Capacity. Capital. Collateral. Credit. And…

Nothing has changed in mortgage qualification. It’s still about the FOUR C’s.

With a 5th C making an appearance, Character.

A potential homebuyer walked into our office and said, “I have a 798 credit score. What are you going to do for me?”

While this is an excellent starting point, we let the client know that we need to verify income, the ability to make a down payment and review the property they wish to purchase.

The mortgage process essentially has not changed. We look at the same things today that we did decades ago and that is the four C’s of mortgage lending!
Capacity: Is the client able to make the payment on the proposed transaction? We will review income, W2 forms, tax returns, pay stubs, current housing payments and debts to determine the buyer’s loan payment capacity.

Capital: Does the client have a down payment? We review bank statements to verify the borrower’s ability to make the down payment and demonstrate their ability to save. Even with low to no down payment programs or transactions, or if the buyer is receiving gift funds for the down payment, we will look at their saving and spending history to determine if they can manage the new payment.

Collateral: The lender will need an appraisal on the purchase property to determine if the collateral will support the mortgage loan. The market value and condition of the property are determined with the appraisal report.

Credit: Great credit and high credit scores have an impact on many transactions. This can include obtaining insurance, employment, and all financial transactions. Good credit comes with better rates and terms for consumers in most financial transactions. For mortgage lending, the best rates usually come with credit scores over 740. It can be challenging to obtain a mortgage with a credit score below 620, but credit isn’t the only component of the mortgage lending decision.

Character: When reviewing a mortgage application package, underwriters are looking at the consumer as a whole, not just at the individual four C’s. With a new approach to credit review called “Trending Credit,” underwriters are not just looking at a credit score, but a borrower’s approach to credit and debt management. Underwriters are looking at job stability, professional growth and money management. Although the “Four C’s” have been the base line for lending for decades, with the advent of the Internet, lenders have the ability to learn a lot about consumers, the properties they are buying and the nature of the transaction.

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Sticky Offers!

This is an extremely busy and frustrating market. If you are a listing agent you are probably a bit overwhelmed with multiple offers and demanding sellers. It is no easy task trying to navigate the transaction to get to the closing table and end up happy.

If you are anyone else, you are running as fast as you can to do business. On any given weekend we here at Wintrust Mortgage can have dozens of borrowers making offers on their dream home. As a matter of fact, pretty much all other lenders in MA are fielding dozens of borrowers making offers on their dream home. With all of this activity, it is more than likely that those dozens of borrowers are all offering on the same homes! At least it sure feels that way.

As long as we are in a multiple offer market there will be one winner and many disappointed losers for every listing…. So how do we make offers that stick?
What matters other than price?

Timing – look at date flexibility, find out what the sellers need and deliver those dates.

Down Payment Size – The greater the down payment, the more attractive the offer!
Cash – Cash is King! Pay cash if you can, you can finance the property at a later date.

Speed – Talk with your lender about getting a “credit only” qualification quickly to satisfy the sellers, this means that the loan, if fully approved, is subject to approval of the property.
What about contingencies?

Financing – Call your loan originator to determine if it is reasonable for your buyer to remove the financing contingency and what the risks are. This is not the same as paying cash – what it means is that buyer’s cannot get the deposit back if denied the loan. If properly pre-qualified, the only concern when removing a financing contingency is that the appraisal comes in at the purchase price, or that the buyer is willing to make up the difference between the agreed upon price and the appraised value. However buyers with complicated self-employment income or other unusual financial circumstances need to be cautious when considering waiving their mortgage contingency.

Inspections – Some people remove the inspection contingency and some people have the inspection at or even before they make an offer. We have seen other offers accepted with the condition that they would have the inspection right away, but that the results of that inspection could not be used to cancel the contract on the house or to renegotiate the agreed upon price.

More Inventory

Until we get more listing inventory we are going to have lots of frustrated buyers. Many potential sellers tell us that their greatest concern about listing their home in today’s market is fear that they will not be able to find another property in the time frame allowed with the sale of their home.

Our Solution

Team up with Wintrust Mortgage to present programs where we can engage sellers in pre-qualification activity and home selling strategies such as utilizing extended locks and lease back agreements to allow enough time to find a new home once their property is under agreement.

Working together, we can bring more ready inventory to the market.

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Shop For the Truth, Not For The Answer That You Want!

Today is the buyer’s commitment date… but the lender has not issued one, in fact they are declining the loan!!!

That’s because the buyer does not qualify for the purchase which is what we told him when he came to us for the loan. He is self-employed and we suggested that he come back once his most recent year of tax returns was completed because his income would be higher. The buyer decided that he didn’t like the news and went to another lender where he was given a pre-approval letter, he then made an offer to buy a property, spent money on the inspection and the appraisal and guess what… the buyer does not qualify and will not be approved.

How does a consumer differentiate between information provided by two presumably professional lenders? How does a buyer determine who is telling the truth?
Here are some steps to take for your own education and protection:

• Have the lender walk you through exactly how they arrived at the approved loan amount for your financial profile.
• Ask for details on all aspects, credit, income, savings and employment history – get the why.
• Use the information gained with the first lender when interviewing for a second opinion “Why can you do this when the other lender said that it could not be done?” Then carefully consider the answer, you can take that answer back to the first lender if you think that will help you gain clarity.
• In light of differing opinion, get a third.

Regulators are trying to create a mortgage system where the consumer cannot get hurt, but that is simply not possible. All industries have good and bad players and various levels of competency of professionals. No amount of regulation is going to change that. Consumers have to be smart, educated and shop responsibly. Not just for the lowest rate or the answer they want to hear but for competency and knowledge in the marketplace.

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Make It All About You

Each day is full of noise about real estate and our economy. Trying to purchase a home has become a competitive sport. Some buyers will fall out of the market when the weather warms and their frustration from multiple out bit offers has worn them out… they will devote their few remaining weekends to summer living versus house hunting.
If this fall is like the past 3 or 4, prices will gently fall, bidding wars will wain with 2 or 3 competitors and sometimes just one bid… versus the double-digit competition in the early spring market. Inventory will continue to be the huge issue.
However, it is important to keep in mind the economic conditions are constantly changing and in our increasingly global economy events near and far can impact interest rates and financial markets for better or worse.
Perhaps the Millennials have it right, with all the hand wringing about “when will this generation start buying real estate?” They are taking their time and waiting until it is right for them. This is wise.
We should be making our major life moves when the time is right for us. Not because our family members, friends and the media are touting it’s now or never, this is the time, rates are low, do it now no matter what, get in at any price.
Buying a piece of real estate is a big and life changing commitment, you cannot move on a whim at the next romance or job offer, you may have to maintain, repair, pay up for improvements with your extra funds. When the time is right for you, go for it. When the time is right for you, the opportunity will be there. If rates are higher, it is likely that values will stabilize or slightly decline, if rates rise keep in mind that rates will likely fall again. Innovative but not risky programs will be developed to support first time buyers in a rising rate environment. There will be a way to make a home purchase happen when the time if right for you!
Home ownership creates stability and wealth, it makes sense. It makes sense when the time is right and the buyers are ready to take on the responsibility.
Don’t fall into the frenzied ‘get it at all cost’ attitude that is starting to rule the current environment. Make the decision that the time is right for you because you are ready to take it on, not because social pressures are mounting for you to make a huge lifestyle change.

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The New Trend in Credit Reporting

While “transactors” and “revolvers” may sound like the newest Sci-Fi movie, they are actually two new categories now measured by a new credit reporting approach called trending credit. This new approach goes back two years and looks not only at payment timeliness but also at credit trends. A “transactor” pays their credit on time and often in full or significantly over the minimum required payment. A “revolver” is more likely to pay the minimum required, move balances around, and shop for better credit card deals. Revolvers are considered riskier especially those who carry large unpaid balances.

Until recently credit reports told us if the applicant was late on a payment or had defaulted on a loan but they didn’t tell us how the consumer manages their debt.
Fannie Mae will begin evaluating how all applicants manage their credit with a two-year look back to determine payment and spending patterns. This is called ‘trended credit data’ and we have yet to learn how this new approach will impact consumers. However, the common belief is that utilizing this approach will help millions of consumers who have little to no credit history or do not generate a credit score, to build their credit profile. This may allow them to qualify for a mortgage today that they did not qualify for in the past.

This new trending data approach will not alter a consumers FICO credit score, but will change the way the consumer’s use of credit is evaluated. It will take some time to determine how this approach is working for the mortgage industry. Credit industry experts say this move by Fannie Mae is a huge step towards fairer credit.
Freddie Mac has not made a decision to adopt this approach as of this time.
There has been no national discussion addressing any potential negative impact this will have on lending qualification. We will have to wait and see but for now it is important to understand that consumers’ credit is now being evaluated at a deeper level.

For more information on this subject read this great article by national real estate reporter, Ken Harney


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Causing delays in the mortgage approval process.

Ahhh… Spring, the flowers are blooming and the kids are running in the yard and this year’s taxes are filed and behind us. This is a great feeling, but one that soon can go away when it comes to securing a home loan.
From first time buyers to seasoned borrowers, it is no secret that your lender will require you to provide income documentation in order to obtain a home loan approval, including W2 paystub’s, tax returns and the like. What you don’t know is that tax transcripts are required on most mortgage loans originated across the country. Tax transcripts are a validation that comes directly from the IRS to prove that the income used to qualify the borrower is actual income of the borrower and that the lender didn’t miss something or that the borrower is not potentially committing fraud.
Normally, getting copies of tax transcripts isn’t a big deal, but for borrowers who filed their 2015 returns late, or who mailed in their tax return versus filing electronically, tax transcripts may not be available or be delayed. Depending on the source of the borrower’s income, the overall strength of the loan file, and the loan program, the lender may be able to make an exception and close on a loan with missing transcripts, but not always.
Be aware that if asked for an extension on a closing or a commitment date due to an inability to obtain transcripts, don’t blame your lender. This situation is temporary and generally by the end of June transcripts are on track and on time. It’s always better to take the time to do it right. As I have always said, careful and steady always wins out over quick and sloppy.

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A Thought Provoking Week…

A Thought Provoking Week…
There are weeks where issues come up during the loan origination process that makes me think “I have to tell the community about that!” These can be just random speed bumps that can be avoided, or they can be serious potholes that can detour the entire process.
Last week was one of those weeks!
Appraisals, home improvements and permits:
If recent work had been done on a home, appraisers are expected to prove and document that the work had been properly permitted. If the appraiser notes that a bath had been added and does not determine if proper permits were issued, the underwriter will request documentation to determine that the bathroom was installed legally.
Be sure to ask your selling clients if they had executed permits prior to any recent work within the past 5 years. If they didn’t get permits, you may want to try to get an inspector from the city or town to provide permits prior to listing the property. Just last week, we had a situation where a bathroom was added in the basement of a home and now has to be removed prior to closing. Needless to say, a situation that could have been avoided caused stress and frustration for both the buyer and the seller.
Commitment dates and extended closings:
Mortgage Commitment letters have expiration dates. This can create some concerns when a closing is months later than the Mortgage Commitment date. The law states that the following documents expire after 90 days and must be updated:
• Income: Pay Stubs
• Assets: Checking, Savings, Investment, Retirement
• Credit: Must be re-pulled after 90 days but should not be re-pulled early
• Appraisal: Good for 120 days before a new appraisal is required
The timing on these documents can create issues. For example, an investment or retirement account may only send out statements quarterly. Also, borrowers who are paid monthly may have to wait 30 days before they can provide the documentation required to update the Commitment Letter and extend the expiration date.
ALL loan approvals are at risk if the borrower ruins their credit, loses or quits their job or if they spend their down payment money. This is true whether their Commitment Letter is issued 3 weeks prior to the closing or 3 months. It is important to work closely with your lender and your buyer so you fully understand what needs to be done to update the Commitment Letter.
Conversely, we have buyers with extended closing dates who are required to submit an application right away. This is fine as long as there is no requirement to order the appraisal as the buyer would be required to pay for a second appraisal if the first one has expired.
As always – if you have questions, thoughts or concerns about the timing of a transaction, give us a call and we will walk through the scenario with you to find a solution that is beneficial for everyone.

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Solar Panels Are Everywhere. How Do They Impact Mortgage Financing?

I was out and about last week and in just few blocks sighted 6 homes in our neighborhood with solar panels. As the daughter of an early environmentalist, seeing so many houses with solar power supplementation excited me. As a mortgage professional I wondered how having solar power might impact the mortgage qualification process.
While researching this topic, I found there are mortgage rules to keep in mind when investing in solar panels and alternative energy production.
The biggest question to remember when thinking about updating your home to a solar panel system: are the solar panels owned or is the equipment leased or being paid for under an agreement with the solar company?
If you own your solar equipment you will be able to sell your home at any time.Complications can arise when you do not own the equipment. I would suggest that if you consider installing solar power, have a lender review the contract to determine if there could be any issues with future financing.

Complications that can arise with leased solar equipment:

  • The solar panels may not be included in the appraised value of the property
  • The buyer may have to qualify with the solar lease payment included in their ratio
  • Traditional electrical services to the house must be maintained and functional
  • There are insurance requirements, and other issues to address that make financing a property with leased solar equipment more challenging

Agents, if you are listing a property with solar power, call me early on to determine any possible complications to a future buyer. Some solar providers have created contracts and lease agreements that are suitable to lending requirements, but it’s a good idea to know what you are dealing with out of the gate.

Amy Tierce
Regional Vice President
We’re here to help you and your buyers do more, learn more and grow more!amy-tierce-headshot-2012 (2)

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6 Tips For Realtors For Managing the Appraisal Process

In today’s active market it can take time for values to reflect all sales activity. Taking a proactive approach to the appraisal process will help the appraiser when it comes time to execute the report.

1. Schedule the appraisal as soon as possible. If you are going to be away, make sure you have coverage for the appraisal appointment. Keeping the process flowing helps avoid delays in the loan approval process.
2. Stage the home as though you are conducting an open house. Now that the property is under agreement, don’t let your seller get too relaxed. Make sure that the house looks as good as it did the day the buyer first saw the property. First impressions do matter, so keep the property showing well!
3. Make sure you get the fully executed Purchase and Sales agreement (P&S) to the lender right away. Appraisers are now charged with reviewing the purchase contract to determine that the property as appraised matches the property represented in the agreement. The appraiser is required to review the P&S before they can release the appraisal report. It is vital that the lender receives the agreement on time.
4. Always be prepared to support the sales price by bringing a folder that contains the comparable sold properties that you and the seller used to determine the list price of the property.
5. List any improvements made to the property since last sold. Especially those changes that are not so readily visible such as electrical, plumbing or roofing work. List all improvements made since the last recorded sale of the property.
6. If the appraisal on a purchase comes in low, keep an open mind and don’t panic. There can be ways to manage this situation that keeps both the buyer and seller in the transaction. It is important to work directly with your loan originator and together you may find solutions that work for all involved.
About Wintrust Mortgage: Wintrust Mortgage was created to assist in the realization of the American dream of home ownership. Our large volume and the ability to lend in all 50 states make us one of the largest mortgage bankers in the country. In 2015 alone, we originated $4.3 billion in loans. Wintrust Mortgage hosts over 190 retail, operations and bank locations across the country. Wintrust Mortgage is a division of Barrington Bank & Trust Company, N.A., a Wintrust Community Bank, NMLS# 449042. Equal Housing Lender. For more information visit the company website at, “Like” us on Facebook by visiting and follow us on Twitter @WinMortgage.


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If It Sounds Too Good to be True…

I am constantly amazed at the various techniques created to target vulnerable people out of their money or identities.  Yet, we are all susceptible to these destructive activities.
In the world of big data, we can be easy targets.  Consider this, on Facebook you can purchase targeted ads called sponsored posts.  For example, you can target your post to homeowners, over 50, within a specific geographical area.  Targeting allows you to market directly to a specific audience.
Someone who I trust and respect recently shared a “sponsored” Facebook post about discounted sunglasses being offered by a famous eyewear designer for one day only, as a fundraiser.  The post claimed that this is the year-end clear out and that all glasses normally priced over $100.00 would be $25.00 for one day only, and all sales would go to charity.  I was fascinated and decided to dig in and see if this offer could possibly be true.
I clicked through to the web site and it all looked to be in order, the logo looked legitimate, the site functioned well, the designs and names of the sunglasses were familiar.  The web site looked genuine to me yet there was something about it all that just felt off to me.  So I decided to invest the $25.00 to get to the truth.
Three weeks later my husband asked me what I ordered from over-seas, confused I found the box and remembered my sunglasses.  They looked like the ones on the site but they were definitely a counterfeit product.  I know because I actually own the same pair that I ordered, you can tell simply by the weight, quality of the materials and the slightly blurry logo on the frame!
Mystery solved, yes it was fraudulent, I think just to sell fake sunglasses, but I am keeping an eye on the credit card statement as well to be sure that there isn’t anything more nefarious going on!
As part of the banking industry we are required to take multiple, annual training classes on many subjects and one of those is social engineering or the types of attacks that can hit you through email, fake phone calls or other communication that comes with a request for a password, or other identifiers.  I am pretty good at spotting a fake, it has become a bit of a game for me.
How do you know when you are looking at the real deal as opposed to a decoy designed to cheat you in some way?
In today’s world of constant non-verbal communication, we think that we are talking with our friends and family when we are posting on social media, and we are.  But when it comes to sourcing a reference for an important transaction, do not believe what you read, even if posted by a trusted friend.  Pick up the phone and have a conversation.  In the end human connection is fulfilling and you can cover more ground and gather more information when talking through a situation with your friends, rather than relying on a social media post for your solution.

We’re here to help you and your buyers do more, learn more and grow more!

About Wintrust Mortgage: Wintrust Mortgage was created to assist in the realization of the American dream of home ownership. Our large volume and the ability to lend in all 50 states make us one of the largest mortgage bankers in the country. In 2015 alone, we originated $4.3 billion in loans. Wintrust Mortgage hosts over 190 retail, operations and bank locations across the country. Wintrust Mortgage is a division of Barrington Bank & Trust Company, N.A., a Wintrust Community Bank, NMLS# 449042. Equal Housing Lender. For more information visit the company website at, “Like” us on Facebook by visiting and follow us on Twitter @WinMortgage.

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