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What Can You Expect?

by Morris Pyle Team

Businesses must treat customers fairly if they expect to do business with them again or get recommendations to their friends. Customers of stores like Nordstrom’s understand that a salesperson is an employee and represents the company.

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The line becomes less clear in some industries, especially ones that involve real estate. Agency is a legal relationship authorizing a person to act for or in the place of another. It involves responsibilities that exceed treating a person fairly.

The duties a buyer or seller can expect to receive from a real estate salesperson or broker include but are not limited to honesty, accountability, full disclosure, representation and reasonable skill and care. Buyers and sellers might additionally expect representation, obedience, loyalty and confidentiality.  State laws can differ on specific duties.

Mortgage and title officers are limited in their duties to the buyer to honesty and accountability and specific requirements under the federal Real Estate Settlement and Procedures Act.

A special relationship with a real estate agent makes it advantageous to have them coordinate efforts with the other professionals in the home buying process. Since most buyers’ and sellers’ transactions are infrequent, the agent can bring valuable experience to the transaction.

Every buyer and seller should discuss the level of service they expect from the real estate professional they work with. Another good question is what happens if the purchase and sale are within the same company.

Fannie Mae will ease financial standards

by Morris Pyle Team

Fannie Mae will ease financial standards for mortgage applicants next month


The top reason mortgage applicants nationwide get rejected is because they’re carrying too much debt relative to their monthly incomes. Fannie Mae will be raising its DTI ceiling from the current 45 percent to 50 percent as of July 29. (iStock)

By Kenneth R. Harney June 6 

It’s the No. 1 reason that mortgage applicants nationwide get rejected: They’re carrying too much debt relative to their monthly incomes. It’s especially a deal-killer for millennials early in their careers who have to stretch every month to pay the rent and other bills.

But here’s some good news: The country’s largest source of mortgage money, Fannie Mae, soon plans to ease its debt-to-income (DTI) requirements, potentially opening the door to home-purchase mortgages for large numbers of new buyers. Fannie will be raising its DTI ceiling from the current 45 percent to 50 percent as of July 29.

DTI is essentially a ratio that compares your gross monthly income with your monthly payment on all debt accounts — credit cards, auto loans, student loans, etc., plus the projected payments on the new mortgage you are seeking. If you’ve got $7,000 in household monthly income and $3,000 in monthly debt payments, your DTI is 43 percent. If you’ve got the same income but $4,000 in debt payments, your DTI is 57 percent.

[For every eight applicants who seek a mortgage, one is rejected]

In the mortgage arena, the lower your DTI ratio, the better. The federal “qualified mortgage” rule sets the safe maximum at 43 percent, though Fannie Mae, Freddie Mac and the Federal Housing Administration all have exemptions allowing them to buy or insure loans with higher ratios.

Studies by the Federal Reserve and FICO, the credit-scoring company, have documented that high DTIs doom more mortgage applications — and are viewed more critically by lenders — than any other factor. And for good reason: If you are loaded down with monthly debts, you’re at a higher statistical risk of falling behind on your mortgage payments.

Using data spanning nearly a decade and a half, Fannie’s researchers analyzed borrowers with DTIs in the 45 percent to 50 percent range and found that a significant number of them actually have good credit and are not prone to default.

“We feel very comfortable” with the increased DTI ceiling, Steve Holden, Fannie’s vice president of single family analytics, told me in an interview. “What we’re seeing is that a lot of borrowers have other factors” in their credit profiles that reduce the risks associated with slightly higher DTIs. They make significant down payments, for example, or they’ve got reserves of 12 months or more set aside to handle a financial emergency without missing a mortgage payment. As a result, analysts concluded that there’s some room to treat these applicants differently than before.

Lenders are welcoming the change. “It’s a big deal,” says Joe Petrowsky, owner of Right Trac Financial Group in the Hartford, Conn., area. “There are so many clients that end up above the 45 percent debt ratio threshold” who get rejected, he said. Now they’ve got a shot.

That doesn’t mean everybody with a DTI higher than 45 percent is going to get approved under the new policy. As an applicant, you’ll still need to be vetted by Fannie’s automated underwriting system, which examines the totality of your application, including the down payment, your income, credit scores, loan-to-value ratio and a slew of other indexes. The system weighs the good and the not-so-good in your application, and then decides whether you meet the company’s standards.

Fannie’s change may be most important to home buyers whose DTIs now limit them to just one option in the marketplace: an FHA loan.

The big downside with both Fannie and Freddie: Their credit-score requirements tend to be more restrictive than FHA’s. So if you have a FICO score in the mid-600s and high debt burdens, FHA may still be your main mortgage option, even with Fannie’s new, friendlier approach on DTI.

3 Steps to Home Buying!

by Morris Pyle Team

A professional Realtor can go a long way in helping you get through the home buying process with the least amount of drama.

Step 1 to buying a home should be Find a Real Estate Agent you trust to help you. This person may become your lifeline during what can be a somewhat stressful transaction. You may end up making many calls and/or emails to seek guidance, information; and sometimes, quite honestly, just to vent about the loan process or financial hoops you have to jump through.

Step 2 is Get Pre-Approved For a Loan before you start shopping. This will help you have a realistic expectation of what you can afford for a house. This also gives you the ability to move forward quickly when you find a house you want to buy.  I am happy to recommend a Loan Officer and lender who will work hard to approve a loan for you!

Step 3 is Start House Shopping! Be sure you are buying a house that you can see yourself living in for a while. Typically you do not want to be back in the market in just a few years. The same is true for financing - make sure the loan you get is something you can handle for the long term. Be aware of the terms. If you decide on a variable mortgage, make sure you understand when rates are going to go up, and, if there are balloon payments, when balloon payments are due & how much.

Buying a home now, in the F-M Area, should be a great investment! Interest rates are very low, & our economy is one of the best! The Best time to buy is NOW! Prices are increasing!

Morris Pyle, Realtor Emeritus, RE/MAX Legacy Realty

Just call or email me to get my 40+ years of experience to help you purchase your dream home!  701-238-1652 or morrispyle@gmail.com 

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Contact Information

Photo of Morris Pyle Team Real Estate
Morris Pyle Team
RE/MAX Legacy Realty
4342 15th Ave. S., Suite 105
Fargo ND 58103
701-238-1652
701-281-0449