QRM in the news.

You may have heard some of the buzz surrounding QRM (Qualified Residential Mortgages) and the possibility of a 20% down payment requirement. The topic has definitely been a hot button issue, with arguments on both sides piling up. I don’t want to write an alarmist piece about the doom that will befall the world if the 20% down payment requirement were to go into effect – I’m not here for the shock value. I also don’t wish to write a piece blaming the federal government for everything under the sun – I like to keep my personal politics to myself. Subjects like this often turn in a maelstrom of pointing fingers, but this isn’t a blame game scenario. Fair warning: this is my blog and I will not watch comments turn into a political mess of jibberish. Want to discuss the issues calmly and rationally? Be my guest. Want to stand on your soapbox? Go get your own blog.

“Skin in the game.”

After the mortgage meltdown, many people argued that the foreclosure mess made it necessary to require homeowners to have some “skin in the game.” The idea is simple, if homeowners are invested in their homes (through a down payment) they are less likely to default on their loans. If you’ve already spent $20,000 on your home, will you just walk away and let the bank foreclose? I’m not here to advocate that everyone deserves a home and we should just give them all loans no matter what their past financials look like. I think we all know that’s a bad idea, but can we truly believe that every homeowner must conform to a one-size-fits-all system of lending?

Let’s take a $100,000 home. Down payment of 20%? $20,000. I know a lot of people, who are good with their money and work hard, but they aren’t going to save that up anytime soon. It’s just not that cut and dry. What about a single mother who is working hard, keeping the kids fed, clothed, and sheltered, making decent money, with a good credit score, but just doesn’t have a lot of room in the budget for savings? Sure, she saves some every week, but $20,000 might seem like an insurmountable goal for her. Should she just give up and never even consider the fact that home ownership might be a possibility? Why not look at the big picture? She has some savings, she pays her rent, and is keeping up with the bills. Look at her housing costs – do they match the potential mortgage payments? Can she afford this home? That’s the real question if you ask me.

I know a lot of people who bought homes with little or no down payment. They’re still in their homes. Still making payments. Still working hard, despite the struggles of the economy. Are these bad people? Nope. They are people who loved the idea of home ownership and were able to find a way to keep the home, no matter what their circumstances. Should we then demonize those who couldn’t? Again, the answer is no. People were hit by a tough economy backed with a sudden burst in the housing bubble and yes, perhaps they had no “skin in the game,” but I refuse to believe that a majority of these foreclosures were people who simply said “ah, heck with it – who cares.” Did some people play the system and not care about the bank or their mortgage as it began to crumble? Of course they did – the same way some people choose to rob banks for a living, or cheat on their spouses, or be a racist. Does that make everyone a racist, adulterating, bank robber? Of course not. We’re being too quick to peg everyone as liars and cheats, when in reality there were plenty of people that just got caught up in the system.

Solutions for responsible home ownership.

We have to stop the blame game and get back to the business of buying and selling homes. Yes, the market went out of control, and a lot of people got hurt in the process. Unfortunately, I think we gambled and took the risk…and we lost to the housing market. The idea that some use to argue for the QRM is based in words like entitlement, handout, moral obligation, and not everyone deserves a house. I find this to be little more than current buzzwords and propaganda. No, there is no Constitutional right that says we all must own a home. What there is however, is the common decency of mankind to want better for himself and others. Of course, we must all work to obtain those things for ourselves.

A lot of focus is on the need to save money. I advocate saving as much as possible, but let’s face the facts – it’s not always easy, even when you’re not out buying a new car and a flat screen TV every other day. It’s tough and people need to learn to get tougher with it (including myself). I think 20% puts home ownership out of reach for a lot of people. Being a nation of renters is not a good idea in my book.

Then there are the attacks on zero down programs. Although they do place risk on the potential for depreciation in the housing market and the homeowner finding themselves underwater on their mortgage, I think these can be a manageable risk. People that use zero down programs should not expect to recoup on the sale of their home any time soon. They should not expect to be able to use their home equity in the near future, even if there are sudden gains in the market. Education is key to this. I know many people who moved into their homes with zero down and they know and understand these principles, so they work hard to pay down their mortgage principal whenever they can, hence increasing their equity at a pace they can afford.

Gone are the no doc loans (aka liar loans). I’ve used no doc loans to purchase my own homes. Why? Because I have been self-employed for so long, that my tax returns don’t back up my income. Because of the tax law (which is a completely different argument), the self-employed are allowed to show losses that make their annual income look much weaker than it actually is. The problem I see with these, is abuse of the system. No doc loans can be a great thing, if there aren’t lies involved. If you make $20,000 a year and use a no doc loan program to purchase a house, you shouldn’t be telling your lender that you make $60,000. It’s really that simple. They became known as liar loans because of their abuse, by home owners and lenders alike. Bring them back and use them responsibly and much of the trouble we saw with them would never happen.

Your home in not an ATM. This single sentence was to me always the most important. Although there are times when using the equity might be a good idea, it’s much like using your credit card – somewhere along the way, you have to pay the bill with interest. Banking on a future increase in your home’s value isn’t solid fundamentals. Most likely, overtime, you will see appreciation with care to the home and a growing economy. However, this is not a definitive fact. No one can see what will happen in five, ten, even thirty years. If we could, we’d all be investors, because it would be easy. Like any investment, there are risks associated with the a purchase of this nature. You might gain value, you might lose value. The one thing my dad taught me that I have always used as a guiding principle was this – you might lose value, but you only lose money if you sell it. Just like stocks, sometimes you have to hold onto them longer than you had originally expected because of fluctuations in the market. Viewing homes as an endless source of cash is not a good idea. You have to weigh the factors – immediate cash vs. long term plans. Without a balanced judgement, you may be walking into a terrible situation.

I do not want to see a world with a 20% down payment requirement. If you don’t, let your Congressmen know. You can visit the Realtor® Action Center for more info and easy links to write your local representatives. I don’t always agree with the National Association of Realtors® (as you’ll see in my upcoming post), but this is one time I stand behind them. We don’t need to make home ownership an insurmountable mountain for many.

photo courtesy of eschipul

Tax credit still a hot topic.

This post originally appeared on June 20, 2010 on another real estate site I had been experimenting with, TattooedRE.com. I happened to read it this morning and thought it was a good one to share in light of the fact that I still see a massive amount of traffic with keywords relating to whether or not the tax credit will be extended into 2011.

I have yet to decide what will become of the Tattooed Real Estate blog, but I haven’t written there in some time now. If someone has an idea, feel free to let me know.

I should have sent this earlier…

Dear Congress,

I wish I had sent this to you a bit earlier, but I admit, I thought we were done with all of this, so I never thought to do it. Of course, in recent weeks, you’ve taken the issue up once again and because of all the confusion (again), I thought I’d write you to let you know what I think. The first time home buyer tax credit is being whispered about all across America once again and I have only you to blame. While I was never a huge fan of the credit to begin with, I understood what you were all attempting to do with it and applauded the fact that many of my clients were able to take advantage of it. It helped some of them make a decision to buy a home and I spoke with them at length about not basing their decisions solely on the free money aspect of the tax credit. I think most of my clients had the right attitude about the credit, so I didn’t fret to much over it in my day to day business, but if you go read my San Antonio real estate blog, you’ll see how much I blogged about it to try and help people keep up to date on it and think of it in a way that didn’t become destructive (in my eyes).

As you debate, work out, and try to reconcile the amendment that would extend the tax credit to September 30, 2010 (extend is probably the wrong word here, as it doesn’t extend the credit itself, just the time line to finish the transaction that was already in place by April 30, 2010), I’d like you to consider a few things. As a real estate agent, I know that your heart is in the right place with this extension – so many buyers out there chose foreclosures and short sales in the mad dash before April 30th and got those homes under contract, but now are faced with the foot-dragging process of getting those transactions closed.

I don’t need to tell you the process is way too slow. Just google a few phrases including the words foreclosure or short sale and tag on slow, how long, or nightmare. You’ll have more pages to read than most of the bills you’ve passed. It’s common knowledge (and frustration) that these distressed properties are about as quick to close as you are to take up controversial bills in an election year.

As you work through the amendment, let’s remember just how long the tax credit has been in place. It’s not as if you invented the tax credit and gave it a shelf life of a month. No, this has been going on almost as long as I’ve been a Realtor®. From the repayable $7,500 credit to the $8,000 credit (which was extended once) this tax credit seems to becoming a normal part of real estate life. Ask me and many agents and we’ll tell you it’s gone on long enough. We’ve created an artificial market, which messes with pricing, expectations, and creates a wait-and-see attitude among consumers (I get numerous keyword searches everyday relating to whether the credit will be renewed or extended into 2011). We tried the tax credit and got what we could out of it. It’s time to let this run out.

My focus, however, is not on killing the tax credit. As you’ve taken up this new amendment, which is designed to give those already in the process a bit more time to close their transactions, I am forced to think that this is mainly for those who got a contract in on a foreclosure or short sale by April 30th. These buyers being the focus of the amendment, I have a better idea.

The proposal.

You’ve already stuck your hands in just about every place you could in the banking industry and told them to do this or do that to fix things during our recent economic troubles. We could argue all day about whether it’s a good idea or whether or not you have the right to…that’s not my intention. I don’t wish to quibble over party politics, I want to save the world. Okay, maybe saving the world is a little strong.

Instead of giving consumers more time to close these transactions, perhaps we could have focused on the transactions themselves. Short sales and foreclosures in many markets are still going to be a thriving (unfortunately) segment of the market for some time. Let’s fix the process. Listen to the agents out there. (Did you actually google what I told you to? If not, go back and do it and start reading.) We want solutions so we can help our clients buy these homes. I’ve had several clients who started out thinking of buying one of these distressed properties, only to walk away in frustration at the molasses-thick buying process. Why would someone want to wait so long only to find out they didn’t even get the house? Why would they then wait months on end and fill out more paperwork than is humanly necessary to move in. View these buyers as what they are – saviors. They are saving our economy, they are saving the banks, and they are going to rebuild neighborhoods. Give them the credit for what they are doing. House by house, they are making this country a better place. Look at Vegas – entire neighborhoods sit idle and empty, collecting trash and debris as the winds roll through the desert. Who would want to live there? Left alone, these neighborhoods will turn into the new slums of America – rotting and decaying without the attention and cash influx they need. It won’t just be big cities that deal with urban blight, it will be small towns and suburban subdivisions.

Let a few houses go “bad” and suddenly the issue spreads. The strip malls that support those areas commercially will have no customers. The offices will have few tenants. The companies that do remain will have to bring their workers in from areas further away (creating new traffic snarls and pollution from longer commutes). Sure, this all seems a bit “doomsday” of me, but the threat of foot-dragging on foreclosures and short sales is real. Just take a look at Detroit for just how much damage it can cause (in an area that already was facing tough times). If we don’t stem the tide and help people buy these homes in an efficient manner, we will change the face of real estate for suburban neighborhoods and cities alike once again.

So instead of buying the consumer more time, how about giving the lenders less? How about telling them to get with the program? I am willing to bet I could increase my short sale and foreclosure sales by several hundred percent over the next few months if my clients knew that the banks would deal with them in a professional manner and with an emphasis on getting the homes sold in a quick and efficient manner. How would you do this? How can you regulate it? Perhaps you can’t. That’s why you’re in Congress and I’m not though – you know how all that works and as we’ve seen in the past, when push comes to shove, the government can get things to happen. Don’t forget, we put a man on the moon. How? Because we focused on it and made it happen. This country (and our government) is capable of the impossible, but only when we set out to do it. So pass this letter around to your fellow lawmakers and look them in the eye and say, “you know what, this guy has a point – let’s do something about this situation.”

Thanks,

Matt Stigliano

PS And don’t let the banks fool you when they say “we’ve got this new program or are doing this to help the consumer.” Ask the consumer how they feel the process is going – they’ll tell you the full story, not just what the banks want you to believe.

photo courtesy of a.drian

NACA – Neighborhood Assistance Corporation of America

NACA, the Neighborhood Assistance Corporation of America, is a non-profit homeowner advocacy group started in 1988 in Boston. I had heard of it when I first started in real estate, but when the housing market crisis hit, talk of it faded quickly and I never got to know much about them. I’m upset that I didn’t know of them sooner. Yesterday, I attended a NACA Workshop to learn more and get an overview of their programs. I’ll be talking about them more over the next few months and I hope you’ll take some time to read up on them and learn a bit more – they’re doing some great things that so few know about.

“Save The Dream” – Saving Owners From Foreclosure

NACA has a goal of saving homeowners from foreclosure and they’re succeeding with flying colors. With their Home Save Program, NACA works directly with lenders and homeowners to find solutions to at-risk situations. By determining a homeowner’s affordable budget and working directly with the lenders, NACA is able to show the lender the danger of keeping the loan “as is” and the benefits of restructuring the loan in order to help the homeowner keep their home. Foreclosure is bad for all of us, not just the homeowner. It hurts our local economies, devastates families, brings local property values down, and can lead to an increase of neighborhood destabilization; whether through an increase of crime, decrease in upkeep, or in some harsh circumstances turning an entire neighborhood into a ghost town. By assisting homeowners in need and advocating for them in Congress and at financial institutions, NACA is helping keep the American dream alive for many and helping stabilize neighborhoods across America.

As a real estate agent in San Antonio, I never want to see any of my clients go through the pain and absolute agony that is foreclosure. I’ve spoke about my own personal struggle with foreclosure before and I still occasionally feel the pains from it today. It’s not something you’d wish on your worst enemy.

I encourage you to visit the NACA website and learn more about them and what they do. If you’re nearing foreclosure, I encourage you to contact them and speak with them about the “Save The Dream” Program. You can, of course, contact me and I’ll get you in touch with someone from their local office.

NACA – Neighborhood Assistance Corporation of America
7330 San Pedro Avenue, Suite 108
San Antonio TX 78216
Phone: (210) 826-2828

photo courtesy of jonny goldstein

By now, everyone has heard how low interest rates have dropped about a million or more times. They are low and getting a loan at interest rates like these would save you a lot of money. The question is, can you get a loan? Unfortunately, after the Roaring-20s carefree attitude towards underwriting that helped lead to the current housing market and high rates of foreclosure (note, I said helped – there were many factors that helped get us where we are right now) caused a strong shift in the way “business is done” in the lending industry and thanks to stricter underwriting guidelines, it is harder to get approved for a loan at those low rates.

My best advice? Speak to a reputable local San Antonio lender. You can never know for sure that you’ll be approved unless you take this step. If you need names of lenders, call me and I’d be happy to provide you with a list of names and numbers of lenders who have a reputation for honesty, integrity, and most important, getting the loan from application to the closing table. You may have to jump through a few more hoops and submit a few more pieces of paperwork than you did last time you bought a home, but until you take that first step, you’ll never know.

Dan Green – The Mortgage Reports

As promised in the video, here is Dan Green’s blog The Mortgage Reports – a must read if you want to follow mortgage rates, news, and lending industry insight and commentary. The post that got me thinking is titled, “Banks : We’re Careful In Underwriting, And We’re Scrutinizing You” and I recommend you read that for a more detailed analysis of what is happening in the mortgage markets today.

Title company gets tough with banks.

In light of the recent halts on foreclosures as states figure out whether banks complied with local laws during their foreclosure process, Fidelity National Financial will require lenders to sign off on warranties in order to avoid so called “robo-signing” disputes on REO (real estate owned, aka foreclosures) properties. This new requirement will go into effect on November 1st. By requiring the banks to warrant that they have performed their duties during the foreclosure process, Fidelity National Financial will be able to eliminate any losses from properties they have issued title insurance on due to future litigation against the lender involved in the foreclosure.

What does this mean for you?

This additional warranty on the part of the lender ensures that if the foreclosed home were to fall under litigation because of the bank’s neglect in the foreclosure process, Fidelity National Title would have the ability to claim any monies owed under this new warranty and pass them onto the buyer as part of their title insurance coverage. This takes some of the worry out of buying a foreclosure in light of the recent foreclosure mess as buyers would be insured against any damages caused by the lender’s practices. I expect to see most of title companies follow suit, especially since Fidelity National Financial is the nation’s largest title insurance company (doing business as Alamo Title, Chicago Title, Commonwealth Land Title, Fidelity National Title, Lawyers Title, and Ticor Title).

photo courtesy of kevindooley

A good lender is easy to find…

…but finding a great lender isn’t always as easy. During a recent transaction, I had the pleasure of working with Scott Cummins of Cornerstone Mortgage (I had worked with him before), a local San Antonio lender who is not just great, he’s excellent. Throughout the transaction, Scott and his mortgage processor, Michelle Bennight, kept both me and my clients informed, which may seem like something a lender is supposed to do, but you’d be surprised how often as an agent I find myself tracking down information from lenders and begging for updates. Scott Cummins is a hands on guy and works with the clients in answering every question that might come along during the transaction. My recent clients raved about him and I have to agree. He makes the mortgage process easy and understandable and most of all, he gets the loan from application to closing (these days not always the easiest task).

On our most recent transaction together, Scott was able to get the financing secured and ready to go in a little over two weeks – we closed two weeks early! In a world where many people are having delayed closings and at times can’t even get a loan to close, this is an amazing feat. My clients were able to move in early and everyone was thrilled. If you’re looking for an excellent lender in San Antonio, contact Scott Cummins of Cornerstone Mortgage at (210) 340-4994 or email him at email hidden; JavaScript is required.

Disclosure: CMP.ly/0

Texas becomes latest state to join the foreclosure fray.

Texas Attorney General, Greg Abbot, sent a letter to twenty seven mortgage companies in Texas on Monday, demanding they halt foreclosure action in the state. Joining with other states who recently have launched their own moratoriums and investigations, the Texas Attorney General is asking lenders to hold off on foreclosure action until October 15, 2010, while the state and mortgage companies work to identify so-called “robo-signers” (employees who signed off on foreclosures without reading the documents or knowing what they were signing – often thousands in a single month) and verify that Texas companies that handle mortgage loans are in compliance with Texas foreclosure laws. Other items they will be looking for include; affidavits signed by individuals claiming personal knowledge of facts or claims that the signatories had reviewed attached documents when they had not and falsified notary documents where notarization took place without the signatory being present or before the documents were even signed.

If you are currently facing foreclosure.

While this may seem like a bit of a reprieve from foreclosure for the 10,946 homeowners in Central Texas who have been notified of foreclosure in the last month, I strongly recommend that if you are currently facing foreclosure in San Antonio, do not allow this news to give you a false sense of hope. While something may come out of this and some foreclosures may be halted or prevented altogether, there are no guarantees. Continue working with your lender in seeking out a solution – whether it is a mortgage modification, a possible short sale, or allowing the home go to foreclosure. It is frustrating to say the least, but without direct communication between the lender and yourself, you are only guaranteeing the foreclosure.

As this news is developing rather fast, I suggest you stay on top of your lender and follow up with the Texas Attorney General’s website for more information as it becomes available. Facing foreclosure is very daunting (I know from personal experience) and I hope for those readers out there that might be facing foreclosure that they can stay strong and get through this. I know I thought it was impossible when in the middle of it all.

photo courtesy of crowt59

A Tale To Tell

Foreclosure has become the buzzword of real estate in the last few years and according to most experts, we’re not going to see an end to it anytime soon. With foreclosure comes a lot of bad feelings – the fear, the uncertainty, the confusion, and the frustration at what is most certainly the most stressful things a home owner (or anyone) will ever face.

I should know. I recently went through a foreclosure. I don’t want to whinge and whine about how life is unfair or anything of that nature, rather, I’d like to invite you to read the post I wrote at AgentGenius about my foreclosure. I wrote it in an effort to let people know they’re not alone and although foreclosure can be daunting, it’s not the end of the line.

It wasn’t an easy post to write and most certainly isn’t a easy situation, but I’m making the best of it as much as possible. I hope my readers can gain a little insight into both myself and foreclosure from the post and gain some understanding of their friends, family, and neighbors that have been through it as well. If you’re out there facing foreclosure, be prepared – it’s not an easy road, but please don’t give in. Do what you can to save your home and if all else fails, try to find the positive in the negatives of it all. Although they don’t know it, I learned the positive aspect from one of my clients. They probably gave me more hope while I was going through it all than they could ever imagine.

I’d love to hear from some other home owners about their experiences with foreclosure and even the short sale process. These two are accounting for a lot of sales these days, in San Antonio and around the country, and I can only guess at how many of you that stop by daily have seen the effects first hand. I hope you all get through it and wind up in a better place in the near future. I know I will. Thanks.

P.S. You should also check out Lesley Lambert’s follow up to my post, “There But For The Grace… Realtors in Distressed Homes,” an interesting look at the intertwining relationship between Realtors® and foreclosure.

photo courtesy of helgasms!

Home Loans.

In my previous post, “Realtor® Speak 101: Loan Underwriting,” we were discussing exactly what underwriting is, but I realized I may not have covered on of the phrases you’ll hear a lot during the loan process. “Underwriting guidelines.” Depending on what type of loan you apply for, these guidelines can be very different.

Think of loans as products, each product sits on a shelf in a store. When you go to shop for a home loan, you lender acts as your personal shopper (kind of how they do it in the Apple Store). Your lender talks to you about what you want and need and they try to find the product that best suits you. Each lender works in a different store and although some stores carry the same loans, one store may have a few you’ve never seen before.

Once you and your lender have picked out the perfect loan product for you (I see you had your eye on the pink one with the sparkles all over it – nice choice) and you apply for it. The whole process begins. This is where underwriting comes in. Each loan comes with its own underwriting guidelines.

Guidelines and requirements.

Each loan has it’s own rules when it comes to underwriting. There are common threads amongst all of them, but many will ask for one thing, yet another will not. The reason? Investors. Once you take a loan, they are typically sold off to investors in bundles to investors. These investors want certain things in place so they feel safe making the investment (ie. they want to be sure the loans won’t default). In order to take some of the risk out of these investments, the investors require certain guidelines be met during the underwriting process. There are also guidelines to be met by the lender and the particular loan product you have chosen.

You’ve probably heard that underwriting guidelines have become much more strict recently and this is very true. For instance, FHA loans do not have any minimum credit score guidelines (although the FHA is looking into changing that). This is what always made FHA loans so attractive to many people. The guidelines didn’t require you to have a specific credit score, so for some people, this was the best route to a home loan.

After the housing market mess started to clear, investors realized that buying loans with no requirements for a minimum credit score seemed very risky. So they changed the rules. Now, in order for your FHA loan to be bought by investors, you must meet certain credit score guidelines that they have set. So when the underwriter is working on your file, they know not only what the requirements are for your particular lender are, but they also have sets of guidelines for the various investors they sell loans to.

So what are the guidelines then?

Ask any lender today what their underwriter’s guidelines are and write it down. Then, a week later (sometimes even days or hours), ask them again. You probably won’t get the exact same answer. Underwriting guidelines change constantly. Whether the new guidelines are handed down from the investors, the federal government (FHA and VA especially), or your lender; they will and can change. Some of the guidelines are followed as if they were law. Some are completely ignored. When HUD wanted to monetize the First Time Home Buyer Tax Credit to enable home buyers to use it as a down payment, lenders largely laughed at the idea of it, as they say it was too risky for them. (Note: It is possible to use it as part of your down payment, but you still need 3.5% of your own cash in order to do so – they basically only allow it as an additional down payment and most lenders won’t even do that.)

Your best bet to being approved for a loan and passing through underwriting without a hitch? Keep your credit scores as high as you can. Have cash reserves (savings). Document everything the underwriter asks for. Don’t apply for any new credit or run up your credit cards during the home buying process. These four things alone will make the process of underwriting run a lot smoother and increase your chances of getting the loan and closing on your new home.

photo courtesy of TheTruthAbout…

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What’s Taking So Long? Underwriting.

If you’ve ever bought a house, you’re probably familiar with hearing “your loan’s in underwriting” and then playing the waiting game until it “comes out of underwriting.” It’s one of the steps in the process of getting a loan and often one of the most frustrating. But what exactly is underwriting?

Underwriting is viewed as a mystical place where loans go somewhere between the time of pre-approval and final issuance of the loan documents. Underwriters are kept in secret and you’d be surprised to know that most real estate agents have never met an underwriter face to face (or if they did, didn’t know it). Loan underwriting is truly a world shrouded in mystery and for good reason – if we all knew our underwriters, it would be very easy for agents to poke and prod an underwriter to get things done. Underwriters would be under a daily assault of phone calls from agents trying to find out where they were in the process and in effect, would be rendered unable to do much more than answer the telephone. This is why lenders keep them locked away in dark caves in highly classified locations.*

Merriam-Webster Online Dictionary defines underwriting as follows:

underwriting – transitive verb
4 a : to agree to purchase (as security issue) usually on a fixed date at a fixed price with a view to public distribution b : to guarantee financial support of (underwrite a project)

To put it simply, the underwriter looks at all the supporting documents and says “yes, I think this is a safe loan to make, let’s do it.” Of course they can say the opposite too. This is how some people get pre-approved, yet wind up getting turned down for a loan. The underwriter is pretty much all powerful when it comes to you getting your loan. Because of their ultimate power, you and your real estate agent need to pay special attention during the underwriting process.

Yesterday, I wrote a somewhat tongue-in-cheek piece on AgentGenius about the power of underwriting, but many Realtors®, although they may have chuckled, also nodded their head in agreement.

It all boils down to this: if the underwriter asks for something, you as a home buyer, better do it. They will ask for ridiculous things at times. Doesn’t matter. They’ll ask for copies of things you’ve sent them four times already. Doesn’t matter. They’ll ask you to move a comma in a sentence in a document you sent. Doesn’t matter. They’ll ask for more information on something you’ve already documented to death. Doesn’t matter. Underwriting is about the lender covering all their bases – all that documentation you send in stays in a file and if something ever goes wrong (you default on your loan), the investor will want the lender to justify their underwriting of the loan.

Underwriting can be a nightmare for a home buyer (and a home seller as well – the longer underwriting takes, the more nervous they become), but by being pro-active and jumping through the hoops, you can get your loan in and out much faster and save some of the headaches caused by underwriting. Typically, your agent will also know what the underwriter needs to complete their job, so they may bug you about it too – the key? Get it done. Right away. Don’t put it off and don’t frustrate yourself with trying to find the answer to “why are they asking for this?,” they have their reasons and it doesn’t really matter what they are (although we can discuss them to death, the underwriter will still want them).

Of special note: it pays to have a local lender for your loan, because they often have better, more direct contact with their underwriting departments and can often help a file through the process by being able to have direct access to the underwriter should a problem arise. With some of the larger banks, their loan processing centers might be halfway across the country and you lose that personal one-on-one interaction between your loan officer and underwriter that can help get things done.

* I have no actual proof that lenders keep underwriters locked in caves or that underwriting is actually an ancient mystic art involving a combination of wizardry and voodoo.

Special thanks to my friends @mayaREguru, @linsey, @toddwaller, and @staceyharmon for the inspiration of this post during a conversation on Twitter.

photo courtesy of wonderferret

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