Sometimes loans don’t close when they are supposed to close. During this recent refinance boom, it’s not uncommon for a lender to be unable to give you a firm closing date. What exactly can cause your loan closing to be delayed?
It seems like the whole world is refinancing their mortgages right now. Well, not the whole world. I imagine other countries aren’t experiencing the same low rate phenomenon that we are right now. However, I can assure you the mortgage industry here at home is experiencing record numbers in volume due to the current market. It’s a great opportunity for a lot of people to save big bucks, and for long term. However, since everyone and their cousin is trying to refinance right now, it’s creating some logistical difficulties.
Think about it. It’s not just the lenders who are overwhelmed with business right now. So are all the vendors they do business with to get the loan closed. That means appraisals are taking longer to get done, and title companies are scrambling to coordinate title searches and loan closings. Even more obscure vendors, like credit reporting agencies, are behind. Say you want to update a customer’s credit report to remove some erroneous information. Guess what? It’s taking longer than ever to get it done.
Because of this huge glut, lock periods for loan rates are typically longer than usual. A lock period is the timeframe in which you must close your loan to secure that fabulous interest rate that got you to commit in the first place. Lenders are having to set realistic expectations for their customers. How can you possibly close a loan in five days if you don’t have the appraisal back? You see, some things are out of your lender’s control. Realtors are very aware of the limitations that lenders are facing these days. They are ensuring that they too set realistic deadlines when negotiating purchase contracts for buyers.
There are so many moving pieces to a puzzle of a loan closing. Everything has to be coordinated to make it go smoothly. That means that you as a customer have certain responsibilities and obligations, as well. For instance, get the requested documents to your lender as soon as possible. If you dilly dally, you may run into problems. You see, your lender has a whole pipeline of loans, as do all the other mortgage lenders that work for that particular company. All of these loans have to be reviewed by an underwriter. So, basically, your loan has to take a number. And if you’re not prompt, your loan may go to the back of a very, very, very long line. Most people want their loans to close at the end of the month or in the first few days of the month, so you can imagine the huge glut and back up that occurs. Thus, be prompt and responsive to your lender’s requests to allow everyone time to do their job.
The moral of the story is to listen to your lender and keep an open line of dialogue going. Keep him/her aware of changing situations. Email is great tool for use in accomplishing this purpose. It takes only a minute or two and can save everyone lots of heartache in the long run. And if your loan closing date gets moved, take heart. It will close, eventually.
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 www.kristinmortgage.com Home Loans Plain Talk.
Showing posts with label credit reports. Show all posts
Showing posts with label credit reports. Show all posts
Saturday, February 21, 2009
Monday, February 2, 2009
Just How Hard Is It to Get a Loan These Days?
By Kristin Abouelata, Home Loan Specialist
Every where you turn you read or see some bit of information about tightening guidelines for mortgage lenders? It makes you wonder if you would qualify for a loan today that you easily qualified for two years ago. Hmmm, would you?
I see or hear it everywhere. On the television news, in the paper. People at parties ask me about it. Clients discuss it. Everyone is curious to know just how difficult it is to get a loan these days. I guess I would answer that by asking just what type of loan are you considering? From what I understand through the media, if you need a car loan, yes- it’s more difficult. And I really have no idea if it is exceptionally more difficult to obtain car financing. I’d be curious to hear from a car financing loan officer on that matter. But a home loan? It just depends.
You see, here’s the thing. Most lenders in our area never did the really, funky loans that have caused this mortgage crisis and only a small slice of the market was committed to subprime loans. Yes, we did stated income. But that was only because Joe Borrower had been on the job forever and had an 8 bazillion credit score. And he was buying a house he intended to call home. You see, the automated underwriting engines assign risk factors to certain aspects of the loan. These risks are based on statistics and mathematical data regarding loan performance. Stuff way over most of our heads. But you see if everyone’s cards were on the table, these old estimates of risk worked for the most part.
But they didn’t work when people lied about the intended use of the property or about how much income they made. Or they didn’t work if they had an unscrupulous lender who assisted them in committing fraud, oftentimes unwittingly. You see, if you didn’t plan to live in the property, you would have had to put more money down and proven your income or your assets. Mathematically, the statistics showed that if you could not substantiate or meet these requirements, you were at risk for default. Oops, false data equals bad results. And ta-da, mass foreclosures.
But around here, most folks did traditional conventional loans for primary residences or obtained FHA mortgages where you had to prove all that stuff anyway. These loans performed well, and continue to do so. And these people still can get loans easily. Not much has changed for them, except if they are getting a conventional loan, they have to bring in a few more pieces of paper to show their income that they didn’t before. And the lender is typically going to collect some type of down payment from you, even it’s marginal or from a grant.
What has changed, credit wise, is if you are an individual who is buying rental property. You have to put more money down, have higher credit, and can only own so many and still qualify. People who scooped up homes, expecting to turn them quickly but couldn’t, are part of the problem we all now face. People who had very little invested into the property when they purchased it. People who could walk away easily when they realized they had no renters and couldn’t sell the home anymore because the house prices dropped. People who didn’t have to prove their income to obtain the loan. Or they agreed to a extremely low interest adjustable rate mortgage where they never thought they would see the adjustment happen. Lots of people in Nevada, California and Florida where individuals invested heavily in the mortgage industry for profit – not necessarily for homeownership and the American Dream.
So, yes, it’s much more difficult for this latter group of individuals to secure financing on the secondary market. But for your typical hardworking family, there are loans out there for you. If you earn good income, have a sensible budget and work history, you should be ok. Some guidelines have tightened up, but these shrinking nets being cast make good sense. However, considering what a beating our pocketbooks have taken lately, good sense is a good thing. But don’t be afraid that you won’t qualify. If you do what your mama and daddy raised you to do, chances are you will.
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 www.kristinmortgage.com Home Loans Plain Talk.
Every where you turn you read or see some bit of information about tightening guidelines for mortgage lenders? It makes you wonder if you would qualify for a loan today that you easily qualified for two years ago. Hmmm, would you?
I see or hear it everywhere. On the television news, in the paper. People at parties ask me about it. Clients discuss it. Everyone is curious to know just how difficult it is to get a loan these days. I guess I would answer that by asking just what type of loan are you considering? From what I understand through the media, if you need a car loan, yes- it’s more difficult. And I really have no idea if it is exceptionally more difficult to obtain car financing. I’d be curious to hear from a car financing loan officer on that matter. But a home loan? It just depends.
You see, here’s the thing. Most lenders in our area never did the really, funky loans that have caused this mortgage crisis and only a small slice of the market was committed to subprime loans. Yes, we did stated income. But that was only because Joe Borrower had been on the job forever and had an 8 bazillion credit score. And he was buying a house he intended to call home. You see, the automated underwriting engines assign risk factors to certain aspects of the loan. These risks are based on statistics and mathematical data regarding loan performance. Stuff way over most of our heads. But you see if everyone’s cards were on the table, these old estimates of risk worked for the most part.
But they didn’t work when people lied about the intended use of the property or about how much income they made. Or they didn’t work if they had an unscrupulous lender who assisted them in committing fraud, oftentimes unwittingly. You see, if you didn’t plan to live in the property, you would have had to put more money down and proven your income or your assets. Mathematically, the statistics showed that if you could not substantiate or meet these requirements, you were at risk for default. Oops, false data equals bad results. And ta-da, mass foreclosures.
But around here, most folks did traditional conventional loans for primary residences or obtained FHA mortgages where you had to prove all that stuff anyway. These loans performed well, and continue to do so. And these people still can get loans easily. Not much has changed for them, except if they are getting a conventional loan, they have to bring in a few more pieces of paper to show their income that they didn’t before. And the lender is typically going to collect some type of down payment from you, even it’s marginal or from a grant.
What has changed, credit wise, is if you are an individual who is buying rental property. You have to put more money down, have higher credit, and can only own so many and still qualify. People who scooped up homes, expecting to turn them quickly but couldn’t, are part of the problem we all now face. People who had very little invested into the property when they purchased it. People who could walk away easily when they realized they had no renters and couldn’t sell the home anymore because the house prices dropped. People who didn’t have to prove their income to obtain the loan. Or they agreed to a extremely low interest adjustable rate mortgage where they never thought they would see the adjustment happen. Lots of people in Nevada, California and Florida where individuals invested heavily in the mortgage industry for profit – not necessarily for homeownership and the American Dream.
So, yes, it’s much more difficult for this latter group of individuals to secure financing on the secondary market. But for your typical hardworking family, there are loans out there for you. If you earn good income, have a sensible budget and work history, you should be ok. Some guidelines have tightened up, but these shrinking nets being cast make good sense. However, considering what a beating our pocketbooks have taken lately, good sense is a good thing. But don’t be afraid that you won’t qualify. If you do what your mama and daddy raised you to do, chances are you will.
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 www.kristinmortgage.com Home Loans Plain Talk.
Saturday, January 3, 2009
FHA 2009: More Money Out of Pocket
Buying a house in 2009 and thinking about an FHA loan? Be aware your out of pocket investment is going up…
We sure have seen a bunch of changes in the mortgage industry this year. FHA has had a few noted ones, such as raising the loan limit. However, new changes will be in effect beginning in January 2009. And for this area, most important is that more money is required from the borrower.
Effective the first day of the year, any property with a case number for FHA ordered will have the new minimum loan to value requirement of 96.5%. What’s a case number, you may ask? A case number is FHA’s way of identifying a property. When you order an appraisal, you must provide the appraiser with the official assigned case number. The lender obtains this number from FHA’s system. If you’re the borrower, and you switch lenders but still have the contract on the same house, the existing case number and the assignment have to get transferred in FHA’s system.
OK, so back to the cash investment required from a borrower. The old rule was you had to have 3% out of pocket to qualify for an FHA loan. And you could finance up to 97.75% of the loan. You could use the other .75% required left over toward your closing costs. Now, you have to put a down payment equal to 3.5%. To make it a little clearer, if you were buying an home via FHA in 2008 that cost $100,000, you could finance up to $97,750, and only pay $750 in closing costs if the seller were will to pay the rest. Now, you have to put $3500 down for a loan amount of $96,500, and you and the seller have to negotiate the rest of the closing costs. Closing costs now cannot be used to meet the 3.5% requirement.
If you think about it, this change will afford FHA a few things. Number one FHA now has more wiggle room to recoup some loss in the event of foreclosure. More money down means more equity. The other aspect is that a borrower now has to a bit more serious about saving for a home if they need FHA financing.
But what hasn’t changed is that the seller can still contribute 6% of the sales pricing to help out with closing costs. That’s more generous than most lending programs with the exception of a few. And your down payment can still be in the form of a gift from a qualifying donor (blood relative is always a safe bet). Thus, these nuances of the FHA loan that have been so beneficial to many aren’t going away.
The FHA program has always been a strong one because its foundations were based upon common sense lending. Income was always verified, assets were always checked out, and the program is only for primary residences. I think these new changes may make folks have to wait a bit longer before buying a house, but it’s a smart move to keep FHA lending healthy and out of the headlines. We’ve had enough mortgage headaches due to bad decisions by lending institutions and borrowers. These changes make sense, and that’s ok with me.
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 www.kristinmortgage.com Home Loans Plain Talk.
We sure have seen a bunch of changes in the mortgage industry this year. FHA has had a few noted ones, such as raising the loan limit. However, new changes will be in effect beginning in January 2009. And for this area, most important is that more money is required from the borrower.
Effective the first day of the year, any property with a case number for FHA ordered will have the new minimum loan to value requirement of 96.5%. What’s a case number, you may ask? A case number is FHA’s way of identifying a property. When you order an appraisal, you must provide the appraiser with the official assigned case number. The lender obtains this number from FHA’s system. If you’re the borrower, and you switch lenders but still have the contract on the same house, the existing case number and the assignment have to get transferred in FHA’s system.
OK, so back to the cash investment required from a borrower. The old rule was you had to have 3% out of pocket to qualify for an FHA loan. And you could finance up to 97.75% of the loan. You could use the other .75% required left over toward your closing costs. Now, you have to put a down payment equal to 3.5%. To make it a little clearer, if you were buying an home via FHA in 2008 that cost $100,000, you could finance up to $97,750, and only pay $750 in closing costs if the seller were will to pay the rest. Now, you have to put $3500 down for a loan amount of $96,500, and you and the seller have to negotiate the rest of the closing costs. Closing costs now cannot be used to meet the 3.5% requirement.
If you think about it, this change will afford FHA a few things. Number one FHA now has more wiggle room to recoup some loss in the event of foreclosure. More money down means more equity. The other aspect is that a borrower now has to a bit more serious about saving for a home if they need FHA financing.
But what hasn’t changed is that the seller can still contribute 6% of the sales pricing to help out with closing costs. That’s more generous than most lending programs with the exception of a few. And your down payment can still be in the form of a gift from a qualifying donor (blood relative is always a safe bet). Thus, these nuances of the FHA loan that have been so beneficial to many aren’t going away.
The FHA program has always been a strong one because its foundations were based upon common sense lending. Income was always verified, assets were always checked out, and the program is only for primary residences. I think these new changes may make folks have to wait a bit longer before buying a house, but it’s a smart move to keep FHA lending healthy and out of the headlines. We’ve had enough mortgage headaches due to bad decisions by lending institutions and borrowers. These changes make sense, and that’s ok with me.
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 www.kristinmortgage.com Home Loans Plain Talk.
Haven’t Sold, Wanna Buy? Bridge the Gap
It’s a buyer’s market. Many people are excited by the bargains. But what if you want that new house but haven’t sold the old one? You can bridge the gap and still get that new house…
Wow. There are some really great bargains out there right now. Talk about motivated sellers. The market is prime for good deals - sellers who have been caught in a slow market and need to sell a house. Maybe they’ve been transferred, maybe they’ve inherited a house – whatever the reason, they’re motivated. And if you’ve been toying with the idea of a new house, it’s a great time to act.
Whoa. But wait a minute. The same market that is creating these great deals is causing you a bit of trouble as well. There’s that minor issue - you already have a house, and you need its equity to close on the new one. And yes, your dream house is on the market with a 20% discount below appraised value. What do you do? You can’t expect to sell your house in time to close on the new one, can you? Part of your offer on the new house is a quick closing. If you put a contingency on your offer “upon the sale of your existing home”, you’ll lose this deal. What are you to do?
Well, if you are financially capable, you can “bridge” the gap. In effect, you obtain what lenders refer to as a bridge loan. How do you do that, exactly? Basically, you liquidate the equity in your existing home to finance the new one. And when the old house sells, you pay off the bridge loan with net proceeds. It’s short term and quick.
There are lender’s limitations, naturally, on bridge loans. For one, the numbers have to work, and you have to be able to get approval carrying all the debt. That means the old mortgage, the new mortgage and the bridge loan, plus all your other debt. Depending on the type of financing you’re getting, there can be additional limitations as well. And there are different types of bridge loans. You have to figure out what’s best for you.
For instance, if you are financing your new home with an FHA loan (Federal Housing Administration), the old mortgage can’t be an FHA mortgage. FHA only allows you to have one FHA mortgage for a primary residence at a time. There are exceptions to the rule. For instance, if you’ve transferred to Knoxville, but your old home in Memphis hasn’t sold, you can get FHA financing on your new home. It’s a common sense thing. If your old house is financed with a Conventional loan, you’re fine to proceed with FHA financing. But in either case, be ready to prove that the old house is under contract for sale.
If you’re new financing is Conventional, you have a different set of ropes to jump. Conventional financing requires you to be able to manage all the debt (house 1, house 2, and the bridge loan), AND show six months reserves to make payments on all three. If your old house has 30 percent equity in it after the bridge loan, then you only need two month’s reserves proven. However, the equity must be verified. No one will take your opinion on the home’s value. Imagine that.
So if opportunity knocks, you do have options. You can make it happen. Just build a bridge.
Whoa. But wait a minute. The same market that is creating these great deals is causing you a bit of trouble as well. There’s that minor issue - you already have a house, and you need its equity to close on the new one. And yes, your dream house is on the market with a 20% discount below appraised value. What do you do? You can’t expect to sell your house in time to close on the new one, can you? Part of your offer on the new house is a quick closing. If you put a contingency on your offer “upon the sale of your existing home”, you’ll lose this deal. What are you to do?
Well, if you are financially capable, you can “bridge” the gap. In effect, you obtain what lenders refer to as a bridge loan. How do you do that, exactly? Basically, you liquidate the equity in your existing home to finance the new one. And when the old house sells, you pay off the bridge loan with net proceeds. It’s short term and quick.
There are lender’s limitations, naturally, on bridge loans. For one, the numbers have to work, and you have to be able to get approval carrying all the debt. That means the old mortgage, the new mortgage and the bridge loan, plus all your other debt. Depending on the type of financing you’re getting, there can be additional limitations as well. And there are different types of bridge loans. You have to figure out what’s best for you.
For instance, if you are financing your new home with an FHA loan (Federal Housing Administration), the old mortgage can’t be an FHA mortgage. FHA only allows you to have one FHA mortgage for a primary residence at a time. There are exceptions to the rule. For instance, if you’ve transferred to Knoxville, but your old home in Memphis hasn’t sold, you can get FHA financing on your new home. It’s a common sense thing. If your old house is financed with a Conventional loan, you’re fine to proceed with FHA financing. But in either case, be ready to prove that the old house is under contract for sale.
If you’re new financing is Conventional, you have a different set of ropes to jump. Conventional financing requires you to be able to manage all the debt (house 1, house 2, and the bridge loan), AND show six months reserves to make payments on all three. If your old house has 30 percent equity in it after the bridge loan, then you only need two month’s reserves proven. However, the equity must be verified. No one will take your opinion on the home’s value. Imagine that.
So if opportunity knocks, you do have options. You can make it happen. Just build a bridge.
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.
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.
Sunday, December 14, 2008
Mortgage Fraud: Why It Affects Everyone
Mortgage fraud is a very serious problem. It’s a an even bigger problem with the current state of our economy. It affects even the innocent bystander.The FBI somewhat recently released a report entitled, “2007 Mortgage Fraud Report,” which stated that mortgage fraud was up 176%. That’s a pretty big number. In fact, the report also reported that the FBI had instigated 1200 cases in which an individual “intentionally misrepresented information a lender used to fund a mortgage in the past year.” That’s very serious business. Just think - if it investigated 1200 cases, how many went undetected? The report further says that the number of mortgage fraud “Suspicious Activity Reports,” catapulted to a 31% increase in 2007. And according to the Mortgage Asset Research Institute, mortgage fraud increased nearly 50% in the second quarter of 2008 compared to last year. It’s scary.
Without a doubt, the subprime loans (that basically no longer exist in the old form) contributed to the increase in fraud. It was just too tempting for desperate or greedy people to lie about one’s income or forge a few docs to get into that home. Most of these individuals truly intended to pay back the loan. Life happened, and they figured out they couldn’t, and it was too late. You see, there are two types of fraud. There is fraud for home purchase and fraud for profit. Fraud for home purchase is usually an individual just wanting to get into a home they think they can afford, however, the lender wouldn’t agree with them if all the cards were on the table. And greedy lenders contribute to this mindset by turning a blind eye to information they probably should question. Fraud for profit is more complicated. It involves sometimes groups of individuals falsifying documents to obtain property and resell and drain the property, extracting all equity and saddling the lender with a mess. Fraud for profit sometimes includes appraisers, realtors and lenders.
Currently, there are three very popular mortgage schemes out there. The first one is the “buy and bail.” Lenders are particularly wary of this one. In this scenario, a homeowner applies for a cheaper mortgage than what they currently are financing. They then present a falsified rental agreement and fake renter for the property they currently can’t afford. They close on the new loan, then they default on the old mortgage. The borrower now has an new affordable mortgage, and the lender is stuck with a foreclosure on the old property.
The second type of fraud is the liar loan. Using technology, borrowers produce fake pay stubs, tax returns or income statements. Even the most careful and seasoned originators or underwriters can’t tell the difference.
And finally, there is the reverse appraisal mortgage fraud. In this scenario, lower than normal property valuations convince a bank that the property is worse less than what it is. The appraisal convinces the bank to do a short sale and settle for less than the mortgage owed.
So, how can fraud affect you? When properties sell at inflated prices and they’re in your neighborhood, your taxes increase unjustly. If they sell at deflated prices, than that effects your property’s value. Also, the properties in these schemes usually deteriorate quickly as no one is really maintaining them. Then, if you’re a neighbor, your property value decreases because you live near an unsightly house. And let’s not forget what the mortgage mess is doing to our current economy. I think we all feel that pain.
So, be on watch. This is serious business. And check your credit to make sure you’re not an identity theft victim. People with good credit scores are a big target for mortgage identity theft. You see, if you’re trying to scam a lender, it’s preferable to “be” Joe Smith with a 740 credit score than the deadbeat crook that you really are. Or worse yet, these thieves drain the real Joe Smith’s home equity line of credit by maximizing and withdrawing the limit. Yikes. Keep up your vigilance,and we lenders will do our part on our end. It takes a village.
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.
Monday, December 1, 2008
Getting a Mortgage? On What Term?
When exploring your options regarding a mortgage, people often overlook the most basic consideration. How long do you want to make payments?
Many people automatically obtain mortgage financing that amortizes over thirty years. Amortize, according to Wikipedia, “is the process of decreasing, or accounting for, an amount over a period of time. The word comes from Middle English amortisen to kill.” Basically, applying it to a mortgage, it means the terms for killing off that huge debt to which you just obligated yourself. That’s a nice thought – killing your mortgage, right? Now, consider the basic question - how long are you going to be hacking away at this debt?
Typically, as aforementioned, the most common loan term is for 30 years. But also quite common is the 15 year mortgage. What’s the most obvious difference? In basic terms, it’s the payment itself. The loan that amortizes over 15 years costs you approximately 20% to 25% more out of pocket per month. That difference oftentimes is where the buck stops. It’s a matter of affordability.
However, if the numbers work for you, a 15 year mortgage has its added attractions. In a nutshell, you pay less interest over the period of the loan, so it’s less out of pocket at the end of the day (or mortgage, in this case). Over fifteen years, this time reduction can result in considerable savings.
There’s another solution to this dilemma. However, it requires personal discipline. You can obtain a 30 year mortgage, figure out what extra principal payments to make each month, and pay it off in 15 years. This situation works for a lot of people. For instance, if your monthly income is inconsistent, it’s a great plan. Say you consistently make $60,000 annually, but you get the majority of your income only two times a year. Obtaining a fifteen year loan, although affordable on paper for you, doesn’t pan out realistically. Yet, if you’re disciplined, you can plop down a big principal payment when the money is flowing those couple of times a year. That way, you’re not backed into a corner to always have to cough up the higher payment. This scenario works for some people quite well.
There are other loan terms besides 15 or 30 year mortgages. There are 10, 20 and 40 year mortgages, too. However, they are not as common. The reason they aren’t is because of the very fact that they are uncommon. You see, the secondary market wants to sell loans into pools of other loans similar in interest rate, type and amortization. Since there aren’t a lot of these “diffent’ type amortizing loans, the appetite to buy them isn’t as evident. And if no one is hungry for the item on the menu, you either don’t carry a lot of it, or you price it a bit higher for the rare, discriminating palate.
But again, you can always choose a 30 year mortgage, and pay it off on a shorter schedule to suit your own personal needs. What you choose to do need only make sense to you. You may qualify for a 15 year loan, but only be comfortable with a 30 year loan. Only you can say. However, if it is easily affordable, then the chance to build your equity more quickly may be a deciding factor.
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 www.kristinmortgage.com Home Loans Plain Talk.
Many people automatically obtain mortgage financing that amortizes over thirty years. Amortize, according to Wikipedia, “is the process of decreasing, or accounting for, an amount over a period of time. The word comes from Middle English amortisen to kill.” Basically, applying it to a mortgage, it means the terms for killing off that huge debt to which you just obligated yourself. That’s a nice thought – killing your mortgage, right? Now, consider the basic question - how long are you going to be hacking away at this debt?
Typically, as aforementioned, the most common loan term is for 30 years. But also quite common is the 15 year mortgage. What’s the most obvious difference? In basic terms, it’s the payment itself. The loan that amortizes over 15 years costs you approximately 20% to 25% more out of pocket per month. That difference oftentimes is where the buck stops. It’s a matter of affordability.
However, if the numbers work for you, a 15 year mortgage has its added attractions. In a nutshell, you pay less interest over the period of the loan, so it’s less out of pocket at the end of the day (or mortgage, in this case). Over fifteen years, this time reduction can result in considerable savings.
There’s another solution to this dilemma. However, it requires personal discipline. You can obtain a 30 year mortgage, figure out what extra principal payments to make each month, and pay it off in 15 years. This situation works for a lot of people. For instance, if your monthly income is inconsistent, it’s a great plan. Say you consistently make $60,000 annually, but you get the majority of your income only two times a year. Obtaining a fifteen year loan, although affordable on paper for you, doesn’t pan out realistically. Yet, if you’re disciplined, you can plop down a big principal payment when the money is flowing those couple of times a year. That way, you’re not backed into a corner to always have to cough up the higher payment. This scenario works for some people quite well.
There are other loan terms besides 15 or 30 year mortgages. There are 10, 20 and 40 year mortgages, too. However, they are not as common. The reason they aren’t is because of the very fact that they are uncommon. You see, the secondary market wants to sell loans into pools of other loans similar in interest rate, type and amortization. Since there aren’t a lot of these “diffent’ type amortizing loans, the appetite to buy them isn’t as evident. And if no one is hungry for the item on the menu, you either don’t carry a lot of it, or you price it a bit higher for the rare, discriminating palate.
But again, you can always choose a 30 year mortgage, and pay it off on a shorter schedule to suit your own personal needs. What you choose to do need only make sense to you. You may qualify for a 15 year loan, but only be comfortable with a 30 year loan. Only you can say. However, if it is easily affordable, then the chance to build your equity more quickly may be a deciding factor.
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 www.kristinmortgage.com Home Loans Plain Talk.
What’s the Low Down on Loan to Value?
When buying a home, most people only concern themselves with the interest rate and the type of loan they are getting. However, the loan to value may be another aspect to take into consideration.
It’s not very often that a borrower takes into heavy consideration what his loan to value is when shopping for a loan. In fact, if the subject is brought up by the customer, it’s mostly in relation to avoiding paying monthly mortgage insurance. But sometimes, a loan to value can affect even more aspects of your loan – like pricing and approval!
What is loan to value? Well, it’s exactly what it says. The loan amount compared to the value of the home you are buying or refinancing. For example, if you are buying a $100,000 home, and your loan amount is only $50,000, your loan to value or “LTV” is 50%. It’s also very common to refinance a home to obtain a lower LTV and drop mortgage insurance that was before required.
Different types of loans have different minimum requirements for LTV’s. With primary residence purchases, for instance, an FHA loan can have as high as a 97.75% LTV (soon to change to 96.5% in 2009). A conventional loan can have as high as a 97% LTV (but more common is 95% LTV). VA and Rural Housing loans can have 100% LTV’s. People who have cash to put down on the property they are buying and financing with a conventional loan oftentimes try to amass 20% of the purchase price in order to avoid mortgage insurance. Mortgage insurance is required when your LTV for a primary residence is above 80% and is issued by independent mortgage insuring companies like Genworth Financial or PMI. Fannie and Freddie, the big purchasers of conventional loans, will require one of these or other approved companies issue mortgage insurance unless the loan has an 80% LTV. And if you’re refinancing the home you live in? The whole grid of acceptable LTV’s changes for the most part, with a few exceptions. And furthermore, if you’re talking about investment properties, it’s another can of worms.
But when else does LTV mean something? Consider when a loan specialist prices your loan. Oftentimes there are pricing differentials based upon the loan to value. For instance, if you carry mortgage insurance and your LTV is 85.01% or higher, you might actually get a better interest rate than if you had an 85% LTV (but don’t get too excited because your monthly mortgage insurance will be higher). Or if your LTV is 60% or lower, you might also get a better interest rate. If you are close to tipping the scales on one of these ratios, it may be to your benefit to ask your loan specialist how close you are to a pricing break one way or another. You’d be surprised to find out it might change your mind as to how much money you decide to put down on your loan.
And guess what else? A low loan to value may be the difference between loan approval and loan denial. Why is that? Because if you are investing enough of your own money into the equity of a property, chances are you won’t default on the loan. And if you do, it’s probably a last recourse. Not to mention, the lender who holds the note won’t lose money because there is enough equity in the property to cover foreclosure costs, re-sale costs and any value loss from an upside down market. The lender is covered. So, the lender will consider the loan less risky and a higher debt to income ratio is tolerated when reviewed with a high credit score.
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 www.kristinmortgage.com Home Loans Plain Talk.
It’s not very often that a borrower takes into heavy consideration what his loan to value is when shopping for a loan. In fact, if the subject is brought up by the customer, it’s mostly in relation to avoiding paying monthly mortgage insurance. But sometimes, a loan to value can affect even more aspects of your loan – like pricing and approval!
What is loan to value? Well, it’s exactly what it says. The loan amount compared to the value of the home you are buying or refinancing. For example, if you are buying a $100,000 home, and your loan amount is only $50,000, your loan to value or “LTV” is 50%. It’s also very common to refinance a home to obtain a lower LTV and drop mortgage insurance that was before required.
Different types of loans have different minimum requirements for LTV’s. With primary residence purchases, for instance, an FHA loan can have as high as a 97.75% LTV (soon to change to 96.5% in 2009). A conventional loan can have as high as a 97% LTV (but more common is 95% LTV). VA and Rural Housing loans can have 100% LTV’s. People who have cash to put down on the property they are buying and financing with a conventional loan oftentimes try to amass 20% of the purchase price in order to avoid mortgage insurance. Mortgage insurance is required when your LTV for a primary residence is above 80% and is issued by independent mortgage insuring companies like Genworth Financial or PMI. Fannie and Freddie, the big purchasers of conventional loans, will require one of these or other approved companies issue mortgage insurance unless the loan has an 80% LTV. And if you’re refinancing the home you live in? The whole grid of acceptable LTV’s changes for the most part, with a few exceptions. And furthermore, if you’re talking about investment properties, it’s another can of worms.
But when else does LTV mean something? Consider when a loan specialist prices your loan. Oftentimes there are pricing differentials based upon the loan to value. For instance, if you carry mortgage insurance and your LTV is 85.01% or higher, you might actually get a better interest rate than if you had an 85% LTV (but don’t get too excited because your monthly mortgage insurance will be higher). Or if your LTV is 60% or lower, you might also get a better interest rate. If you are close to tipping the scales on one of these ratios, it may be to your benefit to ask your loan specialist how close you are to a pricing break one way or another. You’d be surprised to find out it might change your mind as to how much money you decide to put down on your loan.
And guess what else? A low loan to value may be the difference between loan approval and loan denial. Why is that? Because if you are investing enough of your own money into the equity of a property, chances are you won’t default on the loan. And if you do, it’s probably a last recourse. Not to mention, the lender who holds the note won’t lose money because there is enough equity in the property to cover foreclosure costs, re-sale costs and any value loss from an upside down market. The lender is covered. So, the lender will consider the loan less risky and a higher debt to income ratio is tolerated when reviewed with a high credit score.
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 www.kristinmortgage.com Home Loans Plain Talk.
Sunday, November 30, 2008
What Is Right of Rescission, and When Should You Use It?
Did you know you can sometimes change your mind on a real estate transaction even if the note and deed of trust have been signed? It’s called your Right of Rescission, and it exists to give you time to consider your actions.
I had a gentleman call me today that had begun a transaction with another lender, and was getting cold feet. He said he had heard he could rescind or back of the transaction, but couldn’t find anyone who knew what he was talking about. Hmmm. That’s not a great thing to hear.
The Truth In Lending Act affords this “out clause” known as a Right of Rescission (ROR) to borrowers, giving them the right to cancel their loan within three business days of signing the final closing docs and allowing them to a full refund of any monies paid at that closing.
It turns out my guy was confused. He had only signed initial disclosure documents (that’s a whole other article), and had locked his loan. He could walk away from the deal. But as it turns out, this lender had extracted a $500 commitment fee which he probably wouldn’t see again. Note to self, avoid commitment fees.
However, if he had gotten as far as closing, he could have changed his mind. This fact is because his transaction would have met the guidelines for allowing for the rescission of the real estate transaction. He was refinancing the loan on his primary residence. If it was his beach house, then no, that wouldn’t work. It has to be the house you live in. It doesn’t matter what type of house it is, but where you call home. It doesn’t matter if he was refinancing to pull out a little cash to pay off bills or simply lowering his interest rate. He would have had a cooling off period (three business days mentioned above) before the funds to complete the transaction actually disbursed. For instance, if he signed on Monday, he would have Tuesday, Wednesday, midnight of Thursday to say, “HOLD UP!” Business days include Saturdays, but not Sundays or legal public holidays. Thanksgiving counts, but not the Friday afterward.
You can’t rescind every time you are refinancing your primary residence. For instance, if you are refinancing to pay off a construction loan because you just finished building your house, that wouldn’t count. If a state agency is your creditor, there is no ROR.
How do you go about exercising this right? Well, typically, your title company and lender give you very clear guidelines in writing telling you what you should do. During the rescission period, nothing really happens on your loan. If you want out, you have to send the request in writing to the lender, or else the title agency sometimes accepts it in on their behalf. But make sure you keep a paper trail and can show it was sent before midnight of the third day. A phone call or a visit to the lender isn’t legally sound, although most lenders wouldn’t hold you to the transaction if you called them; they’d just get you the paperwork to do it correctly.
Don’t misunderstand me. I’m not advocating people go hog wild and start exercising ROR for the fun of it. It’s very serious decision. A lot of people and companies worked hard to get you to the point of closing. It’s not a frivolous matter. And it happens extremely rarely because most folks are honest and do their jobs right. However, if you feel you were mislead in anyway, now you know you’re not backed into a corner. You have time to right any wrongs, reconsider or simply walk away.
I had a gentleman call me today that had begun a transaction with another lender, and was getting cold feet. He said he had heard he could rescind or back of the transaction, but couldn’t find anyone who knew what he was talking about. Hmmm. That’s not a great thing to hear.
The Truth In Lending Act affords this “out clause” known as a Right of Rescission (ROR) to borrowers, giving them the right to cancel their loan within three business days of signing the final closing docs and allowing them to a full refund of any monies paid at that closing.
It turns out my guy was confused. He had only signed initial disclosure documents (that’s a whole other article), and had locked his loan. He could walk away from the deal. But as it turns out, this lender had extracted a $500 commitment fee which he probably wouldn’t see again. Note to self, avoid commitment fees.
However, if he had gotten as far as closing, he could have changed his mind. This fact is because his transaction would have met the guidelines for allowing for the rescission of the real estate transaction. He was refinancing the loan on his primary residence. If it was his beach house, then no, that wouldn’t work. It has to be the house you live in. It doesn’t matter what type of house it is, but where you call home. It doesn’t matter if he was refinancing to pull out a little cash to pay off bills or simply lowering his interest rate. He would have had a cooling off period (three business days mentioned above) before the funds to complete the transaction actually disbursed. For instance, if he signed on Monday, he would have Tuesday, Wednesday, midnight of Thursday to say, “HOLD UP!” Business days include Saturdays, but not Sundays or legal public holidays. Thanksgiving counts, but not the Friday afterward.
You can’t rescind every time you are refinancing your primary residence. For instance, if you are refinancing to pay off a construction loan because you just finished building your house, that wouldn’t count. If a state agency is your creditor, there is no ROR.
How do you go about exercising this right? Well, typically, your title company and lender give you very clear guidelines in writing telling you what you should do. During the rescission period, nothing really happens on your loan. If you want out, you have to send the request in writing to the lender, or else the title agency sometimes accepts it in on their behalf. But make sure you keep a paper trail and can show it was sent before midnight of the third day. A phone call or a visit to the lender isn’t legally sound, although most lenders wouldn’t hold you to the transaction if you called them; they’d just get you the paperwork to do it correctly.
Don’t misunderstand me. I’m not advocating people go hog wild and start exercising ROR for the fun of it. It’s very serious decision. A lot of people and companies worked hard to get you to the point of closing. It’s not a frivolous matter. And it happens extremely rarely because most folks are honest and do their jobs right. However, if you feel you were mislead in anyway, now you know you’re not backed into a corner. You have time to right any wrongs, reconsider or simply walk away.
Cash Crunch? Maybe It’s Time to Cash Out?
It’s that time of year when people start scrambling for cash or assess their financial standings. Thinking about pulling equity out of your property? Know what your options are before making a move…
It’s probably safe to say that today’s current economic situation is not ideal for the majority of Americans. As rates continue to creep down, many people start to consider refinancing. And if you’re going to refinance, it’s always a good time to discuss cashing out some equity in the property.
Why is it a good topic for discussion? For one, if you are refinancing on the secondary market, you’re going to pay closing costs. It’s best to consider all options before you leap. Not that cashing out equity necessarily makes sense for you. If you just want to take the kids to Disney or throw a silver wedding anniversary party for your parents, you might take a second to think of a better way to finance these items. Do you really want to pay for them over the next 30 years? However, if you’re paying a mound of money in credit card debt and your existing interest rate is way higher than current market rate, than it’s something to consider. Or maybe it’s time to send a kid off to college.
A cash out refinance works this way. Say you bought your house three years ago, financed $100,000 of the $125,000 purchase price at a rate of 7%. In the meantime your house is worth $150,000 now, and you have amassed some icky credit card debt. You’d like to pull out $10,000 in equity from the house to pay off the credit card, and the current rate available to you is 5.75%. This scenario would make sense to consider a cash out.
The down side to a cash out refinance is that, as mentioned before, you have to pay closing costs. You do usually pay a lower rate in title insurance by commanding a re-issue rate. And this charge can be a big ticket item, but other than that the other costs are pretty much standard as they would be for a purchase. The money you would need to set up escrow probably will come back to you from your old escrow account when your old mortgage is paid off. So, that’s more palatable.
Also, keep in mind that if you pull too much equity out of your house, you might have to face monthly mortgage insurance. Right now, the minimum loan to value for a cash out on aprimary residence on a Conventional loan is 85%. For FHA, it’s 95%. But you can expect that to change soon. The reason for the changes? Many people in a tight financial bind sucked the equity out of their homes, then defaulted on the mortgages. As you can imagine, this move hasn’t helped our economy much. Not much at all. So, lenders have safeguards now and higher loan to values, to prohibit this from happening as often.
Make sure you really consider all options when refinancing. Don’t fall into a trap of cashing out for a quick return with a long term pay back. Make sure cashing out has a real purpose and benefit for doing so. Your mortgage lender should be able to crunch the numbers and present your options. Take your time and don’t move too, quickly. But if it makes sense, then lock that low rate!
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.
It’s probably safe to say that today’s current economic situation is not ideal for the majority of Americans. As rates continue to creep down, many people start to consider refinancing. And if you’re going to refinance, it’s always a good time to discuss cashing out some equity in the property.
Why is it a good topic for discussion? For one, if you are refinancing on the secondary market, you’re going to pay closing costs. It’s best to consider all options before you leap. Not that cashing out equity necessarily makes sense for you. If you just want to take the kids to Disney or throw a silver wedding anniversary party for your parents, you might take a second to think of a better way to finance these items. Do you really want to pay for them over the next 30 years? However, if you’re paying a mound of money in credit card debt and your existing interest rate is way higher than current market rate, than it’s something to consider. Or maybe it’s time to send a kid off to college.
A cash out refinance works this way. Say you bought your house three years ago, financed $100,000 of the $125,000 purchase price at a rate of 7%. In the meantime your house is worth $150,000 now, and you have amassed some icky credit card debt. You’d like to pull out $10,000 in equity from the house to pay off the credit card, and the current rate available to you is 5.75%. This scenario would make sense to consider a cash out.
The down side to a cash out refinance is that, as mentioned before, you have to pay closing costs. You do usually pay a lower rate in title insurance by commanding a re-issue rate. And this charge can be a big ticket item, but other than that the other costs are pretty much standard as they would be for a purchase. The money you would need to set up escrow probably will come back to you from your old escrow account when your old mortgage is paid off. So, that’s more palatable.
Also, keep in mind that if you pull too much equity out of your house, you might have to face monthly mortgage insurance. Right now, the minimum loan to value for a cash out on aprimary residence on a Conventional loan is 85%. For FHA, it’s 95%. But you can expect that to change soon. The reason for the changes? Many people in a tight financial bind sucked the equity out of their homes, then defaulted on the mortgages. As you can imagine, this move hasn’t helped our economy much. Not much at all. So, lenders have safeguards now and higher loan to values, to prohibit this from happening as often.
Make sure you really consider all options when refinancing. Don’t fall into a trap of cashing out for a quick return with a long term pay back. Make sure cashing out has a real purpose and benefit for doing so. Your mortgage lender should be able to crunch the numbers and present your options. Take your time and don’t move too, quickly. But if it makes sense, then lock that low rate!
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, November 11, 2008
VA Loans – Thank You for Your Service
The VA home loan guaranty program allows lenders to offer long term affordable housing with zero to low down payments for veterans. It’s one of the benefits you receive as an acknowledgement of gratitude for your service……..
In 1930, Congress and the President established the “GI Bill” which allowed the Veteran Administration (VA) to coordinate benefits for its service people. One of these programs, known as the Home Loan Guaranty Program, was created to help returning veterans and their families assimilate back into civilian life after sacrificing so much personally for their country.
Who qualifies for VA loans? If you served in the military, naval or air service and are active duty or released from duty for reasons other than a dishonorable discharge, you may qualify. You had to serve for 90 days active duty or 181 days consecutively in peacetime. If you served less than the minimum requirement because of discharge or service connected disability, you may also qualify. In addition, if you are the surviving un-remarried wife or husband of an eligible service member who died for his/her country, you may too be eligible. This program was designed to reward you and your loved ones for your service.
“The VA program, in general, is an exceptional program. Many veterans don’t know it can even benefit them if he/she is overseas. We’ve been helping active duty service people by putting their families in homes, and giving them peace of mind that their loved ones and their immediate needs are being taken care of while they’re away”, reflects Jamie Utton, Director of Product Development at Mortgage Investors Group.
These loans are available only for a primary home you intend to occupy. You can’t go and buy a beach house for weekend use with it. However, you can also use your eligibility to refinance your primary residence and pay off debt (except for Texans, for some reason, they don’t allow it in that state). Or, if you had a VA loan prior, and the interest rates have dropped dramatically, you can do a “streamline” refinance – no worries about paying for a new appraisal or the hassle of verifying your income. You’re all set to go.
So what makes the VA loan stand out above other types of financing? It allows for 100% financing for loans up to $417,000 with no reserves (checking and savings money to burn) required. The loan amounts allowed go up to $1.5 million, but you’d have to put some type of down payment into the transaction if you want to borrow that much money, plus show you have enough money to pay your mortgage for two months sitting in the bank if you need it. And if you’re buying a home, the program allows for the seller to pay up to 4% of the closing costs, based upon the purchase price. Basically, you can get into a home for very little or no money at a more than affordable market rate.
And the best part? No extra money is added to your payment for mortgage insurance if you put a less than 20% down payment on the home. That’s a pretty unique feature that makes this loan more affordable than others. Most of the time, the veteran will be required to pay a VA Funding Fee, but it is financed into the loan amount. So, the funding fee is not an out of pocket expense for closing. A veteran can be exempt from paying the funding fee for different reasons, including service connected disability, or if he/she is a surviving spouse of a veteran who died in service or from a service related disability. And regarding credit scores, the VA loan program has more flexibility than some other programs offer.
If you think you may qualify for this loan, let me first of all say, “Thank you.” I really appreciate the sacrifices you’ve made for this country. And if you’re looking to purchase or refinance your home, call a lender today who specializes in VA loans, and take advantage of this great benefit.
š
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 www.kristinmortgage.com Home Loans Plain Talk.
In 1930, Congress and the President established the “GI Bill” which allowed the Veteran Administration (VA) to coordinate benefits for its service people. One of these programs, known as the Home Loan Guaranty Program, was created to help returning veterans and their families assimilate back into civilian life after sacrificing so much personally for their country.
Who qualifies for VA loans? If you served in the military, naval or air service and are active duty or released from duty for reasons other than a dishonorable discharge, you may qualify. You had to serve for 90 days active duty or 181 days consecutively in peacetime. If you served less than the minimum requirement because of discharge or service connected disability, you may also qualify. In addition, if you are the surviving un-remarried wife or husband of an eligible service member who died for his/her country, you may too be eligible. This program was designed to reward you and your loved ones for your service.
“The VA program, in general, is an exceptional program. Many veterans don’t know it can even benefit them if he/she is overseas. We’ve been helping active duty service people by putting their families in homes, and giving them peace of mind that their loved ones and their immediate needs are being taken care of while they’re away”, reflects Jamie Utton, Director of Product Development at Mortgage Investors Group.
These loans are available only for a primary home you intend to occupy. You can’t go and buy a beach house for weekend use with it. However, you can also use your eligibility to refinance your primary residence and pay off debt (except for Texans, for some reason, they don’t allow it in that state). Or, if you had a VA loan prior, and the interest rates have dropped dramatically, you can do a “streamline” refinance – no worries about paying for a new appraisal or the hassle of verifying your income. You’re all set to go.
So what makes the VA loan stand out above other types of financing? It allows for 100% financing for loans up to $417,000 with no reserves (checking and savings money to burn) required. The loan amounts allowed go up to $1.5 million, but you’d have to put some type of down payment into the transaction if you want to borrow that much money, plus show you have enough money to pay your mortgage for two months sitting in the bank if you need it. And if you’re buying a home, the program allows for the seller to pay up to 4% of the closing costs, based upon the purchase price. Basically, you can get into a home for very little or no money at a more than affordable market rate.
And the best part? No extra money is added to your payment for mortgage insurance if you put a less than 20% down payment on the home. That’s a pretty unique feature that makes this loan more affordable than others. Most of the time, the veteran will be required to pay a VA Funding Fee, but it is financed into the loan amount. So, the funding fee is not an out of pocket expense for closing. A veteran can be exempt from paying the funding fee for different reasons, including service connected disability, or if he/she is a surviving spouse of a veteran who died in service or from a service related disability. And regarding credit scores, the VA loan program has more flexibility than some other programs offer.
If you think you may qualify for this loan, let me first of all say, “Thank you.” I really appreciate the sacrifices you’ve made for this country. And if you’re looking to purchase or refinance your home, call a lender today who specializes in VA loans, and take advantage of this great benefit.
š
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 www.kristinmortgage.com Home Loans Plain Talk.
Saturday, October 25, 2008
Mortgage Loan Approval: Are you on pins and needles wondering if you might qualify for a loan?
Get Your Answer Automatically. In today’s market, your answer is often times automatic.
Automated underwriting (AU) systems are used to determine most mortgage lending decisions. AU systems have been around since the 1970s for different institutions such as auto dealers and credit card companies. The first AU system for mortgage banking was introduced by Freddie Mac in 1995. It was designed along the same credit tenements that manual traditional underwriting focused upon – credit, capacity (to repay) and collateral.
Today, whether you are Freddie Mac, a big bank, a mortgage lender or a mortgage insurer, all the major players use some type of AU system to mitigate risk and to evaluate the credit worthiness of applicants. These systems have different names like Zippy, Desktop Underwriter, Assetwise and Clout (all registered trademark names), to list a few. They basically are the same systems, but are “tweaked” to each investor’s guidelines. They are also branded by each investor with its own name (that’s where the funny names come in). What does that mean? Well, Fannie Mae may buy a loan over $1M, but perhaps a particular investor doesn’t want to buy loans over $1M. Thus, the investor would “tweak” their system to deny loans larger than that loan amount. So if you are a lender, and have a$1.2M loan, then you would have to find a different investor who would buy that loan or sell it directly to Fannie Mae. The end goal is to put all the loans into pools or buckets in order to package securities. Some lenders can bulk enough loans to sell directly to Fannie, Ginnie or Freddie, and some just sell to an investor who sells to the big guys.
How does an AU system work? When you speak with a lender, they listen and help you determine what financing options best suit your needs. The lender collects your relevant information by asking you the questions from a loan application. Basically, a lender inputs the loan application information with regard to where the applicant lives, how much money they make, what other properties they may own, what reserves they have, as well as some government mandated questions. The lender pulls a tri-merged credit report (credit from three reporting agencies), and combines all the information, in addition to loan specifics, together in the system. Then, the lender pushes a button and waits for an answer. The system analyzes the data input as well as mortgage loan data, such as loan to value ratios, property type and debt ratios. And, ta-da! You have pre-qualified for a loan. That’s why you can get a quick answer these days. Of course, more often than not, it’s never quite that simple. There are perfect applicants out there who have worked at the same job and lived in the same place for the last 20 years, who have $100K in the bank. But more often than not, an applicant’s situation has its own special nuances.
Which brings me to my next point. AU systems don’t remove the need for a real underwriter in the mortgage approval process. A real, live underwriter reviews all documentation and data to ensure its accuracy. And a good loan office will anticipate what the underwriter will require. Let’s face it, if I were personally lending someone $200,000, I wouldn’t want to leave that decision completely up to a computer. Would you?
It’s safe to say that AU systems have made the lending process more concise, efficient and effective. But regardless, underwriting approval these days is never cut and dried!
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.
Today, whether you are Freddie Mac, a big bank, a mortgage lender or a mortgage insurer, all the major players use some type of AU system to mitigate risk and to evaluate the credit worthiness of applicants. These systems have different names like Zippy, Desktop Underwriter, Assetwise and Clout (all registered trademark names), to list a few. They basically are the same systems, but are “tweaked” to each investor’s guidelines. They are also branded by each investor with its own name (that’s where the funny names come in). What does that mean? Well, Fannie Mae may buy a loan over $1M, but perhaps a particular investor doesn’t want to buy loans over $1M. Thus, the investor would “tweak” their system to deny loans larger than that loan amount. So if you are a lender, and have a$1.2M loan, then you would have to find a different investor who would buy that loan or sell it directly to Fannie Mae. The end goal is to put all the loans into pools or buckets in order to package securities. Some lenders can bulk enough loans to sell directly to Fannie, Ginnie or Freddie, and some just sell to an investor who sells to the big guys.
How does an AU system work? When you speak with a lender, they listen and help you determine what financing options best suit your needs. The lender collects your relevant information by asking you the questions from a loan application. Basically, a lender inputs the loan application information with regard to where the applicant lives, how much money they make, what other properties they may own, what reserves they have, as well as some government mandated questions. The lender pulls a tri-merged credit report (credit from three reporting agencies), and combines all the information, in addition to loan specifics, together in the system. Then, the lender pushes a button and waits for an answer. The system analyzes the data input as well as mortgage loan data, such as loan to value ratios, property type and debt ratios. And, ta-da! You have pre-qualified for a loan. That’s why you can get a quick answer these days. Of course, more often than not, it’s never quite that simple. There are perfect applicants out there who have worked at the same job and lived in the same place for the last 20 years, who have $100K in the bank. But more often than not, an applicant’s situation has its own special nuances.
Which brings me to my next point. AU systems don’t remove the need for a real underwriter in the mortgage approval process. A real, live underwriter reviews all documentation and data to ensure its accuracy. And a good loan office will anticipate what the underwriter will require. Let’s face it, if I were personally lending someone $200,000, I wouldn’t want to leave that decision completely up to a computer. Would you?
It’s safe to say that AU systems have made the lending process more concise, efficient and effective. But regardless, underwriting approval these days is never cut and dried!
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.
Monday, October 13, 2008
Eeny, Meeny, Miny, Moe? Which Lender Do You Choose?
You’re ready to buy a house, and you’ve spoken with 3 different lenders. All of their offers seem comparable. How do you choose just one?
Ok, so you don’t have a particular relationship with any one lender, and you need to get a home loan. Being the prudent shopper that you are, you’ve called around to various lenders, and you’ve obtained 3 very competitive good faith estimates. In fact, these estimates are so competitive, you wonder if the three lenders are in cahoots with each other. (Trust me, they’re not). So, how do you decide?
First, you should consider the reputations of the companies involved. You can check out the company/lender online. How long have they been in business? In today’s volatile market, you want to make sure that whom ever you are obtaining your loan through is in business on the day of closing. When times are tough, mortgage shops have been known to close their doors overnight. Don’t laugh, it happens. Even a good lender may close its door if it is relatively new or poorly managed. Look at the sub prime market. When the bottom fell out of it last year, lenders disappeared right before our very eyes. Ok, I’m exaggerating a bit, but many consumers found themselves shopping for new mortgage at the last minute. And those that were unable to produce one probably lost a bit of cash, not to mention experienced a lot of turmoil and stress. After all, many plans are made by many different people when a home changes hands. Movers are booked, rent is cancelled, new school enrollment is arranged. It can become a logistical nightmare if a closing date is moved.
Secondly, one lender may be able to offer you something another cannot. I’m not talking about anything directly related to the lender’s fees or charges. But some lenders offer discounts or services from other vendors. It can be anything from a coupon for a free appraisal to a gift certificate to Home Depot. Ask your lender if there are any other benefits or advantages to using them. You never know.
A third thing to consider is service. Has one lender been more responsive than the others? Do you get the feeling that one will get the job done over another? A person can have a completely different experience with the exact same loan from one lender to a next. Why is this possible? Because once your loan is out of your lenders hands, it flows through different departments. Many, many people will work on your loan before it is all over. It takes a village to close a loan (not really, but it was fun to say). Seriously, though. A good support staff is what keeps a loan officer on top of the pack. So, take into account a lender’s reputation. A good one is earned for good reason.
And finally, is there a lender you just click with over the rest? Sometimes, it’s a question of personality fit. I’ve heard from countless customers that this aspect is what tipped the scales for them. And it makes sense, when you think about it. After all, if you’re making the biggest purchase of your existence, you really want to work with a person with whom you feel comfortable. Trust me, even seasoned homeowners have questions and misgivings. Thus, the answer of whom you choose may just come down to who you like.
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 www.kristinmortgage.com Home Loans Plain Talk.
First, you should consider the reputations of the companies involved. You can check out the company/lender online. How long have they been in business? In today’s volatile market, you want to make sure that whom ever you are obtaining your loan through is in business on the day of closing. When times are tough, mortgage shops have been known to close their doors overnight. Don’t laugh, it happens. Even a good lender may close its door if it is relatively new or poorly managed. Look at the sub prime market. When the bottom fell out of it last year, lenders disappeared right before our very eyes. Ok, I’m exaggerating a bit, but many consumers found themselves shopping for new mortgage at the last minute. And those that were unable to produce one probably lost a bit of cash, not to mention experienced a lot of turmoil and stress. After all, many plans are made by many different people when a home changes hands. Movers are booked, rent is cancelled, new school enrollment is arranged. It can become a logistical nightmare if a closing date is moved.
Secondly, one lender may be able to offer you something another cannot. I’m not talking about anything directly related to the lender’s fees or charges. But some lenders offer discounts or services from other vendors. It can be anything from a coupon for a free appraisal to a gift certificate to Home Depot. Ask your lender if there are any other benefits or advantages to using them. You never know.
A third thing to consider is service. Has one lender been more responsive than the others? Do you get the feeling that one will get the job done over another? A person can have a completely different experience with the exact same loan from one lender to a next. Why is this possible? Because once your loan is out of your lenders hands, it flows through different departments. Many, many people will work on your loan before it is all over. It takes a village to close a loan (not really, but it was fun to say). Seriously, though. A good support staff is what keeps a loan officer on top of the pack. So, take into account a lender’s reputation. A good one is earned for good reason.
And finally, is there a lender you just click with over the rest? Sometimes, it’s a question of personality fit. I’ve heard from countless customers that this aspect is what tipped the scales for them. And it makes sense, when you think about it. After all, if you’re making the biggest purchase of your existence, you really want to work with a person with whom you feel comfortable. Trust me, even seasoned homeowners have questions and misgivings. Thus, the answer of whom you choose may just come down to who you like.
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 www.kristinmortgage.com Home Loans Plain Talk.
Wednesday, October 8, 2008
Mortgage Lending: It’s a History Lesson
When applying for a loan, a mortgage lender cares more about your past than your future. And sometimes, a lender cares more about your past than the present……When a mortgage underwriter reviews customers’ credit profiles and income histories, what’s happened in the past two years holds a lot of weight as to what their future will be. And what the future may hold for them doesn’t always count for much at all. At least when assessing risk in mortgage lending.
If your future is difficult to substantiate, your past history is what a mortgage underwriter considers. That’s why it can be difficult these days for newly self-employed people to obtain loans. If you start a new business, you have no track record. Couple this fact with the other odds reflecting it’s highly likely you’ll lose money your first year in business, and you can see why you have to be out of the gate two years before you’re not considered a risk anymore.
The history theory is also a hard lesson for people who earn tips as a large part of their income to learn A lender will ask these individuals what Uncle Sam has on record for their earnings for the last two years. There’s no way to soundly document what they’ve earned year to date, except for base pay and their two year history. So, if they’re making a ton of more money in their third year of business, typically a lender can’t substantiate the marked difference in income. The same can be said for people who are self employed and have multiple business expense and depreciation deductions. Lenders count the bottom line when the dust settles. And again, a lender can’t look at year to date earnings to offset what’s on historical record. Year to date earnings might strengthen your profile, but basically, it is what it is.
Of course, your credit score is a reflection of your past. It’s a great indicator of what your future will be. I guess that’s pretty self explanatory when you think in terms of lending. Statistics prove that this number pretty much tells a lender how likely it is you’ll pay on time in the future. It’s a good crystal ball, in general. So if you have an iffy credit score, you need to work to improve it, and reapply for a mortgage in the future.
Sometimes a lender can look to the future, and it’s to your advantage. For instance, if you have a debt, like a car payment, that will be completely satisfied in 10 months or less, it won’t count against you when calculating your monthly debt. The same can be said for child support or alimony that’s about to expire (or at least the legal obligation is about to expire). Likewise, certain payments sometimes won’t count if they’re deferred for a couple of years, like student loans. In addition, generally, a person can just have started a salary job and provide a pay stub after loan closing. However, some programs may be more stringent than others where these areas are concerned.
You see, a lender is going to always count what can be verified, not what the future will hold – no matter how rosy it appears. And most programs these days would require that an applicant be prepared to verify the information, even if the underwriter doesn’t ask for it. So, be informed when you consider buying a house. Your credit history can mean the difference between an A+ and a C- in your interest rate secured and ability to obtain a loan.
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.
If your future is difficult to substantiate, your past history is what a mortgage underwriter considers. That’s why it can be difficult these days for newly self-employed people to obtain loans. If you start a new business, you have no track record. Couple this fact with the other odds reflecting it’s highly likely you’ll lose money your first year in business, and you can see why you have to be out of the gate two years before you’re not considered a risk anymore.
The history theory is also a hard lesson for people who earn tips as a large part of their income to learn A lender will ask these individuals what Uncle Sam has on record for their earnings for the last two years. There’s no way to soundly document what they’ve earned year to date, except for base pay and their two year history. So, if they’re making a ton of more money in their third year of business, typically a lender can’t substantiate the marked difference in income. The same can be said for people who are self employed and have multiple business expense and depreciation deductions. Lenders count the bottom line when the dust settles. And again, a lender can’t look at year to date earnings to offset what’s on historical record. Year to date earnings might strengthen your profile, but basically, it is what it is.
Of course, your credit score is a reflection of your past. It’s a great indicator of what your future will be. I guess that’s pretty self explanatory when you think in terms of lending. Statistics prove that this number pretty much tells a lender how likely it is you’ll pay on time in the future. It’s a good crystal ball, in general. So if you have an iffy credit score, you need to work to improve it, and reapply for a mortgage in the future.
Sometimes a lender can look to the future, and it’s to your advantage. For instance, if you have a debt, like a car payment, that will be completely satisfied in 10 months or less, it won’t count against you when calculating your monthly debt. The same can be said for child support or alimony that’s about to expire (or at least the legal obligation is about to expire). Likewise, certain payments sometimes won’t count if they’re deferred for a couple of years, like student loans. In addition, generally, a person can just have started a salary job and provide a pay stub after loan closing. However, some programs may be more stringent than others where these areas are concerned.
You see, a lender is going to always count what can be verified, not what the future will hold – no matter how rosy it appears. And most programs these days would require that an applicant be prepared to verify the information, even if the underwriter doesn’t ask for it. So, be informed when you consider buying a house. Your credit history can mean the difference between an A+ and a C- in your interest rate secured and ability to obtain a loan.
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.
Monday, September 1, 2008
Interest Rates: One Man’s Gain Is Another’s Loss
How can two borrowers can buy the same house, and get completely different interest rates? There are multiple considerations to take into account when a lender is pricing an interest rate for a customer……
In the old days, you used to be able to call a lender, give them a note amount and term, and get a quote. Lickety split. Not a lot of questions. Just “boom”, there’s your answer. It certainly made interest rate comparison much easier. But in today’s mortgage lending world, it’s just not that easy.
In fact, say you’ve got two customers buying identical homes in a development. Each customer can be quoted completely different interest rates for different reasons. Even if they have the same credit score. That’s because you’re granted different discounts or assessed with different cost additions for various aspects of your lending profile.
For instance, one guy may be getting a conventional loan, and the other an FHA (Federal Housing Administration) loan. With FHA and a credit score of 620, there are no discounts or additions for credit score that a lender will add to the total price. But, dip below a 620 and there will be quite a pricing differential. With a conventional loan, you’ll get discounts the higher your credit score. Thus, a 620 credit score in the conventional realm does not have as much interest rate muscle as a 720. And there are different cost hits in between for every 19 point differential. Plus, if you have less than a 620, you probably won’t get conventional approval. A typical lender nowadays has to be really good at reading a chart to quote a loan in the conventional world.
Another big factor is loan size. Again, you’ll probably pick up a discount if you’ve got a healthy sized loan. However, if you’re financing a smaller amount, it may cost you a bit. Thank goodness for excellent first time homebuyer programs that let qualified borrowers avoid some of these pricing hits.
Another big difference in interest rates available is the buyer’s intention for the property. If it’s a primary residence or a second home, one gets a better rate than if it’s an investment property. From an underwriting perspective, a borrower is less likely to quit paying a mortgage for a property that is intended for personal use. Statistics have proven this aspect of lending to be quite true. Of course, if it is an investment property, the borrower is going to have to come up with a heck of a lot more money out of pocket anyway. If it’s a manufactured home, you have to reconsider loan programs again. Some programs aren’t available for manufactured homes, and especially if it is a manufactured home that is an investment property. You’ll have to find a lender that specializes in this type of loan.
As touched on before, the type of loan matters, too. Conventional rates are different than FHA rates, which are different than VA rates, which are different than Rural Housing rates. Even for the same house. And again, as mentioned before, throw THDA or another first time housing program into the equation, and you start all over again. Of course, you can’t get a VA loan if you’re not a veteran or the spouse of one buying a loan. And you can’t get a rural housing loan if you’re in the wrong zip code and make too much money. So, at times, your choices are limited for you.
Even if you get the same interest rate, it doesn’t necessarily mean your payment will be the same. If your loan requires mortgage insurance, your monthly premium could differ because of your credit profile.
I guess the best advice is to be patient when considering loan programs and payments. Make sure you explore all your options. And don’t worry about the guy sitting next you. Just keep your eyes open and work with a lender that’s trustworthy.
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 www.kristinmortgage.com Home Loans Plain Talk.
In the old days, you used to be able to call a lender, give them a note amount and term, and get a quote. Lickety split. Not a lot of questions. Just “boom”, there’s your answer. It certainly made interest rate comparison much easier. But in today’s mortgage lending world, it’s just not that easy.
In fact, say you’ve got two customers buying identical homes in a development. Each customer can be quoted completely different interest rates for different reasons. Even if they have the same credit score. That’s because you’re granted different discounts or assessed with different cost additions for various aspects of your lending profile.
For instance, one guy may be getting a conventional loan, and the other an FHA (Federal Housing Administration) loan. With FHA and a credit score of 620, there are no discounts or additions for credit score that a lender will add to the total price. But, dip below a 620 and there will be quite a pricing differential. With a conventional loan, you’ll get discounts the higher your credit score. Thus, a 620 credit score in the conventional realm does not have as much interest rate muscle as a 720. And there are different cost hits in between for every 19 point differential. Plus, if you have less than a 620, you probably won’t get conventional approval. A typical lender nowadays has to be really good at reading a chart to quote a loan in the conventional world.
Another big factor is loan size. Again, you’ll probably pick up a discount if you’ve got a healthy sized loan. However, if you’re financing a smaller amount, it may cost you a bit. Thank goodness for excellent first time homebuyer programs that let qualified borrowers avoid some of these pricing hits.
Another big difference in interest rates available is the buyer’s intention for the property. If it’s a primary residence or a second home, one gets a better rate than if it’s an investment property. From an underwriting perspective, a borrower is less likely to quit paying a mortgage for a property that is intended for personal use. Statistics have proven this aspect of lending to be quite true. Of course, if it is an investment property, the borrower is going to have to come up with a heck of a lot more money out of pocket anyway. If it’s a manufactured home, you have to reconsider loan programs again. Some programs aren’t available for manufactured homes, and especially if it is a manufactured home that is an investment property. You’ll have to find a lender that specializes in this type of loan.
As touched on before, the type of loan matters, too. Conventional rates are different than FHA rates, which are different than VA rates, which are different than Rural Housing rates. Even for the same house. And again, as mentioned before, throw THDA or another first time housing program into the equation, and you start all over again. Of course, you can’t get a VA loan if you’re not a veteran or the spouse of one buying a loan. And you can’t get a rural housing loan if you’re in the wrong zip code and make too much money. So, at times, your choices are limited for you.
Even if you get the same interest rate, it doesn’t necessarily mean your payment will be the same. If your loan requires mortgage insurance, your monthly premium could differ because of your credit profile.
I guess the best advice is to be patient when considering loan programs and payments. Make sure you explore all your options. And don’t worry about the guy sitting next you. Just keep your eyes open and work with a lender that’s trustworthy.
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 www.kristinmortgage.com Home Loans Plain Talk.
Saturday, August 30, 2008
Cool Country: Rural Housing Loans
The USDA offers a fantastic program that allows for 100% financing. What’s the catch? Your house you want to buy
has to be in the right part of the county…
has to be in the right part of the county…Remember that old Donnie and Marie Osmond song, “I Was Country, When Country Wasn’t Cool”? I know, I’m dating and embarrassing myself all in one fell swoop. I loved their variety show when I was a kid. Weird as it may seem, that song comes to mind when I think of Rural Housing loans. The United States Department of Agriculture (USDA) offers a home loan guaranty program in Tennessee that is truly affordable and beneficial for moderate to low income families/borrowers. The only catch is you have to be on the right part of the map. Rural areas only, please. But you’d be surprised as to what constitutes “rural”. Did you think Powell was rural?
I think this program is often overlooked because lenders forget that some properties qualify for it. And it’s super easy to figure out. If you go to http://www.rurdev.usda.gov/, you can click on a link that allows you to determine if a specific property address is eligible. Lately, I’ve been happy to discover this program is available for more of my customers than I would have initially guessed.
Why are Rural Housing loans so cool? First and foremost, they allow for 100% financing. Yep, the elusive 100% financing still exists (at least in some counties). Another very attractive feature is the program allows you to finance Rural Housing’s 2% guarantee fee (required) into the loan amount as well. So if you buy a $100K home, you can borrow $102K. And perhaps the most exciting feature? You have no monthly mortgage insurance with this product. That’s right, no monthly mortgage insurance. Now you see what makes this product so affordable.
Of course, you have to be able to qualify. You obviously can’t be making a ton of money and qualify for this type loan. It varies from county to county, but for example, in Knoxville, a 2 person family can’t earn more than $56,600 a year. You have to have been on the job or have recently produced a professional/educational degree or certification during the past two years. And it goes without saying these days, you need a clean credit history. You can’t buy a McMansion or anything. Your loan size is limited by what you can afford. As a general rule of thumb don’t expect to go over $150K.
The seller can pay all of your closing costs or you can get a gift from a family member to pay your closing costs. You can’t buy an investment property-you need to plan to live in the house. And although it’s a terrific product for first time homebuyers, you don’t have to be one to qualify. However, if you are a first time homebuyer, chances are you can fund this loan through Tennessee Housing Development Agency (THDA). That’s a double whammy. You see, THDA offers a fabulous interest rate for first time homebuyers.
So dust off your blue jeans and drive around the county roads with your realtor. You may just find your dream home nestled down at the end of a country lane. Now, wouldn’t that be cool?
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I think this program is often overlooked because lenders forget that some properties qualify for it. And it’s super easy to figure out. If you go to http://www.rurdev.usda.gov/, you can click on a link that allows you to determine if a specific property address is eligible. Lately, I’ve been happy to discover this program is available for more of my customers than I would have initially guessed.
Why are Rural Housing loans so cool? First and foremost, they allow for 100% financing. Yep, the elusive 100% financing still exists (at least in some counties). Another very attractive feature is the program allows you to finance Rural Housing’s 2% guarantee fee (required) into the loan amount as well. So if you buy a $100K home, you can borrow $102K. And perhaps the most exciting feature? You have no monthly mortgage insurance with this product. That’s right, no monthly mortgage insurance. Now you see what makes this product so affordable.
Of course, you have to be able to qualify. You obviously can’t be making a ton of money and qualify for this type loan. It varies from county to county, but for example, in Knoxville, a 2 person family can’t earn more than $56,600 a year. You have to have been on the job or have recently produced a professional/educational degree or certification during the past two years. And it goes without saying these days, you need a clean credit history. You can’t buy a McMansion or anything. Your loan size is limited by what you can afford. As a general rule of thumb don’t expect to go over $150K.
The seller can pay all of your closing costs or you can get a gift from a family member to pay your closing costs. You can’t buy an investment property-you need to plan to live in the house. And although it’s a terrific product for first time homebuyers, you don’t have to be one to qualify. However, if you are a first time homebuyer, chances are you can fund this loan through Tennessee Housing Development Agency (THDA). That’s a double whammy. You see, THDA offers a fabulous interest rate for first time homebuyers.
So dust off your blue jeans and drive around the county roads with your realtor. You may just find your dream home nestled down at the end of a country lane. Now, wouldn’t that be cool?
#
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.
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.
Monday, August 11, 2008
Home Loans: Two Incomes Cut from the Same Cloth
Determining income is tricky when it comes to underwriting a home loan. Sometimes, it turns out you can make too much money. It just depends who’s looking at it.
Did you ever think you could make too much money? Or what if you potentially could make too much money? Now that sounds just plain old silly, doesn’t it? But believe it or not, different entities view your income in different ways. And depending on the situation, you might make too much moola.
Typically, an underwriter is going to be fair yet conservative when determining your income. If you make overtime and you want to count it, you’re going to have to show that you’ve received it for a decent amount of time and that it will continue. If you’ve only been on your job for a few months, you’re not going to be able to use anything but base income to qualify. Even if you’re in the same line of work. Even if it’s typical for the position and and you have a letter from your employer stating overtime will be available to you for the ten years. To an underwriter, in most cases, it’s all conjecture and forecasting. Not the kind of stuff you want to base lending $100,000 dollars against. The underwriter is going to stick with base salary. This rule of thumb applies to conventional, VA and FHA loans. There’s a little variance between agency guidelines, but not a ton.
Consider alimony. Maybe the court says you should get $300 a month, but your ex only pays you sporadically. You’re probably not going to be able to count it. It’s not fair that you can’t, but don’t bet on it. Most of the time you have to show where you have received the income for at least 3 months and more typically 6 months consecutively before you use that extra boost to your bottom line. You also have to show it’s going to continue for at least three years
Now here’s the funny part. If you are applying for a loan that has an income guideline or limitation, all bets are off. Some lenders will count potential income that you could start collecting. Others will average recent overtime into their equation. Typically, these type of loans go through two sets of underwriters (sometimes three!). The first underwriter will verify that the loan conforms to agency guidelines (Fannie, Freddie and Ginnie). When run through this gamut, you will see more traditionally conservative income guidelines applied. But say the lender is selling the loan to THDA (Tennessee Housing Development Agency). This agency has very strictly monitored income guidelines you must meet in order to qualify for the program. This entity will ensure you don’t make too much money as a first time homebuyer because its program is strictly for low to moderate income individuals or families. All of a sudden, your income looks different.
Here is an example of a loan I had recently. This loan was an FHA loan being sold to THDA. The wife on the loan had an ex-husband who should have been paying her court awarded child support in the amount of $320 per month. The ex had only sporadically paid her over the last 6 months, and when he did, it was only half of what he owed her. FHA would not include the income at all, yet THDA counted the full amount.
So which of the above underwriters was correct? Well actually, they both were. It just depends on what your objective is when determining the final figure. And that’s why you can get two incomes cut from the same cloth.
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 www.kristinmortgage.com Home Loans Plain Talk.
Did you ever think you could make too much money? Or what if you potentially could make too much money? Now that sounds just plain old silly, doesn’t it? But believe it or not, different entities view your income in different ways. And depending on the situation, you might make too much moola.
Typically, an underwriter is going to be fair yet conservative when determining your income. If you make overtime and you want to count it, you’re going to have to show that you’ve received it for a decent amount of time and that it will continue. If you’ve only been on your job for a few months, you’re not going to be able to use anything but base income to qualify. Even if you’re in the same line of work. Even if it’s typical for the position and and you have a letter from your employer stating overtime will be available to you for the ten years. To an underwriter, in most cases, it’s all conjecture and forecasting. Not the kind of stuff you want to base lending $100,000 dollars against. The underwriter is going to stick with base salary. This rule of thumb applies to conventional, VA and FHA loans. There’s a little variance between agency guidelines, but not a ton.
Consider alimony. Maybe the court says you should get $300 a month, but your ex only pays you sporadically. You’re probably not going to be able to count it. It’s not fair that you can’t, but don’t bet on it. Most of the time you have to show where you have received the income for at least 3 months and more typically 6 months consecutively before you use that extra boost to your bottom line. You also have to show it’s going to continue for at least three years
Now here’s the funny part. If you are applying for a loan that has an income guideline or limitation, all bets are off. Some lenders will count potential income that you could start collecting. Others will average recent overtime into their equation. Typically, these type of loans go through two sets of underwriters (sometimes three!). The first underwriter will verify that the loan conforms to agency guidelines (Fannie, Freddie and Ginnie). When run through this gamut, you will see more traditionally conservative income guidelines applied. But say the lender is selling the loan to THDA (Tennessee Housing Development Agency). This agency has very strictly monitored income guidelines you must meet in order to qualify for the program. This entity will ensure you don’t make too much money as a first time homebuyer because its program is strictly for low to moderate income individuals or families. All of a sudden, your income looks different.
Here is an example of a loan I had recently. This loan was an FHA loan being sold to THDA. The wife on the loan had an ex-husband who should have been paying her court awarded child support in the amount of $320 per month. The ex had only sporadically paid her over the last 6 months, and when he did, it was only half of what he owed her. FHA would not include the income at all, yet THDA counted the full amount.
So which of the above underwriters was correct? Well actually, they both were. It just depends on what your objective is when determining the final figure. And that’s why you can get two incomes cut from the same cloth.
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 www.kristinmortgage.com Home Loans Plain Talk.
Saturday, August 9, 2008
How Does a Fed Cut Affect Home Mortgage Rates?
How Does a Fed Cut Affect Home Mortgage Rates?
By Kristin Abouelata
You hear quite a bit lately that "the Fed is cutting the interest rate." Maybe you've been considering a refinance, and you're waiting to move forward till the Fed takes action again. But be smart about waiting and watching. A Fed cut doesn't directly affect long term rates (for instance a 30 year fixed mortgage), but it does impact long term mortgage rates. The problem is the impact might not have the result you've been waiting for.
Who is the Fed? Well, it's really the Federal Reserve. And when the Fed cuts rates, it usually cuts the Fed Funds Rate, which is the rate banks lend each other money. However, when the Fed lowers the Fed Funds Rate, Prime Rate, the rate banks give their best customers, usually drops as well. Ok, that's great. But what does that really mean to the average person on the street? It means that anything that has an interest rate tied to Prime is directly affected by the Feds' rate cut. Typically, these are short term loans. For instance: a credit card or a Home Equity Line of Credit (HELOC). In general, these rates decline when the Fed lowers rates. On the flip side, a Fed rate cut means your savings will perhaps not yield as much interest and your CD (certificate of deposit) won't be at such a great rate. So, it's not all good.
Why aren't mortgages directly affected? Because mortgage rates are typically longer term rates and are influenced by buyers and sellers in the bond market. Daily movements in the bond market cause mortgage rates to change. That's why you might get a quote from a loan officer on Tuesday, and on Wednesday, your quoted interest rate has increased .125%. The Fed lowers rates to help stimulate the economy. Ultimately a healthy economy is good for the real estate market. Jesse Lehn, Senior Vice President for Mortgage Investors Group, believes, "...a liquid real estate market is beneficial for the mortgage market and that keeps rates competitive." So, when the Fed lowers rates, indirectly it can help mortgage rates, but there is no direct correlation.
Another misconception is that mortgage rate changes occur in direct relation to when a Fed rate cut happens. In actuality, most mortgage rate changes, positive or negative, occur regardless of whether the Fed is actually meeting. That's because the mortgage market anticipates what the Fed is going to do.
A good loan officer should have their finger on the pulse of the market, but again it's a gamble. Remember to have a target interest rate in mind if you want to lock a loan but are watching the market. Trying to lock an interest rate on the day the mortgage rates have reached their lowest point in a year is like trying to get a royal flush in poker. It happens, but it's not a realistic goal. It just means you were lucky. Just stick to your home financing goals and consider the big picture, and you'll be fine.
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.
Article Source: http://EzineArticles.com/?expert=Kristin_Abouelata
http://EzineArticles.com/?How-Does-a-Fed-Cut-Affect-Home-Mortgage-Rates?&id=940500
Monday, August 4, 2008
Jumbo Loans and White Elephants: Will the Pace Pick Up?
The rates for jumbo loans (loans above $417,000) have caused somewhat of a glut in the real estate market of higher end homes. What’s caused these rates to stay steadily higher while rates for traditional loan sizes have seen record lows in the past months?According to Wikipedia, the definition for a white elephant is “a valuable possession which the owner cannot dispose of, but whose cost (particularly of upkeep) exceeds its usefulness.” Hmmm. Sounds like some of the higher priced homes we hear may be sitting on the market a little bit longer than usual. According to the Knoxville Area Association of Realtors (KAAR), the number of homes valued at $500K+ which sold in May 2008 was 34. But there were 205 new listings.
Ok, so I have to give you a little bit of history about the origin of the phrase white elephant. It really has nothing to do with mortgage lending, but it’s a cool information nugget to know. Per Wikipedia (yes, again), in the tales from the Buddhist scriptures, Buddha’s mother dreamt of a white elephant giving her a lotus flower on the eve of Buddha’s birth. Thus, in Southeast Asia, it became a status symbol to own a white elephant (basically a requirement if you were some type of royalty). However, due to being sacred and all, the owner couldn’t have the white elephant actually do any work or labor to offset its keep. Ever wonder how much food an elephant can consume a day? Think of the clean up after it eats! You not only get to feed the beast constantly, but you also have nothing to show for it when you’re done. You get the picture.
So, my analogy of there being a few white elephants in the real estate market right now is due in part to the jumbo rates not being so hot as of late. Loans below $417,000 are sold into mortgage backed securities. But jumbo loans are sold into private backed securities. And unfortunately due to the debacle in the mortgage industry that occurred in markets such as Florida, Nevada and California (where a lot of loan sizes are above $417K), there’s not a great appetite for the jumbo loan. It’s kind of like jumbo loans are liver and spinach on the menu. A few people will buy that stuff, but it’s not as popular as the cheeseburger.
So what to do if you need a jumbo loan? Make sure you work with a lender who knows their stuff and can present you with options. Adjustable rate mortgages (ARM) may suit your needs as long as they are fixed for a decent amount of time and won’t paint you into a corner. An ARM may buy you enough time to refinance at a later date when the market calms down. You might also be able to wrangle a first and a second so the first loan fints under the conforming loan size umbrella and the second part of your financing is at a smaller loan amount with a higher interest rate. Just be smart and make sure your lender is smart. And if you’re selling your home, sit tight. These homes are moving, however it might be at an elephant’s pace. Don’t fret, though. An elephant’s top speed can reach 25 mph.
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.
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.
Thursday, July 31, 2008
VA Loans – BTW Oak Ridge will be host to the 2nd Annual East Tennessee Business Conference for Veterans
August 5th, Oak Ridge will be host to the 2nd Annual East Tennessee Business Conference for Veterans. The purpose of the conference is to increase business opportunities for disabled veterans and veteran owned small businesses. It also seems like a good time to remind veterans of homeownership opportunities available to them…..
In 1930, Congress and the President established the “GI Bill” which allowed the Veteran Administration (VA) to coordinate benefits for its service people. One of these programs, known as the Home Loan Guaranty Program, was created to help returning veterans and their families assimilate back into civilian life after sacrificing so much personally for their country.
Who qualifies for VA loans? If you served in the military, naval or air service and are active duty or released from duty for reasons other than a dishonorable discharge, you may qualify. You had to serve for 90 days active duty or 181 days consecutively in peacetime. If you served less than the minimum requirement because of discharge or service connected disability, you may also qualify. In addition, if you are the surviving un-remarried wife or husband of an eligible service member who died for his/her country, you may too be eligible. This program was designed to reward you and your loved ones for your service.
“The VA program, in general, is an exceptional program. Many veterans don’t know it can even benefit them if he/she is overseas. We’ve been helping active duty service people by putting their families in homes, and giving them peace of mind that their loved ones and their immediate needs are being taken care of while they’re away”, reflects Jamie Utton, Director of Product Development at Mortgage Investors Group.
These loans are available only for a primary home you intend to occupy. You can’t go and buy a beach house for weekend use with it. However, you can also use your eligibility to refinance your primary residence and pay off debt (except for Texans, for some reason, they don’t allow it in that state). Or, if you had a VA loan prior, and the interest rates have dropped dramatically, you can do a “streamline” refinance – no worries about paying for a new appraisal or the hassle of verifying your income. You’re all set to go.
So what makes the VA loan stand out above other types of financing? It allows for 100% financing for loans up to $417,000 with no reserves (checking and savings money to burn) required. The loan amounts allowed go up to $1.5 million, but you’d have to put some type of down payment into the transaction if you want to borrow that much money, plus show you have enough money to pay your mortgage for two months sitting in the bank if you need it. And if you’re buying a home, the program allows for the seller to pay up to 4% of the closing costs, based upon the purchase price. Basically, you can get into a home for very little or no money at a more than affordable market rate.
And the best part? No extra money is added to your payment for mortgage insurance if you put a less than 20% down payment on the home. That’s a pretty unique feature that makes this loan more affordable than others. Most of the time, the veteran will be required to pay a VA Funding Fee, but it is financed into the loan amount. So, the funding fee is not an out of pocket expense for closing. A veteran can be exempt from paying the funding fee for different reasons, including service connected disability, or if he/she is a surviving spouse of a veteran who died in service or from a service related disability. And regarding credit scores, the VA loan program has more flexibility than some other programs offer.
If you think you may qualify for this loan, let me first of all say, “Thank you.” I really appreciate the sacrifices you’ve made for this country. And if you’re looking to purchase or refinance your home, call a lender today who specializes in VA loans, and take advantage of this great benefit.
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NaVOBA is the Voice of the Veteran Business Movement
2nd annual east tennessee veterans' business conference
The Y-12 National Security Complex and The University of Tennessee Center for Industrial Services Procurement Technical Assistance Center (UT CIS-PTAC) join with a host of East Tennessee agencies for the second annual East Tennessee Veterans Business Conference. The theme of this conference is Increasing Opportunities for Veteran-Owned Businesses.š
[Website Here]
----------
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 www.kristinmortgage.com Home Loans Plain Talk.
In 1930, Congress and the President established the “GI Bill” which allowed the Veteran Administration (VA) to coordinate benefits for its service people. One of these programs, known as the Home Loan Guaranty Program, was created to help returning veterans and their families assimilate back into civilian life after sacrificing so much personally for their country.
Who qualifies for VA loans? If you served in the military, naval or air service and are active duty or released from duty for reasons other than a dishonorable discharge, you may qualify. You had to serve for 90 days active duty or 181 days consecutively in peacetime. If you served less than the minimum requirement because of discharge or service connected disability, you may also qualify. In addition, if you are the surviving un-remarried wife or husband of an eligible service member who died for his/her country, you may too be eligible. This program was designed to reward you and your loved ones for your service.
“The VA program, in general, is an exceptional program. Many veterans don’t know it can even benefit them if he/she is overseas. We’ve been helping active duty service people by putting their families in homes, and giving them peace of mind that their loved ones and their immediate needs are being taken care of while they’re away”, reflects Jamie Utton, Director of Product Development at Mortgage Investors Group.
These loans are available only for a primary home you intend to occupy. You can’t go and buy a beach house for weekend use with it. However, you can also use your eligibility to refinance your primary residence and pay off debt (except for Texans, for some reason, they don’t allow it in that state). Or, if you had a VA loan prior, and the interest rates have dropped dramatically, you can do a “streamline” refinance – no worries about paying for a new appraisal or the hassle of verifying your income. You’re all set to go.
So what makes the VA loan stand out above other types of financing? It allows for 100% financing for loans up to $417,000 with no reserves (checking and savings money to burn) required. The loan amounts allowed go up to $1.5 million, but you’d have to put some type of down payment into the transaction if you want to borrow that much money, plus show you have enough money to pay your mortgage for two months sitting in the bank if you need it. And if you’re buying a home, the program allows for the seller to pay up to 4% of the closing costs, based upon the purchase price. Basically, you can get into a home for very little or no money at a more than affordable market rate.
And the best part? No extra money is added to your payment for mortgage insurance if you put a less than 20% down payment on the home. That’s a pretty unique feature that makes this loan more affordable than others. Most of the time, the veteran will be required to pay a VA Funding Fee, but it is financed into the loan amount. So, the funding fee is not an out of pocket expense for closing. A veteran can be exempt from paying the funding fee for different reasons, including service connected disability, or if he/she is a surviving spouse of a veteran who died in service or from a service related disability. And regarding credit scores, the VA loan program has more flexibility than some other programs offer.
If you think you may qualify for this loan, let me first of all say, “Thank you.” I really appreciate the sacrifices you’ve made for this country. And if you’re looking to purchase or refinance your home, call a lender today who specializes in VA loans, and take advantage of this great benefit.
---
NaVOBA is the Voice of the Veteran Business Movement
2nd annual east tennessee veterans' business conference
The Y-12 National Security Complex and The University of Tennessee Center for Industrial Services Procurement Technical Assistance Center (UT CIS-PTAC) join with a host of East Tennessee agencies for the second annual East Tennessee Veterans Business Conference. The theme of this conference is Increasing Opportunities for Veteran-Owned Businesses.š
[Website Here]
----------
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 www.kristinmortgage.com Home Loans Plain Talk.
Tuesday, July 22, 2008
Need Cash for a Home Closing? Consider a Gift
Coming up with a down payment or money for closing costs for a home loan can be a challenge these days. What extra money you were setting aside may all of sudden be going toward your gas tank or your grocery bill. To obtain your dream of homeownership, it may be time to accept that gift from Mom and Dad………
I saw a cartoon the other day that was pretty funny, but also pretty sad when you think about it. It showed a couple sitting across from a mortgage lender, and the caption read, “We’re here to apply for a tank of gas.” With increases in prices for just about everything, it gets more and more difficult to stash away a nest egg for a down payment. And pretty much every loan requires some part of down payment, even if you get a 100% financing loan. After all, you still are generally going to be required to put down some earnest money on your contract and in most cases, pay for an appraisal up front. You may have been trying to save it up on your own, but it may be time to accept some help from your family.
Most loan programs, be it Conventional, FHA, VA or Rural Housing, require the borrower to pay for something. In particular, FHA and Conventional home purchases want a minimum of 3% to come out of the borrower’s pocket. If you are doing a Conventional loan, you still can’t receive a gift for your 3% down payment, but you can use a gift to help with closing costs. However, FHA will allow your source of down payment to be a gift. So, if you find yourself a bit short on cash, you may need to ask someone to gift you the down payment or closing costs (or if your really lucky, and it’s allowed – both!).
All lenders are particular about just who can give you a gift for your down payment or closing costs. Pretty much across the board, the gift must be from a blood relative. You may have to prove that the gifter is a relative thru birth certificates, christening records, etc. Strange but true. Conventional loans will also allow an employer to give you a gift. But in any case, the most important factor is that whoever is giving the gift does not expect to be paid back. A certification to that effect will be required to be signed by the donor. Otherwise, it’s really a loan, now isn’t it? And as a responsible lender, we’re going to include that payment in your debt to income ratio, and we’ll probably want a bunch of documentation to prove the terms, etc. So, make sure it truly is a gift.
As of the date I’m writing this article, FHA will allow for down payment assistance programs, such as Nehemiah or Ameridream. Lenders view these products as “gifts” in a sense. They are basically seller concessions funneled through the down payment assistance channels. However, by the time this article is published, they may be null and void. It’s currently being reviewed and could go away. Or it may still be there, but just know it’s under review.
Lenders are very particular about how the gift funds reach the closing table. If you deposit the gift before closing, you have to show it coming out of the donor’s account and depositing into your account. It’s a lot of paper to collect. The easiest method is for Grandpa or your Great Aunt to just send a cashier’s check payable to you and your title company to the closing table. Smoother, quicker, simpler.
Gifts are a wonderful thing, and a gift of a down payment is a useful gift. After all, I think it’s safe to say that homeownership is one gift that keeps on giving, wouldn’t you?
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