The first timer's guide to getting a mortgage loan.

I was writing an email to a first timer who just got her offer accepted on a building and will be getting an FHA loan. As I was telling her the steps that we would be taking together, I realized the need to syndicate instructions for getting a mortgage because there is a lack of knowledge with the general public in regards to this detailed and exacting process. Considering that getting a home loan is the largest financial transaction of most people's lives I think it's important to educate and prepare those who are about to get their first mortgage. Getting your offer accepted on a property is just the beginning. Here is my letter, I've crossed out her name for privacy reasons, and because she's a mega-huge celebrity. (OK, that last part may be true).


"Hi xxxx, since this is your first time I'll outline our process here for getting you your mortgage in case you are interested in what lies ahead.
Once you send me everything I need (bank statements, paystubs, W2s, Tax Returns, ID) and I get the purchase contract and title prelim report from escrow, I will submit your loan to the lender. Danielle my processor will be running xxxx's credit and information through a computer underwriting program called DU. It underwrites the file electronically and gives me feedback and a case number which I can use to take the loan to different lenders. Right now I'm using a bank called xxxx because they are the quickest and smoothest FHA lender on the market. I can also use Wells, Citi or Metlife as the need may arise. Most lenders have the same rates because they are all selling the loans to the same place-Freddie Mac. You will have to get an appraisal for the property, which is paid by you and refunded at closing. The appraisal for a one unit property in LA is usually $300-$350. Once the appraisal is completed, the bank underwriter will look at all the items in the loan package and issue a loan approval with conditions attached. Those conditions will be things like updated paystubs, bank statements, gift letters, etc. I'll be asking you for these items and it's important that you return them quickly. We will lock our interest rate in after loan approval and at that point, the clock will be ticking. We will have 30 days to fund our loan or else re-lock it for a fee of about $500. I will consult you when its time to lock the rate. After we satisfy the underwriters conditions, you will sign your loan docs. Usually escrow sends a notary to sign with you, or you go into the escrow office to sign. After the loan docs are returned there will be some finalizing from the underwriter and then your loan funds into escrow, they give the seller the money and give you the deed and record everything at the county recorder. Once that's done the property is all yours. You usually get 1.5 months until your first payment is due. You can choose if you want your property tax and fire insurance impounded (paid monthly with your mortgage payment) or not. I recommend getting impounds because it makes less bills to manage. The lenders give you a better rate if you impound also because they know the taxes and insurance will be paid.

If there is any further questions you may have, don't hesitate to ask."

So there it is, the steps involved with closing a mortgage loan. The process has gotten more difficult since the mortgage industry meltdown of 2007-2008 and it's important to use a lender who knows what they are doing and has kept abreast of the rapid fire mortgage guideline changes. As always, I'm happy to answer any inquiries or add you to my list of 200+ closed loans.

Getting your offer accepted is just the beginning.

The Return of Foreign National Mortgages

Getting a mortgage is not easy. It's made even harder when you are a foreign citizen trying to get one. First of all, you have no social security number and therefore no credit in the US, your income is from another country and is not verifiable by US lenders, and your assets are in non-US bank accounts. It's a daunting process and it has been neigh impossible since the credit bubble/mortgage meltdown of 07.

I have come across a pair of foreign lenders (in California only). They both only go to 65% LTV for purchase or refinance loans. Their rates are between 7-9%, neither will require income documentation but both will need to see 12 months of payments in reserves. The maximum loan amount is $1m. This is a tough loan scenario to make for most situations. Considering the apparent lack of any significant bank or broker programs lending to foreign nationals here in California, I think it is a step in the right direction.

As always, you can reach me at 310-709-8283 or here

New FHA guidelines. The times they are a changin'

FHA has been under close scrutiny as of late because, quite simply, they give out mortgages to many borrowers with shaky credit histories and questionable abilities to repay. Hoping to mitigate potential losses, the government is instituting several new policies bent on making the trillion dollar FHA-insured loan portfolio less prone to subprime-style blowout.

1. UFMIP increased to 2.25% with case numbers after April 5, 2010. This is the amount that borrowers have to pay at closing for their mortgage insurance. This fee is why FHA loans are so expensive compared to conventional ones.

2. Seller contribution to closing costs reduced to 3% effective in the summer (exact date TBA).

3. Increased lender enforcement. (This means we must be diligent in the loans we approve and close-expect more patriot act type verification of identity).

4. HUD is also asking Congress for authority to increase the cap on the annual MIP.

5. Waiver of property flips. (Our lenders have verbally informed us that once a mortgagee letter is sent by HUD, they will follow the flip waiver guidance shortly thereafter). This is the good part, as many flippers will sell their finished houses to FHA first timers who don't want to do fixup work.


On the surface this looks like HUD is getting stricter, however in an effort to protect the FHA insurance fund these changes are necessary to ensure longevity in the fund. Keep in mind that HUD has had a history of lowering MIP’s once the fund improves along with the overall economy. FHA remains the only choice for many borrowers, and I believe that FHA is the linchpin that is supporting the revival (or at least sustenance) of the residential housing market.