday morning.

“What would happen if someone else used my social security number for a utility bill and I never lived at that address? This happened about five years ago when I found out about it. Will this hurt the underwriting of the house I am trying to buy”?

During our conversations it turned out that this “utility bill” turned into a collection. Fortunately it was five years old. I also learned that his credit scores are: 615, 625, and 652.

Answer:

The first thing you want to do when you find out something like this is dispute it with all the credit bureaus: Equifax, Trans Union, and Experian. This process is much easier than it use to be years ago thanks to the Internet. Each of these company’s have a web site full of information you should understand about your credit, credit scores, and how to improve them. You can file your dispute on line from their web site.

The Government mandated a few years ago that every person be entitled to one free credit report each year, …from each bureau. This is a wonderful thing because years ago you were not allowed to even look at your report. You were really up that well known creek and just guess who had the paddles. Get your report once a year from each company and take the time to review it.

There is only one web site you can get these reports from and that is annualcreditreport.com.
If your credit scores are high enough this 5 year old, small collection should not prevent a loan from being approved. Since most underwriting is now performed on an automated system you may be required to provide an explanation and supportive documentation or you may even be required to pay the collection.

In this particular case the credit scores are not really bad but they are not really good either. In fact, they are a little low compared to the average. This is a great example as to why you should monitor your credit every year. Don’t wait till you are applying for a loan.

I don’t have a clue what Donald’s employment history is or what his Debt to ratio is or how much he is putting down. These factors all play a part in loan approval and could be considered compensating factors if all three are very strong.

However, knowing what I do know, my recommendation would be that a conventional loan with a high loan to value (small down payment) would be difficult and the interest rate, if it were approved, would reflect the low scores. I would recommend an FHA loan. The interest rates are excellent and require only a small down payment. Again, this is assuming the other factors are in line.

FHA mortgages are wonderful. They are very forgiving about credit, low down payment, and they have some of the best rates on the market. I might add one thing here about the interest rate. At this point in time the par rate is equal to or lower than a conventional loan (depending on the lender) so if the company you are working with is charging you a much higher rate they may be taking advantage of your situation thinking you don’t know any better. Please, shop interest rates.

You can find out more about loan qualification from my web site at Mortgage Underwriters.

That’s it for today. Comments are welcome and if you pose a question I will try to provide answers.

Always,

Connie

Can I Refinance FHA

FHA mortgages have always been very good loans for the homebuyer. In today’s market the FHA refinance programs offer maximum benefits to the homeowner that wants to lower payments or get out of an adjustable rate mortgage. FHA offers three types of refinance mortgage loans: Cash-Out, No Cash-Out, and Streamline Refinance.

Streamline refinances were designed to lower monthly payments on FHA mortgages only. They can be done with or without an appraisal, and with or without credit qualification. The streamline refinance does not allow for any cash back to the borrower.

Loan Type Conversion Allowed:

1. 30 yr fixed to 30 yr fixed: The new payment must be lower than the old payment.
2. 30 yr fixed to 15 yr fixed: New payment cannot be more than $50 higher. Note: 15 yr fixed to 30 yr fixed is not allowed.
3. Fixed Rate to ARM: Owner occupied homes only
4. ARM to Fixed Rate
5. ARM to ARM: Rate must be lower than current loan
6. 203K to 203B

Streamline Refinance “Without” An Appraisal:

The new loan amount cannot be more than the original loan amount, OR more than the current principle balance plus closing cost. ... Whichever is less. This only applies to owner occupied as non-owner occupied borrowers can only refinance the existing balance, and do not have the option of rolling in the closing costs.

The only credit verification required is a verification of mortgage payments. This can be done with 12 copies of cancelled checks, front and back. IF cancelled checks are available, no in-file report is required unless the underwriter prefers that method to verify mortgage payments.

Streamline Refinance “With” An Appraisal:

An FHA streamline refinance with an appraisal allows the borrower to finance in the closing costs, discount points, and prepaids provided it all fits within the loan to value limits. The new loan amount may be the current principle plus closing costs, discount points and prepaids, OR, the appraised value x 97.75% (97.65%, or 97.15%, high or low cost state). Whichever is less!
IF the smallest of these two values is greater than the original mortgage balance credit verification is required.

Streamline Refinance – “Credit Qualifying”:

The loan amount is calculated based on the previous formulas and qualifying requires full employment verification, credit report, and debt to income ratio compliance. Typically these loans are used when the new mortgage payment will be higher, deletion of a borrower on new mortgage, or in assumptions involving due-on-sale clauses.

FHA "No Cash Out" Refinance:

This regular no-cash-out loan may be used to refinance a FHA mortgage, a VA mortgage, or a conventional mortgage and requires the borrower to fully qualify. Second mortgages may be included in the new loan if they are older than one year, if not you must prove that the funds were used solely to repair or rehabilitate the home. If not, paying off or including these loans would be considered a cash-out refinance.

This loan can be used to buy out the equity of an ex-spouse provided it is documented in the divorce papers. It is still considered a no-cash-out because this equity is considered indebtedness.

IF the property was purchased less than a year ago and is not currently an FHA loan, the loan amount will be the appraised value plus closing cost, OR the original sales price plus closing cost. Whichever is less!

If the purchase was more than a year ago and not currently FHA, the loan amount would be calculated the same as a "streamline refinance with an appraisal".

FHA "Cash Out" Refinance:

This loan can be used to refinance a FHA loan, a VA loan, or Conventional loan. This loan has many advantages: Max loan to value is 75% for conventional loans but FHA loans allow 85% plus a portion of the closing costs.

The property must be owner occupied for at least 12 months and the borrower must fully qualify.

Seller Contributions

Seller Concessions - How Much Is Too Much?

It is common for real estate professionals, mortgage loan officers, buyers and sellers to ask as to how much the seller is allowed to pay in contributions on a conventional mortgage loan in Georgia. Closing costs that are normally paid by the borrower are considered contributions if they are not paid by other parties. The seller, builder, developer, real estate agent or any other interested party to the transaction, including any affiliates, may pay these contributions.

The maximum allowable contributions from interested parties are based upon the lesser of the purchase price or appraised value, property type and the down payment amount.

Primary residences and second homes with less than 10% down allow contributions of 3%. If the buyer pays between 10 and 25% down the contributions are limited to 6%. Down payments of more than 25% allows contributions up to 9% on conforming loan amounts but non-conforming loans are limited to 6%. The maximum contribution is 6% for conforming 80/20 and 90/10 on primary residence and second home financing.

Investment property is limited to 2% concessions regardless of down payment.

Contributions toward any of the following are included in the maximum allowable limits:

1. Normal Closing Costs
2. Discount points
3. Commitment fees
4. Origination Fees
5. Mortgage Insurance Premium
6. Discount Points for temporarily or permanently lowering the borrowers monthly payment or interest rate.
7. Any other transfer fees normally paid by the borrower, e.g., transfer taxes, tax stamps, title insurance, surveys, appraisal, and recording and attorney fees.
8. Homeowner association fees for future dues.

If there are excess contributions, a downward adjustment to the property's sales price must be made to reflect the amount of any contributions that exceed the maximum contribution limits. The LTV/TLTV ratio must then be calculated based upon the lesser of the reduced sales price or the appraised value.

The value of any personal property, e.g., furniture, decorator items, automobiles or other "giveaways", must also be deducted from the property's sales price regardless of the amount of any other contributions.

A cash credit, cash rebate, incentive or inducement/enticement to purchase from the seller, builder, or developer must also be subtracted from the property's sales price. Examples may include but are not limited to: excessive marketing costs, commissions, or seller financing at below market interest rates.

A new LTV/TLTV must be calculated whenever the property's sales price is reduced. The LTV/TLTV is based on the lesser of the adjusted sales price or the appraised value.

Usually, a small list of personal property may come with a house. Most built-in appliances (such as stove, refrigerator, dishwasher), window coverings and carpeting, are usually considered to be fixtures so no adjustment to the purchase price is needed.

Sometimes some personal property items may be left for convenience and has little value, e.g., pool cleaning equipment, lawn mowers, picnic tables and patio sets. If personal property is less than 2% of the value of the property or has a value of less than $500 it is not considered a contribution.

You see how important it is that Loan Officers and Real Estate Agents understand the limits of concessions. A lack of training on our part can cause major frustration for the buyer and seller. Sales contracts and mortgage loans should be structured correctly.

Jerry Sanders owns an Atlanta Georgia Mortgage Company and understands the power of detailed knowledge. Reach him on the Web at http://www.peachstatemtg.com/ or http://www.mortgageunderwriters.com/