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Mark Aalto's Blog

By Mark Aalto NMLS: 116708 | Mortgage Broker
or Lender in Portland, OR
  • How Does a Short Sale Impact Credit Scores?

    Posted Under: Home Buying in Portland, Financing in Portland, Credit Score in Portland  |  February 8, 2012 6:27 AM  |  386 views  |  No comments

    Yesterday I shared an article about the impact of major credit events on the timeline of buying a home. Today’s article is focused on the impact of major credit events on credit scores themselves. Please see below for further information.

    I’ve had multiple conversations both with Realtors and with consumers about short sales, modifications and foreclosures. Specifically, what is more harmful to a credit score – foreclosure or short sale? Based on the chart above, it would appear that short sales impact credit scores less than an actual foreclosure. But it doesn’t appear that credit scores fully recover more quickly with a short sale compared with a foreclosure.

    If you would like to know more about how long it takes to be eligible for a mortgage after a major credit event, please click here

    Over the course of the next few years foreclosures, short sales and bankruptcy will truly have a major impact on lending and real estate alike. It will be important for consumers (and industry professionals) to have access to accurate information. Buying a home after a major credit event can be tricky at best. Hopefully this information helps simplify things a bit.

  • When Can I Buy a Home Again?

    Posted Under: Home Buying in Portland, Financing in Portland, Foreclosure in Portland  |  February 7, 2012 6:27 AM  |  386 views  |  No comments

    A recent article from my company:

    Life doesn’tI-stock-Photos-from-2006-to-2010-032-300x300 always go as planned. At Pacific Residential Mortgage, we recognize that many of our friends, neighbors and customers have had life events that have led to bankruptcy, short sale and even foreclosure. But, if someone has had the unfortunate experience of one of these difficult credit events, will that put home ownership out of reach? At Pacific Residential Mortgage, we realize that bad things can happen to good people, so we offer a product line of loans for folks who’ve experienced difficult credit events.

    If you’re asked, “can I ever buy a home again?” the answer is YES!

    For your convenience we’ve created an at-a glance eligibility timeline

  • Concession Obsession - When to say When

    Posted Under: Home Buying in Portland, Home Selling in Portland, Financing in Portland  |  February 3, 2012 6:17 AM  |  402 views  |  No comments

    I get asked fairly frequently by Realtors and consumers alike what the maximum contribution from the seller is for various programs. I have "borrowed" the information listed below from my employer. The original post can be found here

    It has become common place to see seller concessions on most new real estate sales contracts. While this can be a tremendous benefit to a home buyer, it’s important to be aware of the limitations that are placed on the amount of concessions by the various loan programs that exist today. Listed below are the maximum amounts – expressed as a percentage of the purchase price – that the seller can contribute towards the buyer’s settlement costs:

    Conventional LTV 91% or higher = 3% LTV 76% to 90% = 6% LTV 75% or less= 9% Investment = 2%

    Homepath All = 6% Investment = 2%

    FHA All = 6%

    USDA All = 6%

    VA All = 4%

    The contribution from the seller can be used to pay for the buyer’s closing costs, prepaid items (such as property taxes, insurance, and interest), and deposits with the lender to establish reserve accounts. Note that the amount of seller contribution cannot exceed the actual costs that the buyer incurs, which prevents the buyer from receiving cash back at closing.

  • How to not Drive your Loan Officer Crazy in Six Easy Steps

    Posted Under: Home Buying in Portland, Home Selling in Portland, Financing in Portland  |  January 30, 2012 7:15 AM  |  424 views  |  No comments

    I've said it before but I think it bears repeating: being a Loan Officer in this day and age is not for the faint of heart. Loan Officers are being blamed for everything from the financial markets to global warming to coffee breath.

    Now that you are applyling for a mortgage it's the perfect time to act crazy and pay us back right?

    Actually, no. If you want a semblance of order in your financial life I have compiled a list of what you can do to not only help your Loan Officer maintain their sanity but yours as well. So without further delay, here are six easy steps you can take to prevent your Loan Officer from going crazy.

    Continue to pay your creditors on time. Yes, you are close to the remarkable feat of closing a loan in the midst of all this mortgage craziness but if you make late payments to your creditors during your loan process bad things will happen. Very bad things. And yes, we do check your credit one last time right before we are finished with your transaction. If you have to rob a Plaid Pantry to pay your creditors on time maybe it's time to reconsider this whole mortgage thing.

    Don't buy a new car, new alpaca, new country etc. Taking on new debt while in the midst of getting a home loan is all kinds of crazy. Your lender needs to take a "snap shot" of your financial picture and expects you to financially hold your breath for about 30 days. (45 to 60 days for credit unions and banks). Try not to turn blue.

    Be prepared to provide the source of deposits to your account. If you have a whole bunch of seemingly random deposits showing up in your bank account we need to know where those came from. Outside of electronic payroll deposits, be prepared to provide documentation and proof of the source of these transactions on your statement. If you have been waiting to sell your pancreas for a little extra cash, wait a little longer until after your loan closes.

    Stay on the job. Even if you feel like your life is a living example of the movie "Office Space" please don't switch jobs in the middle of your transaction or worse yet, quit right after signing your loan papers. It's really important to have the appearance of stability. We lenders like to think you'll have a consistent source of income and continue to pay on your loan for the next 15 to 30 years. We're crazy that way.

    Try not to ask every person in your life for mortgage advice. This is important. Crazy uncle Nester is not the guy to ask about mortgages or about anything important for that matter. Find someone that you know and trust that recently completed a transaction. Chances are, they'll direct you to a Loan Officer that knows what they are doing. Finding a Loan Officer you can trust that does a great job is the key to having a good transaction. Having 15 different relatives giving you advice is the very definitionn of crazy.

    Be prepared to provide documents. Lenders have to be able to verify your income, your assets and a whole host of other things throughout the process of completing your loan. We understand that not everyone likes the "system" but if you're trying to obtain hundreds of thousands of dollars for a mortgage it shouldn't come as a surprise that lenders will actually ask for things. You might be able to travel under the radar when selling macrame scotch tape cozies but that's not going to work when you're asking for institutional loans.

    I hope this list gives a laugh or two but more importantly, helps to keep the stress levels of everyone involved in your transaction a notch or two lower. Sara and I are always available for questions should you wish to contact us. Have a great day.

  • FHA - Putting the Crazy in Lending

    Posted Under: Home Buying in Portland, Home Selling in Portland, Financing in Portland  |  January 27, 2012 6:36 AM  |  427 views  |  2 comments

    We all have that crazy relative that makes a series of disastrous decisions that make us shake our heads. "When will they learn? Why do they keep making choices that make no sense?" We secretly sigh a sigh of relief that no matter how bad we mess things up it will never be close to our disaster prone cousin/uncle/nephew etc.

    Enter FHA, the crazy relative of the lending world.

    Several years ago FHA decided that money laundering was an acceptable practice. A large number of loans were closed in which the seller gave a portion of their closing proceeds to a charitable organization which then in turn gave those funds to a buyer that had no down payment. Not surprisingly, these loans defaulted in droves and FHA had a mess on their hands.

    We've all told crazy uncle Nester that the newest pyramid scheme involving acid washed jeans and pictures of David Hasselhoff with a mullet would fail - just like the last ill-conceived business venture involving trained ferrets giving motivational speeches to clients with adult onset ADD. We should have done the same with FHA.

    Fast forward to 2012 and after mounting losses to their insurance fund FHA has raised their monthly mortgage insurance premiums by approximately 400%. Press releases will show that FHA is trying to shore up its losses by raising expenses. But don't be fooled. In reality these changes are another version of acid washed jeans with monogrammed David Hasselhoff pockets.

    What FHA is doing is effectively eliminating the very best clients from obtaining loans backed by FHA. Customers able to use other financing options will do so - and should do so. What FHA will be left with is customers with very marginal credit or funds arrived purely from gifts from relatives. And, by doing so, they are setting themselves up for a clientele that is more likely to default than the customers they are losing.

    FHA has gone from being a great option for most consumers to being an option for consumers with no other way to obtain financing. It's a shame really but the changes to the program have made FHA a third place winner in a beauty contest with three contestants.

    You can tell uncle Nester you told him so later.

  • Where have all the Listings Gone?

    Posted Under: Home Buying in Portland, Home Selling in Portland, Financing in Portland  |  January 26, 2012 1:51 PM  |  411 views  |  3 comments

    Today I am fortunate to be able to post an article written by Brian Porter at JMA Properties. Thanks Brian for the great article and for your permission to repost. For those of you that would like to see more content from Brian, please visit his website at www.brianporter.com or www.portlandlistings.com So without further delay:

    It is winter and inventory goes down in the winter because it is not the best time to sell, but RMLS is reporting that the active listing count is at its lowest point in 3 years. Take a look at the Inventory in Months chart below, courtesy of RMLS:

    Why is inventory so low? Well, for starters sales are up. Closed sales increase 18.9% when comparing November 2011 with November 2010.

    Second, new listings are down. Year to date new listings are down 26% in 2011 compared to 2010.

    Supply is down, demand is up. Either one of these factors is enough to affect price, but the combination of lower supply and higher demand has had a positive effect on price. From October to November 2011 the median sale price was up 3.3%. However prices fell 4.6% over the past 12 months.

    Who in their right mind would want to sell right now? Banks, owners who are under water (short sales), builders, investors who flip properties, sellers who want to move up, down or out of the area, sellers who are getting the squeeze because of relatively high mortgage rates vis-a-vis current mortgage rates or adjustable rate mortgages, etc. In other words, the only people selling right now are selling because they have to sell, or they are looking to re-position their assets.

    Even though prices have been going up lately, we will still probably see our winter capitulation cycle where sellers who were not able to sell during the high season give up and sell at whatever price they can get. So I believe that we will see a dip in prices over the next couple of months. However, when spring comes, look out!

    This is the most exciting real estate market I have seen in the past 20 years. Opportunities abound!

  • Flipping Over Flipping Part 2

    Posted Under: Home Buying in Portland, Home Selling in Portland, Financing in Portland  |  January 25, 2012 6:18 AM  |  417 views  |  No comments

    Property market

    Image by alancleaver_2000 via Flickr

    Lenders have become increasingly cautious about lending on properties that have been “flipped.” For those of you that aren’t aware of the term, a “flip” of a property refers to the rapid sale of a property from the time it is first purchased to when it is sold. In the lending world, if a sales contract is written prior to a seller owning a property for 90 days the transaction is a flip.

    As a consumer or a seller or a real estate agent, how does this apply to you and why should you care?

    Quite simply, your transaction may become a stressful, confusing mess if the lender and Realtor do not know how to handle a flip transaction properly. For some loan products, lenders will issue a decline if the property involved is a flip. Ask your Loan Officer if they are aware of what constitutes a flip and how and when these transactions can be funded. The last thing that anyone wants is to have a transaction declined at the last-minute. For those of you that are Realtors, the best thing you can do is to make sure to notify your Loan Officer right away about how long the seller has owned the property.

    Recently FHA extended an exception to their flip guidelines. See related information about the current exception here. For FHA loans when a seller has owned a property for less than 90 days it is still possible to complete the sale as long as the sales price is no greater than 20% above the amount the seller paid for the property. If the increase is greater than 20% a second appraisal will be required along with a home inspection ordered directly by the lender. It’s very important that investors are aware that health and safety issues identified in the home inspection will need to be addressed prior to closing. This can be a challenge if the seller or investor is unprepared or unwilling to do repairs to the property.

    If it all possible, it’s best to wait until the seller has owned the property for at least 90 days to even write an offer if financing will be needed. This is especially important for conventional financing since most lenders will not fund flip transactions with a Fannie Mae or Freddie Mac loan.

    If you have questions about your transaction or about current guidelines, Sara and I are here to help. Give us a call at 503 496-0400.

    In the meantime, good luck with your purchase or sale!

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