What is the most important part of a mortgage loan application?

The declarations page is the most important part of a loan application! 

Why you ask?
Because it opens up a conversation about some of the major red flags and problems a Mortgage loan can run into. By going over the declarations page of the application with the applicant you can address and alleviate many of the pitfalls later in the process.
Remember there are 2 families depending on you and your pre -qualification letter
  1. Buyer (family)
  2. Seller (seller)

The worst thing in the world is to

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What are LLPA and how do they effect mortgage rates?

Lately I have received a few questions on LLPAs and I wanted to share some thoughts with you incase they come up with a client.

Loan Level Price Adjustments (LLPAs) are on all Fannie Mae and Freddie Mac loans. Based on LTV, Credit Score, Number of units, occupancy type, and Loan Type/Purpose.
Fannie and Freddie started these LLPAs some 6 years ago to add risk adjustments to their loans. The higher the risk on the loan the higher the LLPA maybe to mitigate that risk.

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The Dead Cat Story

shrig-im-dead-cat_2Close your eyes.  Relax.  Think back to a simpler time—a time before cell phones, before email, before PDAs and internet search engines.  Think back to a time when real estate agents had glamour-shot photographs on their business cards and online was not around.

Now, ask yourself these questions:  How did real estate agents look up properties in the MLS?  How did they know a house was for sale?  How did they know which house was for sale or a bank foreclosure?  How did they know if the house had 3 or 4 bedrooms?  The answer to all these questions could be found in an invaluable source real estate agents called “the book.”  Yes, the Austin MLS published a book once each month that contained all the listings.  So, if real estate agents wanted a virtual tour, they had to drive to the property to take an actual, visual tour themselves, take notes with pen and paper, and then run to the nearest payphone to call their clients to let them know they had found a house for them to preview.  Talk about putting some miles on your car!

This lack of instant connection did, however, work in the favor of the real estate investor.  Less-than-serious buyers were quickly weeded out of the system; and, rather than having the convenience of viewing hundreds of homes from the comfort of their own homes, real estate agents had to actually drive to a house to preview it

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Is Austin, Texas, in a housing bubble?

I am repeatedly asked these questions:  Is Central Texas experiencing a housing bubble?  If we are, will this bubble lead to another downturn in home prices sooner rather than later?  As I search for the answers, I am, in most cases, assured by respondents that this bubble is real and that a down market is imminent.  Of course, my first response involves seeing the actual data used to draw those conclusions.  Most, if not all, of the respondents base their conclusions on these two factors:  First, they have seen this same thing play out time after time and, secondly, the obvious affordability problems that we are experiencing will lead to a market correction.

While I do agree that the current market is long and that home prices and rental rates have skyrocketed during the past few years, I must first consider the data and the fundamental underpinnings to determine if we are truly in a housing bubble in Austin, Texas.  Perception and conventional wisdom are sometimes far removed from the reality of the market. To determine that reality we must look at the data available to us.  Only then can we make an educated guess (yes, still a guess) about what the market is actually poised to do.

Here are the three data points—in no particular order—I will consider in this analysis:

  • Supply (resale and new construction)
  • Demand (population and employment)
  • Affordability (what a typical homeowner can afford)

Supply is the total numbe

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