New Homebuyer FYI #2

compiled by Hassan Nicholás
FYI #2...random stuff to know

• A Lease not created equal - An auto lease on your credit report is looked upon differently then other types of credit that appear on your report. Why? Lenders figure that even if you pay off that lease, you're still going to need transportation. Which means you'll probably get another lease or have to buy a car outright. So even if you only have 10 months or less left on your lease, a lender could still count those remaining payments against since they anticipate you "replacing" it with another car lease, payment or purchase.

• New Gold Faucet with your Rehab loan? Maybe not - Thinking about using a rehab loan from the government to turn that fixer-upper into the house of your dreams? Well, you might want to hold off on clearing the yard for that new pool. Unfortunately, no improvements considered to be a luxuary are permitted. But, what if the home you're going to purchase already has the pool? Well, then that's fine. Just hold off on installing the imported Italian marble tiles in the bathroom.

• YSP & Pre-Closing Rate Bumps – Yield Spread Premiums can be tool for brokers and agents to pull bait and switch scams on first-time homebuyers. How does it work? The agent convinces the borrower to float the rate (probably tells them that interest rates will likely lower) up until closing. Then, the day before closing the agent announces a “rate bump” due to a dip in credit score, market conditions, cut in appraised value, a pop-up on the credit report, or whatever excuse they can make up to raise the rate – usually by ¼ but no greater than 1/8 points (anything higher might send red flags to the buyer wondering why the rate increased by so much). The agent then presents the buyer with new GFE, TIL and 1003 documents reflecting the changed rate and everything else re-disclosed and compliant (Although, in some states if the rate is changed, the buyer must be given three days notice. If that is the case an agent might backdate documents to reflect that). Since it is unlikely that the borrower can find new financing a day before closing they are practically forced to “eat” the extra cost and take the loan while the agent enjoys an extra $1,000 per transaction. And many times the buyer won’t blame the agent because they claimed to have understood the market risk of going the “floating rate” route anyway.