My Interview with Eliot at Credit Karma

Q&A with a Mortgage Professional

Written by Eliot May 26th, 2009 at 12:07 PM CDT 1 comment

Today we put together a list of questions that we frequently receive regarding mortgages, refinances, credit requirements and other related inquiries that pertain to the home mortgage industry. Today, we’re lucky to have Jeff Chin, owner of a boutique brokerage, Independent Mortgage, to answer your questions.

What is your background, your mortgage experience, and your current position?

I’m a recovering engineer turned Mortgage Advisor. I started originating loans in 2002, quickly found a liking to it as a profession and with my business partner, we founded Independent Mortgage, LLC in 2004. As a principal, I still originate residential and commercial mortgages. In my spare time, I hold credit management workshops for people to help them understand how scores are formulated and how to improve on them.

2. There is a lot of talk of loan modifications, new programs, new loan limits, and overall change in the mortgage environment. What do you see as the biggest difference in the mortgage environment in the past few years?

The days of liberal lending has definitely left us. Today the climate is one of tremendous suspicion. Lending guidelines are consistently tightened, where a borrower’s profile is under tremendous scrutiny. A borrower’s income, assets, and credit score are checked numerous times. Property values, in a similar fashion, are reviewed in multiple passes to assure that ambiguous issues are not gleaned over. The common sense factor has really disappeared. In our office, we can only shake our head in frustration and try to help our borrowers understand.

3. What do you recommend for borrowers looking to take advantage of these low rates?

The climate remains incredibly favorable for borrowers. Although we (Mortgage Originators) are very busy, looking into a refinance is well worth that 5 or 10 minutes to initiate the process. All things considered for mortgage refinancing currently, a borrower should check his/her credit score to see if it sufficient to get qualify. Currently a 620 credit score is the bare minimum to “talk turkey”. With so many programs, it would be to a borrower’s advantage to select a good mortgage professional to work with. Program guidelines are rapidly changing, so a borrower should “stick with it” until refinancing will not become beneficial.

4. I’m looking to buy a home and I’ve heard about several new programs that are out there. What experience do you have with them, and where should I start?

Today, there’s a lot excitement with the $8,000 tax credit that can be used as a downpayment. I would advise a homebuyer to seek out a knowledgeable Realtor and Mortgage Advisor in tandem. A borrower should know what loan amount they are qualified for, but, just as important, the type of property that are within their qualifications. Unfortunately, Condominiums are on the “highly suspicious” list, so there are lots of prohibitive lending issues in their purchase. Multi-families are also assessed with risk adjustments.

5. My lender has changed several times, and I’m not sure who I should speak to about a loan refinance. What are my options?

You can try to continuously contact the servicer or contact a mortgage broker. Both options are valid and sound, but a broker’s responsibility to place a borrower with the best program that multiple lenders have to offer.

6. What advice do you have for someone that has fallen behind on their payments? What’s the

best course of action for them?
Falling behind does not mean they are shut out of getting help. The best option is to contact their servicer to explore their options. If the circumstances are that their income isn’t adequate to continue with their program, then they should have a solid hardship case. Explore the support groups that are available for mortgage distress. Otherwise, a good Mortgage Advisor should be able to offer some guidance.

7. How important is credit score in qualifying for a loan?

It is monumental… I am seeing the minimum score for programs continue to creep up.

8. What is the minimum credit score, or other requirements to get the best rates in today’s market? What’s the minimum score needed to qualify for a loan?

A score over 740 gives a borrower the most leverage, little or no adjustments on rate. Anything between 740 and 620 means that there will be considerations to rate. As of this writing, there are no mainstream programs for people with credit scores under 620. There are some FHA programs that exist for borrowers with scores as low as 580, but in practice, they require much stricter underwriting conditions as well as numerous letters of explanations. I have not been very successful in getting these loans approved, and from what my other collogues have told me, no one has. It is another case of the government promising false hope.
Hopefully you have found these question and answer session helpful for those looking to take advantage of these low rates to purchase or new home, or refinance to help lower and stabilize monthly costs. Keep the questions coming and we’ll continue to post answers to popular questions.

If Lenders Were Manufacturing Cars

Recent news about the US automakers seems very bleak. Chrysler and GM will be closing down dealerships as means to recover. Here’s some thoughts on some of the mortgage loans for borrowers:

• The Camry – best fit for a small family. Much like the Conventional loan for borrowers with equity in their home (more than 20%), solid credit scores and adequate income to support their mortgage.
• The Hummer – excessive road hog. Jumbo loans that remain at minimum a full percent higher than a conventional rate.
• The Kia (pick a model) – FHA loans are the equivalent. Low to no cost to get in, but, ongoing maintenance costs may mount up one day.
• Strectch Limos – investor mortgages. These models are for the business investors, but are not priced like they used to be.
• The Edsel – Stated income mortgages that just don’t exist anymore.

No Gagh Please!

I’m excited that the new Star Trek movie is starting today, anxious to see the young James Tiberious Kirk and how his universally diverse crew got started. But I am still nastogic about the original Star Trek series. It has been very apparent with mortgage lenders that they are too. The status quo for lenders today remains to be an appetite for only the standard steak and potatoes. Borrowers need great credit scores, equity, and solid income. Like the premier nite, the wait on refinances are long, but, will be well worth it if you can qualify.

Programs like FHA and HARP (Home Affordable Refinance Program) are intended to help borrowers get into lower rates. But difficult guidelines for loan limits, subordinations, home values, credit, etc., force many good candidates to be treated like the Klingon’s staple diet of serpent worms, Gagh! No thanks, lenders say.