Are You Considering Getting A Mortgage To Buy A Condo? Do Your Homework First.

As a seasoned mortgage loan originator, I know that condos are popular among first-time home buyers. After all, the average condo costs less than the average single-family home. Condos require less maintenance and many complexes offer amenities like gyms and pools, all of which are attractive to young, active owners.condominium-690086_1920

But condos aren’t perfect.

There are homeowner’s association rules and monthly dues or fees to cover association management and upkeep of common areas. Then there’s the fact that condos can be more difficult to buy (at least with a mortgage) than single-family homes. That’s especially true if you want to use an FHA loan to buy a condo. When you apply for a mortgage, the lender begins the underwriting process. The underwriting of your loan involves a process in which it:

  • Evaluates whether you have the means and credit to repay the loan.
  • Assesses the property you’re buying.

The investor wants to know that if you default on your mortgage it can sell your property and recoup most of its money. When you’re buying a single-family home, the underwriting process is pretty straightforward. We will appraise the home to ensure it’s worth what you’re paying for it and make sure there is a clean title (so somebody else can’t claim they own it).

When you buy a condo additional factors to consider include:

  • Any commercial space takes up no more than 25% of the square footage.
  • At least 10% of association dues are deposited in reserves.
  • Less than 15% of association dues are more than 60 days late.
  • At least 51% of the units in a new building will be owner-occupied.
  • The building is properly insured.
  • There’s no current litigation regarding safety, structural soundness, habitability or functional use.
  • No single entity owns more than 10% of units, except in buildings with five to 20 units, where a single entity can own two units.

These factors began playing a larger role in the underwriting process following at the onset of the housing crash in 2008. As a result, it’s simply more difficult to get a loan to buy a condo.


So before you buy, simply do a little more homework to avoid any last-minute disappointment that could come from not being able to get a mortgage on the condo you want to buy. Ask to see the all the condo documents and ask the sellers the same questions the lenders will ask about the association finances and owner-occupied units. In many cases, you’ll be able to spot red flags right away. Ask your LO if you are unsure about anything related to the property.

And the most important tip: Meet the older woman dressed in a housecoat peering over the balcony. She knows more about the building and residents than anyone does.

Please take a look at for more information on American Fidelity Mortgage Services Inc. Other blog posts can be found at AFMSI is also on Twitter (@AFMSI3), Facebook, and LinkedIn.

Musician segues into mortgages


By Jean Murphy
Daily Herald Correspondent

Who could have imagined that a rock bassist who performed for years with a popular South Side band and even appeared on Dick Clark’s “American Bandstand” TV show would transform himself into a very successful mortgage banker?

That is exactly what Joe Cuttone of The Hounds, and later bassist for solo artist John Hunter, did.

In 1986, after opening for Foghat and REO Speedwagon as part of The Hounds, having a contract with Columbia Records and appearing on “American Bandstand” alongside Hunter, Cuttone gave up music for mortgages.

“I had two kids at the time and hated Los Angeles. As bass player, I had handled most of the business for the band, so when I heard about a job here, I borrowed my dad’s suit and tucked an 8-inch braid into the back of my shirt and went for an interview,” Cuttone said.

He was hired as a loan officer by Tom Rank, founder of today’s Lisle-based American Fidelity Mortgage. Rank was a Realtor with Century 21 in Naperville who had seen a need for a mortgage company that could serve the real estate community by offering a variety of programs and products from a number of different lenders.

“This was the original mortgage broker concept,” Cuttone said. “A broker could take a loan and place it with a number of different lenders. They took the idea from insurance brokers who sold policies for a variety of companies.”

Rank had started his Naperville-based company, which was originally called “Century 21 Alumni Mortgage,” in 1981. Cuttone went to work for Rank in 1986.

Two years later the firm became a true mortgage banking firm because, by then, it had its own money to fund the loans and just sold the servicing to other companies. In this way, Cuttone said, they were able to offer their customers better rates.

Over the years the company changed names and locations two more times, becoming Alumni Mortgage in 1995 and American Fidelity Mortgage a year after that. Wheaton became its home base for several years and then in 2010 the company moved to its current headquarters in Lisle.

During this time, Cuttone capitalized on his sales personality and became the firm’s top producer, simultaneously progressing up the ladder to manager, then vice president, then president. He purchased the company from Rank in 2006.

Today American Fidelity Mortgage is a “direct endorsed underwriter” for FHA loans and an automatic underwriter for VA loans. This means the company has the ability to approve those types of loans in-house.

“But ours is still a small, local company by design. We have 48 employees and probably write about 1,200 loans per year, mainly in Illinois. But we also do a few in Indiana and Wisconsin. Our average volume is $500 million in loans per year,” Cuttone said.

American Fidelity has also become known for writing reverse mortgages, which are designed for senior citizens, becoming one of the Top 100 endorsers of these mortgages in the country.

“I have a healthy skepticism of this type of loan and don’t believe they are right for everyone. We didn’t really start selling them heavily until I hired Rich Glover, who is a member of the National Reverse Mortgage Lenders Association and has a real passion for these loans. Members of his team are the only ones who handle them for us because it takes a certain mindset to do them and I don’t want to ramrod people into them,” Cuttone said.

In 2010, during the recession, he invested his time and money in obtaining a cloud-based loan-origination system so American Fidelity could better compete with the big companies. The system allows secure, online preapproval applications and also enables its loan officers to work securely from their laptops off-site.

Then, at the end of 2014, Cuttone chose to trim back the firm. American Fidelity Mortgage had grown to 14 branches and Cuttone felt it had become too big and impersonal with too many layers.

“When you own a company, you want to make sure your people are presenting the company in a way that is professional, honest and caring and in this business, you want to make sure that the real estate agents have confidence in you. To earn that confidence, I had to work harder than everyone else and I didn’t want to lose that.

“I wanted to make sure that we maintained our quality because ours is a referral business and we need to make sure our customers are so satisfied that they will come back for their next loan,” he explained.

So Cuttone chose to make American Fidelity Mortgage leaner and more controllable. It became a boutique mortgage banker that could embrace and lead its customers through the complicated mortgage process and offer free pre-approvals for people seeking to buy a new home. He also hired Frank Zak from Chase to run the day-to-day operations.

Cuttone went back on the street to meet the customers and write loans, meeting clients in real estate offices or wherever is most convenient.

“In the future, I see American Fidelity Mortgage continuing to fill the void between the large and medium companies. Since we are locally owned and we do business where we live, go to church and where our children went to school, people know us and feel comfortable doing business with us,” he said.

“This is a family business. My son, daughter, wife, sister, brother-in-law and niece all work here and we also have lots of friends working for us. They know they have to do a great job or Thanksgiving dinner will be miserable,” he quipped.

American Fidelity Mortgage, which is celebrating its 35th anniversary this year, is the fifth oldest licensed mortgage banking company in Illinois. For more information, call (630) 681-1010.

Top 3 Mortgage Career Needs to Attract Millennial Talent

I’m a baby boomer, a part of the generation born after World War II. My career in the mortgage industry started with working along side boomers. Boomers are independent, resourceful, goal-oriented, and competitive, among other things. Then “Generation X” appeared and I began working with them in the mortgage profession. They were the latchkey kids. Self-reliant. Technology savvy. Skeptical. A little pessimistic.


Now the Millennials have arrived. What is a Millennial and what does it mean to my company?

Researchers and the press are still tossing around the definition of a Millennial. Lazy? Screen-addicted? Entitled? However they are defined, they are hard to ignore. There are 80 million of them, age 20-32, in the U.S. spending $300 billion annually. By 2020 they will make up 50% of the workforce.

What is a little strange is that the mortgage industry doesn’t seem to have a group of mortgage advisors that can relate to this generation. The average age of a mortgage consultant is over 50. I began wondering, how we can broaden our reach to this new generation of staff and client market?

A recent Deloitte study of the Millennials showed by the end of 2020, two out of three of them expect to move on from their current employer. In other words, when they start they already “have one foot out the door.” Employers in the mortgage industry will need to understand this workforce and create original approaches to persuade them to come to work and stay.

So what are the top 3 steps the mortgage employer must take or understand to attract Millennial talent?

  1. Define the mortgage business in terms of people and opportunity, not process.

Millennials are motivated to help causes and other people, not institutions or profit. We need to explain that nothing is more satisfying than being in a profession that helps others realize the dream of home ownership. A mortgage professional provides the critical step to home ownership, to raising a family, and to be part of a community. By doing this we also create the loyalty they seek from an employer.

The study showed that Millennials want to develop in their careers. They seek leadership opportunities, mentoring, and training. They want to get promoted. The mortgage employer who shows them a vision into their future has a much better chance to retain the ambitious Millennial and grow the market.

  1. Mortgage employers need to be flexible in the way they present HOW we do business.

The survey showed that 88% of Millennials are not satisfied with the levels of flexibility in the workplace. They are peer and social network connected, not location connected. The mortgage culture is built on technology and flexible work schedules (there ARE real deadlines, but those are more in the processing side). In “the old days”, a meeting with a loan officer had to happen in the office or in their home.  Now borrowers can apply online making it easy to adapt to everyone’s schedule. Status notices are now sent via email rather than relying on the phone.bored-16811_1920

We should be able to explain the work-life balance in the mortgage industry and how our business fits right in with their needs. Providing a little flexibility to live a life can go a long way to promote our business.

  1. Align the profession with the Millennial’s need to be part of a cause.

Another study by the Millennial Project found a top need for Millennials is to be associated with a cause. They want to lend their knowledge, experience, and time to help something bigger than themselves. Millennials are passionate about issues. They want to expand their network by meeting like-minded people. They want to expand their expertise. The study concluded, “Millennials don’t enjoy feeling taken for granted, and they desire important leadership roles in causes they care most about, even if they can’t commit large financial donations presently.”

Again, the industry is loaded with volunteer opportunities and civic causes. If a mortgage professional is not already taking advantage of being in organizations like the Rotary, Habitat for Humanity, park district, church, or school, they should be.

This business has been rewarding beyond money for my family and my employees. I want to provide employees a meaningful, substantive career that will reward a new generation of staff seeking a genuine desire to help people. I want to reward them by providing a career not a job. I want to reward them as they search to be part of something bigger than an office space.

Please take a look at for more information on American Fidelity Mortgage Services Inc. Other blog posts can be found at We are also on Twitter, Facebook, and LinkedIn.



Are Home Appraisals a Good Investment to Save Money?

Short answer: Yes. If an appraisal is part of your purchase or refinance transaction it is worth the investment.

But there are other things an appraisal can help with.

I have noticed a lot of reasonably priced homes with rather high tax bills. If you look at the history of these properties, many of them were purchased prior to the 2008 mortgage crisis.

It is hard to imagine that during the late 1990’s and early 2000’s, home values were increasing so rapidly if you bought a home with 5% down you had a good shot of getting rid of your mortgage insurance the next year. That is how quickly the homes were appreciating in our area.

How would an appraisal help now?

The appraisal is a third party assessment of your home’s value performed by a licensed taxes-646511_1280appraiser. It is not a market analysis that a realtor would give you. However, if you have a realtor you know, that wouldn’t hurt to get you started.

If the tax base was set on a $400,000 home purchased in 2005 and you bought the same home for $250,000 in 2016, chances are the taxes were based on the original purchase price. The average tax base for real estate in Illinois is 2.28%.

$400,000 x 2.28% equals a real estate tax of $9,120 per year.

$250,000 x 2.28% equals a real estate tax of $5,700 per year.

If you buy that $250,000 home today and the taxes end-up at $8,500, hooray for you! You got a bargain. But, your taxes could be a little on the high side—an appraisal for that purchase would be proof of that imbalance.

If you feel like your neighbors are paying less in taxes—perhaps it is someone you know with the same floor plan, or you just can’t believe you are paying so much—contact your local assessor’s office for a description of the review process. You won’t need an attorney unless your taxes are high (like $30,000 per year) then you might want one.calculator-385506_1920

Be prepared for this response: “Real estate taxes are a look back process and we have to incorporate what you were paying three years ago with what you pay now.”

That may have worked in 2010 when taxes were on the decline and assessors were averaging value loss. Local real estate values have leveled so that should have no impact now. Also be prepared to hear that the taxes cover a number of services that have all gone up in cost.  Be brave and press on.

This is where the appraisal comes in. It can be used to back your assertions. The good news is that it has worked in some cases to lower taxes. That depends on you bucking the trend of government waiting you out in hopes that you will get frustrated.

The positive in all of this: when you look at historic sales of properties, you will notice that of all the big ticket items you want to purchase, homes have actually been the only one that has become more affordable.


Home is Mother’s Day

Politicians love naming the streets of their towns after famous people. How about this: “Single mom gets up early, makes breakfast, packs lunch, gets kid(s) off to school, goes to work, comes home, helps with homework, makes dinner and goes to bed exhausted, AVENUE”.

april-723028_1920There is probably a reason that stars don’t look at the camera and say “Hi Dad”, no it is always “Hi Mom”. I always said my dad gave me my business sense but my mom gave me a heart. The great thing about the mortgage industry is the ability to help someone become a homeowner. It is the society’s protective bubble for the family.

So whether you are going home to visit mom or you are having people to your own home, make sure mom knows that all you are, is in good part due to her love. Happy Mother’s Day.

A Simple Way to Avoid Mortgage Paperwork Frustration

LOX… not what you have at the local deli on a bagel. This is an acronym in the mortgage industry for Letter Of Explanation. Please don’t ask why isn’t it LOE. It’s a mortgage industry mystery.breakfast-991821_1920

So, what is the LOX? Imagine you had something on your credit that wasn’t exactly perfect. You would be required to address the issue in writing. I have seen a lot of clients stress over this. The key is to keep your explanations as simple as possible. Don’t leave anything to the imagination.

It is inherent in our business to think negatively. It’s a DNA thing. With that in mind, you should begin your LOX with a simple “To Whom It May Concern” salutation.

Resist the urge to vent. You can hold the whole “the jerks at (fill in the business/bank/law firm) were out to get me” explanation for your next cocktail party. For lending purposes, simply state how it happened, how you realized the error, and how you don’t plan to have it happen again.

Boom.  Done and done.

Unless it is a mortgage late payment in the past 90 days the letter will suffice. We don’t like asking for them, customers don’t like writing them, but underwriters always ask for them.

This LOX may not be as delicious, but it isn’t poison either.

Mortgage Tip of the Week: You don’t have to pay monthly PMI.

Private Mortgage Insurance (PMI) has been a necessary evil in this industry for decades. If banks had their way everyone would put 20% down. This mentality is what created the need for private insurance companies to issue defaulters insurance that covers the bank in case of foreclosure.

The easiest way to eliminate it is to buy it out all at once with a single premium policy. The cost would range and is usually converted to a percentage of the loan amount. So instead of paying a recurring payment monthly you can pay it off all at once.

The advantage is a lower down payment paired with a lower monthly payment. When you buy a property the seller can actually pay the PMI off as a sales concession. Don’t expect the rock bottom asking price, but it is a win/win for you and the seller.

Ask your Mortgage Counselor about this.

(P.S.: Take a look at AFMSI.  We post industry news and related articles on our LinkedIn, Facebook, and Twitter pages.)

The Small Realities of Economies of Scale

“Economies of scale.”

If I had a dollar for every time someone threw that phrase at me, well let’s just say the phrase wouldn’t apply anymore.

By definition: “economies of scale are the cost advantages that enterprises obanalysis-1010888_1920tain due to size, output, or scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output.” (If you can’t trust Wikipedia, what can you trust?)

Uh huh…in layman terms, if your business is big your widget production costs are cheaper and you are in a stronger position in the sales pecking order. As a business owner, the ability to leverage your services is at your disposal.

In truth, “economies of scale” is the ability of the big guys (did I say banks?) to stomp out the smaller competition. Some might call that the laws of microeconomics and natural evolution of an industry. I call it bad for the consumer.

The sports metaphor would be akin to a small market team getting the first pick in a draft with visions of securing the franchise player, only to frustratingly discover your superstar is being pressured not to play in a small market. You invest time and money just to lose that star to a bigger franchise with more advertising and perhaps a more enticing nightlife scene.

How often do we hear about big market owners raising prices on everything without regard to the individual ticket holder (their customer)? Do they think relationships when they go home at night, or do they think profit? In our industry, when the $50,000 mortgage applicant hits the radar of the “too big to fails” and their layers of customer service teams, I wonder of they ever have meaningful and substantive contact with the person on the other end of the application? I know we do.

There are nights when I wonder if being part of a group of local small shops is worth it. If the big guys are truly better, why don’t I just fold in with them? This might sound like little guy sour grapes—maybe it is, or maybe just some tart fruit mixed with cold reality.

The reality is there is a need for both the large and the small in the mortgage industry. Both provide a service. There is a difference. The small guys like to stay away from bad press. I have read some of what has been written about the big guys…yeah, I’m okay not being a part of that reality.

So, next time you hear “economies of scale” also think service, relationships, and small.

(P.S.: Take a look at AFMSI.  We post industry news and related articles to our LinkedIn, Facebook, and Twitter pages.)



American Bandstand to American Dream

BandstandAfter 18 years in the music industry, I went from performing on American Bandstand to helping people achieve the American Dream. I liked my company so much, I bought it. (Has that been used before?!)

That company is American Fidelity Mortgage Services, INC. of Lisle, Illinois, a western suburb of Chicago. American Fidelity is licensed in Illinois, Wisconsin and Indiana.

We are now celebrating our 35th year in the mortgage industry. I waited until now to start a mortgage blog. I am using my initial post to introduce myself. It has been a long and interesting journey.

I will be sharing what I learned along the way, as well as what I continue to learn. I was, in a way, deep  in the trenches of this turbulent industry. Hopefully my insights can save you time, aggravation, and money.

Stay Tuned

Delivering the Dream To Our Veterans

What is the first question any mortgage consultant should be asking……Are you eligible for a VA loan? The main reason I have the freedom to blog, is because of the men and women that served this country.

VAWhile some mortgage companies would rather not write these loans due to limitations on fees, it is our moral obligation to make sure that our veterans are aware of this great benefit. It is rewarding to deliver the Dream to those who defended the Dream.  In most cases the VA loan requires no down payment, the rates are very aggressive and the process isn’t that tricky. The government doesn’t always get things right, but the VA loan is the exception and should be explored by every veteran and their mortgage consultant.