GIFTS, GRANTS, COMMUNITY SECONDS AND LOANS FROM FAMILY MEMBERS
• FHA purchase transactions in which the borrower’s funds for down payment, closing costs, prepaid expenses and/or discount points are provided by a gift, grant, community second or loan from a family member or
• FHA purchase or refinance transactions in which, for qualification purposes, the borrower receives a gift to pay down or payoff installment debt.
o Credit Score 580 – 639:
Reserves are not required.
o Borrowers without credit scores and borrowers who do not meet minimum trade line requirements published in the “Credit History” section of FHA Product
Gifts, etc. are now permitted.
PROPERTY FLIPPING – Effective Immediately; (This is GOOD for investors & getting the number of distressed properties off of the market).
For FHA and VA purchases, the seller seasoning requirement has been decreased from 90 days to 30 days.
• Flagstar continues to require a second appraisal for properties sold within 90 days of seller acquisition if the new purchase price exceeds the seller’s acquisition cost by 20% or more.
When determining the 20% increase in sales price, property improvements made subsequent to seller acquisition may not be included in the acquisition cost.
To Be Determined (TBD) Property Addresses for Underwriting of FHA & VA Loans
We are now underwriting loans for borrowers who have not yet selected a property. To ensure loan approval, it is imperative that loan packages contain all pertinent disclosures, credit, income, and asset documentation.
BORROWERS WITHOUT CREDIT SCORES
The following overlays replace our current guidance for FHA borrowers without credit scores:
• The borrower must now have a 12-month rental history. This requirement is reduced from the current 24-month requirement.
• Borrowers who live with family or otherwise live rent-free remain ineligible for FHA financing.
• The borrower must have at least two additional pieces of non-traditional credit, and each trade line must have a 12-month history.• Borrower may not have had a previous bankruptcy or foreclosure.
• Maximum ratios 31/43.
• Gifts, grants, community seconds and/or loans from family members are now permitted for all or part of the borrower’s funds to close, subject to FHA requirements.
REPAIR ESCROW HOLDBACKS FOR REO PROPERTIES
Repair escrows are now permitted for FHA purchases of bank-owned properties when exterior repairs cannot be completed due to weather conditions.
• Approval of the repair escrow is granted on a case-by-case basis and will not be permitted for structural items or items that affect the health and safety of the occupants.
Mortgage Miracles Happen
December 17, 2010
December 8, 2010
Self-Employed? What to Expect When Applying for a Mortgage Refinance Loan
Based on the past mortgage boom and subsequent bust, self-employed borrowers have been impacted greatly. The ’stated loan’ of yesterday has gone the way of the buggy whip. The fraudsters butchered that particular mortgage loan by turning them into liar loans. The whole idea of stating some one’s income was a sign of how out of control the real estate and mortgage industries had become. Proving your gross income and determining your debt to income ratio, is the baseline of the pre-approval process for a mortgage refinance.
When it comes to your mortgage refinance, self-employed borrowers are going to be challenged more than ever with the tightening of guidelines and anti-fraud measures now in place.
What self-employed borrowers should expect when applying for a mortgage refinance:
-Full tax return disclosure, business and personal for at least 2 years
-Adjusted gross income will be the effective gross income
-All business expenses must be reasonable and with-in industry standards
-Schedule E and other expenses must be fully disclosed and accurate
-Prepare to provide all incorporation documentation and identification of all owners/partners
-Married partners may need marriage licenses
-Lenders will perform INCO check, to verify the tax returns that are due, have been submitted with IRS or extensions have been filed
-All bank accounts must be disclosed, it is best to have sufficient funds and cash flow in your personal accounts
-If funds from business accounts are utilized, be prepared for detailed explanations, underwriters are not fond of business funds used for personal use.
-Documentation will need to be provided how business account withdrawals will not negatively impact business operations and cash flow
-Prepare to explain deposits into your accounts and unusually large deposits, especially if you have a relatively new business or very tight debt to income ratios
-You will need a two-year self-employment history
-Expect scrutiny on handwritten documentation and checks
-Direct deposits, wire transactions are preferred when analyzing bank accounts
-Be prepared to explain one time, large expenses that are not reoccurring
-Depreciation on tax returns can be returned to the asset side of your income statement
-The newer your business the more scrutiny you will receive, 20 years of self-employment speaks for itself
-The more organized and detailed your documentation, the better.
-All gift money needs total documentation from origin to destination, bank statements reflecting every aspect of the gift money transaction (for FHA and VA loans)
-Be prepared to document and explain how you pay yourself
-Addresses must match up with business licenses, taxes, drivers licenses, etc…. Different and mismatched addresses across the file will cause problems
Longevity, organization and proper documentation are paramount for self-employed borrowers. Newer businesses will receive more intense analysis for obvious risk reasons. If paperwork is disorganized and sloppy, take the time to get organized, it will help the business in every way.
If the accounting for the business is air tight, expect a relatively simple approval process. If the accounting is sloppy and dis-organized, look for heavy scrutiny and a lot of questions and explanations.
If the business is not organized, you need to get that way, the business will benefit and prosper in many ways.
When it comes to your mortgage refinance, self-employed borrowers are going to be challenged more than ever with the tightening of guidelines and anti-fraud measures now in place.
What self-employed borrowers should expect when applying for a mortgage refinance:
-Full tax return disclosure, business and personal for at least 2 years
-Adjusted gross income will be the effective gross income
-All business expenses must be reasonable and with-in industry standards
-Schedule E and other expenses must be fully disclosed and accurate
-Prepare to provide all incorporation documentation and identification of all owners/partners
-Married partners may need marriage licenses
-Lenders will perform INCO check, to verify the tax returns that are due, have been submitted with IRS or extensions have been filed
-All bank accounts must be disclosed, it is best to have sufficient funds and cash flow in your personal accounts
-If funds from business accounts are utilized, be prepared for detailed explanations, underwriters are not fond of business funds used for personal use.
-Documentation will need to be provided how business account withdrawals will not negatively impact business operations and cash flow
-Prepare to explain deposits into your accounts and unusually large deposits, especially if you have a relatively new business or very tight debt to income ratios
-You will need a two-year self-employment history
-Expect scrutiny on handwritten documentation and checks
-Direct deposits, wire transactions are preferred when analyzing bank accounts
-Be prepared to explain one time, large expenses that are not reoccurring
-Depreciation on tax returns can be returned to the asset side of your income statement
-The newer your business the more scrutiny you will receive, 20 years of self-employment speaks for itself
-The more organized and detailed your documentation, the better.
-All gift money needs total documentation from origin to destination, bank statements reflecting every aspect of the gift money transaction (for FHA and VA loans)
-Be prepared to document and explain how you pay yourself
-Addresses must match up with business licenses, taxes, drivers licenses, etc…. Different and mismatched addresses across the file will cause problems
Longevity, organization and proper documentation are paramount for self-employed borrowers. Newer businesses will receive more intense analysis for obvious risk reasons. If paperwork is disorganized and sloppy, take the time to get organized, it will help the business in every way.
If the accounting for the business is air tight, expect a relatively simple approval process. If the accounting is sloppy and dis-organized, look for heavy scrutiny and a lot of questions and explanations.
If the business is not organized, you need to get that way, the business will benefit and prosper in many ways.
December 7, 2010
Mortgage Rates Wait for No One
CNBC and Bankrate.com just reported that home loan rates are at their all time lows. Yes, all time lows! This is great news for anyone who has yet to refinance to take advantage of the lowest rates ever recorded, or to purchase that new home or investment property more affordably than ever before.
Both 30 year and 15 year fixed rates clipped down to their lowest levels. All this is incredible as just months ago, many experts had anticipated that rates would be well above 5% this summer and on their way to 6% by year end.
Last month, NBC reported that nearly 50% of all people with a 30 year fixed rate had rates higher than 5.75% – do you know where your interest rate is at currently? It’s worth a look.
Plus – in most parts of the country, home values as reported by both the National Association of Realtors and the S&P Case-Shiller indices are higher than last year. If you were unable to refinance last year, the combination of your current home value and historic low interest rates may provide you a greater opportunity to save money than ever before.
Finally, even if your home has lost value from when your loan was originated, you may still be able to refinance. There are some special programs available that might allow you to refinance without private mortgage insurance, even if your loan will now exceed 80% of the present value.
Don’t miss the chance to saving money. Even if you have already taken advantage of the historic rates that have been offered, don’t miss this chance to help your family and friends.
Time waits for no one…and when rates rise, they will rise quickly! Case in point, take a look back at the month of November. They have jumped .25% in one week and another .25% this past week to make it a .5% higher rate than what the month of Octobers rates were.
If you or someone you know has not refinanced, get off the fence, save yourself or have them save a bundle of money and get going. You have to get your loan package put togehter and prepare in advance rather than sit back and not take the initiative to do anything.
Those that take action will save a lot of money over the years. Are you going to be one that does or are you going to pay the price by sitting back and not being proactive about your finances during the time that you can set yourself and your family up for the long term to have more wealth than you originally expected when you had bought your home.
Both 30 year and 15 year fixed rates clipped down to their lowest levels. All this is incredible as just months ago, many experts had anticipated that rates would be well above 5% this summer and on their way to 6% by year end.
Last month, NBC reported that nearly 50% of all people with a 30 year fixed rate had rates higher than 5.75% – do you know where your interest rate is at currently? It’s worth a look.
Plus – in most parts of the country, home values as reported by both the National Association of Realtors and the S&P Case-Shiller indices are higher than last year. If you were unable to refinance last year, the combination of your current home value and historic low interest rates may provide you a greater opportunity to save money than ever before.
Finally, even if your home has lost value from when your loan was originated, you may still be able to refinance. There are some special programs available that might allow you to refinance without private mortgage insurance, even if your loan will now exceed 80% of the present value.
Don’t miss the chance to saving money. Even if you have already taken advantage of the historic rates that have been offered, don’t miss this chance to help your family and friends.
Time waits for no one…and when rates rise, they will rise quickly! Case in point, take a look back at the month of November. They have jumped .25% in one week and another .25% this past week to make it a .5% higher rate than what the month of Octobers rates were.
If you or someone you know has not refinanced, get off the fence, save yourself or have them save a bundle of money and get going. You have to get your loan package put togehter and prepare in advance rather than sit back and not take the initiative to do anything.
Those that take action will save a lot of money over the years. Are you going to be one that does or are you going to pay the price by sitting back and not being proactive about your finances during the time that you can set yourself and your family up for the long term to have more wealth than you originally expected when you had bought your home.
December 6, 2010
Mortgage Myths Dispelled
The mortgage industry continues to change, almost daily. I wanted to dispel some common myths about mortgages in our current lending environment.
1. I have to have perfect credit to get a mortgage.
FALSE-You can qualify for a mortgage with a middle credit score a low as a 620.
2. I need to have a large down payment.
FALSE-For an FHA mortgage only 3.5% of the purchase price is required as a down payment. The down payment can even be a gift from a relative, close friend, employer, etc. In fact, you can buy a HUD Home with as little as $100 down! (A HUD home is one that HUD has foreclosed on and is trying to sell)
3. I have to be able to verify consistent income.
TRUE-The days of Stated Income, No Income, and No Ratio are gone. Income must be fully verifiable.
4. I must be employed.
FALSE-Those that are retired, on Social Security, Permanent Disability, or any other verifiable income are typically able to get mortgages as long as we can show the continuance of future income for at least three years.
5. The $8000 first time home buyer credit has expired?
TRUE and FALSE-Yes, 4/30/10 was the last day for most people to be under contract to buy a home and qualify; however, you have until 4/30/11 and still be eligible to get the credit if you were in the military, Foreign Service, and intelligence corp who served at least three months of qualified overseas duty in 2009.
7. I am currently in a Chapter 13 Bankruptcy so I cannot get a mortgage.
FALSE-You can typically get a mortgage during your Chapter 13 repayment as long as you have made at least 12 months payments on time and you have permission from the court.
8. I filed a Chapter 7 Bankruptcy three years ago so I cannot get a mortgage.
FALSE-You would be eligible for a mortgage two years after your bankruptcy has been discharged.
9. I can qualify for a mortgage if at least three years has passed since I had a foreclosure.
TRUE
10. I cannot qualify on my own, but my Mother can be a co-signor.
TRUE-Your Mom can be a co-signor so long as her credit is satisfactory and her debt to income ratios are good. She would have to qualify via the same process of you.
Please let me know if you have any questions. I hope this post helps answers some myths and gives you hope for home ownership!
1. I have to have perfect credit to get a mortgage.
FALSE-You can qualify for a mortgage with a middle credit score a low as a 620.
2. I need to have a large down payment.
FALSE-For an FHA mortgage only 3.5% of the purchase price is required as a down payment. The down payment can even be a gift from a relative, close friend, employer, etc. In fact, you can buy a HUD Home with as little as $100 down! (A HUD home is one that HUD has foreclosed on and is trying to sell)
3. I have to be able to verify consistent income.
TRUE-The days of Stated Income, No Income, and No Ratio are gone. Income must be fully verifiable.
4. I must be employed.
FALSE-Those that are retired, on Social Security, Permanent Disability, or any other verifiable income are typically able to get mortgages as long as we can show the continuance of future income for at least three years.
5. The $8000 first time home buyer credit has expired?
TRUE and FALSE-Yes, 4/30/10 was the last day for most people to be under contract to buy a home and qualify; however, you have until 4/30/11 and still be eligible to get the credit if you were in the military, Foreign Service, and intelligence corp who served at least three months of qualified overseas duty in 2009.
7. I am currently in a Chapter 13 Bankruptcy so I cannot get a mortgage.
FALSE-You can typically get a mortgage during your Chapter 13 repayment as long as you have made at least 12 months payments on time and you have permission from the court.
8. I filed a Chapter 7 Bankruptcy three years ago so I cannot get a mortgage.
FALSE-You would be eligible for a mortgage two years after your bankruptcy has been discharged.
9. I can qualify for a mortgage if at least three years has passed since I had a foreclosure.
TRUE
10. I cannot qualify on my own, but my Mother can be a co-signor.
TRUE-Your Mom can be a co-signor so long as her credit is satisfactory and her debt to income ratios are good. She would have to qualify via the same process of you.
Please let me know if you have any questions. I hope this post helps answers some myths and gives you hope for home ownership!
December 3, 2010
Before You get a Mortgage: Ten Credit Do’s and Don’ts
How can a fully approved loan get denied for funding after the borrower has signed loan docs?
Simple, the underwriter pulls an updated credit report to verify that there hasn’t been any new activity since original approval was issued, and the new findings kill the loan.
This generally won’t happen in a 30 day time-frame, but borrowers should anticipate a new credit report being pulled if the time from an original credit report to funding is more than 60 days.
Purchase transactions involving short sales or foreclosures tend to drag on for several months, so this approval / denial scenario is common.
It’s An Ugly Cycle:
First-Time Home Buyer receives an approval
Thinks everything is OK
Makes a credit impacting decision (new car, furniture, run up credit card balance)
Funder pulls new credit report and denies the loan
In the hopes of stemming the senseless slaughter of perfectly acceptable approvals, we’ve developed a “Ten credit do’s and don’ts” list to help ensure a smoother loan process.
These tips don’t encompass everything a borrower can do prior to and after the Pre-Approval process, however they’re a good representation of the things most likely to help and hurt an approval.
Ten Credit Do’s and Dont's:
DO continue making your mortgage or rent payments:
Remember, you’re trying to buy or refinance your home – one of the first things a lender looks for is responsible payment patterns on your current housing situation.
Even if you plan on closing in the middle of the month, or if you’ve already given notice, continue paying that rent until you’ve signed your final loan documents.
It’s always better to be safe than sorry.
DO stay current on all accounts:
Much like the first item, the same goes for your other types of accounts (student loans, credit cards, etc).
Nothing can derail a loan approval faster than a late payment coming in the middle of the loan process.
DON’T make a major purchase (car, boat, big-screen TV, etc…):
This one gets borrowers in trouble more than any other item.
A simple tip: wait until the loan is closed before buying that new car, boat, or TV.
DON’T buy any furniture:
This is similar to the previous, but deserves it’s own category as it gets many borrowers in trouble (especially First-Time Home Buyers).
Remember, you’ll have plenty of time to decorate your new home (or spend on your line of credit) AFTER the loan closes.
DON’T open a new credit card:
Opening a new credit card dings your credit by adding an additional inquiry to your score, and it may change the mix of credit types within your report (i.e. credit cards, student loans, etc).
Both of these can have a negative impact on your score, and could result in a denial if things are already tight.
DON’T close any credit card accounts!! DO NOT DO THIS!:
The reverse of the previous item is also true. Closing accounts can have a negative impact on your score (for one – it decreases your capacity which accounts for 30% of your score).
DON’T open a new cell phone or satelite or dish tv or similar type of account:
Cell phone companies pull your credit when you open a new account. If you’re on the border credit-wise, that inquiry could drop your score enough to impact your rate or cause a denial.
DON’T consolidate your debt onto 1 or 2 cards:
We’ve already established that additional credit inquiries will hurt your score, but consolidating your credit will also diminish your capacity (the amount of credit you have available), resulting in another hit to your credit.
Collections: Sometimes a lender will require you to pay of a collection prior to closing your loan; other times they will not.
The best rule of thumb is to only pay off collections if absolutely necessary to ensure a loan approval. Otherwise, needlessly paying off collections could have a negative impact on your score.
Consult your loan professional prior to paying off any accounts.
DON’T take out a new loan:
This goes for car loans, student loans, additional credit cards, lines of credit, and any other type of loan.
Taking out a new loan can have a negative impact on your credit, but also looks bad to underwriters and investors alike.
…
Follow these Do’s and Don’ts for a smoother mortgage approval and funding process.
Just remember the simple tip: wait until AFTER the loan closes for any major purchases, loans, consolidations, and new accounts.
Simple, the underwriter pulls an updated credit report to verify that there hasn’t been any new activity since original approval was issued, and the new findings kill the loan.
This generally won’t happen in a 30 day time-frame, but borrowers should anticipate a new credit report being pulled if the time from an original credit report to funding is more than 60 days.
Purchase transactions involving short sales or foreclosures tend to drag on for several months, so this approval / denial scenario is common.
It’s An Ugly Cycle:
First-Time Home Buyer receives an approval
Thinks everything is OK
Makes a credit impacting decision (new car, furniture, run up credit card balance)
Funder pulls new credit report and denies the loan
In the hopes of stemming the senseless slaughter of perfectly acceptable approvals, we’ve developed a “Ten credit do’s and don’ts” list to help ensure a smoother loan process.
These tips don’t encompass everything a borrower can do prior to and after the Pre-Approval process, however they’re a good representation of the things most likely to help and hurt an approval.
Ten Credit Do’s and Dont's:
DO continue making your mortgage or rent payments:
Remember, you’re trying to buy or refinance your home – one of the first things a lender looks for is responsible payment patterns on your current housing situation.
Even if you plan on closing in the middle of the month, or if you’ve already given notice, continue paying that rent until you’ve signed your final loan documents.
It’s always better to be safe than sorry.
DO stay current on all accounts:
Much like the first item, the same goes for your other types of accounts (student loans, credit cards, etc).
Nothing can derail a loan approval faster than a late payment coming in the middle of the loan process.
DON’T make a major purchase (car, boat, big-screen TV, etc…):
This one gets borrowers in trouble more than any other item.
A simple tip: wait until the loan is closed before buying that new car, boat, or TV.
DON’T buy any furniture:
This is similar to the previous, but deserves it’s own category as it gets many borrowers in trouble (especially First-Time Home Buyers).
Remember, you’ll have plenty of time to decorate your new home (or spend on your line of credit) AFTER the loan closes.
DON’T open a new credit card:
Opening a new credit card dings your credit by adding an additional inquiry to your score, and it may change the mix of credit types within your report (i.e. credit cards, student loans, etc).
Both of these can have a negative impact on your score, and could result in a denial if things are already tight.
DON’T close any credit card accounts!! DO NOT DO THIS!:
The reverse of the previous item is also true. Closing accounts can have a negative impact on your score (for one – it decreases your capacity which accounts for 30% of your score).
DON’T open a new cell phone or satelite or dish tv or similar type of account:
Cell phone companies pull your credit when you open a new account. If you’re on the border credit-wise, that inquiry could drop your score enough to impact your rate or cause a denial.
DON’T consolidate your debt onto 1 or 2 cards:
We’ve already established that additional credit inquiries will hurt your score, but consolidating your credit will also diminish your capacity (the amount of credit you have available), resulting in another hit to your credit.
Collections: Sometimes a lender will require you to pay of a collection prior to closing your loan; other times they will not.
The best rule of thumb is to only pay off collections if absolutely necessary to ensure a loan approval. Otherwise, needlessly paying off collections could have a negative impact on your score.
Consult your loan professional prior to paying off any accounts.
DON’T take out a new loan:
This goes for car loans, student loans, additional credit cards, lines of credit, and any other type of loan.
Taking out a new loan can have a negative impact on your credit, but also looks bad to underwriters and investors alike.
…
Follow these Do’s and Don’ts for a smoother mortgage approval and funding process.
Just remember the simple tip: wait until AFTER the loan closes for any major purchases, loans, consolidations, and new accounts.
December 2, 2010
Refinance Now and pay the pre-payment penalty or wait til the pre-pay expires then refinance?
So a dliemma has been presented by a borrower that has a pre-payment penalty and is wanting to lower the payments, but has less than one year for the pre-payment penalty to expire.
If a borrower has a pre-payment penalty and is considering to not refinace because of a pre-payment penalty, then you need to do the math and compare the long term savings by getting the lowest possible rate while rates are low rather than waiting til the timer period expires for a pre-payment penalty to expire. The bigger risk is that rates will increase and by waiting you will in turn pay more in interest over the term of the loan rather than biting the bullet and paying the pre-payment penalty now. By analyzing the numbers with the help of Excel, which is my best friend in determining the benefit and seeing the true numbers, you will then see the wisdom in what to do for your personal financial matters.
Here's the link to the excel spreadsheets that I've made available to help make the decision by taking a step back and analyzing the numbers. Once you plug in the numbers and review the figures, you can then know if you should proceed to move forward or not to refinance at the current time.
http://wedohomeloansforyou.com/index.php?page=calculators-payment-comparison
Make sure you not only use this spreadsheet yourself, but also share it with your family and friends so they can help make the decision that they can better their finances for the long term.
If a borrower has a pre-payment penalty and is considering to not refinace because of a pre-payment penalty, then you need to do the math and compare the long term savings by getting the lowest possible rate while rates are low rather than waiting til the timer period expires for a pre-payment penalty to expire. The bigger risk is that rates will increase and by waiting you will in turn pay more in interest over the term of the loan rather than biting the bullet and paying the pre-payment penalty now. By analyzing the numbers with the help of Excel, which is my best friend in determining the benefit and seeing the true numbers, you will then see the wisdom in what to do for your personal financial matters.
Here's the link to the excel spreadsheets that I've made available to help make the decision by taking a step back and analyzing the numbers. Once you plug in the numbers and review the figures, you can then know if you should proceed to move forward or not to refinance at the current time.
http://wedohomeloansforyou.com/index.php?page=calculators-payment-comparison
Make sure you not only use this spreadsheet yourself, but also share it with your family and friends so they can help make the decision that they can better their finances for the long term.
Window of Opportunity May Be Closing – Sooner Than You Think
I wanted to reach out to you before it's too late. Many people have heard that home loan rates reached record lows in October, 30 year rates were in the super low 4's, 15 year rates were bewteen 3.375 & 3.625%, all depending on the LTV and the borrowers credit score. Due to the frenzy and buzz of the low rates, I've been busier the past few months with emails and phone calls from clients wanting to take action compared to the rest of the year prior to this fall who wanted to take advantage of this wonderful lending envirnment.
But – and this is an important but – it is more important than ever to act now.
Over the last week, rates have started rising again due to a combination of good economic news and the Fed's latest Treasury Security purchasing plan. In fact, over the last week rates have risen 0.5% from where rates were in October! That's right – 0.5%! For two days they dropped back down .25% to make it a .25% rise and yesterday rates increased again .25% to go back up to the .5% higher than October.
While some people say good things come to those who wait, others say to strike while the iron is hot and make hay while the sun is shinging. In this case, the "iron is still hot" and the sun is shinging with rates still under 5% at exceptionally low levels, but it's starting to turn, and quickly. And we will quite likely never see home loan rates this low again.
It will only take a minute – give me a quick call so we can look at your situation. Doesn't cost anything to check it out, and the choice of moving forward will be up to you. But don't miss this closing window of opportunity to save significantly on your monthly budget. What better gift to give yourself...and just in time for the holidays!
Case in point, a family that has a $220,000 mortgage that is currently paying 5.875% on a 30 year and their new loan is 4.375% for a 20 year mortgage, they will save approximately $90,000 in interest and they payments are going to stay about the same or within $10 to $20 of the year mortgage.
That's a savings that you cannot wait till next summer or some time in the future and expect to get the savings over time. Why? Two reasons. One, the markets move and are not going to wait on anyone to be ready. If rates creep up to over 5%, they may not go down to the super low 4's for years. Two, Time is on your side or not on your side, pending on acting or not acting.
I look forward to hearing and working from you! If you happen to be reading this article and you will not benefit from refinancing at all, surely you know a few people in your sphere of influence that can benefit from restructuring their mortgage and finances.
But – and this is an important but – it is more important than ever to act now.
Over the last week, rates have started rising again due to a combination of good economic news and the Fed's latest Treasury Security purchasing plan. In fact, over the last week rates have risen 0.5% from where rates were in October! That's right – 0.5%! For two days they dropped back down .25% to make it a .25% rise and yesterday rates increased again .25% to go back up to the .5% higher than October.
While some people say good things come to those who wait, others say to strike while the iron is hot and make hay while the sun is shinging. In this case, the "iron is still hot" and the sun is shinging with rates still under 5% at exceptionally low levels, but it's starting to turn, and quickly. And we will quite likely never see home loan rates this low again.
It will only take a minute – give me a quick call so we can look at your situation. Doesn't cost anything to check it out, and the choice of moving forward will be up to you. But don't miss this closing window of opportunity to save significantly on your monthly budget. What better gift to give yourself...and just in time for the holidays!
Case in point, a family that has a $220,000 mortgage that is currently paying 5.875% on a 30 year and their new loan is 4.375% for a 20 year mortgage, they will save approximately $90,000 in interest and they payments are going to stay about the same or within $10 to $20 of the year mortgage.
That's a savings that you cannot wait till next summer or some time in the future and expect to get the savings over time. Why? Two reasons. One, the markets move and are not going to wait on anyone to be ready. If rates creep up to over 5%, they may not go down to the super low 4's for years. Two, Time is on your side or not on your side, pending on acting or not acting.
I look forward to hearing and working from you! If you happen to be reading this article and you will not benefit from refinancing at all, surely you know a few people in your sphere of influence that can benefit from restructuring their mortgage and finances.
November 30, 2010
Conventional Loans, We now lend up to 97%, only 3% down required on conventional loans X
Many people think you need 20% down to get a conventional loan. It has been only 5% down.
Conventional Loan Guideline update:
Guidelines are loosening for purchase Loans
Effective immediately, we now lend up to 97% on conventional loans.
Only 3% down required on conventional loans.
Requirements
SFR (Single Family property)
Owner Occupied
A mid FICO score of 720 or greater is required by both borrowers.
So the pro's and cons of why to go with the 97% conventional vs. the 96.5% FHA loan.
The borrower does not have to be a first time home buyer for 97% financing.
Conventional loans always require two (2) months of cash reserves are not always needed if there are compensating factors. There can be reasons to go with an FHA loan if one guideline kicks a borrower out of conforming guidelines.
If the borrwer does not have a 720 mid score, then going with an FHA loan may be the way to go. With the conventional 97% loan, there is NO upfront mortgage insurance required, unlike FHA loans have an upfront MI factor of 2.25% of the loan amount.
There is a monthly mortgage insurance requirement.
Make sure you get the latest marketing tips for real estate agents.
Also, make sure your clients and potential clients are getting the insights they need on lending and the changes: to read on lending changes, guidelines, credit tips, seller concession topics and others, a must read blog:
November 23, 2010
Rates improving again, economic data & global tensions favor the bond markets.
Rates are improving again, economic data & global tensions in Korea have favor the bond markets today.
The past 10 days have been a sit back and wait for rates to improve before you lock.
This morning is the morning to start locking again as rates are back to being good enough to move forward.
You can't wait 2 to 10 days to move forward, it's move forward now.
The past 10 days have been a sit back and wait for rates to improve before you lock.
This morning is the morning to start locking again as rates are back to being good enough to move forward.
You can't wait 2 to 10 days to move forward, it's move forward now.
November 15, 2010
Mortgage Rates & Predictions of what they are doing & going to do.
Are you thinking about refinancing? Wondering if rates will rise or fall in the next few days?
Conforming Mortgage Rate Predictions Only
First, the fine print. These mortgage rate predictions are for conforming mortgages in Cincinnati, Ohio; Loudoun County, Virginia; and everywhere else that conforming mortgages are available.
Jumbo mortgages are not part of this survey because jumbos don't price like conforming loans. The same goes for FHA streamlines. Furthermore, unique property types including non-warrantable condos in Chicago, condotels in Florida, and loans for investors with more than 4 properties financed are excluded.
Email me anytime 
for a real-time rate quote.
for a real-time rate quote.Breaking Down The Predictions
Here's the mortgage rate outlook for the upcoming week:
- 50% think mortgage rates will increase
- 29% think mortgage rates will decrease
- 21% think mortgage rates will won't change
I expect mortgage rates to increase.
My advice not be appropriate for your individual situation and I'm not always right. Ultimately, you may find your time better spent listening to The Grapefruits of Wrath.
"Here come the inflation hawks. Mortgage rates rise."
This all has an unfortunate, familiar feel to it.
The 600 Billion Dollar Bond Backlash Begins
Two weeks ago, the Federal Reserve made a new, $600 billion commitment to the bond markets. The plan is commonly called QE2, or Quantitative Easing: Part II.
Upon the QE2 announcement, mortgage markets immediately improved, and for good reason. A bonus $600 billion in demand is enough to unhinge the Supply and Demand curve and that's exactly what happened. Bond prices rose and bond yields fell. Mortgage rates made new all-time lows. But only for a minute.
Just 40 hours after the Fed's plans for were made public, the Bureau of Labor Statistics released the October jobs report and it showed 151,000 new jobs created. Economists had been expecting about one-third of that. Mortgage rates rose on the notion that the economy isn't as weak as had been purported.
And then, a small firestorm erupted around QE2.
Some observers made the obvious point that the Fed is buying $600 billion in U.S. bonds and, to fund the project, the group is -- quite literally -- printing its own cash. This is inflationary because "printing money" creates new supply that devalues every other dollar in circulation.
The concern spread overseas as nations including China, Germany and Japan joined the chorus of critics.
Inflation is low today, it's argued, but the Fed is setting the stage for high inflation tomorrow, and inflation is awful for mortgage rates.
Inflation Concerns Mount; Mortgage Rates Are Rising
The specter of inflation is always present in bond traders' minds, but it has a nasty way of going viral. What begins as a few legitimate economic concerns, when given the right petri dish, can spread into a full-fledged panic in days.
The conditions look right for that kind of panic.
The current bond market looks a lot like it did in May of 2009. Inflation fears took rates up 1.125% in 10 days back then.
If you'll remember back to May 2009, the first stimulus package was 3 months old and the Fed had just started another round of bond-buying. After a run of poor economic data, mortgage rates had made all-time lows and a mini Refi Boom had started.
Wall Streeters had piled into mortgage bonds as a safety play -- and then they got spooked. Investors couldn't sell their stuff fast enough. Stock markets rallied and bond markets reeled. Lenders were issuing 4 rate sheets per day just to keep up.
But it wasn't just how fast rates were changing -- it was by how much they changed:
- Tuesday, May 26, 2009: Rates up by 0.250 percent
- Wednesday, May 27, 2009: Rates up by 0.625 percent
- Thursday, May 28, 2009: Rates down by 0.250 percent
- Friday, May 29, 2009: Rates down by 0.375 percent
- Monday, June 1, 2009: Rates up by 0.500 percent
It was absurd, and the market looks poised to do it again. We're a single piece of inflationary data away from seeing the return of 5 percent mortgage rates.
It's Time To Lock Your Mortgage Rate
When mortgage rates move, they move quickly. Especially when markets are wound as tightly as they are right now.
My advice: There's no penalty for refinancing twice (or thrice!) so take the bird-in-hand. Refinance now. Then, if the market goes lower in 2011, refinance again later. Just make sure you're asking your loan officer about "zero cost loans". It would be silly to pay closing costs twice.
If you're shopping for a loan, those that have their files prepared and ready to submit to underwriting when the rates have the right pricing will get the right pricing. Those that wait to start to put the loan process when rates are there will miss the boat. Why? When a file is submitted, to ensure the best chance of meeting deadlines, you must have a complete file from start rather than waiting until the moment is right to start it. By then it's usually too late to get the rate that the consumer would like to get.
I've seen this over 20 times in the past 30 days alone with families that think the rate that we quote one day will still be there in 5 days or 3 weeks later by waiting until they think or hear interest rates are where they need to be to move forward. In the past 3 business days, since Tuesday November 9th, 2010, rates have deteriorated by .5% in rate.
As mentioned above, the bond markets this past few weeks and over the next few weeks are very volatile. They are constantly changing, not just daily, but sometimes 3 to 4 times a day in rates going up or down enough to make it so the pricing great enough to have us help the consumer in paying closing costs or the opposite in the borrower having to pay more in closing costs if you want a rate when the pricing has deteriorated.
To ensure the lowest rate possible, you don't wait until rates are back to the desired rate or where they've been to start the loan application and/or , having your conditions and checklist of items sent in is critical and important to verify your income documentation and
submit file ask me what I can do for you.
I've seen this over 20 times in the past 30 days alone with families that think the rate that we quote one day will still be there in 5 days or 3 weeks later by waiting until they think or hear interest rates are where they need to be to move forward. In the past 3 business days, since Tuesday November 9th, 2010, rates have deteriorated by .5% in rate.
As mentioned above, the bond markets this past few weeks and over the next few weeks are very volatile. They are constantly changing, not just daily, but sometimes 3 to 4 times a day in rates going up or down enough to make it so the pricing great enough to have us help the consumer in paying closing costs or the opposite in the borrower having to pay more in closing costs if you want a rate when the pricing has deteriorated.
To ensure the lowest rate possible, you don't wait until rates are back to the desired rate or where they've been to start the loan application and/or , having your conditions and checklist of items sent in is critical and important to verify your income documentation and
submit file ask me what I can do for you.
- Send me an email or call me with the basics of what you're trying to do. We will discuss your scenario.
- I'll have some follow-up questions for you.
- Next, I'll get you pricing and tell you what can be done and what is realistic or not realistic.
If you like the rate, I'll lock it for you and we'll start working toward closing. That's it!
Expect me to reply to your phone call or email within about an hour, during business hours.
October 28, 2010
Seller concession, FHA vs. Conventional
When buying and selling a home, one of the big motivating factors a buyer will buy one house over another is based on seller concessions. In simplistic terms, seller concessions is the seller contributing money that the seller would receive and crediting those funds back to the buyer to assist in paying for closing costs. This is a very big motivating factor for many first time home buyers as well as move-up buyers.
There are two (2) types loans that have drastically different guidelines of seller concessions to each other with residential mortgage loans, FHA and conventional loans. If you are a seller, a buyer or a real estate agent or real broker and you are involved in this process of buying or selling a home, then understanding the difference between an FHA and a conventional loan for seller concessions is going to save headache right before closing when the lenders doc drawer is trying to send docs to the title company and everything is co-sure. When those involved don't understand what is permitted and what is not permitted, then deadlines are missed an finger pointer and relationships can be ruined by those that don't understand the basic guidelines of these differences of loan products.
1) FHA Seller Concessions
6%
There are no limitations to what percent base on credit scores nor based on the buyers down payment and LTV (loan to value).
Seller contributions allowed up to 6% of the sales price, but seller contributions may not exceed the actual amount of closing costs, pre-paid expenses and discount points
§ UFMIP, when paid by the seller, is included in the 6% limitation o Seller must pay all or no UFMIP – Partial financing of UFMIP is not allowed
§ Any seller contribution exceeding 6% of the sales price results in a dollar for dollar reduction to the sales price before calculating the maximum loan amount
Job Loss Insurance
§ May be paid by builder or seller of property
§ HUD-I must reflect payment made directly to the insurance company
§ Amount paid on behalf of the borrower is included in the 6% seller contribution limitation
§ A copy of the insurance policy is required at closing
Homebuyer Counseling
§ May be paid by builder or seller of property
§ Amount paid on behalf of the borrower is included in the 6% seller contribution limitation (typical fees are $250)
§ A copy of the homebuyer counseling certification is required prior-to-closing
2) Conventional Guideline for Seller Concessions
Contributions/Concessions
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Borrower closing costs paid by the property seller or by any other interested party to the transaction (i.e. builder, developer, real estate agent, lender or any of their affiliates) are considered contributions. Items paid by the property seller that are the responsibility of the seller are not contributions (i.e. real estate sales commissions, charges for pest inspections or costs that the property seller is required to pay under state or local law). Funds the purchaser receives from a non-participant to the sales transaction are not considered contributions, even when they are used to pay closing or settlement costs (i.e. the property purchaser’s employer or a family member).
Standard Conforming
· Primary residence/second home > 90% LTV = 3% of value.
· Primary residence/second home > 75-90% LTV = 6% of value.
· Primary residence/second home < 75% LTV = 9% of value.
· Non-owner occupied properties = 2% of value.
Super Conforming
· Primary residence/second home = 3% of value.
· Non-owner occupied properties = 2% of value.
The amount of any contributions in excess of the limitations set forth above will be considered a sales concession. Any amount contributed by an interested party that exceeds the costs to close the loan, must be considered a concession and subtracted from the purchase price.
Additional examples of contributions granted by any interested party to the transaction that are considered to be sales concessions (regardless of the of the limits above) are:
For purposes of determining the LTV and CLTV, the dollar amount of any sales concessions or contributions that exceed the maximum allowed must always be deducted from the purchase price. The LTV and CLTV are then calculated using the lower of the reduced purchase price or the appraised value. The appraisal must reflect the effect that any subsidies, contributions or sales concessions have on the market value for the property. The AU Feedback must accurately reflect the LTV and CLTV adjusted for any financing or sales concessions in the transaction.
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Must pay all or no UFMIP – Partial financing of UFMIP is not allowed
§ Any seller contribution exceeding 6% of the sales price results in a dollar for dollar reduction to the sales price before calculating the maximum loan amount
Job Loss Insurance
§ May be paid by builder or seller of property
§ HUD-I must reflect payment made directly to the insurance company
§ Amount paid on behalf of the borrower is included in the 6% seller contribution limitation
§ A copy of the insurance policy is required at closing
Homebuyer Counseling
§ May be paid by builder or seller of property
§ Amount paid on behalf of the borrower is included in the 6% seller contribution limitation (typical fees are $250)
§ A copy of the homebuyer counseling certification is required prior-to-closing
October 20, 2010
Go with refinancing and pay your house off in 20 years or less & save ten's of thousands of dollars.
Question:
20-year rate expense
Dear Ben,
My wife and I are trying to figure out if it's a smart move to refinance our current loan -- we just finished paying off the first year -- and go from a 30-year fixed-rate mortgage to a 20-year fixed-rate mortgage.
My wife and I are trying to figure out if it's a smart move to refinance our current loan -- we just finished paying off the first year -- and go from a 30-year fixed-rate mortgage to a 20-year fixed-rate mortgage.
I don't know if it is better to use the money we spend on the origination fees and settlement fees or to put that money directly toward the current mortgage principal. Here are the numbers:
Current loan
· 30-year fixed-rate loan of $317,400 at 5.375 percent.
· Paying $1,777.35 a month plus $479.79 for escrow for a total monthly payment of $2,257.14.
We've paid off one year of the original loan to a loan balance of $312,649.24. I had put down 25 percent when I bought the house for $423,000.
New loan
· 20-year fixed-rate loan for what I assume will be $312,649.24 at 4.375 percent.
· Pay $1,956.94 a month plus $479.79 for escrow.
I will also have to put down $7,500 for closing costs.
Added bonus: We were also thinking of putting another $30,000 toward the principal since this money is currently in a money market account and not earning very much. Should we put this money toward the new loan or the old loan? Any insight would be greatly appreciated.
Answer:
I ran the numbers for you, too. At $7,500, I think your closing costs are a little high. A Closing cost study has the national average for closing on a $200,000 purchase mortgage at $3,741. Have your lender walk you through the projected costs.
Mortgage rates are lower now than the rates you provided, but I've used your 20-year rate for the illustration below:
Existing 30 year Mortgage | Refi with a 20-year mortgage | |
Loan amount: | $312,649 | $312,649 |
Interest rate: | 5.375 percent | 4.375 percent |
Loan term (months): | 347 months remaining | 240 |
Mortgage payment: | $1,777.34 | $1,956.94 |
Total payments: | $616,738 | $469,666 |
Total interest: | $304,089 | $157,016 |
Effective interest expense1: | $228,067 | $117,762 |
1 Assumes 25 percent marginal federal income tax rate and no state income tax impact.
Saving 1 percent on the interest rate and shortening the loan term to 20 years cuts your interest expense in half. The effective interest expense assumes you can fully utilize the mortgage interest deduction on your federal income taxes.
I also ran the numbers for your additional payment scenario. The additional principal payment is larger for the existing mortgage by $7,500 because you don't have to pay any closing costs. You would want to make sure there isn't a prepayment penalty before making that big of an additional principal payment on the existing loan.
Additional payment expenses
Existing mortgage w/additional principal of $37,500 | 20-year refi w/additional principal of $30,000 | |
Loan amount: | $275,149 | $282,649 |
Interest rate: | 5.375 percent | 4.375 percent |
Loan term (months): | 265 | 240 |
Mortgage payment: | $1,777.35 | $1,769.16 |
Total payments: | $470,722 | $440,599 |
Total interest: | $195,573 | $141,950 |
Effective interest expense1: | $146,680 | $106,462 |
1 Assumes 25 percent marginal federal income tax rate and no state income tax impact.
As you can see, there's a $40,000 difference, after-tax, in interest expense by refinancing, plus making the additional principal payment. You'd want to make sure you're not emptying out your emergency fund to make the additional principal payment.
My rule of thumb with additional principal payments is to go ahead and make them if you expect to earn less after-tax on your investments than the effective rate on your mortgage. This is assuming you can fully utilize the mortgage interest deduction.
Even if closing costs are to be on the high side, I'd go with a refinance, presuming you plan to be in the house long enough to justify those closing costs.
October 1, 2010
FHA Higher Loan Limits Extended, a necessary evil for the housing market!
There wasn't much fanfare, and it literally happened in the cover of night, but sometime after midnight Thursday morning, the U.S. Congress passed an extension of the increased Fannie/Freddie/FHA loan limits for high cost housing markets to a maximum $729,750.
Big deal, right? Well, yes.
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The higher loan limits for high-priced housing markets were instituted back in 2008, when President George W. Bush signed the Housing and Economic Recovery Act.
At the time, the mortgage market had crashed entirely, and the only games left in town were Fannie, Freddie, and FHA.
They each had a loan limit of $417,000, which knocked an awful lot of potential borrowers out of the game. The move was designed to moderate the credit crunch and promote borrowing and buying.
Since the peak of the housing boom in 2006, home prices are down 28 percent (S&P/Case-Shiller). That means many higher-priced markets aren't quite so high-priced anymore. Of course there are still hot spots, many in California, where the median home price is well over $417,000, but the national median home price currently stands at $178,600 (National Association of Realtors).
More important than home prices, however, are the players in the mortgage market today, or, shall I say, the lack of players in the market. Fannie, Freddie and FHA are originating around 90 percent of all new loans today. Higher loan limits therefore afford higher risk to these entities. The Federal Housing Administration (FHA) reports that loans over $400,000 have a higher risk of default.
Government officials continue to claim they want to increase private sector mortgage activity, and they have to. In order for the Obama Administration to expunge Fannie and Freddie from the U.S. mortgage market successfully, they have to ensure there's a market in existence behind them. Right now there isn't. Investors don't want to touch anything that doesn't carry a government guarantee.
Letting the loan limits drop to the previously legislated $625,000 limit, some argue, would have at least been a little boon to the jumbo market, which is struggling for business right now. But would it really juice the private mortgage market?
Some claim the only way the private market will ever recover is to start rolling back the loan limits, at least slightly, because if we continue the government loan limit status, nothing will change and the government will control 90 percent plus of the mortgage market for the foreseeable future.
The trouble with that argument is that at the present time there are no investors for the loans.
There has been exactly one jumbo securitization in the past year, and it wasn't all that big.
Why?
Because potential investors in potential private label mortgage securities need to know what the new structures of these loans will be; they need comfort that their interests are aligned with the interests of all the players that exist between them and the borrowers (servicers, appraisers, etc.).
The Dodd-Frank financial reform bill did not mandate risk retention by any of the intermediaries, at least not yet. Policy makers have a year to define what exactly is a "qualified residential mortgage." So bottom line, without the increase in the loan limits, a fairly sizeable part of the mortgage market would have ground to a halt.
Lawmakers had no choice.
September 27, 2010
Simple Secrets of Living Debt-Free From those who don't owe a penny
If you can’t afford to pay for it now, you can’t afford it. When my grandfather told me that 40 years ago, it didn’t sound nearly as radical as it does today. Grandpa borrowed money only once in his life -- to buy a house -- and even then he paid it off long before the bank required.
Of course, times are different now. Everything costs so much more. There’s no way you can live comfortably these days without borrowing money and going into debt.
Wait a minute! If you believe those last three sentences, then have we got an article for you. Those three sentences are as false as Grandpa’s teeth.
I picked the brains of some leading personal finance experts and my own network of volunteer "Miser Advisers" to get their thoughts on living comfortably without going into debt -- or at least without borrowing to the extent that most Americans do today. Here are their secrets...
Be afraid, be very afraid, of credit cards. To paraphrase Jack Nicholson’s character in the movie A Few Good Men, "Credit cards? You can’t handle the credit cards!" Roughly 60% of active credit card accounts are not paid off every month. Many people think that they can game the system -- earn lots of bonus points or cash back by frequently using a credit card -- and pay it off every month. In reality, most people just end up in debt.
Pay in cash, and you certainly will spend a lot less. According to Bankrate.com, the average credit card purchase ends up costing 112% more than the purchase price (that’s right, more than twice as much) because we fail to pay it off right away.
To me, there are only a few wise uses of a credit card. These include establishing your credit history... genuine emergencies... and transactions such as car rentals that require a card.
Practice the art of procrastination. When it comes to debt-free living, procrastination can be a virtue, not a vice. We’ve all had buyer’s remorse. That’s the feeling of regret you get when you buy something that disappoints you. Buyer’s remorse often is compounded by a sense of guilt when you buy something on credit. The purchase has disappointed you, and you haven’t even paid for it yet.
Practice procrastination when it comes to discretionary purchases, particularly if you plan to use a credit card. Wait at least one week between the time you see an item in a store or online and the time you go back to buy it. Chances are good that you will decide that you don’t want it after all. And whenever you do buy, save your receipts so that you can return items you regret for a full refund.
Shine up that used car. When it comes to buying an automobile, the smart money is almost always on buying a used (but not abused) vehicle, so you let the guy who buys the new car pay the 20% or more in value that most new cars lose in their first year of ownership.
Still have that urge-to-splurge on a new car? Anthony Manganiello, author ofThe Debt-Free Millionaire, has this simple advice that helps him resist the call -- keep your car really clean. He says that a sparkling used car feels like a new car and helps him resist the unending barrage of car commercials.
Buy a home, not a castle. Granted, few people can afford to buy a home without taking out a mortgage, but that doesn’t mean that you need to live your entire life with a mortgage hanging over your head, as many Americans do. The secret is to choose a house costing no more than 75% of the maximum amount you can qualify to borrow and then aggressively paying off your mortgage early.
"The priority is to get into something you can afford and then work on trading up or improving the house you have," says personal finance columnist Gregory Karp in his book Living Rich by Spending Smart.
Once you’re in that affordable home, begin making extra principal payments to pay off the loan early. If in the course of a year you make just one extra monthly payment, you can knock years and many thousands of dollars in interest off your mortgage.
Ask yourself, "When is Christmas next year?" That sounds like a stupid question, but as Heather Wagenhals of the Unlock Your Wealth Foundation points out, many people are financially blindsided every year by holidays, vacations and other "spending events" that can be planned for well in advance.
The same goes for "emergencies." Certainly it is possible to have a truly unanticipated financial emergency, but for many people, almost everything is an emergency because they’ve failed to plan -- and save -- for even those things that can be anticipated. A car with 100,000 miles on it needing repairs shouldn’t be an emergency. You know it’s going to need repairs... you just don’t know exactly when.
Figure out what Grandpa would do. If you still aren’t convinced that it’s possible to live debt free, or nearly so, like previous generations of Americans did, keep track of everything you spend money on for a month. Then look at that list, and ask yourself one simple question, "Did my grandparents spend money on that?" A second or third automobile? Unlikely. More than one TV? Doubtful. Meals in restaurants, other than for very special occasions? Rarely. Pet-grooming services? Not a chance. Bottled water? Are you crazy? Tanning salons? Fuggedaboutit.
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