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21 07, 2014

What’s Ahead For Mortgage Rates This Week – July 21, 2014

Mythbusters: 5 Reasons Why Diet Sodas Might Not Be as Healthy as You ThinkLast week’s economic news offered a variety of indications that the economic recovery continues, but some readings missed their expected levels. The Philadelphia and New York branches of the Federal Reserve Bank reported higher than anticipated manufacturing for their respective regions and new jobless claims were lower than expected.

Fed Chair’s Senate Testimony Hints at Coming Interest Rate Hike

Federal Reserve Chair Janet Yellen testified that the Fed might have to raise interest rates sooner than expected if the economy continues to outperform the Fed’s projections. Ms. Yellen said that the central bank presently estimates that the first rate increases will take place approximately one year from now.

The Federal Open Market Committee (FOMC) of the Fed has repeatedly stated that members will continue to review data and economic conditions changing monetary policy. Ms. Yellen said in last week’s remarks that this holds true whether economic conditions improve or decline.

In other Fed-related news, the Philadelphia Fed released its manufacturing index for July with higher than expected results. The Philly Fed’s reading for July was 23.90 as compared to expectations of 16.50 and June’s reading of 17.80.

The New York Fed reported a similar trend for July with a reading of 25.60 as compared to an estimated reading of 17.50 and June’s reading of 19.30. This is good news after the Northeast’s economy was slammed by severe weather last winter. Weather conditions stalled area housing and labor markets.

Weekly jobless claims were lower at 303,000 than expectations of 310,000 new jobless claims and the prior week’s reading of 305,000 new jobless claims.

Home Builders Post Positive Confidence Reading for July

The National Association of Home Builders posted its highest builder confidence reading in six months for July with a reading of 53 against the expected reading of 50 and June’s reading of 49. Numbers above 50 indicate that more builders surveyed have a positive outlook than not.

Housing Starts for June were reported lower than expected at an annual level of 893,000 against an expected reading of 1.02 million and May’s reading of 985,000 housing starts.

Mortgage Rates Lower

According to Freddie Mac’s weekly survey, average mortgage rates were slightly lower last week. The average rate for a 30-year fixed rate mortgage fell by two basis points to 4.13 percent. Discount points were 0.60 as compared to the prior week’s reading of 0.70 percent. The average rate for a 15-year fixed rate mortgage was 3.23 percent as compared to the previous reading of 3.24 percent.

Discount points for a 15-year mortgage averaged 0.50 percent against the prior week’s reading of 0.50 percent. The average rate for a 5/1 adjustable rate mortgage dropped by two basis points to 2.87 percent with discount points unchanged at 0.40 percent.

The University of Michigan’s Consumer Sentiment Index for July fell just short of expectations at 81.3. Analysts expected a reading of 83.0, based on June’s reading of 82.50. Analysts said that although labor markets are improving, consumers continue to face rising costs for gasoline and food, which likely explained the dip in confidence for July.

What’s Ahead

This week’s economic news releases include Existing Home sales from the National Association of REALTORS®, New Home Sales from the Department of Commerce and the FHFA House Price Index. The Chicago Fed is set to release its National Activity Index. Freddie Mac mortgage rates and New Jobless Claims will be released Thursday as usual.

14 07, 2014

What’s Ahead For Mortgage Rates This Week – July 14, 2014

What's Ahead For Mortgage Rates This Week July 14 2014Last week brought news from the Fed as two Federal Reserve Bank Presidents made speeches and the Federal Open Market Committee (FOMC) of the Fed released the minutes of its last meeting. The minutes reveal the Fed’s intention to wrap up its bond-buying program in October with a final purchase of $15 billion in mortgage-backed securities (MBS) and Treasury bonds. No economic news was issued Monday following of the 4th of July holiday.

Further indications of a strengthening labor market were seen. May job openings reached their highest level since June 2007, and quits and layoffs fell from April’s reading of 4.55 million to 4.50 million. Weekly jobless claims fell to 304,000 against expectations of 320,000 new jobless claims and the prior week’s reading of 315,000 new jobless claims.

Fed Speeches Address Inflation, Banks Too Big to Fail

Tuesday’s speech by Minneapolis Fed Bank president Narayana Kocherlakota calmed concerns over inflation; Mr. Kocherlakota said that the Fed expects inflation to remain below its target rate of two percent for several more years. He tied low inflation to the unemployment rate and said that the nation’s workforce is not fully utilized in times of low inflation, and cautioned that June’s national unemployment rate of 6.10 percent “could well overstate the degree of improvement of the U.S. labor market.”

Stanley Fischer, the Fed’s new vice-chairman, spoke before the National Bureau of Economic Research last Thursday. Mr. Fischer addressed the issue of breaking up the nation’s largest banks to eliminate the government’s exposure to banks too big to fail. He said that it wasn’t clear that breaking up the largest banks would end federal bailouts of banks considered too big to fail. Mr. Fisher also said that breaking up the biggest banks would be “a complex task with an uncertain payoff.”

Mr. Fischer also said that any efforts to prevent a housing bubble should focus on the supply side and cautioned that “measures aimed at reducing the demand for housing are likely to be politically sensitive.”

FOMC Minutes Reveal End Date for Bond Purchases

The minutes of the Fed’s last FOMC meeting indicate that the Fed plans to continue bond purchases at the rate of $10 billion per month with a final purchase of $15 billion in October. FOMC members re-asserted their oft-stated position that the Fed’s target interest rate of 0.00 to 0.25 percent will not change for a considerable time after the bond purchase program ends.

Mortgage Rates Rise

Average mortgage rates rose across the board last week. The average rate for a 30-year fixed rate mortgage increased by three basis points to 4.15 percent; discount points were also higher at 0.70 percent. The average rate for a 15-year fixed rate mortgage rose by two basis points to 3.24 percent with discount points higher at 0.60 percent. The average rate for a 5/1 adjustable rate mortgage rose by one basis point to 2.99 percent with discount points unchanged at 0.40 percent.

What’s Ahead

This week’s scheduled economic news includes retail sales and retail sales without the auto sector, Fed Chair Janet Yellen’s testimony, the Fed’s Beige Book report and the NAHB Homebuilder’s Market Index. Housing Starts, Consumer Sentiment and Leading Economic Indicators round out the week’s economic reports.

17 06, 2014

What To Do When Your Real Estate Loan Is Declined

What To Do When Your Real Estate Loan Is Declined There are many reasons why a mortgage loan could be declined. It doesn’t have to be the end of your real estate dreams. Here are a few things to consider if you’ve been turned down for a mortgage.

Loan-To-Value Ratio

The loan-to-value ratio (LTV) is the percentage of the appraised value of the property that you are trying to finance. For example, if you are trying to finance a home that costs $100,000, and want to borrow $75,000, your LTV is seventy-five percent.

Lenders don’t like a high LTV. The higher the ratio, the harder it is to qualify for a mortgage. To reduce the percentage, you can save up a bigger down payment. Some lenders may approve the loan if you buy mortgage insurance, which protects the lender in the case of default, but makes your mortgage payment higher.

Credit To Debt Ratio

Lenders will be less likely to approve your mortgage loan if you have a high credit-to-debt ratio. The ratio is figured by dividing the amount of credit available to you, on a credit card or auto loan, and dividing it by how much you are currently using.

High debt loads will scare away most lenders. Try to keep your debt to under fifty percent of what is available to you. Lenders will appreciate it, and you will be more likely to be approved for a mortgage.

No Credit Or Bad Credit

Few things can derail your mortgage loan approval like credit issues. Having no credit record can be as bad for your approval chances as bad credit. With no record of timely loan payments from anywhere, a lender is unable to determine your likelihood to repay the mortgage. Some lenders will consider other records of payment, like utility bills and rent reports from your landlord.

If you have frequent late charges or collections, you’ll need to work on getting those paid on time, every time. There aren’t many lenders who will approve someone with bad credit, especially in today’s market.

Talk to your loan officer to determine which problem applies to you, and learn the steps to fix it. Then, you can finance the home or condo of your dreams.

If you’re ready to buy a home or condo, I can help. Together, we’ll determine how much you can afford, and I’ll negotiate to get the best price and terms for you. Get in touch with me so I can help you. 

13 06, 2014

What Are The Closing Costs Of Real Estate?

What Are The Closing Costs Of Real EstateYou’ve found the perfect property and a great mortgage loan with the best interest rate you can find. What’s next in the home buying experience? Signing the contracts and paying the closing costs. But what exactly are closing costs?

Here Is A List Of The Most Common Closing Costs:

  • Titling Fees – These include the title search and title insurance, and the associated attorney fees. These costs are usually paid by the seller but can be assigned to the buyer.

  • Recording Fees – The government charges a fee to record the change in ownership of the

    [city] real estate. This can be paid by either the seller or the buyer.

  • Survey Fee – A survey fee can be required by the lender. It is a fee for the survey of the land or lot, and its structures, to determine that it matches the property description.

  • Mortgage Application Fees – Occasionally mortgage application fees are included in the closing costs, but usually are paid prior to closing by the buyer.

  • Appraisal And Inspection Fees – An apriaisal and inspection are required by the lender to ensure that the value of the property is equal to that of the loan, and to make sure there aren’t any underlying problems that detract from the property value. These fees are usually paid by the buyer.

  • Points – Points are equal to one percent of the principal of the loan. These discount points are paid by the buyer to the lender to reduce the final interest rate of the loan.

  • Brokerage Commission – The seller pays the real estate agent the brokerage commision fee for listing, showing the property, and handling the contract negotiations. The commission is usually a percentage of the sale price of the property, and determined in advance by the seller and the real estate agent.

  • Underwriting Fees – The buyer pays underwriting fees to the lender to pay for the costs of determining if the buyer qualifies for the mortgage loan.

  • Property Tax – County property taxes are usually required to be paid for six months in advance at the time of closing. The buyer is responsible for these fees.

4 06, 2014

Thinking About Buying An Investment Property? 6 Tips To Ensure You Don’t Get Fleeced

Thinking About Buying an Investment Property? 6 Tips to Ensure You Don't Get FleecedPurchasing an investment property is one of the most important decisions that you’ll ever be a part of. As such, it’s a necessity to make your decisions with only the most careful of consideration.

Here are the six tips that you need to heed in order to ensure that you don’t get fleeced.

Find The Right Property At The Right Price

Yes, this is a whole lot easier said than done. However, it’s not impossible. All it takes is some patience and research.

You have to determine what everything in your area is selling for in order to be able to spot a bargain! Further, you need to know that various property classes will outperform each other. For example, land and home units will appreciate differently.

Figure Out The Cash Flow

It’s always a good idea that you know how to maintain your mortgage repayment obligations over the long term. It’s recommended that you analyze the cost of servicing any loan only on an after-tax basis. By taking this approach, you have the power to calculate and put the cost into actual terms that make sense for you.

Look For A Good Property Manager

Finding a good property manager who is a professional in his or her field is vital. Your property manager’s job will be to make certain that everything is in order between you and any of your tenants. A good property manager can extract the best possible value for you from your property and help to keep your tenants in line as well.

Choose The Appropriate Type Of Mortgage

There are many options available for financing the investment property that you choose, so it’s best to get sound advice. Options such as a variable rate loan and a fixed rate loan are both popular choices, but your specific circumstances will dictate what’s most suitable for you. Consider that variable rates often end up being cheaper over time, yet fixed rates at the right time are ideal.

Take Equity From Another Property

Leverage the equity from your residence or another investment property. Doing this is actually an ideal way to purchase your investment property. Equity can be calculated by way of calculating any difference between what you owe on your mortgage and the overall value of your property.

Comprehend Both The Market And Dynamics When Buying

It’s best to analyze what other properties are available in the area when you’re looking at an investment property. It’s very advisable to actually talk to both local people and real estate agents in the neighborhood. They can give you hints on small, yet vital, things like which side of a street is considered more desirable.

These are the six tips to help make sure that you don’t ever get fleeced when buying an investment property. They can make the difference between purchasing a great property that has a high return on investment and purchasing a lemon.

Call your trusted mortgage professional today for some answers and more information.

19 02, 2014

What Is A Mortgage Pre-Approval?

What Is A Mortgage Pre-Approval?When you are purchasing a home, your broker may recommend you obtain a mortgage pre-approval before you find the home of your dreams.

There are some benefits to being pre-approved before you find a home, but oftentimes, people confuse pre-qualifications with pre-approvals.

So the question many buyers have is what exactly is a mortgage pre-approval?

In a nutshell, it’s when the lender provides you (the buyer) with a letter stating that your mortgage will be granted up to a specific dollar amount.

What Do I Need For Pre-Approval?

In order to obtain a pre-approval for your home purchase, you will have to provide your lender all of the same information you would need to show for qualifying for a mortgage.

This means providing tax returns, bank statements and other documents that prove your net worth, how much you have saved for your down payment and your current obligations.

What Conditions Are Attached To A Pre-Approval?

Generally speaking, a pre-approval does have some caveats attached to it. Typically, you can expect to see some of the following clauses in a pre-approval letter:

  • Interest Rate Changes – a pre-approval is done based on current interest rates. When rates increase, your borrowing power may decrease.
  • Property Passes Inspection – your lender will require the property you ultimately purchase to come in with a proper appraisal and meet all inspection requirements.
  • Credit Check Requirements – regardless of whether it’s been a week or six months since you were pre-approved, your lender will require a new credit report. Changes in your credit report could negate the pre-approval.
  • Changes In Jobs/Assets – after a pre-approval is received, a change in your employment status or any assets may result in the pre-approval becoming worthless.

Getting pre-approved for a home mortgage may allow you more negotiation power with sellers and may help streamline the entire loan process.

It is important however to keep in mind there are still things that may have a negative impact on actually getting the loan.

It is important to make sure you keep in contact with the lender, especially if interest rates increase or your employment status changes after you are pre-approved.

5 02, 2014

Overpay On Your Mortgage Or Add To Your Savings, This Is The Question

Overpay On Your Mortgage Or Add To Your Savings, This Is The QuestionSo you find yourself with a little bit of extra money – perhaps due to a raise, an inheritance or an unexpected windfall?

Should you put all of your money toward paying down the mortgage on your home? Or would you be better off placing your extra cash into a savings account?

Deciding whether to pay down your mortgage or add to your savings is a complex choice and it depends on a number of factors in your personal financial situation.

Here are some of the things that you will need to consider when making the decision:

How Much Are Your Savings Earning?

Take a look at the savings accounts where you are keeping your money and assess the interest that your savings are earning. Is your money earning more in savings than you would save by paying down your mortgage earlier?

Does Your Mortgage Have Overpayment Penalties?

Some mortgage lenders will charge you a fee if you try to repay your mortgage earlier than the agreed upon term. Check with your lender to find out and calculate whether the extra costs will outweigh the benefits you get from overpaying your mortgage. If they do, put your windfall in savings instead.

What are Your Other Debts?

It doesn’t make sense to be overpaying on your mortgage if you have a lot of credit card debt that is charging you an enormous amount in interest. Prioritize your high-interest debt first before you think about overpaying on your mortgage.

Do You Have An Emergency Fund?

You should always have an emergency fund in cash that will protect you from having to use expensive credit card debt if an unexpected payment comes up such as a burst pipe or a flat tire on your car or if you lose your job.

A good rule is to have the equivalent of three to six months of savings in a bank account just in case you need it. This is a first priority and only when you have this emergency fund established should you consider overpaying on your mortgage.

These are just a few of the important factors that you should consider when deciding whether to overpay the mortgage on your home or place the money in savings. For more information, contact your trusted mortgage professional.

21 01, 2014

Fannie Mae And Freddie Mac, How They Impact Real Estate

Fannie Mae And Freddie Mac, How They Impact Real EstateFannie Mae and Freddie Mac have been in the news quite a bit over the past few years, so it’s a good time to do a refresher on who they are and what role they play in the real estate market.

Who Are Fannie Mae And Freddie Mac?

Fannie Mae is the Federal National Mortgage Association. Freddie Mac is the Federal Home Loan Mortgage Corporation. They were originally created to raise homeownership levels and increase the availability of affordable housing.

Fannie and Freddie don’t sell mortgages directly to homeowners. They buy mortgages from lenders, so the lenders can use the money to issue new home mortgages.

In 2008, due to mismanagement resulting in billions of dollars of losses, Fannie and Freddie were taken over by the government.

How Do Fannie And Freddie Impact Real Estate?

  • They contributed to the financial crisis and real estate downturn, by loosening underwriting standards, buying and guaranteeing risky loans and increasing purchases of mortgage-backed securities.
  • They are key players in the government’s Making Home Affordable foreclosure-prevention program. If your mortgage is owned by Fannie Mae or Freddie Mac, you may be able to refinance your loan and take advantage of lower interest rates.
  • They influence mortgage interest rates and the availability of home loans. Freddie, Fannie and the Federal Housing Administration together now guarantee about 90 percent of all new mortgages, far above their historic level.

What’s Going To Happen To Fannie And Freddie?

Fannie and Freddie’s future is uncertain. An amendment to the bailout legislation passed in 2012 which will require both to wind down by 2018. But this will not happen soon, if at all.

Congress must agree on a plan, which could take years, and then the market’s dependence on the companies and the financial backing they provide must be reduced.

As of the end of 2013, Fannie and Freddie will have repaid nearly all of the $187 billion dollar bailout loan back to taxpayers. In 2013, Fannie and Freddie made more than $100 billion and are involved in more than half of all new mortgages.

If you have further questions on this topic, please contact myself or your trusted mortgage professional. I’m happy to help.

11 12, 2013

The Pros And Cons Of Making Biweekly Mortgage Payments

The Pros And Cons Of Making Biweekly Mortgage PaymentsHave you ever considered paying off the mortgage on your home in two biweekly payments rather than one monthly payment? It might seem like this wouldn’t make a difference, but the truth is that biweekly payments really do add up more quickly.

Since there are 52 weeks in a year you will end up making 26 payments in total – which is equal to 13 months rather than 12. This means that your mortgage will be paid off more quickly and you will save money on interest payments in the long run.

This arrangement might be the best for you when it comes to paying off your mortgage quickly and saving money, but it’s important to consider the possible disadvantages before you make the decision.

Cons Of A Biweekly Mortgage Payment

  • Often lenders do not offer biweekly services free of charge. You will be required to pay a registration fee as well as paying biweekly charges.
  • If your budget doesn’t allow the room to pay more toward your mortgage every year, this could be a foolish move. Don’t neglect the importance of having an emergency savings fund or paying your bills.
  • If you have your mortgage payment set up via direct debit from your bank account, taking out a payment every two weeks could catch you out if the funds are not there, especially if you are only paid once per month. This would result in charges for insufficient funds from both your lender and your bank.

Pros Of A Biweekly Mortgage Payment

  • Some people find that paying their mortgage biweekly fits better into their budget because it’s easier to plan for a smaller payment amount – especially if they are paid every two weeks.
  • By shaving years off the length of your mortgage, you are reducing the amount of money you will pay over the long run.
  • You will also be speeding up the time it takes to build equity in your home.
  • You will be compelled to make an extra mortgage payment per year, enforcing good habits on yourself that will eventually pay off.

These are just a few factors to consider before deciding whether you should make biweekly payments on your mortgage. If you don’t want to commit to biweekly payments on your home mortgage, you can always save up your money and make a lump sum payment at the end of the year.

For more tips and advice, feel free to reach out to your trusted mortgage professional today.

10 12, 2013

The Low Down On The HUD-1 Settlement Statement

The Low Down On HUD1 Settlement StatementWhen preparing for a closing on your refinance or home purchase, one of the documents you will be provided with a few days before closing is a HUD-1 Form. This form provides you with valuable information about your loan.

While at first, this three page document may seem intimidating, if you understand what you see in each section, it is not as confusing as you might think. Let’s break down the various parts of the HUD-1 and talk about what they mean.

Loan Information

On the first page of your HUD1, you will see your loan information at the top. This includes the type of mortgage, property location, loan amount and the date of closing. This information is very basic but also is very important to review for accuracy.

Buyer And Seller Costs

If you are refinancing your home, you will only see information in the buyer section of the HUD-1. This section will define any charges associated directly with the home including taxes, insurance and any amounts that are due from you or payable to you at closing.

You will also see a total of all settlement costs which you can find broken down by category on page two of the HUD-1.

Page 2 Is Important

On the second page of your HUD-1 form, you will see a complete breakdown of all costs associated with your loan. This includes appraisal fees, broker or lender fees, and if your loan is a purchase loan, you will also see information regarding fees paid to a real estate broker if applicable.

Additional information found on this page includes escrow payments the lender may require be paid prior to closing. In most cases, escrow will include a portion of taxes and insurance payments that will be due through the quarter following closing on the mortgage.

Final And Important Highlights Of Page 3

Finally, you will need to review the signature page of your HUD-1 form. This page also contains critical information regarding your loan. Your interest rate, information on whether or not your loan will increase and the total amount you will pay over the life of your loan.

Additionally, you will see a comparison of the fees that you are actually paying compared to what your lender estimated at the type of application.

Borrowers need to review their HUD-1 form thoroughly prior to signing any loan documents. Typically, this form will be provided to a borrower a day or two prior to closing to allow for review and to get any questions answered prior to closing.

Having a basic understanding of the HUD-1 form can help make your closing much less stressful. For further questions on this topic feel free to reach out to your trusted mortgage professional.

5 12, 2013

10 Questions You Should Ask Yourself Before Applying For A Mortgage: Part 2

10 Questions You Should Ask Yourself Before Applying For A Mortgage Part 2Yesterday you may have read the blog post on questions to ask yourself before applying for a mortgage. Here are 5 additional that you may want to think about before you go into your meeting with your loan officer.

Here are questions 6-10 that you may need to get answers to before completing your application:

6. How Long Until We Can Close Our Loan?

Loan closing times are based on a number of factors. Closing dates may be delayed if there are missing documents or other underwriting delays. Speak with the loan officer to get an estimate on the time from application to closing.

7. What Possible Delays May I Face In Closing?

There are a number of delays that often cannot be avoided. However, some can be avoided by making sure you provide your loan officer with all the documents they request in a timely manner. In some cases, there may be a delay in getting the appraisal completed or for title searches. Your loan officer can discuss other reasons why a delay may occur.

8. Do I Need An Attorney For Closing?

When you are ready to close your loan, you are welcome to have an attorney representing you. Generally, there will be an attorney present at the closing however, they are there to represent the lender. If you feel more comfortable having an attorney present, discuss this with your loan officer to ensure the attorney receives the date, time and location of closing.

9. Should I Lock In My Interest Rate?

Before locking in a rate, make sure it is important to understand there may be fees associated with an interest rate lock. Bear in mind, should rates decline during the period between application and closing you will not be able to take advantage of those lower rates.

10. When Will I Get A HUD1 Statement?

As a borrower, you are entitled to review their HUD1 statement prior to closing. Your loan officer should make arrangements with you to provide the statement one or two days prior to closing for your review. This will give you an opportunity to review loan terms, interest rate and costs of the loan.

Never hesitate to ask your loan officer any questions you may have. The more questions you have addressed during the application process, the less likely you will be to be confused at the time of your mortgage closing.

Keep in mind, your loan officer is there to answer your questions and guide you through the entire loan process.

4 12, 2013

10 Questions You Should Ask Yourself Before Applying For A Mortgage: Part 1

10 Questions You Should Ask Yourself Before Applying For A Mortgage Part 1If you are considering applying for a refinance, it is important to understand the mechanics of your mortgage loan. Before you sit down to speak with your loan officer, you should consider preparing a list of questions you feel may need to be answered.

Typically, your loan officer will be available to assist through the entire mortgage process. Here are some questions that you may need to get answers to before completing your application:

1. What Type Of Loan Is Best For Me?

Your loan officer can discuss the various loan programs available to help you refinance. Some borrowers will benefit greatly from adjustable rate mortgages while others prefer fixed rate. However, other borrowers may find a fixed rate is the best option. Discuss various loan terms such as 30-year or 20-year mortgage loans.

2. What Documents Are Required?

Be prepared to provide your loan officer with several documents. The most common documents include pay stubs, bank statements and tax returns. Loan officers will also need a complete list of debts including auto payments, credit card payments and student loans.

3. What Costs Are Involved?

Prior to a loan closing you will be required to pay some costs up front. These may include appraisal fees, credit report fees and application fees.

Discuss all these costs with the loan officer to determine how much money will be required prior to the loan being approved. In addition, discuss any funds that will be required to complete the loan closing.

4. Can I Select My Own Appraiser?

When you apply for a refinance loan, lenders will require a property appraisal. Lenders typically maintain a list of approved appraisers and supply those lists to the loan officers. Typically, the loan officer will assign an appraiser to review the property. Borrowers generally have no input regarding the choice of appraisers.

5. When Will I Get A Good Faith Estimate?

Good Faith Estimates must be issued after you have completed your loan application. A second GFE is typically presented along with the HUD1 prior to closing. Keep in mind, the GFE is only an estimate of costs and that actual costs may be slightly higher or lower.

Never hesitate to ask your loan officer any questions you may have. The more questions you have addressed during the application process, the less likely you will be to be confused at the time of your mortgage closing.

Keep in mind, your loan officer is there to answer your questions and guide you through the entire loan process. For additional questions you should ask, check out tomorrow’s blog post.

14 11, 2013

Reasons Why You Should Consider Refinancing Your Mortgage

Reasons Why You Should Consider Refinancing Your MortgageRefinancing a mortgage is a golden opportunity to lock in today’s low interest rate for the next 15 or 30 years. While interest rates now are still low, there’s a good chance they will be heading up in the coming months.

The Fed won’t maintain the current bond purchasing level forever, and just as rates spiked in September when the Fed hinted the bond purchasing would change, rates will spike even more when purchasing levels actually do change.

As interest rates remain very low for 30-year and 15-year mortgages, homeowners can benefit greatly from a refinance. Several types of people in particular should consider refinancing.

Carrying A High Rate

Anyone with an interest rate well above today’s level should think about a refinance. Unless the homeowner is planning to sell within the next few years, a refinance will almost always save money in the long run if the rate can be lowered by at least a percent.

Switching From FHA To Conventional

Given that FHA mortgages now carry mortgage insurance premiums for the life of the loan, it makes a lot of sense for borrowers to switch away from them when they can. Refinancing may be possible once the homeowner has built up enough equity to qualify for a mortgage from a traditional lender, without the burden of mortgage insurance.

ARM Coming Up On Adjustment

The low rate of an adjustable rate mortgage sticks only for the first few years of the mortgage. After this point, the rate adjusts each year based on market trends.

Rather than paying the adjusted rate, which is almost always higher, homeowners can refinance into a new fixed rate mortgage to lock in one of today’s low fixed rates for the duration of the mortgage.

Cash Out To Consolidate Debt

Homeowners carrying high-interest debt, like credit cards and personal loans, can often benefit from consolidating it into their mortgage. As long as they maintain at least 20 percent equity in their home, they can get a cash-out refinance for an amount higher than their current mortgage balance.

They can then use the difference to pay off high-interest debt. For more information about refinancing your mortgage feel free to contact your trusted mortgage professional.

13 11, 2013

3 Tips To Sidestep These Common FHA Loan Hang-ups

3 Tips To Sidestep These Common FHA Loan Hang-upsFHA loans are becoming increasingly popular these days as potential homeowners are not able to qualify for mortgages from traditional lenders. The FHA insures these high-risk loans, in turn allowing borrowers with low down payments and less than perfect credit to purchase homes and bolster the housing market.

However, getting through the loan process with the FHA is more difficult than with a traditional lender, and you may need to cope with some of these common loan hang-ups.

Property Condition

You can’t buy just any property with a FHA loan. The appraiser must deem it to be livable, without any conditions that could jeopardize health or safety. If the home has chipping paint, a leaky roof, or a wobbly banister, the financing could fall through.

Sometimes you can get the seller to make the needed repairs to pass inspection, but in other cases, you may have to go an alternate route. The FHA 203K streamline loan allows you to borrow up to $35,000 over the purchase price of the home for repairs and updates. It’s important to check with your local mortgage lender to determine any specific local FHA 203k loan details.

Low Appraisal

In addition to inspecting the property, appraisers also estimate its market value. These estimates are based on the property’s features and a comparison to similar properties that have sold recently. If the appraisal is low, the FHA loan funding could fall through because the FHA will not let you borrow more than the home’s appraised value.

Rather than trying to scrape together a bigger down payment, just take the information to the seller to renegotiate the purchase price. The seller will likely recognize that other buyers would be in the same boat, leading the seller to agree to a lower purchase price.

High Debt-to-Income Ratio

Your FHA loan may encounter a snag in the underwriting process if your total debt payments, including your new mortgage, would be a high percentage of your income. If you are in this situation, ask your lender to try running you through the automated underwriting program called TOTAL.

The process is quick, and often you can make up for a high debt-to-income ratio with other compensating factors, like a larger down payment or a cash reserve of several months of mortgage payments. For more information on common FHA loan hang-ups feel free to contact your trusted mortgage professional today.

7 11, 2013

Factors To Consider When Applying For A Home Mortgage

Factors To Consider When Applying For A Home MortgageOwning a home can be a sign of independence and success. It allows you to build up equity and the mortgage interest and property taxes are tax-deductible. What can you do to make a home affordable for you?

Reputable lenders look at a list of criteria to decide how much they’ll loan you. 

This List Includes:

  • Credit score
  • Existing assets including cash
  • Car leases or loans
  • Credit card balances
  • Debt consolidation loans
  • Home equity loans
  • Installment loans
  • Student loans
  • Other monthly debts
  • Size/source of your down payment

If you’d like to get an idea of what you can afford before talking to a lender, here are a few tools you can use to decide whether a home is within your budget.

Here Are Some Guidelines:

  • As a rule of thumb, your house hunting budget shouldn’t be more than 2.5 times your pre-tax annual income.  If you earn $50,000 a year, your budget for house hunting should be around $125,000.
  • Your Housing Expense Ratio, which is principal, interest, taxes and insurance shouldn’t be more than 25% to 28% of your pre-tax monthly income.
  • Your Debt-to-Income Ratio should be no more than 36% of your pre-tax monthly income.  This is the ratio between how much you owe and how much you earn.
  • Use an online calculator to figure how much home you can afford.

“Qualifying for” and “can afford” are two different things.  Shopping for a home within your budget will save you a lot of heartache now and in the future.

If you’d like help determining how much mortgage you can really afford, call your trusted mortgage professional today.

6 11, 2013

Are 50 Year Mortgages A Good Financing Option?

Are 50 Year Mortgages A Good Financing OptionWhen most people are taking out a mortgage on a property, they select either a 15 or 30 year mortgage loan. However, there is a new mortgage option that has been available to home owners since 2006 and that is the 50 year mortgage loan.

Although a half-century might seem like a very long loan term, there can be some advantages to taking out a five-decade mortgage. Here are some of the pros and cons to taking out a mortgage that you repay over 50 years.

Advantages

The main benefit that you will experience with a 50 year mortgage is the ability to take out a larger loan and buy a more expensive house that you might not have otherwise been able to afford. This means that you can enjoy a better standard of living with lower monthly payments.

A 50 year mortgage might also make home ownership easier to qualify for as a first time homebuyer. On a monthly basis, it means that you will have more room in your budget for paying for other expenses.

Disadvantages

Of course, the major disadvantage to a 50 year mortgage is that you will end up paying much more interest over the loan period. Also, you will build equity in the home very slowly and you will not gain back much equity if you sell the home a few years on.

Also, often 50 year mortgages will come with higher interest rates than their 30 year counterparts. You can usually expect to pay an extra 0.25% or more than you would if you took out a 30 year mortgage, which can really add up over time.

It might be advantageous to take a 50 year mortgage with low payments in the beginning, with the aim to refinance and reduce your term in the future when you are earning more money and can make higher mortgage payments.

A 50 year mortgage can sometimes be advantageous, but ask yourself if you really want to wait until you are in your 70s or 80s before owning your home! If a 50 year mortgage is the only way you can afford your mortgage payments, you might be considering a home that is beyond your price range.

To find out more about the right mortgage term for you on your property, call your trusted mortgage professional today. 

1 11, 2013

Recent Government Activity And Its Effect On Mortgage Interest Rates

Recent Government Activity And Its Effect On Mortgage Interest RatesMortgage rates typically are tied more to the yields on the 10-year Treasury note more than any other indicator. With the government in flux as the shutdown happened and ended, mortgage rates are also changing.

Overall, mortgage rates have decreased because of a lack of confidence in the government’s ability to get its finances under control.

Although rates spiked in September when the Fed hinted that they would not be purchasing as many bonds, they quickly released an announcement that they would actually be maintaining their current purchasing habits.

The Time Is Ripe For Homeowners

Since then, mortgage interest rates have been dropping back down to their previous levels. With 30-year and 15-year fixed mortgage rates continuing at very low levels, the time is ripe for homeowners to purchase or refinance.

In the day following the reopening of the government, mortgage rates continued at their low levels, which surprised some economists. The stock market went down and yields on the 10-year Treasury note also decreased, which both suggest a lack of confidence in the government.

Despite their ability to come to an agreement, investors and economists note that it is just a temporary fix, and there will likely be anothershowdown looming. Rates may remain low for a little while, but as the government begins releasing more economic data, mortgage interest rates could increase if the data shows growth in the economy.

Buyers Expect An Increase Of Applications

The government shutdown did have an effect on the volume of applications for government mortgages, like FHA and VA loans. Both reached a six-year low, largely because there were no staff on hand to answer questions over the phone and the offices were running on skeleton crews.

As the offices are back up and running again, buyers are expected to increase their volume of applications because those who had been delaying their applications now need to get the ball rolling on their home purchases.

Amidst all of the uncertainty, one thing is quite clear. It’s unlikely that interest rates will drop significantly lower than they are now, so buyers looking to get a mortgage and homeowners looking to refinance may be best off locking a rate soon rather than waiting.

2 10, 2013

How Does An Interest-Only Mortgage Work?

How Does An Interest-Only Mortgage Work?When you have been researching your different options for a mortgage on your home, you might have heard of an “Interest-Only Mortgage”. What exactly does this type of mortgage mean and how does it work?

Usually when you take out a loan, you must pay back the capital debt (the amount you borrowed) and the interest on that debt. An interest-only mortgage offers a cheaper option for purchasing a property, because you will only be making payments on the interest and not the capital.

Compared to a repayment style mortgage where you are paying down the principle of the loan, an interest-only mortgage will have much lower monthly payments.

However, when you reach the end of the mortgage term with an interest-only mortgage, you will not have paid off any of the original principle of the loan. This means that you will still not be any closer to owning the home than when you started, whereas with a repayment mortgage you would be in full possession of the property.

You will reach the end of the loan term, still owing the lender $250,000 or whatever the value of the house was. Also, if you do not pay off that lump sum at that point, the lender will charge you interest on the entire loan for the full time.

From the description of how it works, it seems like there would never be a good situation for taking out an interest-only mortgage. However, if you are stretched financially and you are desperate to get onto the property ladder it might be a viable option. Some people take on an interest-only mortgage so that they can buy their first home, then when their income goes up they switch to a repayment mortgage.

These types of mortgages are often used by buy-to-let investors, who are able to claim their tax back against the mortgage interest. If this is your goal, you might find this strategy advantageous.

To find out more about mortgages and determine the best option for your needs when buying a home, contact your trusted mortgage professional.

1 10, 2013

Don’t Let Confusion With Mortgage Jargon Cost You

No More Confusion About Mortgage Jargon, Understand ItA recent study of US and UK home buyers, conducted by the London based Nationwide Building Society, found that more than 40% of people buying homes were confused by the jargon that lenders used to describe mortgages.

When it comes to taking out a mortgage on your home, could confusing mortgage jargon be costing you money and causing you to make ill-informed choices?

According to the study, only 31% of home buyers understood what the term “LTV” meant, an acronym that stands for “loan to value” and describes the ration between the amount of the mortgage and the value of the home.

Not only did the survey show that many mortgage borrowers were confused about what the terms meant, but they also were shy about asking for explanations of various words that they didn’t understand.

In order to make a wise financial decision and choose the right mortgage for you, it is essential to do your research and understand exactly what you are signing up for. If you are unsure of what a mortgage term means, don’t be afraid to ask your lender for clarification.

Here are a few of the common mortgage jargon words that many homebuyers don’t understand:

Adjustable Rate Mortgage

This is a loan that has an interest rate which will fluctuate over time, such as every three years or every year after the first five years. This type of mortgage can be advantageous if you plan to sell the home within the first few years of owning it. Another option is a fixed rate mortgage, which does not fluctuate.

Qualifying Ratios

This is a calculation that your mortgage lender will make in order to determine the largest mortgage that you could possibly afford to obtain. The calculation is made by looking at your income, your existing debt and other factors.

Stips Or Stipulations

If your mortgage lender mentions “stips” they are probably talking about stipulations, which are the requirements that are submitted in order to clear your mortgage to close. This includes verifications of your bank statement as well as proof of employment and rent. Verification of Rent and Verification of Employment are often abbreviated as VOR and VOE.

HUD

This refers to the US Department Of Housing Development Settlement Statement that you will be required to sign when taking out a mortgage. This document contains the details of the arrangement, including all fees agreed upon.

These are just a few examples of mortgage jargon that you might not be familiar with. If you have any more questions about taking out a mortgage on a home, contact your trusted mortgage professional.

13 09, 2013

What You Need To Know About Mortgage Insurance

What You Need to Know About Private Mortgage InsuranceIf you are on the verge of buying real estate, you’ve probably heard the term Private Mortgage Insurance. Mortgage professionals talk about it a great deal, but you may be asking, “What is it exactly? And why should I care?”

Private Mortgage Insurance Defined

PMI is required by lenders if the down payment of a purchase is less than 20 percent of the home’s value. It protects the lender if the borrower defaults on the loan.

It also makes the lender more apt to loan, even if the down payment is as low as 3%, because in the long run, the lender’s investment is protected.

You Pay For It

Unlike other types of insurance which you pay to protect your interest in an asset, you pay Private Mortgage Insurance to the mortgage company to protect its interest in your new real estate. (Note that PMI is not usually tax deductible. Check with a tax professional for details.)

Make It Go Away: PMI Can Be Terminated Once You’ve Paid Down Your Loan

Once you pay down your mortgage to the point where it hits the magical 80% of the original purchase price or appraised value, whichever is less, you can request cancellation of PMI. The Homeowners Protection Act requires that loans made after 1999 include notifications to the borrower when you arrive at this point in your payments.

Your PMI payments must be automatically canceled once you pay down your loan to 78%. At closing, and on a yearly basis, you should receive information from your lender about when you can request cancellation.

Whether you’re ready to buy real estate or need more information before taking the plunge, I can help. Contact your trusted mortgage professional today.

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