FINANCING HOME PAGE   This section is a Financing Primer, more of a Financing 101. We haven't gone into exhaustive detail, but we have tried to give you an overview of HOW things ought to work, WHAT to expect, WHEN to expect them, HOW to benefit & HOW to plan. For more detailed information or to get details of your specific situation we also have included links to our LENDER PARTNER's sites. CONTENTS: Financing it affects everything ONLINE Lending Financing should come first! How do I choose a Lender? Lender Partner MINIMUM standards

Financing is one of the least understood and yet the single most important element of a home sale or purchase because without Financing that is acceptable to the Buyer there will be no closing!

You will be living with the consequences and co$t$ of your financing decisions for as long as you own your home so it makes sense to take as much care in researching financing options & selecting a Lender as you spend finding a home. Actually it can cost you more to have the wrong financing than to pay too much for the house!

Since you are researching homes online it is a safe bet to say that you will probably also research financing online, so let's address a common question WHO SHOULD I USE? AN ONLINE LENDER, A LENDER WHO'S ONLINE OR A LOCAL LENDER? Read an article that might help you make up your mind.

 

Without financing acceptable to the Buyer,
the Buyer definitely will not buy.

If the contract is written before the Buyer has had their loan processed far enough to KNOW FOR CERTAIN they can get the loan they've applied for then everyone can be in limbo for weeks. As I've mentioned before several times, national figures say that over 40% of all Buyers get ALMOST to closing before they discover they cannot have the loan they want or cannot get a loan at all. Whether you are a Buyer or a Seller where does that leave YOU? When is it safe to brag to your friends? Spend $$ & make moving plans? Change the kids schools? Look for a new job? Etc.?

Think on it, after all a Buyer's work and research they still don't know if you can have the house they have their heart set on & don't know what downpayment, closing costs, monthly payment or other strange terms they might have to accept if they do get approved. Just because you can get any credit card or car loan you want is no assurance you can get a home loan. They are completely different types of beasts and use totally different standards for approval!

On the flip side of the coin the Seller could also lose the house they want. I think you'll agree that is not a great way to begin a transaction that impacts your life so greatly.

Rightly so, many Sellers will not even accept a contract from a Buyer without some strong assurances from a mortgage company that the Buyer can do what they want in a manner that will make them happy. How can you even write a binding contract until you know what kind of financing terms to put on the contract? Both of you will have to live with the terms you put on the contract so be sure they are accurate.

Even with all those concerns, financing is something that most people put off until too late.

Oddly enough Financing issues are usually the very first concerns Buyers have when the thought of moving enters their mind, but they put the financing research off because it is more fun to look at homes. The sad truth is that no matter how easy or hard it was to find or sell a home the whole deal is off if acceptable Financing cannot be secured. And then there are the contractual issues. . .

 

Were you aware that Financing terms were an integral portion of the contract terms?

Because so many Buyers and Sellers had major legal issues in the "good ol' days" when contracts were written before it was determined whether the Buyer could get acceptable financing, effective February '02 the new State Promulgated Contracts REQUIRE financing to have been researched and some definite decisions to be made BEFORE the contract can be written. Financing info is now a pivotal portion of the new contracts. Without accurate financing info you do not have a contract. With wrong information you don't have a binding contract.

There are also laws that say you can't speed, but people do. So how do you protect yourself?

 

Factors like these, and the fact that more sales fall apart due to financing issues than any other reason, caused the For Sale By Owner Registry to "Partner" with local Lenders and Title Companies to help Buyers and Sellers successfully consummate their transactions with the minimum amount of surprises.

These LENDER PARTNERs have pledged to do whatever is necessary to ensure Buyers and Sellers have the definitive information needed to make informed decisions. We require these LENDER PARTNERs to give service way beyond the industry norms and the minimums required by law. We impose much stricter standards of behavior, training and ethics on our Lender Partners than any imposed by the State licensing board. Our Lender Partner & Closing Partners will give you much more care and assistance than you get from a normal Lender or Title company.

Buyers and Sellers both need to feel comfortable they can actually buy the house they want so they can each make their respective plans. How can anyone make plans (or even sleep at night) until they understand their financing limitations and KNOW they can get financing they can live with?

And then there is the issue of writing a contract and not getting burned. There are some safeguards built into the contract, but many more that may need to be added.

 

Appraisals protect the Buyer from paying too much for the house, but there are no contractual safeguards to protect Buyers from high rates, poor terms or unscrupulous lenders.

Tales of fear & ignorance plus complaints against Lenders is another reason we were prompted to add Lender and Closing Partners.

You can trust our LENDER PARTNERs to help not only with the financing, but also help you understand the whole process - contracts, closing, title work, surveyors, inspectors, insurance, etc. They are required to take the time to teach you what is normal and abnormal in every situation and will help you have a very smooth closing. If you ever feel you have been let down in any way we want to hear about it! Complaints

A NOTE OF CAUTION: Don't ever let anyone talk you into taking a loan with a higher rate or undesirable terms with the bland assurances you can refinance later. Before you settle for less than desirable financing terms, first there should be an attempt to help you correct whatever issues you have. Many Lenders don't want to help you because it is too much work, but all Lender Partners are required to go the extra mile.

Sometimes due to your timing constraints a loan with a refinance scenario might be the only solution, but this usually isn't the best solution as REFINANCING is just as difficult and paper intensive as BUYING was in the first place so all you've done is delay the inevitable. Another word of caution, in a Refinance you are the Buyer and the Seller and have BOTH sets of closing costs, so refinancing can be quite costly if it is unnecessary!

Our Lender Partners want you to enter into your transaction with the information you need to make an informed decision.

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FINANCING HAS TO COME FIRST!
How else do you know if you can buy the house you want?

You can't even write a binding contract until you have researched and made some firm decisions about financing.

If you have not already, you need to go back and read Evaluation vs. PQ in the Buying section to better understand the differing levels of Financial research & preparation.

If one of our Lender Partners are doing the financing of the sale then the law also allows our Lending Partners to pick up where FSBO services are required by law to stop. By law all FSBO services must cease performing services at time of contract. Now instead of being left all on your own with no one to guide you thru the most critical phase of the sale, our Lender Partners will step you thru the balance of the transaction.

They are allowed to help from contract to closing. They will help coordinate: appraisers - inspectors - insurance - attorneys - title companies - document preparations - the filing of legal documentation & the transfer of title. This effectively bridges the gap between being a For Sale By Owner and using an Agent. As a matter of fact, except for the showing aspect, people tell us they feel they derive more service from the combination of For Sale By Owner Registry, Lending Partners & Closing Partners than they do with an Agent. They tell us they feel better because they don't feel they are being left out in the dark & they get to maintain control of their life! People always feel much more comfortable and relaxed when they feel some measure of control!

Thru this website we will try to educate you about financing rules and regulations so that you will know how to better help the Lender help you.

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HOW DO I CHOOSE A LENDER?

Or another way to say it might be "What's the difference between Lenders?"

First of all you shouldn't get wildly varying rates like you see on car loans or credit cards. All "A" lenders follow the underwriting, paperwork and procedural guidelines set down by Fannie Mae (FNMA) and Freddie Mac (FHLMC). As a matter of fact so do most "B" Lenders since these standards are based upon the performance of actual loans.

"A" Lenders all dip from the same "FNMA/FHLMC money well" so actual delivery rates can't vary significantly. If the Lenders know the same things about you (they can't know too much, but it is easy to know too little) they all should give you basically the same quote. Calling for quotes on different days, or on volatile rate days and therefore calling at a different time of day might generate a slightly different quote, but there is no way they can vary significantly.

By the same token since Closing Costs DO NOT originate from your Lender, but instead are fees paid to third party services (appraisers, recording fees, attorneys, surveyors, etc.) Closing Costs cannot vary significantly either. Don't be mislead by NO or REDUCED Closing Cost quotes, the costs don't disappear, they are simply paid in another a fashion - typically by giving you a higher interest rate than if you paid your own costs or, in certain circumstances, rolling the costs into the loan. This is good to know because it gives you a more accurate way to compare quotes plus now you know there is a way to reduce your out of pocket expenses.

 

So if the rates are the same and the costs are the same what's different?

It's the People you work with. (see this article about trying to work without the people)

It is how much Service they provide. How Comfortable they make you feel.

Are you just a number to them or do they genuinely seem to Care about your situation? Do they Ask Questions and dig into your background trying to find the best option for you? Will they Answer Your Questions openly and completely? Do they seem Knowledgeable?

It's their Honesty, their Personalities & how you get along with them.

On questions of rate, do they give you fast, glib answers or do they take the time to Learn enough about you to give a studied, correct answer. There is no ONE RATE, the rates depend upon your situation. The basic premise is the higher the risk the higher the rate. The converse is true as well, the lower the risk the lower the rate.

Although rates don't really vary on the "standard" mortgages, does your Lender have other Options available to you? Sometimes the standard 30 year fixed isn't the right mortgage for you, it depends upon your situation. If the Loan Officer isn't Interested enough in you to investigate your whole situation and make some Suggestions as to other good options you'll never know what you are missing that might have saved you money or fit your situation better.

There are 2 major things you can't check out, but which have a major impact on how easy it will be to get your loan approved, how much paperwork is involved, and if there are any last minute picky approval conditions. . .

• the Lender's relationship with the Underwriters and
• are they known for their surprise costs & rates, which goes back to their Honesty?

Unfortunately by the time you know these things it is too late.

If the Mortgage company &/or their Loan Officers are known for sloppy processing and marginal loans then the Underwriters will scrutinize YOUR loan more closely. This means your loan could take much longer to underwrite &/or they could come back with more approval conditions OR a turndown instead of an approval if you are only marginally qualified for the loan type the Lender submitted you under.

These are just some of the reasons why we refuse to work with just "any old" mortgage company and insist upon NAMB members.

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Here are the minimum standards we demand from our Lending Partners.

You have the right to expect to receive every one of the services listed below. If any of our Lending Partners do not live up to your expectations we want to know. The For Sale By Owner Registry is striving to furnish you with the most complete service available.

If they are furnishing your financing all our Lending Partners have pledged to offer all the help and information you would normally expect from a Lender plus, at a very minimum:

• Remain active members in good standing with the National Association of Mortgage Brokers (NAMB) Being an active member in the Associations ensures you get a Lender that applies to the NAMB's Code of Ethics, their 10 Best Business Practices and, in case of trouble, also gives you a fast and inexpensive Arbitration Option in addition to all the remedies available under the law.
• Remain active members in good standing with the Texas Association of Mortgage Brokers (TAMB
• Remain active members in good standing with their local Association of Mortgage Brokers
• Instead of just doing a preQualification (PQ) our Lender Partners the must furnish a full EVALUATION or PreApproval so that everyone involved can make definite plans!
• Give you a discount on the cost of pulling your credit
• Full & accurate disclosure of ALL closing costs
• Pick up where the law requires a For Sale By Owner service to cease providing service.
• Outline all Procedural and Qualifying information
• Contract assistance
• Provide Closing Assistance
• Education & Assistance throughout the transaction
• Give you the information needed to make informed decisions about your real estate transaction.

By Law our Lender Partners are NOT ALLOWED to furnish most of these services if they are not your lender on this transaction. This means you are on your own during the most critical portion of the process if you do not use one of our Lender Partners! Do you feel qualified to "go it alone" or would you be more comfortable with professional assistance?

 

Now lets look at some specific issues you might encounter