Cheryl L. Peck
This book is designed to help those in residential real estate financing learn the details of originating and processing loans. This step by step guide was developed from insight gained in ten years of making and correcting mistakes. This book can be used to make experienced people more knowledgeable, and can help train new employees on the intricacies of loan processing. This book contains almost all you need to know about the mortgage process but the author realizes there is always some new circumstance, or program, that just didn’t get covered within the confines of this writing.
Cheryl Peck has over 30 years of experience in business. Her first job out of college was as a “repo man” where she began her interest in finance and heard every excuse known on why someone doesn’t pay their bills. Her career culminated with ten years as a mortgage broker building her business from one employee, doing one loan the first month, to a company with over a dozen employees closing more than 70 loans a month. She has also spent time as a federal employee and as a federal contractor leading to a job as the regional manager of over 300 employees supporting various parts of the Defense Department and other federal agencies. Through all of this, in her heart she was always an entrepreneur. Having had several businesses “on the side” she finally quit her job and started her Mortgage Brokerage. Despite having no real experience in this area, she took a short course, incorporated herself, navigated the minefields of government regulation and succeeded in a business that some say has a worse reputation than selling used cars. She built her business on honesty and integrity and with the guiding principle to treat clients the way she would want to be treated. In an industry not known for good customer services, she did more than 80% of her business through referrals and “word of mouth” advertising. She even had family members of her competition coming to her for loans! After 10 years of working 12 to 14 hours a day and never really having time off, Cheryl closed her business in 2007 and now lives a “semi-retired” life. In addition to taking care of her husband and her dog Harley, she spends some time writing and working on various new less intense entrepreneurial pursuits.
Reducing the Amount of Funds to Close
Most programs require that the funds to close be sourced and seasoned (generally, the money must be in the client’s account for sixty days, hence the requirement for two month’s statements on the accounts).
Tip: If the client is having a hard time coming up with sourced and seasoned funds to close a purchase, he should consider paying the first year’s homeowner’s insurance premium directly to the agent. The agent will send the insurance declarations page, along with the paid invoice, to the processor and the attorney. The settlement statement will show the premium as a POC item (Paid Outside of Closing) and will generally not require further documentation.
Earnest money is not usually sourced or seasoned. A larger earnest money payment, given when the contract is signed as “consideration,” means less money the client must bring to closing. The amount of earnest money paid must be documented, either by front and back copies of the cancelled check or a statement on the realtor’s letterhead that the money was received, if the amount is greater than 2 percent of the sales price. Of course, the underwriter may ask for documentation of the earnest money payment as a condition for closing. Earnest money paid, which is less than 2 percent of the sales price is generally not documented.
Closing at the end of the month will save several hundred dollars in prepaid interest.
If the client must close at the beginning of the month, find out if the lender allows interest credits. Many do not. This will eliminate the prepaid interest the client must pay at closing. If allowed, the interest credit applies to loans funded by a certain date—usually the tenth of the month. Rather than collecting interest from the client from the date of closing through the end of the month, the lender credits the client for the interest from the first of the month through the closing/funding date. The first payment is due on the first of the next month, paying the entire interest due on the previous month. Example: If the purchase loan closes the fifth of August, rather than collecting interest from the client for the fifth through the thirty-first, the lender credits the client five days of interest on the settlement statements. Then, the first payment would be due September 1, paying August principal and interest in its entirety.
