Your real estate market update for Greater Portland!
Marc Chadbourne
September 2020
There Is No Substitute For Experience!

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Today's Feature Stories

Keep Calm: How to Answer Lender Questions

The loan approval process is indeed exactly that: a process. From the initial application submission all the way to the settlement table and beyond, there are many different steps that are taken. From the borrower’s point of view however, things get pretty quiet after submitting the application and providing the needed documentation. It wouldn’t take much to imagine a loan file just sitting on someone’s desk waiting to be looked at. But that’s not what’s going on at all. There are different people working on different aspects of the submitted loan. An appraisal is ordered. Credit reports and credit scores are requested. Title insurance policies are generated. 

Things get pretty quiet for the borrower during this time but in reality, the wheels are turning. Once the file is ready for a review, the completed loan package is delivered to the underwriter. The underwriter is the person making sure the submitted loan meets the guidelines established for the requested loan program. Generally, this mostly means the underwriter goes down the approval checklist and signing off on them one by one. 

After about two weeks in and a bit of silence on the borrower’s end, a voicemail is left. The lender called and has a couple of questions. Uh oh. What now? What did they find? Is there something I don’t know about? Are they turning down my application? 

For the uninitiated, this might cause a bit of consternation. But from the lender’s point of view, it’s perfectly common. When a loan is first submitted it is digitized (if is isn’t already) and electronically submitted through an Automated Underwriting System, or AUS. Within a few moments after the submission, a list of “findings” is sent back. These findings are sometimes referred to as loan conditions. For example, the findings ask for the most recent paycheck stubs covering a 30 day period. Or maybe some updated bank statements are being asked for. In general, and at this stage, the loan has essentially been preapproved and all that is needed is some follow up paperwork. Credit documents within the file need to be less than 30 days old. Most often these requests are simply to get the loan file in compliance with these findings. 

The takeaway is essentially that once these findings are produced, the loan begins the documentation process. In other words, the borrowers and the lender know in advance whether or not the loan will make it to the settlement table. Because of the AUS findings, if there are some things that are amiss, they’re taken care of at the beginning of the process. The only time a loan does get a preapproval but is later derailed is due to some things discovered that weren’t know at the time of application. But in general, most loans do in fact close with few if any problems.

But it’s the voicemail that the lender left that can bring a bit of pause. The trick to answer lender questions is very simple: answer them. At this point the lender isn’t still deciding whether or not to approve your loan application but instead just filling in any paperwork gaps needed to get the closing papers to the settlement table. If there is a recent late payment showing up on a credit report, a lender might want an explanation letter. The response? Just describe what happened. Many times, the response is “I don’t know how that payment is showing a late” or some such response. There’s no need to get creative with a lender question, just answer and move on. In all likelihood, it’s a harmless request. So, pick up the phone and return the call.


Title Insurance Explained

Title insurance is indeed an insurance policy but is only needed when financing a home or refinancing a home loan. For the relatively few times someone can take out a home loan, the concept and utility of title insurance can be foreign to some. In addition, there is more than one type of title insurance policy. Title insurance is a form of an indemnity policy that protects lenders and buyers from a financial loss due to a deft in a title report.

Title is a public record of property ownership. If you’re a homeowner now you can look through your title policy and you will see who owned the property and when. Sometimes these records can go back a couple of hundred years. The list of buyers and sellers will be shown in the title report, all the way up to the current owner. However, there are times when ownership was transferred but not done so properly. That’s called a defect. There is also an Owner’s Policy which protects the buyer’s equity in the property. Depending upon what is customary for the area, usually it’s the sellers who pay for this policy. The Owner’s Policy is in force for as long as the owners own the home. The other type of policy is in force until the mortgage is paid off.

Okay, so let’s look at an example. Let’s say a happy couple buy their first home. They apply for a mortgage, get approved and soon the movers come. They’ve been in their house for a few months and there’s a knock on the door. They answer and it’s someone delivering a certified letter claiming they new owners don’t legally own the home, the person sending the letter does. The letter states that when the previous couple bought the home together, they later divorced. The divorce decree didn’t completely remove one of the parties from public record and that individual is still showing as an interested party. 

Other issues can be other unreported problems associated with past ownership. A simple mistake in filing in public records can contribute to problems. Forgery is another when one party signs off on a sale using the other party’s signature. Maybe there’s a long lost cousin who was listed as an heir to the property and can claim ownership. In all of these, title insurance protects the lender and the new owners. 

Sometimes a policy is issued that “insures around” a particular feature of the property. This can happen when it is discovered that your property is showing the fence is actually one foot into the neighbor’s.    This is called an encroachment and in the event of such a scenario, title insurance can still be issued by carving out the one foot and leaving that area without title insurance. Typically, this isn’t an issue but will need to be addressed.

Title insurance, much like any other type of insurance policies, are a bit on the “dry” side and make for some rather boring reading. However, within that policy are some very important facts about the property’s history of transfer and ownership. While you may not need to read the entire policy at your settlement, you do need to be alerted when there’s a defect.


5 Tips for Creating the Perfect Zoom Room

Whether you’re working from home and need a great backdrop for video calls or your kids will need a spot to nail virtual learning, it seems everyone wants to know how to create the perfect Zoom space right now. Here are some tips to help.


Building A Backyard Studio To Expand Living Space

A Toronto homeowner was before his time when he decided to put a studio in his unused backyard. The freestanding structure is now the envy of friends and family who are clamouring for space as they spend time at home during COVID-19.


Mortgage Rates
Averages as of September 2020:

30 yr. fixed: 2.91%
15 yr. fixed: 2.46%
5/1 yr. adj: 2.91%

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Marc Chadbourne,Broker, NAR Green Designation CRS GRI ABR
Cell: 207-465-5569
Gardner Real Estate Group
511 Congress Street
Portland, Maine 04101

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