Did you ever wonder who these “people” were that had so much to say about the state of our economy? Well, Fannie, Freddie and Ginnie aren’t people, they are institutions. They are the shortened names for Fannie Mae (FNMA-Federal National Mortgage Association), Freddie Mac (FHLMC -Federal Home Loan Mortgage Corporation) and Ginnie Mae (GNMA-Government National Mortgage Association). They are the big three, and they buy the majority of mortgages for all homes across the nation.
The names Freddie and Fannie are all over the place lately. It’s quite common to hear these names on the nightly news on a regular basis. Or you see them online on your favorite news website. Ginnie Mae, not as much. So what exactly are these entities? And what do they have to do with mortgage lending?
These days, you can talk to practically any mortgage lender, they verify your life history and you find yourself owning a home. But you rarely make your mortgage payment to that original lender after an interim period. That’s because lenders make most of their money by selling your loan and it’s servicing.. And more often than not, whatever company you make your payment to doesn’t own your loan. It is the “servicer” of that loan. It is called your servicer because it is simply servicing your loan for the institution that actually owns it.
What happens is your loan gets sold to another company that sells it to one of the big three, or sometimes the company you got your loan from originally sells it directly to one of the big three. Freddie, Fannie and Ginnie buy “pools” of loans. Loans quickly become “pooled” into groups of loans of similar size, interest rate and type. The servicer gets a monthly fee from the institution for servicing your loan and processing your payments. This fee is small (about 3/8 of a percent), but if your pool gets big enough, it can create a tidy sum of income when sold to Fannie, Freddie or Ginnie. There are companies that service billions of dollars of loans. You might have heard lately in the news that some of these servicing portfolios didn’t perform. That’s created a little bit of a headache lately in the mortgage world.
The entire system of mortgages (originators, brokers, banks) is designed to create these pools because so much income can be generated from servicing. When enough loans are made to create a pool, the company sells the loans to Freddie, Fannie or Ginnie, generating more income. This action in turn allows the company to make more loans, and so on and so forth. The whole process begins again.
Freddie, Fannie and Ginnie set underwriting guidelines for lenders to follow that will allow for lower risk loans. The foreclosures of late have caused these guidelines to become less lenient, and in general, more documentation is required to close a loan. The loans in the pools serviced have been reviewed to make sure they are compliant with the guidelines set forth.
So, now you know who Freddie, Fannie and Ginnie are. And now you know why the government cares so much that these three stay healthy.
Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at http://www.kristinmortgage.com/ Home Loans Plain Talk.
Showing posts with label Home Loan. Show all posts
Showing posts with label Home Loan. Show all posts
Saturday, February 21, 2009
Friday, July 25, 2008
Mortgage Lending: What's Your Point?
Buying a home is a confusing process, and one of the most confusing prospects is settling on an interest rate. Even when you decide what type of loan you want, you find you still have options as to what rate to lock. Some of these options stem from whether or not you buy down the rate by paying a point. A point is a fee that equals 1% of the loan amount. For instance, if you are buying a $100,000 home, and your note amount is $97,000 (because you're putting $3000 down), a point would cost you $970.
You can see the points you are being charged on line and 802 of your Good Faith Estimate, and later, on the same line on your HUD-1. This line item reflects fees known as "discount points", but they truly aren't interchangeable with origination fees (line 801) even if they sometimes serve the same purpose. If you choose to pay a discount point, you should expect a lower rate than if you didn't. So, if you're quoted a rate of 6% 0 + 1, you are paying 1 discount point. If the quote is 6% 1+0, you're paying an origination fee. And 6% 0+0? You're paying no fees in either form.
What's the difference between an origination fee and a discount point? Well a few things. Technically, an origination fee is what you pay the lender or the organization that takes the initial application and processes the loan. A discount point is specifically paid to the lender to buy down or permanently lower the interest rate, and it's usually a percentage of the loan amount. You can also pay additional points to buy down your rate, not just a flat 1%. You can pay a .5% or 2%. It just has to make good economical sense for you. And it shouldn't be robbing you blind.
From a tax standpoint, there isn't much difference. An origination fee is generally tax deductible as long as it's charged in the form of a "point" or percentage of the loan amount. However, you may ask your lender to charge you a discount point versus an origination fee to keep things neat and simple. Sometimes mortgage lenders charge you an origination fee when technically they should be charging you a discount point. But they're collecting all the fees anyway and happen to be giving you a lower rate. It really matters most if you are working with a mortgage broker. Mortgage brokers can't be paid discount points, only origination fees or broker fees. They can collect discount points to lower your rate, but the discount point has to be paid to the mortgage lender with whom they're doing business. And, this information should be disclosed properly on your Good Faith Estimate
A typical trade off is that a 1% discount point equals about .25% reduction in interest rate. You should be able to easily decipher whether or not it's worth it to buy your rate down. How long do you plan to be in the home? If not that long, then maybe you should think about a 0+0 quote. If it's your forever home, then dipping into your wallet and footing higher closing costs might be worth it in the long run.
However, if you look at your Good Faith Estimate and it seems you're paying too much in origination fees and/or discount points, then you probably are. Say something to your lender. And if he doesn't budge, you may want to look elsewhere. Go with your gut instinct or call another reputable lender and get a second opinion.
Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at http://www.kristinmortgage.com Home Loans Plain Talk.
Tuesday, May 20, 2008
Like an Old Shoe- The FHA Loan is a Good Fit
You hear so much about FHA (Federal Housing Administration) loans lately? Why? Because sometimes an FHA loan is the best fit for your mortgage needs…
FHA (Federal Housing Administration) loans are really a hot product right now. Mortgage companies and brokers are scrambling to become approved FHA lenders left and right. However, FHA loans have been around for a long time, helping a lot of people get into homes. Some people say it’s become the new “sub prime” loan. What that really means is that if you can’t qualify for a conventional loan, FHA’s guidelines are more flexible than some loan products. And because of this point, the FHA loan fits a lot of people’s needs and goals.,
When should you consider an FHA loan? One great fit for an FHA loan is if you are buying a property and are looking to put as little money down on the property as possible. I had one couple that had plenty of money and excellent credit, but the seller of the property they were buying was conceding “nada”, and all the funds for closing were being footed by this couple out of their own check book. They were retired and relocating. Their goal was to spend as little money as possible, but still get into the home they desired. FHA fit their needs perfectly, because they were able to finance 97.75% of the loan amount. Their rate was competitive and their mortgage insurance was reduced. Also, they had plenty of money left over to buy plane tickets to visit the grandkids. Be aware, however, there is a loan limit for the FHA loan, so not all properties will qualify. But the limit is pretty generous.
Many times people have very little cash to put down on the property, but they have very nice credit. Again, FHA fits their needs greatly. Since FHA can pretty much offer the lowest cash necessary to close available to many, it’s easier for a buyer to negotiate for the seller to make a concession to lower or even eliminate the buyer’s cash out of pocket. Naturally, the seller has to be ok with what they are netting from the sale of the property. And the lender will make sure the house is worth the contract price. But FHA allows the seller to pay up to 6% of the buyer’s closing costs and on top of that, will let them gift the buyers the minimum required 3% investment through a down payment assistance program. So you see, you can get into a house with little or no money if you qualify for an FHA loan.
Another great thing about FHA? It doesn’t have any major pricing hits for a minimum qualifying credit score of 620. In the conventional loan world, there typically are pricing increases for loans every corresponding 19 point increase in credit score. Most secondary lenders who offer FHA loans will only give you a pricing hit if you dip below a 620 credit score.
And what if you have a credit score below 620? If you don’t get an automatic underwriting approval, you can possibly obtain a manual approval. What’s a manual approval? It’s when a real live human being looks at your file, and considers actors other than your credit score to qualify you. You may have to show you’ve paid other bills that don’t appear on your credit report on time for the past year. These types of bills would perhaps be your cell phone bill, utility bill, rent, or car insurance premium. Couple this evidence with a strong, hard explanation of why your credit score is less than perfect, and you still have a good chance of loan approval. But, be aware that your minimum credit score must typically be a 580 or higher.
Another nice fit for an FHA loan? Manufactured homes. You can still obtain an FHA loan to buy a new or refinance an existing manufactured home. Of course, there are stringent guidelines regarding the property that must be met, but FHA is still in the manufactured home market. In fact, it’s one of the few product types offered on the secondary market that still will endorse a manufactured home loan. The VA will too.
So, if one of the above mentioned situations reflects your scenario, make sure you investigate your options with FHA financing. You won’t be sorry you did. You know what they say? If the shoe fits - wear it.
When should you consider an FHA loan? One great fit for an FHA loan is if you are buying a property and are looking to put as little money down on the property as possible. I had one couple that had plenty of money and excellent credit, but the seller of the property they were buying was conceding “nada”, and all the funds for closing were being footed by this couple out of their own check book. They were retired and relocating. Their goal was to spend as little money as possible, but still get into the home they desired. FHA fit their needs perfectly, because they were able to finance 97.75% of the loan amount. Their rate was competitive and their mortgage insurance was reduced. Also, they had plenty of money left over to buy plane tickets to visit the grandkids. Be aware, however, there is a loan limit for the FHA loan, so not all properties will qualify. But the limit is pretty generous.
Many times people have very little cash to put down on the property, but they have very nice credit. Again, FHA fits their needs greatly. Since FHA can pretty much offer the lowest cash necessary to close available to many, it’s easier for a buyer to negotiate for the seller to make a concession to lower or even eliminate the buyer’s cash out of pocket. Naturally, the seller has to be ok with what they are netting from the sale of the property. And the lender will make sure the house is worth the contract price. But FHA allows the seller to pay up to 6% of the buyer’s closing costs and on top of that, will let them gift the buyers the minimum required 3% investment through a down payment assistance program. So you see, you can get into a house with little or no money if you qualify for an FHA loan.
Another great thing about FHA? It doesn’t have any major pricing hits for a minimum qualifying credit score of 620. In the conventional loan world, there typically are pricing increases for loans every corresponding 19 point increase in credit score. Most secondary lenders who offer FHA loans will only give you a pricing hit if you dip below a 620 credit score.
And what if you have a credit score below 620? If you don’t get an automatic underwriting approval, you can possibly obtain a manual approval. What’s a manual approval? It’s when a real live human being looks at your file, and considers actors other than your credit score to qualify you. You may have to show you’ve paid other bills that don’t appear on your credit report on time for the past year. These types of bills would perhaps be your cell phone bill, utility bill, rent, or car insurance premium. Couple this evidence with a strong, hard explanation of why your credit score is less than perfect, and you still have a good chance of loan approval. But, be aware that your minimum credit score must typically be a 580 or higher.
Another nice fit for an FHA loan? Manufactured homes. You can still obtain an FHA loan to buy a new or refinance an existing manufactured home. Of course, there are stringent guidelines regarding the property that must be met, but FHA is still in the manufactured home market. In fact, it’s one of the few product types offered on the secondary market that still will endorse a manufactured home loan. The VA will too.
So, if one of the above mentioned situations reflects your scenario, make sure you investigate your options with FHA financing. You won’t be sorry you did. You know what they say? If the shoe fits - wear it.
Home Loans: Should Tom, Dick and Harry Pull Your Credit?
There’s much confusion these days about how often or when you should allow your credit to be pulled. Here’s a little background info on when it’s ok to say yes….
The fact of the matter is that today when you are investigating home financing, the big question on everyone’s lips is, “What’s your credit score?” Many people are clueless as to what their credit score is. Pricing and product availability are hugely driven by credit scores in the mortgage industry. The difference between a 620 credit score and a 720 score means a world of difference to your wallet. However, when it comes to lending money for a home loan, there is a point when a lender must make a credit inquiry.
What is a credit inquiry? It’s when a lender or another entity you are asking to extend you credit requests a tri-merge credit reporting agency to assess and report your credit scores. At the back of the report, there is a list of what organizations you have given permission (or not) to pull your credit recently. And, too many credit inquiries can affect your credit score negatively. However, not all inquiries will do so, just ones that are a result of you applying for new credit. For example, if you apply for a mortgage, car loan or credit card, these are the types of inquiries, when you agree to them, which can affect your FICO credit score. The term FICO stands for Fair Isaac & Co. Credit, the entity that developed this scoring method for determining if you’ll actually repay your debt. However, some inquiries don’t affect your FICO credit score, like a future employer doing a background check on your credit.
So, if you want to apply for a mortgage, and compare different lenders, are you asking for trouble by allowing every Tom, Dick and Harry to pull your credit (or Tammy, Diane and Helen for that matter)? Well, yes and no. It depends. The scoring engine will typically ignore all mortgage or auto inquiries made in the 30 days prior to your most recent scoring. So, you need to make a decision within 30 days if you plan to do major rate shopping. And if the scoring engine finds mortgage or auto inquiries older than 30 days, it groups those inquiries into a typical shopping period as well. So, yes you can shop, just do so wisely.
I advise you to let one lender pull your credit; they can tell you what your score is, and then you can inform other lenders what your score is for the purpose of comparing loans. You can also ask what your debt to income ratio is. With that information, a lender should be able to give you a Good Faith Estimate and Truth in Lending that’s pretty spot on. If they say they can’t do so without pulling a credit report, then move on. A lender should be able to give you an estimate if you know the answers to the right questions. And since it’s an estimate, if you give the wrong information, be aware that all bets are off. As long as you are aware that what you are quoted is based on the information you’ve given(as yet unverified), the lender should be able to give you information that allows you to choose them from other considerations. When you’ve made the final choice, the lender will then have to pull your credit to move forward if they have not done so already.
So, be a smart shopper. But don’t be careless with your information. It could hurt you if you don’t share it wisely.
The fact of the matter is that today when you are investigating home financing, the big question on everyone’s lips is, “What’s your credit score?” Many people are clueless as to what their credit score is. Pricing and product availability are hugely driven by credit scores in the mortgage industry. The difference between a 620 credit score and a 720 score means a world of difference to your wallet. However, when it comes to lending money for a home loan, there is a point when a lender must make a credit inquiry.
What is a credit inquiry? It’s when a lender or another entity you are asking to extend you credit requests a tri-merge credit reporting agency to assess and report your credit scores. At the back of the report, there is a list of what organizations you have given permission (or not) to pull your credit recently. And, too many credit inquiries can affect your credit score negatively. However, not all inquiries will do so, just ones that are a result of you applying for new credit. For example, if you apply for a mortgage, car loan or credit card, these are the types of inquiries, when you agree to them, which can affect your FICO credit score. The term FICO stands for Fair Isaac & Co. Credit, the entity that developed this scoring method for determining if you’ll actually repay your debt. However, some inquiries don’t affect your FICO credit score, like a future employer doing a background check on your credit.
So, if you want to apply for a mortgage, and compare different lenders, are you asking for trouble by allowing every Tom, Dick and Harry to pull your credit (or Tammy, Diane and Helen for that matter)? Well, yes and no. It depends. The scoring engine will typically ignore all mortgage or auto inquiries made in the 30 days prior to your most recent scoring. So, you need to make a decision within 30 days if you plan to do major rate shopping. And if the scoring engine finds mortgage or auto inquiries older than 30 days, it groups those inquiries into a typical shopping period as well. So, yes you can shop, just do so wisely.
I advise you to let one lender pull your credit; they can tell you what your score is, and then you can inform other lenders what your score is for the purpose of comparing loans. You can also ask what your debt to income ratio is. With that information, a lender should be able to give you a Good Faith Estimate and Truth in Lending that’s pretty spot on. If they say they can’t do so without pulling a credit report, then move on. A lender should be able to give you an estimate if you know the answers to the right questions. And since it’s an estimate, if you give the wrong information, be aware that all bets are off. As long as you are aware that what you are quoted is based on the information you’ve given(as yet unverified), the lender should be able to give you information that allows you to choose them from other considerations. When you’ve made the final choice, the lender will then have to pull your credit to move forward if they have not done so already.
So, be a smart shopper. But don’t be careless with your information. It could hurt you if you don’t share it wisely.
Friday, April 25, 2008
Free Money! - Save $200.00 on your Home Loan
If you or someone you know is looking for a home loan or to refinance - give me a call and save $200.00 on closing costs.
Have a GREAT WEEKEND!
Saturday, March 1, 2008
For Sale by Owner (FSBO), what do I need to know about home financing?
FSBO or For Sale by Owner can be a hugely successful endeavor and can save you money. But to be successful, this endeavor must be executed correctly. Below are a few tips that may help you be successful in this venture.
Price the Home Correctly: It is crucial that you research and place the correct price tag on your home when selling it. A reputable real estate agent is the first person to contact to help appraise your home. Many agents won’t lend you the time of day to assist you with this aspect since they aren’t listing your home. But a good agent will do it for you with no strings attached. They realize that their business is based on reputation and referrals. They may not get this listing, but you may want them to represent you in your next home purchase. Or your cousin may need a good realtor’s help in the future. Do your homework. Find similar homes in your area and compare their price tags. Are the homesas attractive as yours? Are they as large as yours? Pricing the home correctly is crucial.
Use your time: A FSBO property allows you to place your home on the market for the maximum price to see if it sells quickly. If you have a deadline to sell your home, market it yourself well in advance of this deadline. Later, if you feel you need a realtor’s help, you haven’t painted yourself into a corner. You still have time to market and sell the property correctly.
Market the Home: Make it easy for people to know more about your home without investing too much time. Put a For Sale by Owner sign in the front yard with contact numbers. Put a brochure with information out front so people can pre-screen the information and not waste your time. Talk to your local paper or other FSBO’s and investigate whether placing an ad in the local paper has had results. Different markets yield different results. Consider hosting an open house, but make sure you get the information out to the right market.
Put Your Home’s Best Foot Forward: You want to make sure your home sends the right message to prospective buyers. People have to be able to see themselves in that home. What is the first impression when driving up to the home? What’s the feeling inside? Take measure to provide maximum curb appeal. You want to make sure people want to come inside the house. The outside of your home should entice them to do so. The interior should be clean, airy and free of clutter. Try to make the home smell good and pack away personal effects that remind prospects someone else lives there. The realtor that helps you determine a market price should be able to make suggestions in this area that will make your home more marketable.
Is Your Prospect Qualified?: Make sure your buyer is pre-qualified before entertaining their offer. You can request that a preferred mortgage lender you trust or another reputable lender provide this service. If a person isn’t qualified to buy your home, you don’t want to lose valuable marketing opportunity to attract other prospects. Do not take verbal offers seriously. A serious prospect will sign a contract and provide earnest money as a show of good faith. Make sure you are using a legal contract and that it is executed properly and protects your interest. Again, that real estate agent who helped you earlier or an attorney may be a good idea at this juncture. A well executed sales contract is worth its weight in gold.
Of course all of the above is based upon my personal opinion and experience. Use these thoughts for informational purposes only. And good luck selling your home!
Price the Home Correctly: It is crucial that you research and place the correct price tag on your home when selling it. A reputable real estate agent is the first person to contact to help appraise your home. Many agents won’t lend you the time of day to assist you with this aspect since they aren’t listing your home. But a good agent will do it for you with no strings attached. They realize that their business is based on reputation and referrals. They may not get this listing, but you may want them to represent you in your next home purchase. Or your cousin may need a good realtor’s help in the future. Do your homework. Find similar homes in your area and compare their price tags. Are the homesas attractive as yours? Are they as large as yours? Pricing the home correctly is crucial.
Use your time: A FSBO property allows you to place your home on the market for the maximum price to see if it sells quickly. If you have a deadline to sell your home, market it yourself well in advance of this deadline. Later, if you feel you need a realtor’s help, you haven’t painted yourself into a corner. You still have time to market and sell the property correctly.
Market the Home: Make it easy for people to know more about your home without investing too much time. Put a For Sale by Owner sign in the front yard with contact numbers. Put a brochure with information out front so people can pre-screen the information and not waste your time. Talk to your local paper or other FSBO’s and investigate whether placing an ad in the local paper has had results. Different markets yield different results. Consider hosting an open house, but make sure you get the information out to the right market.
Put Your Home’s Best Foot Forward: You want to make sure your home sends the right message to prospective buyers. People have to be able to see themselves in that home. What is the first impression when driving up to the home? What’s the feeling inside? Take measure to provide maximum curb appeal. You want to make sure people want to come inside the house. The outside of your home should entice them to do so. The interior should be clean, airy and free of clutter. Try to make the home smell good and pack away personal effects that remind prospects someone else lives there. The realtor that helps you determine a market price should be able to make suggestions in this area that will make your home more marketable.
Is Your Prospect Qualified?: Make sure your buyer is pre-qualified before entertaining their offer. You can request that a preferred mortgage lender you trust or another reputable lender provide this service. If a person isn’t qualified to buy your home, you don’t want to lose valuable marketing opportunity to attract other prospects. Do not take verbal offers seriously. A serious prospect will sign a contract and provide earnest money as a show of good faith. Make sure you are using a legal contract and that it is executed properly and protects your interest. Again, that real estate agent who helped you earlier or an attorney may be a good idea at this juncture. A well executed sales contract is worth its weight in gold.
Of course all of the above is based upon my personal opinion and experience. Use these thoughts for informational purposes only. And good luck selling your home!
Friday, February 8, 2008
Todays Million dollar question, "Should I refinance now?"
over the last four weeks... I cannot tell you how many times I have been asked, "Is now the time to refinance?" For that here is my advice:
LOCKING IN YOUR INTEREST RATE AND OTHER TALES OF LAS VEGAS
“Should I lock my loan? Are the rates going up? Are the rates going down? What’s the market supposed to do in the next week?” These are questions that every experienced loan officer has been asked by his or her customers on various occasions. I’ll tell you one thing, if I had a hard and fast answer to any of these questions, I would be reading a book on my own private yacht in the Mediterranean Sea. And my butler would be asking me what I wanted for lunch.
Here’s the deal on locking in your loan. Typically a standard lock is for 30 days. This time frame gives all parties involved in the transaction adequate time to complete their responsibility in the loan process. If you are closing within 30 days, you should probably go ahead and lock your rate, provided you are comfortable with the terms quoted to you. What if the rate goes down .125%? I counter and ask what if the rate goes up .125%? Are you willing to risk it?
If you are happy with your payment, then I advise you to lock in the rate. Your mortgage lender will give you a picture of the general trend of interest rates, or you can research it for yourself. Find the loan payment amount you are aiming for and focus on this issue to lock your loan. I’ve seen it happen plenty of times: everyone speculates the rates are going down, but the next day you see a .25% increase. Of course the converse does happen at times, but I haven’t seen it happen as much!
I’ve had customers who have checked with me every day to see where the rates are and I’ve never seen this vigilance result in a significant rate improvement. Not to say it can’t happen, I’m just relaying the odds from personal experience that it won’t. But, if this course is what my customer is most happy taking, I’m just as happy to update them daily till they feel comfortable locking. But keep in mind it’s a gamble. If it was easy, there would be a lot of folks on the beach with their butlers. It is very difficult to predict short term movements in the market. Try it for a few days just for fun, and you’ll see what I mean.
When a loan is locked, your mortgage company has made a commitment to provide a product at that note rate to its secondary market source. If the rates go down, you still are expected to close at your locked rate. If the rates go up, you still expect to close at your locked rate. A lock represents a commitment from the customer and the lender. So, find your comfort zone and lock your rate. Spend your time worrying about what you’re going to do with all the money you saved on your refinance or how you are possibly going to get boxes packed in time to move in two weeks!
Friday, January 18, 2008
Ch-Ch-Ch-Changes……Why You Might Want to Refinance Now!
Big changes are expected in the mortgage market for 2008. With rates so low, now is a good time to weigh your refinance options…..
Have you been reading the papers or listening to the news lately? (Ok, I guess you have been because you are reading THIS paper. Just call me Master of the Obvious). Rates are low. Actually, rates are really quite low. You may be considering refinancing in the next couple of months. Maybe you need equity from your home but you're hesitant to touch that great rate you got a couple of years ago. Or, maybe you're sure you want to refinance but are waiting for the latest news from the "Fed" before you take the plunge. Well, there are a few reasons why you may want to take action sooner than later.
Fannie Mae and Freddie Mac, the major lending institutions for non-government loans, have recently announced that they will move to risk based pricing in the new year. What is risk based pricing and why do you care? This announcement means that loans with higher risk characteristics will receive a higher rate. In the recent past, risk based pricing was typically reserved for non-conforming loans, or loans that were outside conventional guidelines. In 2008, you can expect to see risk based pricing passed on to conforming loans. What constitutes a higher risk? First and foremost is your credit score. If your loan to value is greater than 70% - your rather healthy credit score of 680 won't get you the same rate that your neighbor's 720 credit score will get him. Same goes for your sister and her 620 credit score. Her mortgage rate will be much higher than yours. Fannie and Freddie will assess tiered "hits" or cost increases to borrowers based upon their credit scores. That could make a huge difference in the rate you will be quoted in December and the rate you would be quoted next year. It may also mean you might not qualify for a loan tomorrow that you would qualify for today. And now lenders will have to pull your credit to actually give you a hard and fast quote. If you have a good idea of what your credit score is, you can compare lender's quotes more effectively. But if you haven't a clue as to what your credit score is, a lender will have to know it in order to be on target with a quote.
And there's more. Although pundits say the rates will stay low (and no, I'm not a pundit), another cost will be passed on to the consumer that will begin to be realized by many lenders very shortly. As a result of recent increases in foreclosure rates, Fannie Mae has decided to increase its margin in order to maintain adequate capital reserves for federal regulators. And Freddie Mac is expected to follow suit, although the announcement is not official as of the date I am writing this column. It may be official by the time you are reading it. Even if rates remain stable through the upcoming period, increased margins mean higher effective rates to consumers. Thus, if you are mildly considering a refinance for whatever reason, you should really decide now if it's right for you. Waiting too long could cost you money.
Of course, refinancing has to make sense. You need to consult with a reputable mortgage lender who can help you analyze your options and choose what's right for you. You need to weigh the savings against the closing costs and also take into consideration how the refinance may or may not benefit you. But, don't drag your feet. Do your homework. Get your ducks in a row. And finally, the risk based pricing and all that other stuff I discussed will also apply to new home purchases (but not select first time homebuyer programs- they remain the same). Whatever type of mortgage you are considering, now is the time to investigate before the changes occur.
Email your home loan financing questions to Kristin Abouelata, Mortgage Specialist, at question@kristinmortgage.com or call (865) 567-0113.
Let my experience work for you!
Kristin Abouelata / Mortgage Specialist with Mortgage Investors Group
Phone: (865) 567-0113
1-800-489-8910
http://www.kristinmortgage.com/
Have you been reading the papers or listening to the news lately? (Ok, I guess you have been because you are reading THIS paper. Just call me Master of the Obvious). Rates are low. Actually, rates are really quite low. You may be considering refinancing in the next couple of months. Maybe you need equity from your home but you're hesitant to touch that great rate you got a couple of years ago. Or, maybe you're sure you want to refinance but are waiting for the latest news from the "Fed" before you take the plunge. Well, there are a few reasons why you may want to take action sooner than later.
Fannie Mae and Freddie Mac, the major lending institutions for non-government loans, have recently announced that they will move to risk based pricing in the new year. What is risk based pricing and why do you care? This announcement means that loans with higher risk characteristics will receive a higher rate. In the recent past, risk based pricing was typically reserved for non-conforming loans, or loans that were outside conventional guidelines. In 2008, you can expect to see risk based pricing passed on to conforming loans. What constitutes a higher risk? First and foremost is your credit score. If your loan to value is greater than 70% - your rather healthy credit score of 680 won't get you the same rate that your neighbor's 720 credit score will get him. Same goes for your sister and her 620 credit score. Her mortgage rate will be much higher than yours. Fannie and Freddie will assess tiered "hits" or cost increases to borrowers based upon their credit scores. That could make a huge difference in the rate you will be quoted in December and the rate you would be quoted next year. It may also mean you might not qualify for a loan tomorrow that you would qualify for today. And now lenders will have to pull your credit to actually give you a hard and fast quote. If you have a good idea of what your credit score is, you can compare lender's quotes more effectively. But if you haven't a clue as to what your credit score is, a lender will have to know it in order to be on target with a quote.
And there's more. Although pundits say the rates will stay low (and no, I'm not a pundit), another cost will be passed on to the consumer that will begin to be realized by many lenders very shortly. As a result of recent increases in foreclosure rates, Fannie Mae has decided to increase its margin in order to maintain adequate capital reserves for federal regulators. And Freddie Mac is expected to follow suit, although the announcement is not official as of the date I am writing this column. It may be official by the time you are reading it. Even if rates remain stable through the upcoming period, increased margins mean higher effective rates to consumers. Thus, if you are mildly considering a refinance for whatever reason, you should really decide now if it's right for you. Waiting too long could cost you money.
Of course, refinancing has to make sense. You need to consult with a reputable mortgage lender who can help you analyze your options and choose what's right for you. You need to weigh the savings against the closing costs and also take into consideration how the refinance may or may not benefit you. But, don't drag your feet. Do your homework. Get your ducks in a row. And finally, the risk based pricing and all that other stuff I discussed will also apply to new home purchases (but not select first time homebuyer programs- they remain the same). Whatever type of mortgage you are considering, now is the time to investigate before the changes occur.
Email your home loan financing questions to Kristin Abouelata, Mortgage Specialist, at question@kristinmortgage.com or call (865) 567-0113.
Let my experience work for you!
Kristin Abouelata / Mortgage Specialist with Mortgage Investors Group
Phone: (865) 567-0113
1-800-489-8910
http://www.kristinmortgage.com/
Saturday, November 24, 2007
What are all these fees and why is a mortgage so expensive?
Not only are the expenses associated with a mortgage hard to understand, people often wonder why a loan costs so much. Here's a little background info to explain why home financing isn’t cheap…
Did you ever wonder what a great credit score really gets you in the mortgage market? Many people think it means they get better pricing. Unfortunately, that’s not really the case. It mostly just means your lender won’t have to hassle you for as much documentation to do your loan. In fact, no documentation may be required from you at all if it’s a purchase and you put enough money down. I’ve heard many clients say, “I’ve got great credit, so quote me your best rate.” Good credit can’t directly influence the rate. But it can influence your mortgage loan officer to give you better pricing. If your lender can be assured your loan process is streamlined and smooth, and that they won’t have excessive hours to devote to the process, they may be able to quote you a more competitive rate. Much about a quoted rate depends upon the man hours it will take to make your loan, the loan amount itself and how quickly you can close.
Lenders usually have a minimum percentage of income they are supposed to make on a loan. That percentage is flexible, but only to a certain extent. For instance, the loan amount size is a huge contributing factor. If you’ve got a really large loan amount, your lender doesn’t need to have a feeding frenzy on your loan. The percentages lower because the payback is higher.
However, if you’ve got a really, difficult loan and a modest loan amount, you can expect higher rates or discount points. Or fees. Some lenders may raise your fees to make you think you’re NOT paying as much. But you are. You have to in order for the lender to cover the cost of doing business.
Here’s the secret. Closing a loan is actually a very involved process. Lenders can’t do the loans for free or break even profit because it’s a business and their in it for profit. Plus, there are many people involved in the loan process that you aren’t even aware exist. Processors, closers, post closers, insurers… a staff of thousands! Ok, so maybe not thousands, but your file is probably touched by 5+ different divisions (at minimum) within a mortgage company. Since it is a business, the lenders must make enough money on the loan to cover their costs and actually make money, too. The lender also pays outside parties for services too, like the appraisal, flood cert and automated underwriting system. Paying your originator is just the beginning of the mouths (and families) being fed by your business. It ain’t cheap to close and sell a mortgage.
When you examine all the fees and charges on a good faith estimate, your lender should be able to tell you exactly where that money is going and how it is to be spent. Your lender should have no qualms in telling you what costs are associated with your loan, or which funds cover third party expenses that your lender incurs by doing your loan. And some of that money will be profit. Much of it may be. But remember, you’re not just paying the salary of only one person. However, you shouldn’t pay too much for your loan. After all, the lender will make additional profit on the loan when it is sold on the secondary market.
A good lender will validate any fees and charges for you and should make you feel ok with the fees. If they don’t seem reasonable or fair, always ask questions. If you don’t like the answer, say so. And if you still don’t like the answer, than look for a new lender. Buying a home is such an important purchase and you should feel good about it.
Let my experience work for you! Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist, at question@kristinmortgage.com or call (865) 567-0113. Kristin will try to answer all questions on her website Home Loans Plain Talk.
Kristin Abouelata
Mortgage Specialist
Let my experience work for you!
Knoxville, TN 37919
Phone: 865-567-0113
http://www.kristinmortgage.com/
Did you ever wonder what a great credit score really gets you in the mortgage market? Many people think it means they get better pricing. Unfortunately, that’s not really the case. It mostly just means your lender won’t have to hassle you for as much documentation to do your loan. In fact, no documentation may be required from you at all if it’s a purchase and you put enough money down. I’ve heard many clients say, “I’ve got great credit, so quote me your best rate.” Good credit can’t directly influence the rate. But it can influence your mortgage loan officer to give you better pricing. If your lender can be assured your loan process is streamlined and smooth, and that they won’t have excessive hours to devote to the process, they may be able to quote you a more competitive rate. Much about a quoted rate depends upon the man hours it will take to make your loan, the loan amount itself and how quickly you can close.
Lenders usually have a minimum percentage of income they are supposed to make on a loan. That percentage is flexible, but only to a certain extent. For instance, the loan amount size is a huge contributing factor. If you’ve got a really large loan amount, your lender doesn’t need to have a feeding frenzy on your loan. The percentages lower because the payback is higher.
However, if you’ve got a really, difficult loan and a modest loan amount, you can expect higher rates or discount points. Or fees. Some lenders may raise your fees to make you think you’re NOT paying as much. But you are. You have to in order for the lender to cover the cost of doing business.
Here’s the secret. Closing a loan is actually a very involved process. Lenders can’t do the loans for free or break even profit because it’s a business and their in it for profit. Plus, there are many people involved in the loan process that you aren’t even aware exist. Processors, closers, post closers, insurers… a staff of thousands! Ok, so maybe not thousands, but your file is probably touched by 5+ different divisions (at minimum) within a mortgage company. Since it is a business, the lenders must make enough money on the loan to cover their costs and actually make money, too. The lender also pays outside parties for services too, like the appraisal, flood cert and automated underwriting system. Paying your originator is just the beginning of the mouths (and families) being fed by your business. It ain’t cheap to close and sell a mortgage.
When you examine all the fees and charges on a good faith estimate, your lender should be able to tell you exactly where that money is going and how it is to be spent. Your lender should have no qualms in telling you what costs are associated with your loan, or which funds cover third party expenses that your lender incurs by doing your loan. And some of that money will be profit. Much of it may be. But remember, you’re not just paying the salary of only one person. However, you shouldn’t pay too much for your loan. After all, the lender will make additional profit on the loan when it is sold on the secondary market.
A good lender will validate any fees and charges for you and should make you feel ok with the fees. If they don’t seem reasonable or fair, always ask questions. If you don’t like the answer, say so. And if you still don’t like the answer, than look for a new lender. Buying a home is such an important purchase and you should feel good about it.
Let my experience work for you! Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist, at question@kristinmortgage.com or call (865) 567-0113. Kristin will try to answer all questions on her website Home Loans Plain Talk.
Kristin Abouelata
Mortgage Specialist
Let my experience work for you!
Knoxville, TN 37919
Phone: 865-567-0113
http://www.kristinmortgage.com/
Tuesday, November 6, 2007
Buying Your First Home, It’s Easier Than You Think! – Now what? Part III
For a first time homebuyer, once you’ve found a house and been pre-qualified for a home, the steps to closing can be somewhat confusing. It’s actually a simple process that when understood, actually makes sense.
You have found the perfect house. You can’t believe that you are actually buying it! You thought buying a house was only for old people with kids, you know, like in their thirties or something. Now what happens?
You’ve should already have been pre-qualified for a home loan by a mortgage specialist. In fact, that lender gave you a letter, saying as much, and you gave it to the seller, giving them peace of mind that your offer is real and you can back it up. Your credit has probably already been pulled and you’ve been given a copy of it. Your realtor will provide the fully executed sales contract to your lender. Upon receipt of this contract, your lender will update and get you all your documents and disclosures to sign, within three days of receipt of your contract. If your credit has already been pulled and you’ve seen these documents, expect a NEW set since you finally have a property in mind. And trust me, this is only the beginning of the deluge of documents you will see, sign and sign again.
Your lender will now go back to your loan and put in all the particulars of this property - such as taxes, homeowner’s association fees - and reflect any earnest money you may have put down with the contract. At this point, with a property determined, you can explore locking in an interest rate or reserving funds if the loan is through a particular housing agency. Your lender will also want to collect and update documentation that proves all you have related about yourself. I call it “eye balling” the documents. Assessments will be made if there is further documentation required to substantiate your loan application.
When all contract contingencies are removed, the lender will order the appraisal for your property. The lender chooses the appraiser and the type of appraisal necessary to ensure the value of the property. After all, it’s the lender’s money on the line, and in case you don’t repay your loan, the value of the loan may have to recouped in a foreclosure sale of the property. Not likely to happen, but the lender will make sure they are protected by the appraisal. The appraiser will notify all parties involved that there may be repairs required before the value can be found or the property will adhere to a certain standard required by the lender. The lender will communicate this information to your realtor to negotiate the repairs with the seller.
The lender prices, processes and assembles your loan for underwriting. They order title work from your chosen title company and coordinate all the pieces of the puzzle for the closing. They collect your homeowner’s insurance and share this information with the title company. The title company searches the title and rectifies any outstanding liens for closing. Sometimes, the title company finds old tax liens or worker’s liens (known as materialmen’s liens). They make sure that these liens will be satisfied prior to you taking ownership to the property. They also make sure that everything historically has been recorded and released properly.
Once the appraisal is received and the documents are submitted to underwriting for final approval, the lender receives an underwriting decision. Sometimes, there may be something in your file that will cause an underwriter to ask for more documentation. Sometimes, an underwriter will ask for additional comparable sales of homes in the area for the appraisal. Many times, a customer never knows that these conditions arise because their lender anticipates or addresses them for them. Sometimes a customer may be contacted for information. But, your mortgage specialist should have a good assessment of the situation and be able to validate and explain anything they ask of you.
Two days before closing, you will receive a HUD-1 Settlement Statement from your lender and/or title company. This document is summation of all the charges and fees in connection with your loan. You will be asked to review this document to ensure that it is correct. It will also reflect how much cash you will need to bring to closing.
At the closing, all parties involved usually show up at the same time to sign documents. Sometimes, the seller and the buyer sign separately due to scheduling conflicts. Your realtor and your lender should be expected to attend your closing. You will sign a stack of huge documents, but when all is said and done, you will handed the keys to your new home!
Your lender, realtor and title company should all work to make this process as seamless for you as possible. Their job is to make this experience an informed, easy and worry free process. You will have to make certain decisions, but you should be informed so that they do not overwhelm you. It’s easy to forget how mind boggling all the documentation can be in the home loan process when are exposed to it every day as part of your job. Your lender should be patient and explain things simply -no smoke and mirrors. Buying a home doesn’t need to be difficult or stressful. A good lender will make it exciting and educational!
Because you can, visit: Home loan Knoxville TN
You have found the perfect house. You can’t believe that you are actually buying it! You thought buying a house was only for old people with kids, you know, like in their thirties or something. Now what happens?
You’ve should already have been pre-qualified for a home loan by a mortgage specialist. In fact, that lender gave you a letter, saying as much, and you gave it to the seller, giving them peace of mind that your offer is real and you can back it up. Your credit has probably already been pulled and you’ve been given a copy of it. Your realtor will provide the fully executed sales contract to your lender. Upon receipt of this contract, your lender will update and get you all your documents and disclosures to sign, within three days of receipt of your contract. If your credit has already been pulled and you’ve seen these documents, expect a NEW set since you finally have a property in mind. And trust me, this is only the beginning of the deluge of documents you will see, sign and sign again.
Your lender will now go back to your loan and put in all the particulars of this property - such as taxes, homeowner’s association fees - and reflect any earnest money you may have put down with the contract. At this point, with a property determined, you can explore locking in an interest rate or reserving funds if the loan is through a particular housing agency. Your lender will also want to collect and update documentation that proves all you have related about yourself. I call it “eye balling” the documents. Assessments will be made if there is further documentation required to substantiate your loan application.
When all contract contingencies are removed, the lender will order the appraisal for your property. The lender chooses the appraiser and the type of appraisal necessary to ensure the value of the property. After all, it’s the lender’s money on the line, and in case you don’t repay your loan, the value of the loan may have to recouped in a foreclosure sale of the property. Not likely to happen, but the lender will make sure they are protected by the appraisal. The appraiser will notify all parties involved that there may be repairs required before the value can be found or the property will adhere to a certain standard required by the lender. The lender will communicate this information to your realtor to negotiate the repairs with the seller.
The lender prices, processes and assembles your loan for underwriting. They order title work from your chosen title company and coordinate all the pieces of the puzzle for the closing. They collect your homeowner’s insurance and share this information with the title company. The title company searches the title and rectifies any outstanding liens for closing. Sometimes, the title company finds old tax liens or worker’s liens (known as materialmen’s liens). They make sure that these liens will be satisfied prior to you taking ownership to the property. They also make sure that everything historically has been recorded and released properly.
Once the appraisal is received and the documents are submitted to underwriting for final approval, the lender receives an underwriting decision. Sometimes, there may be something in your file that will cause an underwriter to ask for more documentation. Sometimes, an underwriter will ask for additional comparable sales of homes in the area for the appraisal. Many times, a customer never knows that these conditions arise because their lender anticipates or addresses them for them. Sometimes a customer may be contacted for information. But, your mortgage specialist should have a good assessment of the situation and be able to validate and explain anything they ask of you.
Two days before closing, you will receive a HUD-1 Settlement Statement from your lender and/or title company. This document is summation of all the charges and fees in connection with your loan. You will be asked to review this document to ensure that it is correct. It will also reflect how much cash you will need to bring to closing.
At the closing, all parties involved usually show up at the same time to sign documents. Sometimes, the seller and the buyer sign separately due to scheduling conflicts. Your realtor and your lender should be expected to attend your closing. You will sign a stack of huge documents, but when all is said and done, you will handed the keys to your new home!
Your lender, realtor and title company should all work to make this process as seamless for you as possible. Their job is to make this experience an informed, easy and worry free process. You will have to make certain decisions, but you should be informed so that they do not overwhelm you. It’s easy to forget how mind boggling all the documentation can be in the home loan process when are exposed to it every day as part of your job. Your lender should be patient and explain things simply -no smoke and mirrors. Buying a home doesn’t need to be difficult or stressful. A good lender will make it exciting and educational!
Because you can, visit: Home loan Knoxville TN
Friday, November 2, 2007
Reported in USA Today: Mortgage rates drop to the lowest level in 5 months
WASHINGTON (AP) — Rates on 30-year mortgages fell to the lowest level in five months as evidence mounted that the economy is slowing down.
Freddie Mac, the mortgage company, reported Thursday that 30-year, fixed-rate mortgages dipped to 6.26% this week, down from 6.33% last week. It was the lowest level since 30-year mortgages were at 6.21% the week of May 17.
Click to Read the complete article in USA Today
Freddie Mac, the mortgage company, reported Thursday that 30-year, fixed-rate mortgages dipped to 6.26% this week, down from 6.33% last week. It was the lowest level since 30-year mortgages were at 6.21% the week of May 17.
Click to Read the complete article in USA Today
Monday, October 29, 2007
So, you found an article taped to your iPOD, “Psst…Tell Your Kids that Buying a Home Is Easier than They Think!” Part II
Just out of school and considering buying your first home? You’ll be surprised how easy it can be to qualify for a loan. Too often, the newly minted workforce doesn’t realize the confidence lenders have in their ability to be responsible homeowners.
Ok, so Mom and Dad told you that you need to buy a house. You've graduated from college and you're earning a decent income. Even though you don't feel like it most of the time, you are officially all grown up. But you ask yourself, "I'm only twenty-four years old, who would possibly loan me money to buy a house?"
First time homebuyer programs are established with flexible guidelines to attract – you guessed it –first time homebuyers! You are in a great position to buy a home provided you have established some history of decent credit. Even if you don't have traditional lines of credit to show for yourself, you may have established non-traditional credit and not even realized it. Do you have utilities, a cell phone and cable bill in your name? Have you paid them on time for 12 months? Then you have established non-traditional credit. Granted, many of you already have a credit card or gas card in your name. That's why Dad wanted your name on it, too. Good thinking on his part. At the time, you were just excited to get the credit card "for emergencies." It didn't even occur to you that you were establishing a good credit history.
Most lenders want to see at least a year under your belt earning income. The majority of new job workers are making at or under the median income limit for their area. There are those that beat the curve, but then, if you're making that much money on your first job, you don't need a first time homebuyer program. You can probably take another route to your first home. Also, recent graduates can get credit for having a diploma. If you have a diploma and an employer who is willing to verify that you earn what you say and are likely to continue on with them, then you're good to go -even without a year's employment history to show for yourself.
Some lending programs ask that a borrower have maintained an excellent rental history, preferably a two year history. But, you don't get penalized if you have been living at home. Especially, if home is in the same city that your school is located. You are simply asked to provide explanation as to how you managed to live rent free. Sometimes, Mom and Dad have to provide a written statement. They're probably willing to do that to get you out of the house and off the payroll.
What about a down payment and closing costs? Most programs will allow a seller to chip in 3% of the sales price toward your closing costs. This allowance can cover most if not all of your closing costs. Your realtor simply needs to be aware that you need this concession so she/he can negotiate it with your purchase contract. And how much do you have to come up with for a down payment? How about $0? Nearly all first time homebuyer programs are designed for empty pocket consumers with potential to earn more and maintain good credit. Some programs don't require you to have any reserves in the bank. Since so many first time homebuyers live on a budget, these programs allow for the reality of life. And you can be rewarded for being a conscientious consumer with lower than average interest rates being available to you.
You may be ready to buy your first home and not even know it. A good mortgage specialist will pre-qualify you, find out what you can afford or what your comfortable paying. Then, you just have to find the right home. It's easier than you think!
Because you can, visit: Home loan Knoxville TN
Ok, so Mom and Dad told you that you need to buy a house. You've graduated from college and you're earning a decent income. Even though you don't feel like it most of the time, you are officially all grown up. But you ask yourself, "I'm only twenty-four years old, who would possibly loan me money to buy a house?"
First time homebuyer programs are established with flexible guidelines to attract – you guessed it –first time homebuyers! You are in a great position to buy a home provided you have established some history of decent credit. Even if you don't have traditional lines of credit to show for yourself, you may have established non-traditional credit and not even realized it. Do you have utilities, a cell phone and cable bill in your name? Have you paid them on time for 12 months? Then you have established non-traditional credit. Granted, many of you already have a credit card or gas card in your name. That's why Dad wanted your name on it, too. Good thinking on his part. At the time, you were just excited to get the credit card "for emergencies." It didn't even occur to you that you were establishing a good credit history.
Most lenders want to see at least a year under your belt earning income. The majority of new job workers are making at or under the median income limit for their area. There are those that beat the curve, but then, if you're making that much money on your first job, you don't need a first time homebuyer program. You can probably take another route to your first home. Also, recent graduates can get credit for having a diploma. If you have a diploma and an employer who is willing to verify that you earn what you say and are likely to continue on with them, then you're good to go -even without a year's employment history to show for yourself.
Some lending programs ask that a borrower have maintained an excellent rental history, preferably a two year history. But, you don't get penalized if you have been living at home. Especially, if home is in the same city that your school is located. You are simply asked to provide explanation as to how you managed to live rent free. Sometimes, Mom and Dad have to provide a written statement. They're probably willing to do that to get you out of the house and off the payroll.
What about a down payment and closing costs? Most programs will allow a seller to chip in 3% of the sales price toward your closing costs. This allowance can cover most if not all of your closing costs. Your realtor simply needs to be aware that you need this concession so she/he can negotiate it with your purchase contract. And how much do you have to come up with for a down payment? How about $0? Nearly all first time homebuyer programs are designed for empty pocket consumers with potential to earn more and maintain good credit. Some programs don't require you to have any reserves in the bank. Since so many first time homebuyers live on a budget, these programs allow for the reality of life. And you can be rewarded for being a conscientious consumer with lower than average interest rates being available to you.
You may be ready to buy your first home and not even know it. A good mortgage specialist will pre-qualify you, find out what you can afford or what your comfortable paying. Then, you just have to find the right home. It's easier than you think!
Because you can, visit: Home loan Knoxville TN
Monday, October 22, 2007
Series Part I Psst…Tell Your Kids that Buying a Home Is Easier than They Think!
We encourage our kids to plan for their future, but we seldom include buying a first home sooner than average as a path to building that future. Let them know buying a home is easier than they think.
Most of the people who read this column are not first time homebuyers. The fact of the matter is many of you that are first time homebuyers and reading this article are relatively mature individuals who are fighting off your commitment fears of being tied to a mortgage. But there is a huge segment of the population that could buy their first home, yet it doesn’t occur to them to do so. Who are these people? Well, it’s your 24 year old son or daughter, new to the work force, and is throwing away money on rent somewhere. Encouraging your children to buy a home when they are young is some of the soundest financial advice you can give them. Equity in a home is an easy way to grow one’s portfolio with very little investment. But the fact of the matter is it doesn’t occur to most of us to encourage the younger generation to buy early in their lives. And trust me, it rarely occurs to our kids themselves to consider buying a home in the early twenties. They are more concerned with buying a new Halo 3 for their Xbox.
Why do so many people miss the boat on this opportunity? It could be they plan to be in the area for only a short time because they will job hop to advance their career, thus viewing a mortgage as “too permanent.” I counter to simply sell the house when you move. Or maybe they expect their income to double or triple over the next three years. I say buy a home now, then upgrade to a new home; sell or rent the old house. Investing in real estate is a proven, safe and solid return on investment. And with the right combination of credit history (or a history of paying utilities, cable and your cell phone on time) and no money down, you or someone you care about can start investing in the future.
When Junior starts his new job at the company and 401(K) is available, he’s been informed by his folks, boss or peers to enroll and contribute at least a little something to it with every paycheck. Yet, he is rarely counseled quit renting that apartment for $750 a month and buy a $75,000 house. Where will he come up with the money to do it? There are multiple options for first time buyers that allow for 100% financing. Get the seller to kick in closing costs (up to 6% of sales price with some products), and one can close on a loan and bring no funds to the table. If your home value appreciates 4% in the next year, that’s a nice return on a no cash investment.
For some time, I’ve considered writing this series for first time buyers to let them know buying a home is easier than they think. But, the more I thought about it, the more I realized the advice I would offer would most likely not reach my target audience. So parents, it is up to you to supply your kids with this last little bit of advice and help to set them free to further establish their independence in this world. Clip this article out and tape it to their iPOD or the steering wheel of their car – someplace it will get noticed.
I think for most of us who have been through the experience, our first home buy was a very daunting experience. There are so many choices and unknowns - it can be overwhelming. In this series, I will try to break it down the process into small logical steps and make it easier understand the steps involved in financing your first home. Where do you start? That is perhaps the easiest part. Our newly established worker should first make a list of all his or her debt obligations such as student loans (unless deferred), car payments, credit card debt, etc. Hopefully at this age, this will be a small list. Then add what you think amount you could afford for a mortgage. Take that amount and divide it by your gross monthly income. If you come in at 43% or less, you’re in business. If you have something in your savings or checking - great. If not, don’t let it deter you. You have options.
Contact a mortgage specialist to drill out the details and find a good realtor who knows your market for housing you can afford. What next? Get ready to tell your landlord “Adios!.”
Because you can, visit: Home loan Knoxville TN
Most of the people who read this column are not first time homebuyers. The fact of the matter is many of you that are first time homebuyers and reading this article are relatively mature individuals who are fighting off your commitment fears of being tied to a mortgage. But there is a huge segment of the population that could buy their first home, yet it doesn’t occur to them to do so. Who are these people? Well, it’s your 24 year old son or daughter, new to the work force, and is throwing away money on rent somewhere. Encouraging your children to buy a home when they are young is some of the soundest financial advice you can give them. Equity in a home is an easy way to grow one’s portfolio with very little investment. But the fact of the matter is it doesn’t occur to most of us to encourage the younger generation to buy early in their lives. And trust me, it rarely occurs to our kids themselves to consider buying a home in the early twenties. They are more concerned with buying a new Halo 3 for their Xbox.
Why do so many people miss the boat on this opportunity? It could be they plan to be in the area for only a short time because they will job hop to advance their career, thus viewing a mortgage as “too permanent.” I counter to simply sell the house when you move. Or maybe they expect their income to double or triple over the next three years. I say buy a home now, then upgrade to a new home; sell or rent the old house. Investing in real estate is a proven, safe and solid return on investment. And with the right combination of credit history (or a history of paying utilities, cable and your cell phone on time) and no money down, you or someone you care about can start investing in the future.
When Junior starts his new job at the company and 401(K) is available, he’s been informed by his folks, boss or peers to enroll and contribute at least a little something to it with every paycheck. Yet, he is rarely counseled quit renting that apartment for $750 a month and buy a $75,000 house. Where will he come up with the money to do it? There are multiple options for first time buyers that allow for 100% financing. Get the seller to kick in closing costs (up to 6% of sales price with some products), and one can close on a loan and bring no funds to the table. If your home value appreciates 4% in the next year, that’s a nice return on a no cash investment.
For some time, I’ve considered writing this series for first time buyers to let them know buying a home is easier than they think. But, the more I thought about it, the more I realized the advice I would offer would most likely not reach my target audience. So parents, it is up to you to supply your kids with this last little bit of advice and help to set them free to further establish their independence in this world. Clip this article out and tape it to their iPOD or the steering wheel of their car – someplace it will get noticed.
I think for most of us who have been through the experience, our first home buy was a very daunting experience. There are so many choices and unknowns - it can be overwhelming. In this series, I will try to break it down the process into small logical steps and make it easier understand the steps involved in financing your first home. Where do you start? That is perhaps the easiest part. Our newly established worker should first make a list of all his or her debt obligations such as student loans (unless deferred), car payments, credit card debt, etc. Hopefully at this age, this will be a small list. Then add what you think amount you could afford for a mortgage. Take that amount and divide it by your gross monthly income. If you come in at 43% or less, you’re in business. If you have something in your savings or checking - great. If not, don’t let it deter you. You have options.
Contact a mortgage specialist to drill out the details and find a good realtor who knows your market for housing you can afford. What next? Get ready to tell your landlord “Adios!.”
Because you can, visit: Home loan Knoxville TN
Sunday, October 21, 2007
For Sale by Owner (FSBO)), what do I need to know?
FSBO or For Sale by Owner can be a hugely successful endeavor and can save you money. But to be successful, this endeavor must be executed correctly. Below are a few tips that may help you be successful in this venture.
Price the Home Correctly: It is crucial that you research and place the correct price tag on your home when selling it. A reputable real estate agent is the first person to contact to help appraise your home. Many agents won’t lend you the time of day to assist you with this aspect since they aren’t listing your home. But a good agent will do it for you with no strings attached. They realize that their business is based on reputation and referrals. They may not get this listing, but you may want them to represent you in your next home purchase. Or your cousin may need a good realtor’s help in the future. Do your homework. Find similar homes in your area and compare their price tags. Are the homesas attractive as yours? Are they as large as yours? Pricing the home correctly is crucial.
Use your time: A FSBO property allows you to place your home on the market for the maximum price to see if it sells quickly. If you have a deadline to sell your home, market it yourself well in advance of this deadline. Later, if you feel you need a realtor’s help, you haven’t painted yourself into a corner. You still have time to market and sell the property correctly.
Market the Home: Make it easy for people to know more about your home without investing too much time. Put a For Sale by Owner sign in the front yard with contact numbers. Put a brochure with information out front so people can pre-screen the information and not waste your time. Talk to your local paper or other FSBO’s and investigate whether placing an ad in the local paper has had results. Different markets yield different results. Consider hosting an open house, but make sure you get the information out to the right market.
Put Your Home’s Best Foot Forward: You want to make sure your home sends the right message to prospective buyers. People have to be able to see themselves in that home. What is the first impression when driving up to the home? What’s the feeling inside? Take measure to provide maximum curb appeal. You want to make sure people want to come inside the house. The outside of your home should entice them to do so. The interior should be clean, airy and free of clutter. Try to make the home smell good and pack away personal effects that remind prospects someone else lives there. The realtor that helps you determine a market price should be able to make suggestions in this area that will make your home more marketable.
Is Your Prospect Qualified?: Make sure your buyer is pre-qualified before entertaining their offer. You can request that a preferred mortgage lender you trust or another reputable lender provide this service. If a person isn’t qualified to buy your home, you don’t want to lose valuable marketing opportunity to attract other prospects. Do not take verbal offers seriously. A serious prospect will sign a contract and provide earnest money as a show of good faith. Make sure you are using a legal contract and that it is executed properly and protects your interest. Again, that real estate agent who helped you earlier or an attorney may be a good idea at this juncture. A well executed sales contract is worth its weight in gold.
Of course all of the above is based upon my personal opinion and experience. Use these thoughts for informational purposes only. And good luck selling your home!
Because you can, visit: Home loan Knoxville TN
Price the Home Correctly: It is crucial that you research and place the correct price tag on your home when selling it. A reputable real estate agent is the first person to contact to help appraise your home. Many agents won’t lend you the time of day to assist you with this aspect since they aren’t listing your home. But a good agent will do it for you with no strings attached. They realize that their business is based on reputation and referrals. They may not get this listing, but you may want them to represent you in your next home purchase. Or your cousin may need a good realtor’s help in the future. Do your homework. Find similar homes in your area and compare their price tags. Are the homesas attractive as yours? Are they as large as yours? Pricing the home correctly is crucial.
Use your time: A FSBO property allows you to place your home on the market for the maximum price to see if it sells quickly. If you have a deadline to sell your home, market it yourself well in advance of this deadline. Later, if you feel you need a realtor’s help, you haven’t painted yourself into a corner. You still have time to market and sell the property correctly.
Market the Home: Make it easy for people to know more about your home without investing too much time. Put a For Sale by Owner sign in the front yard with contact numbers. Put a brochure with information out front so people can pre-screen the information and not waste your time. Talk to your local paper or other FSBO’s and investigate whether placing an ad in the local paper has had results. Different markets yield different results. Consider hosting an open house, but make sure you get the information out to the right market.
Put Your Home’s Best Foot Forward: You want to make sure your home sends the right message to prospective buyers. People have to be able to see themselves in that home. What is the first impression when driving up to the home? What’s the feeling inside? Take measure to provide maximum curb appeal. You want to make sure people want to come inside the house. The outside of your home should entice them to do so. The interior should be clean, airy and free of clutter. Try to make the home smell good and pack away personal effects that remind prospects someone else lives there. The realtor that helps you determine a market price should be able to make suggestions in this area that will make your home more marketable.
Is Your Prospect Qualified?: Make sure your buyer is pre-qualified before entertaining their offer. You can request that a preferred mortgage lender you trust or another reputable lender provide this service. If a person isn’t qualified to buy your home, you don’t want to lose valuable marketing opportunity to attract other prospects. Do not take verbal offers seriously. A serious prospect will sign a contract and provide earnest money as a show of good faith. Make sure you are using a legal contract and that it is executed properly and protects your interest. Again, that real estate agent who helped you earlier or an attorney may be a good idea at this juncture. A well executed sales contract is worth its weight in gold.
Of course all of the above is based upon my personal opinion and experience. Use these thoughts for informational purposes only. And good luck selling your home!
Because you can, visit: Home loan Knoxville TN
Thursday, October 18, 2007
GOOD FAITH ESTIMATES - EVERYTHING YOU NEED TO KNOW BUT WERE AFRAID TO ASK
If you've ever been through the home buying process before, you know that the Good Faith Estimate is one of the most important documents you will review to make a decision about your home financing. Oftentimes, you may request this document from multiple lenders and get completely different looking paperwork and figures. But in essence, there are only a few key factors you should focus on when comparing these documents.
One the these key factors to compare, bottom line, is the amount of closing costs you are being charged. I once had a customer who told me that he was quoted a 6% rate with no discount points and no origination fees. My good faith estimate also had a 6% rate, but I was charging a 1% discount fee charge. I asked to see his good faith estimate from the other lender. The other lender had inflated the closing costs to make up the money that would otherwise have been collected by a discount fee.
Clever, but not necessarily upfront. When it was all said and done, my total costs were cheaper by almost $400. What it boils down to is all secondary market lenders have access to basically the same rate. We just package it differently. By charging my customer the discount fee upfront, my customer earned the benefit of the tax deduction afforded this charge. So, lesson number one, if a quote is completely out of the ballpark from what someone else is quoting, there is probably a good explanation behind it. It's possible that they can really offer something out of the ordinary once in a while, but doubtful.
The other key factor to compare is the payment, but don't get caught up the escrow portion of the payment. Your escrows will be what they will be at closing. No lender has control over what you decide to pay for homeowner's insurance or what your county taxes are. Lenders simply guess at that figure. So, in general, you shouldn't focus too much on "pre-paids." They are what they are, and will be finalized when you get to the closing table. When looking at a payment, it is more important to compare the principal and interest and if applicable, mortgage insurance portions of the payment breakdown. As I said before, your escrows payments (taxes, insurance) will be finalized later.
You should never have to have your credit pulled before someone gives you a good faith estimate, nor should you pay for the estimate. Some lenders will require the aforementioned in hopes of "tying" you to them. The best advice is to find someone you like and trust when shopping for a mortgage. You want someone who will take care of the details and whom you can depend upon.
Because you can, visit: Home loan Knoxville TN
One the these key factors to compare, bottom line, is the amount of closing costs you are being charged. I once had a customer who told me that he was quoted a 6% rate with no discount points and no origination fees. My good faith estimate also had a 6% rate, but I was charging a 1% discount fee charge. I asked to see his good faith estimate from the other lender. The other lender had inflated the closing costs to make up the money that would otherwise have been collected by a discount fee.
Clever, but not necessarily upfront. When it was all said and done, my total costs were cheaper by almost $400. What it boils down to is all secondary market lenders have access to basically the same rate. We just package it differently. By charging my customer the discount fee upfront, my customer earned the benefit of the tax deduction afforded this charge. So, lesson number one, if a quote is completely out of the ballpark from what someone else is quoting, there is probably a good explanation behind it. It's possible that they can really offer something out of the ordinary once in a while, but doubtful.
The other key factor to compare is the payment, but don't get caught up the escrow portion of the payment. Your escrows will be what they will be at closing. No lender has control over what you decide to pay for homeowner's insurance or what your county taxes are. Lenders simply guess at that figure. So, in general, you shouldn't focus too much on "pre-paids." They are what they are, and will be finalized when you get to the closing table. When looking at a payment, it is more important to compare the principal and interest and if applicable, mortgage insurance portions of the payment breakdown. As I said before, your escrows payments (taxes, insurance) will be finalized later.
You should never have to have your credit pulled before someone gives you a good faith estimate, nor should you pay for the estimate. Some lenders will require the aforementioned in hopes of "tying" you to them. The best advice is to find someone you like and trust when shopping for a mortgage. You want someone who will take care of the details and whom you can depend upon.
Because you can, visit: Home loan Knoxville TN
Monday, October 15, 2007
LOCKING IN YOUR INTEREST RATE AND OTHER TALES OF LAS VEGAS
“Should I lock my loan? Are the rates going up? Are the rates going down? What’s the market supposed to do in the next week?” These are questions that every experienced loan officer has been asked by his or her customers on various occasions. I’ll tell you one thing, if I had a hard and fast answer to any of these questions, I would be reading a book on my own private yacht in the Mediterranean Sea. And my butler would be asking me what I wanted for lunch.
Here’s the deal on locking in your loan. Typically a standard lock is for 30 days. This time frame gives all parties involved in the transaction adequate time to complete their responsibility in the loan process. If you are closing within 30 days, you should probably go ahead and lock your rate, provided you are comfortable with the terms quoted to you. What if the rate goes down .125%? I counter and ask what if the rate goes up .125%? Are you willing to risk it?
If you are happy with your payment, then I advise you to lock in the rate. Your mortgage lender will give you a picture of the general trend of interest rates, or you can research it for yourself. Find the loan payment amount you are aiming for and focus on this issue to lock your loan. I’ve seen it happen plenty of times: everyone speculates the rates are going down, but the next day you see a .25% increase. Of course the converse does happen at times, but I haven’t seen it happen as much!
I’ve had customers who have checked with me every day to see where the rates are and I’ve never seen this vigilance result in a significant rate improvement. Not to say it can’t happen, I’m just relaying the odds from personal experience that it won’t. But, if this course is what my customer is most happy taking, I’m just as happy to update them daily till they feel comfortable locking. But keep in mind it’s a gamble. If it was easy, there would be a lot of folks on the beach with their butlers. It is very difficult to predict short term movements in the market. Try it for a few days just for fun, and you’ll see what I mean.
When a loan is locked, your mortgage company has made a commitment to provide a product at that note rate to its secondary market source. If the rates go down, you still are expected to close at your locked rate. If the rates go up, you still expect to close at your locked rate. A lock represents a commitment from the customer and the lender. So, find your comfort zone and lock your rate. Spend your time worrying about what you’re going to do with all the money you saved on your refinance or how you are possibly going to get boxes packed in time to move in two weeks!
Because you can, visit: Home loan Knoxville TN
Here’s the deal on locking in your loan. Typically a standard lock is for 30 days. This time frame gives all parties involved in the transaction adequate time to complete their responsibility in the loan process. If you are closing within 30 days, you should probably go ahead and lock your rate, provided you are comfortable with the terms quoted to you. What if the rate goes down .125%? I counter and ask what if the rate goes up .125%? Are you willing to risk it?
If you are happy with your payment, then I advise you to lock in the rate. Your mortgage lender will give you a picture of the general trend of interest rates, or you can research it for yourself. Find the loan payment amount you are aiming for and focus on this issue to lock your loan. I’ve seen it happen plenty of times: everyone speculates the rates are going down, but the next day you see a .25% increase. Of course the converse does happen at times, but I haven’t seen it happen as much!
I’ve had customers who have checked with me every day to see where the rates are and I’ve never seen this vigilance result in a significant rate improvement. Not to say it can’t happen, I’m just relaying the odds from personal experience that it won’t. But, if this course is what my customer is most happy taking, I’m just as happy to update them daily till they feel comfortable locking. But keep in mind it’s a gamble. If it was easy, there would be a lot of folks on the beach with their butlers. It is very difficult to predict short term movements in the market. Try it for a few days just for fun, and you’ll see what I mean.
When a loan is locked, your mortgage company has made a commitment to provide a product at that note rate to its secondary market source. If the rates go down, you still are expected to close at your locked rate. If the rates go up, you still expect to close at your locked rate. A lock represents a commitment from the customer and the lender. So, find your comfort zone and lock your rate. Spend your time worrying about what you’re going to do with all the money you saved on your refinance or how you are possibly going to get boxes packed in time to move in two weeks!
Because you can, visit: Home loan Knoxville TN
Saturday, October 13, 2007
Dazed and Confused: What Kind of Private Mortgage Insurance (PMI) Should You Choose?
Private Mortgage Insurance, Lender Paid Mortgage Insurance...it's all very confusing. By learning the terminology, its meaning and then asking the right questions, you can determine what makes the most financial sense for you.
So, you’re putting less than a 20% down payment on the house you are buying and you are getting a conventional loan. Your lender has given you the option of paying a monthly private mortgage insurance (PMI) premium or offering you a higher rate where the lender pays it, known as lender paid mortgage insurance (LPMI). Which scenario is better for you? You’re confused and don’t really understand it all; you’d prefer to just have the decision made for you rather than weigh the options yourself. However, if you don’t consider all the options, you could be making a financial mistake.
PMI protects the lender against default and is required on loans that are deemed higher risk If you are investing less than 20% of your own money into a home, a lender considers it easier for you to walk away from your debt obligation if you find yourself in a pickle and can’t pay your mortgage. Your lender can buy/pay your mortgage insurance for you, but to do so, they charge you a higher rate plus a profit margin. To make a decision as to which route to take, you need to weigh the pros and cons.
You have more interest to deduct on your taxes because of your higher rate when you have LPMI. But if you and your spouse make $100,000 annually or less, or individually you make $50,000 annually, your monthly mortgage insurance is deductible. Depending on your tax bracket, the higher interest rate may or may not benefit you. You should crunch the numbers or ask your accountant’s advice.
PMI automatically terminates when your loan to value (of the original property value) reaches 78%, and but you can request it terminated when it reaches 80%. Some lenders will allow you to terminate the insurance when the appreciated loan to value reaches 80%. So, how long are you keeping this loan? Will you be paying down the principal balance rapidly? Is this your forever home and your forever mortgage rate? Then perhaps LPMI isn’t such a hot option. You can review an amortization schedule when making this decision to figure out just what payment will get you to that target loan to value (LTV). If you know that you will be making extra principal payments regularly, your lender should be able to help you analyze that scenario as well. However, if you’re going to be in the house a short time, than LPMI might just be the way to go.
Finally, just look at your basic payment both ways. Which way is more affordable for your current needs? The pricing on these products fluctuates. One product may be cheaper than another based on loan amount, term, down payment and other factors. You may also qualify for a second mortgage to make up the remaining 20% down payment and avoid private mortgage insurance altogether. What works best for your needs?
When considering your options, discuss your plans with your lender. Consider the above points and discuss them with her/him. By doing so, you should be able to clear the fog and make an educated decision
Because you can, visit: Home loan Knoxville TN
So, you’re putting less than a 20% down payment on the house you are buying and you are getting a conventional loan. Your lender has given you the option of paying a monthly private mortgage insurance (PMI) premium or offering you a higher rate where the lender pays it, known as lender paid mortgage insurance (LPMI). Which scenario is better for you? You’re confused and don’t really understand it all; you’d prefer to just have the decision made for you rather than weigh the options yourself. However, if you don’t consider all the options, you could be making a financial mistake.
PMI protects the lender against default and is required on loans that are deemed higher risk If you are investing less than 20% of your own money into a home, a lender considers it easier for you to walk away from your debt obligation if you find yourself in a pickle and can’t pay your mortgage. Your lender can buy/pay your mortgage insurance for you, but to do so, they charge you a higher rate plus a profit margin. To make a decision as to which route to take, you need to weigh the pros and cons.
You have more interest to deduct on your taxes because of your higher rate when you have LPMI. But if you and your spouse make $100,000 annually or less, or individually you make $50,000 annually, your monthly mortgage insurance is deductible. Depending on your tax bracket, the higher interest rate may or may not benefit you. You should crunch the numbers or ask your accountant’s advice.
PMI automatically terminates when your loan to value (of the original property value) reaches 78%, and but you can request it terminated when it reaches 80%. Some lenders will allow you to terminate the insurance when the appreciated loan to value reaches 80%. So, how long are you keeping this loan? Will you be paying down the principal balance rapidly? Is this your forever home and your forever mortgage rate? Then perhaps LPMI isn’t such a hot option. You can review an amortization schedule when making this decision to figure out just what payment will get you to that target loan to value (LTV). If you know that you will be making extra principal payments regularly, your lender should be able to help you analyze that scenario as well. However, if you’re going to be in the house a short time, than LPMI might just be the way to go.
Finally, just look at your basic payment both ways. Which way is more affordable for your current needs? The pricing on these products fluctuates. One product may be cheaper than another based on loan amount, term, down payment and other factors. You may also qualify for a second mortgage to make up the remaining 20% down payment and avoid private mortgage insurance altogether. What works best for your needs?
When considering your options, discuss your plans with your lender. Consider the above points and discuss them with her/him. By doing so, you should be able to clear the fog and make an educated decision
Because you can, visit: Home loan Knoxville TN
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