Equal Housing Lender
WHY the 6th and Final Step of the Home Prep Pilot is Critical to Getting Clients “Mortgage Ready”
By Pamela Marron, Loan Originator, NMLS#246438 • August 18, 2022
Below are 5 common issues that often prevent clients from getting a mortgage.
- Short-term credit issues that can be resolved within 6 months.
- Long-term credit issues can take up to 5 years to remedy.
- Student Loan refinance help.
- Down Payment Assistance(DPA) with the help of DownPaymentResource.com and a resource for loan originators called Down Payment Connect.
- Budgeting for a home purchase.
A pilot program called Home Prep is being developed to connect loan originators and realtors to HUD housing and credit counselors who can work with prospective homebuyers on resolving one or more of these issues and get clients “mortgage ready”.
A 6th and final step for clients who have had specific credit issues in the past will provide a safeguard so that the same issues don’t come up on a new mortgage.
Ask your client if they have had any of the issues noted below in their past and apply remedies UPFRONT before a client even starts looking for a home.
Ask the client if they had a past short sale, foreclosure, deed in lieu (DIL), modification, or bankruptcy where property was included.
During the past housing crisis, a foreclosure credit code often showed up on credit for short sales, DIL and even modifications. The foreclosure code requires a longer wait period to get a new mortgage. This incorrect credit often could not be visibly seen on a credit report but did show up in the Fannie Mae and Freddie Mac automated underwriting system (AUS) findings.
Asking clients detailed questions when specific past credit issues exist and then running their loan through AUS systems UPFRONT is CRITICAL to ensure that these past issues will not pop up during the loan process and prevent the client from getting a mortgage.
- Run loan through the Fannie Mae and Freddie Mac automated underwriting systems for FHA, VA and conventional programs, and through the Guaranteed Underwriting System (GUS) for USDA loans.
- In fact, run ALL client loans through both the Fannie Mae and Freddie Mac AUS systems UPFRONT for prospective homebuyers to insure a thorough pre-approval.
There is nothing worse than finding out that a client cannot get an AUS approval AFTER the client has signed a contract, put a deposit down, given notice to a landlord, and paid for a home inspection and appraisal. An AUS denial towards the end of a contract can be catastrophic, where the only options for a client are a government loan manual underwrite with stricter guidelines and a higher interest rate, or a non-QM loan with a higher interest rate and more down payment required.
Ask the client if they had a bankruptcy and a property was included that had a short sale, foreclosure, Deed in Lieu (DIL) or even excessive late payments.
- When a bankruptcy has a property included, the mortgage payment history ceases to show up on a credit report after the bankruptcy discharge date unless the debt is re-affirmed. Remedies to get the payment history and closing date of a short sale, foreclosure or DIL:
- Retrieve a verification of mortgage (VOM) from the past mortgage company.
- The client can request a mortgage payment history from the past mortgage company.
- Your credit reporting agency has a report that can provide this information for a fee.
Check the final date the mortgage showed as reported and closed and review the payment history to make sure the client meets derogatory credit wait timeframe for specific loan types[1].
Ask the client if they had a defaulted student loan or mortgage.
- Check the Credit Alert Interactive Voice Response (CAIVRS) system UPFRONT, a federal government database of delinquent federal debtors, to ensure client credit is clear.
Ask the client who is a veteran if they had a past short sale, foreclosure or deed in lieu.
- Pull a Certificate of Eligibility (COE) FIRST to confirm existing eligibility.
- If there is $0 eligibility:
- Contact VA at 877-827-3702 to get determination of Bonus Entitlement.
- Calculate VA Bonus Entitlement:
The calculation for basic + bonus full entitlement looks like this:
| Amount | |
|---|---|
| Basic entitlement: | $36,000 |
| Bonus entitlement: | $70,025 |
| $36,000 + $70,025 = | $ |
| Subtract amt used: - | $ |
| Remaining Entitlement: | $ |
| Multiply by 4: | $ |
| Amt. of Basis Entitlement remaining: | $ |
| (only if used $36,000 or less) | |
| Add “Bonus” amount: | $ |
| Amt. of Entitlement Available: | $ |
We are looking for up to 10 licensed mortgage loan originators to be part of this pilot. You can be new or experienced. Call Pam Marron at 727-534-3445, email pam.m.marron@gmail.com or use the form below to be considered for the pilot.
Stay tuned.
Pilot Program Inquiry
Writer Pamela Marron is a licensed Loan Originator NMLS #246438 in Florida who works for Innovative Mortgage Services, NMLS #250769 in Lutz, Fl. Articles written are strictly her opinion and are published to help loan originators, real estate professionals and mortgage clients. This is not used to solicit for business.
Pam Marron | NMLS# 246438
Tara Jerse | NMLS# 2105127
Innovative Mortgage Services, Inc. | NMLS# 250769
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Pam Marron, NMLS# 246438
Innovative Mortgage Services, Inc. NMLS# 250769
