What is an appraisal? An appraisal is a report provided by a licensed appraiser, which states that appraisers opinion on what, the current value of a specific property is. It includes pictures, charts and an assessment of the neighborhood. There are three methods used to asses the value, but the most common for residential mortgages is the Comparative Market Approach which heavily relies on the data involving the activity and sales of similar and like homes within a close geographical area.
Why is the appraised value of a property important? The bank relies on the information provided from the appraisal to determine if they want to lend and how much money they would lend on a specific property based on the value and condition, which is in the appraisal report.
What changed recently that suddenly homes are not appraising? Well in the last few years, there has been a decline in Real Estate values and therefore homes are appraising for less now than they have in recent years. People who want to sell or refinance are faced with appraisers who are very conservative on value because house prices are declining.
If I want to Purchase or refinance, can I choose my own appraiser?
Not anymore. This is another change that has occurred in the last year. There are new rules that lenders have to adhere to. This rule is called HVXCC, Home Value Code Of Conduct. Almost all mortgages in the country have to follow this rule which basically does not let anyone with any interest in the transaction speak to an appraiser regarding the appraisal and the value. So when you enter into a mortgage transaction, an independent appraisal management company randomly chooses the appraiser. The Realtor or Mortgage professional cannot speak to this appraiser to ask what the value may be or tell them what value is necessary to make the deal.
Once an appraisal is done and the value came in lower, is the appraiser fee refundable? No, appraisers get paid to do their job and once they have provided their report, the fee is not refundable anymore.
What are your options when the value comes in low? It is possible to challenge the appraised value. Usually you would have to provide the management company with new information such as another comparable sale or a copy of an active contract of sale etc. Once the appraiser has received the new information they can revise the appraised value at that point.
How can a person determine the value of there home before applying for a mortgage? There are some online sites, which for the most part are inaccurate. I would think that the best way would be to call a local realtor who has a good handle on the Real Estate market. They are familiar with the same information as the appraiser and therefore they can give you an accurate guide as your approximate value.
What are the biggest obstacles to getting an accurate appraised value? One of the biggest challenges is that a lot of appraisal management companies have appraisers from other areas do the appraisal. Sometimes those appraisers just cover the county where your home is but they are for the most part unfamiliar with the demographics of the area so the value can be wrong. For example about one year ago I did a refinance of an attached home in Spring Valley. The appraiser compared it to other attached homes in Spring Valley. Because he was not from Rockland, he didn’t know about all of our villages and unincorporated areas. This specific home was in South Spring Valley. There was a sale on the block that the appraiser missed because he never searched South Spring Valley. The appraisal came in about $60,000 less than it should have. If this was a purchase it may have killed the deal.
Appraisals are key components of the mortgage transaction. Understanding the in’s and out’s of the appraisal limitations and expectations is key to a successful transaction.
Tuesday, December 21, 2010
Tuesday, December 7, 2010
THE TEN COMMANDMENTS When applying for a Real Estate Loan
10)Thou shall not change jobs, become self-employed or quit your job. When applying for a mortgage, job consistency and security are one of the key elements of the approval process. If you change jobs, you have to have worked at least 30 days and provide a paystub verifying at least a 30 day history. If you change the method of employment, wage earner to self employed or commissioned, you may not be able to verify any income because the mortgage guidelines require a minimum of a 2 year history.
2) Thou shall not buy a car, truck or van (or you may be living in it)! This is a big deal. If you are approved for a mortgage loan and then buy a car, the added debt if you finance the car may make your commitment invalid. When qualifying for a mortgage, your income vs. your debt is analyzed. Any changes can negatively affect your file even post commitment. Nowadays, we actually check your credit right before closing and we require you to explain any inquiries on your credit report in writing as to who inquired, why and whether new credit was extended as a result of those inquiries.
3) Thou shall not use charge cards excessively or let your accounts fall behind. Since your credit report is what is used to verify your credit worthiness, your willingness to pay back the mortgage loan, your credit another key component to your mortgage approval. The higher your credit score the more likely you will get approved and the credit score will determine what interest rate you are qualified for. A lower credit score, even just a little lower can cost thousands of dollars over the life of your 30mn year mortgage.
4) Thou shall not spend money you have set aside for closing. Buying a home is costly, between the down payment and your closing costs. Before you enter into any real estate transaction your attorney and mortgage professional should give you a good estimate of how much money you will need to close. If you don’t have the money prior to closing, there are some things that can be done but they are not guaranteed and they have there own set of ramifications. The examples of ways to lower the costs to close are: a. Seller’s concession, where the seller agrees to pay a portion of your closing costs, within the allowable guidelines of the mortgage that you are applying for. b. You receive a lender credit, the bank/mortgage company raises your interest rate and gives you a credit or rebate at the closing to help with the closing costs c. You put less money down. This is not always possible and can result in higher rates, and PMI.
5) Thou shall not omit debts or liabilities from your loan application. Getting a mortgage today is not like it was in the olden days (like prior to 2007), so if you omit debts or liabilities, we will find out about it. We do many background checks and verifications prior to closing a loan. If debts and liabilities are omitted it can be construed as FRAUD and grounds for your loan to be denied.
6) Thou shall not buy furniture or appliances on credit. Any added debt can affect you qualifying for your loan. Ithe added debt and inquiries can possibly lower your credit score. If we discover this prior to closing on that last minute credit check your rate and approval can be affected.
7) Thou shall not originate any inquiries into your credit. Same as above, this can cause your credit score to be affected and thus affect your rate and approval.
8) Thou shall not make large deposits without first checking with your loan officer. All Large deposits need to explained and verified. It is not good enough to say that someone returned a loan, or it was cash in the house or someone gave it to you without verification, documentation and written explanations. Banks want to make sure that you are not taking on additional debt, if these deposits were loans. It doesn’t matter how good your credit is, how much money that you have in the bank or how much you earn..
9) Thou shall not change bank accounts. If you need to change accounts, discuss it with your loan officer. This creates a paperwork nightmare. We have to verify the withdrawal and deposit into a new account. The most important thing to watch out for is that many banks put a hold the initial deposit, even if it is a certified or bank check for 10 business days and this can affect your ability to get a certified check for your closing and you may have to delay your closing.
10) Thou shall not co-sign a loan for anyone. A cosigned loan is the same as your loan. The debt is on your credit as if it was yours. It affects your borrowing ability. After a years time most lenders will accept 12 months canceled checks from the other party and then the debt will not affect you except if it is delinquent.
2) Thou shall not buy a car, truck or van (or you may be living in it)! This is a big deal. If you are approved for a mortgage loan and then buy a car, the added debt if you finance the car may make your commitment invalid. When qualifying for a mortgage, your income vs. your debt is analyzed. Any changes can negatively affect your file even post commitment. Nowadays, we actually check your credit right before closing and we require you to explain any inquiries on your credit report in writing as to who inquired, why and whether new credit was extended as a result of those inquiries.
3) Thou shall not use charge cards excessively or let your accounts fall behind. Since your credit report is what is used to verify your credit worthiness, your willingness to pay back the mortgage loan, your credit another key component to your mortgage approval. The higher your credit score the more likely you will get approved and the credit score will determine what interest rate you are qualified for. A lower credit score, even just a little lower can cost thousands of dollars over the life of your 30mn year mortgage.
4) Thou shall not spend money you have set aside for closing. Buying a home is costly, between the down payment and your closing costs. Before you enter into any real estate transaction your attorney and mortgage professional should give you a good estimate of how much money you will need to close. If you don’t have the money prior to closing, there are some things that can be done but they are not guaranteed and they have there own set of ramifications. The examples of ways to lower the costs to close are: a. Seller’s concession, where the seller agrees to pay a portion of your closing costs, within the allowable guidelines of the mortgage that you are applying for. b. You receive a lender credit, the bank/mortgage company raises your interest rate and gives you a credit or rebate at the closing to help with the closing costs c. You put less money down. This is not always possible and can result in higher rates, and PMI.
5) Thou shall not omit debts or liabilities from your loan application. Getting a mortgage today is not like it was in the olden days (like prior to 2007), so if you omit debts or liabilities, we will find out about it. We do many background checks and verifications prior to closing a loan. If debts and liabilities are omitted it can be construed as FRAUD and grounds for your loan to be denied.
6) Thou shall not buy furniture or appliances on credit. Any added debt can affect you qualifying for your loan. Ithe added debt and inquiries can possibly lower your credit score. If we discover this prior to closing on that last minute credit check your rate and approval can be affected.
7) Thou shall not originate any inquiries into your credit. Same as above, this can cause your credit score to be affected and thus affect your rate and approval.
8) Thou shall not make large deposits without first checking with your loan officer. All Large deposits need to explained and verified. It is not good enough to say that someone returned a loan, or it was cash in the house or someone gave it to you without verification, documentation and written explanations. Banks want to make sure that you are not taking on additional debt, if these deposits were loans. It doesn’t matter how good your credit is, how much money that you have in the bank or how much you earn..
9) Thou shall not change bank accounts. If you need to change accounts, discuss it with your loan officer. This creates a paperwork nightmare. We have to verify the withdrawal and deposit into a new account. The most important thing to watch out for is that many banks put a hold the initial deposit, even if it is a certified or bank check for 10 business days and this can affect your ability to get a certified check for your closing and you may have to delay your closing.
10) Thou shall not co-sign a loan for anyone. A cosigned loan is the same as your loan. The debt is on your credit as if it was yours. It affects your borrowing ability. After a years time most lenders will accept 12 months canceled checks from the other party and then the debt will not affect you except if it is delinquent.
Sunday, November 21, 2010
Can someone even get a mortgage today?
Well, if you were to speak to the First Meridian closing department in Brooklyn, it seems that many peoples actually can get approved and are actually closing mortgage loans today!
So assuming that one can qualify for a mortgage loan, the #1 question that I am asked all the time is, what is my rate? And when should I lock in my rate and how do I know that this rate is the best possible rate?
In order for me to properly answer I have to ask questions. The rate is determined by the following 5 factors.
A. Percentage down payment or “loan to value”
B. Credit score.
C. Type of loan; Conventional, FHA or No income Verification.
D. Loan Term, 15 or 30 year and
E. Type of property- house, condo or coop.
All of these factors determine what your rate will be.
A client called me a few months ago and asked me what his rate would be. I answered him by asking more questions. He said, my credit is excellent, my income is stable and I already have a pre approval from another mortgage consultant (what is a pre-approval or a pre-qual? A discussion for a later article!). I said okay and I was about to give him the current rate when he mentioned that he owns a rental property in Lakewood NJ. I asked him, does the property show a loss? He said he thinks his accountant does a good job. I said to him, I can give you a rate but until I see your tax returns and your credit etc.. I could not write a pre-approval letter. To make a long story short, his income was fine albeit the rental losses. The problem was his credit score was 642!!
He was eligible for rates that were ½ % higher because of the credit score. The lower the score, the higher the risk to the lender so, the higher the rate. If your score is low you may not be able to put less than 20% down, you may not be able to get a mortgage at all!
Needless to say, we closed the loan, her score improved and she got a great rate!
Getting a mortgage in November 2010 is different than in the prior years. Sometimes when refinancing, the best deal out there is with the current servicer of your current mortgage. Sometimes the best deal out there is not the one that boasts the lowest rate, but the one that actually ends up at the closing table.
So assuming that one can qualify for a mortgage loan, the #1 question that I am asked all the time is, what is my rate? And when should I lock in my rate and how do I know that this rate is the best possible rate?
In order for me to properly answer I have to ask questions. The rate is determined by the following 5 factors.
A. Percentage down payment or “loan to value”
B. Credit score.
C. Type of loan; Conventional, FHA or No income Verification.
D. Loan Term, 15 or 30 year and
E. Type of property- house, condo or coop.
All of these factors determine what your rate will be.
A client called me a few months ago and asked me what his rate would be. I answered him by asking more questions. He said, my credit is excellent, my income is stable and I already have a pre approval from another mortgage consultant (what is a pre-approval or a pre-qual? A discussion for a later article!). I said okay and I was about to give him the current rate when he mentioned that he owns a rental property in Lakewood NJ. I asked him, does the property show a loss? He said he thinks his accountant does a good job. I said to him, I can give you a rate but until I see your tax returns and your credit etc.. I could not write a pre-approval letter. To make a long story short, his income was fine albeit the rental losses. The problem was his credit score was 642!!
He was eligible for rates that were ½ % higher because of the credit score. The lower the score, the higher the risk to the lender so, the higher the rate. If your score is low you may not be able to put less than 20% down, you may not be able to get a mortgage at all!
Needless to say, we closed the loan, her score improved and she got a great rate!
Getting a mortgage in November 2010 is different than in the prior years. Sometimes when refinancing, the best deal out there is with the current servicer of your current mortgage. Sometimes the best deal out there is not the one that boasts the lowest rate, but the one that actually ends up at the closing table.
Friday, November 19, 2010
Will the FED’s ‘Quantitative Easing Lower Rates . . . or Raise Them?!?!
You can’t turn on the news these days without hearing about the Federal Reserve Board’s attempt at keeping interest rates low to spur more lending (for mortgages, business lending and other consumer loans) via a plan known as Quantitative Easing part 2 (QE2).
The plan provides for the FED to purchase Treasury Bonds to take them out of the market. When the supply of Treasuries is reduced, the price will increase due to simple supply and demand. When the price of Treasuries increase, the Yield (or return) on those Treasuries decreases. The Yield is the cost of money to lenders so the lower the Yield, the lower rates will be.
Mortgage rates are based on the Yield of Mortgage Backed Securities, which are closely tied to the performance of Treasury bonds. So when Treasury prices increase, typically you will see the price of Mortgage Backed Securities increase as well. When these prices go up, the Yields go down and this is supposed to bring down mortgage rates.
Unfortunately, the immediate effect of this most recent Quantitative Easing has been the opposite. Because many investors had already expected QE2, they had priced the decreased supply of Treasuries into the market. When the announcement was made that the FED would be buying approximately $600Billion of Treasuries, the market was actually disappointed and this drove the price of Treasuries lower – in turn raising the Yield and Mortgage Backed Securities followed in kind. The market had anticipated a purchase closer to the $1 Trillion range.
In the short term, rates have increased a bit and the level of support for lower prices for Mortgage Backed Securities seems to be on the near horizon. This could certainly change so if you are in the market to buy or refinance a home, you will want to work with someone that monitors these changes on a daily basis as we are seeing swings in rates on a daily basis – and often with multiple changes in a single day.
I often equate the Mortgage Backed Securities market to someone buying a Certificate of Deposit (CD) at a bank. Right now, the rates are so low on CD’s that there really is a disincentive to purchase one and tie your money up for a prolonged period of time at such a low return. Imagine purchasing a 30 year Mortgage Backed Security and having to take such a low return for 30 years!
With returns so low for these investors, it may not be likely that they would be willing to accept any less moving forward. If this happens, no amount of Quantitative Easing will entice them to pay more for the Mortgage Backed Securities and therefore it would be unlikely that we will see any significant reduction in mortgage rates. No one can predict if rates will be headed any lower in the short term, however, one thing is certain and that is that rates will increase at some point.
The main hesitation for Mortgage Backed Security investors at this point is that they don’t want to be stuck holding these long term investments for a prolonged period of time with such a low return when rates increase. This is primarily what is keeping the rates from going lower as the FED had intended.
Let’s see what the next few weeks and months hold for mortgage rates. Either way, with rates at historic lows, it would pay to start investigating any buying or refinancing options at this time before they do go up.
The plan provides for the FED to purchase Treasury Bonds to take them out of the market. When the supply of Treasuries is reduced, the price will increase due to simple supply and demand. When the price of Treasuries increase, the Yield (or return) on those Treasuries decreases. The Yield is the cost of money to lenders so the lower the Yield, the lower rates will be.
Mortgage rates are based on the Yield of Mortgage Backed Securities, which are closely tied to the performance of Treasury bonds. So when Treasury prices increase, typically you will see the price of Mortgage Backed Securities increase as well. When these prices go up, the Yields go down and this is supposed to bring down mortgage rates.
Unfortunately, the immediate effect of this most recent Quantitative Easing has been the opposite. Because many investors had already expected QE2, they had priced the decreased supply of Treasuries into the market. When the announcement was made that the FED would be buying approximately $600Billion of Treasuries, the market was actually disappointed and this drove the price of Treasuries lower – in turn raising the Yield and Mortgage Backed Securities followed in kind. The market had anticipated a purchase closer to the $1 Trillion range.
In the short term, rates have increased a bit and the level of support for lower prices for Mortgage Backed Securities seems to be on the near horizon. This could certainly change so if you are in the market to buy or refinance a home, you will want to work with someone that monitors these changes on a daily basis as we are seeing swings in rates on a daily basis – and often with multiple changes in a single day.
I often equate the Mortgage Backed Securities market to someone buying a Certificate of Deposit (CD) at a bank. Right now, the rates are so low on CD’s that there really is a disincentive to purchase one and tie your money up for a prolonged period of time at such a low return. Imagine purchasing a 30 year Mortgage Backed Security and having to take such a low return for 30 years!
With returns so low for these investors, it may not be likely that they would be willing to accept any less moving forward. If this happens, no amount of Quantitative Easing will entice them to pay more for the Mortgage Backed Securities and therefore it would be unlikely that we will see any significant reduction in mortgage rates. No one can predict if rates will be headed any lower in the short term, however, one thing is certain and that is that rates will increase at some point.
The main hesitation for Mortgage Backed Security investors at this point is that they don’t want to be stuck holding these long term investments for a prolonged period of time with such a low return when rates increase. This is primarily what is keeping the rates from going lower as the FED had intended.
Let’s see what the next few weeks and months hold for mortgage rates. Either way, with rates at historic lows, it would pay to start investigating any buying or refinancing options at this time before they do go up.
Thursday, November 11, 2010
The fact and fiction about rehab mortgages
A few years ago a client called me. They had a small amount of money and a steady income.
They were searching for a home with a purchase price, which at the time was really low. It was what they could afford. A local realtor found them a home. it was a 90 year old, old style colonial. It was ugly, and needed a bit more than just TLC. Old kitchen, very dated bathrooms, a damp basement and drafty windows. The house comprised of very small rooms and didn't flow. It was the only home in their price range and neighborhood.
I put them into a loan, which we seldom hear about. The FHA 203K loan. This is a rehab loan. It is a great product for the client that wants either purchase a home or refinance their home to do construction. There are two challenges that come up when someone is in this situation
A. When purchasing, the client has enough money for the down payment and closing costs but not enough do to the repairs/addition/rehab
B. The house either appraises low or in poor condition. A bank will not lend on a house that is in less than good condition or if it need repairs. On a refinance, a bank will not lend over the as is value of the house. One may want to make an addition that will drastically increase the value of the house upon completion but right now as is, the value is lower so there is not enough equity to do a cash out. On a purchase, it’s almost the same. The bank will not lend over the purchase price because of work that will be done.
How does one finance these renovations? In today’s credit and lending climate, the builders and contractors don't have any venues for rehab/repair/construction funds. The days of the easy Home Equity Lines of Credit are gone.
The FHA 203k is a great option. Let me explain some the details of how this loan works and what are the options that you may have.
The 203K loan is a rehab/construction/repair loan. It does not finance new construction. If you buy a home and tear it down to build a new home, you must build on the original foundation. You can modify, enlarge it etc. but you cannot buy a lot and build a new home.
It will not finance luxury items like a swimming pool, hot tub etc
You can borrow from as little as $5,000 up to the FHA limits in our area. On a one family home, the limit in our area of $729,000. The home must be owner occupied, primary residence, not a second home, vacation home or investment property. It can be a 1-4 family or a mixed-use property if the applicant lives in the residential unit.
A normal mortgage has 2 steps. This loan is a 3 step process.
Step 1: Credit. Every loan has a credit portion; this is the analysis and approval of the applicants credit, income and assets
Step 2. The appraisal portion, every loan requires and appraisal. This is provided to the bank so that the bank can make a decision if the collateral is acceptable
Step 3. Construction/rehab/repair. This is unique to the 203K. The bank evaluates the scope of the job and bases the loan on an “after improved value”.
Very basically, the way this loan works is, the bank lends up to 96.5% of the after improved value, basing the loan on the purchase price + the rehab cost. For example, if you buy a home for $300,000 and then you want to do $150,000 renovation, and the after improved value is 450,000, under the 203K program you would get a mortgage of up to $434,250. At closing, the seller would get the $300,000 (purchase price) and the rest of the money would go into an escrow account to be disbursed as needed during the rehab period.
For more information on 203K loans and other loan products contact a local mortgage professional who knows the in’s and out’s of FHA financing. The key to a successful mortgage experience is the professional that you work with.
They were searching for a home with a purchase price, which at the time was really low. It was what they could afford. A local realtor found them a home. it was a 90 year old, old style colonial. It was ugly, and needed a bit more than just TLC. Old kitchen, very dated bathrooms, a damp basement and drafty windows. The house comprised of very small rooms and didn't flow. It was the only home in their price range and neighborhood.
I put them into a loan, which we seldom hear about. The FHA 203K loan. This is a rehab loan. It is a great product for the client that wants either purchase a home or refinance their home to do construction. There are two challenges that come up when someone is in this situation
A. When purchasing, the client has enough money for the down payment and closing costs but not enough do to the repairs/addition/rehab
B. The house either appraises low or in poor condition. A bank will not lend on a house that is in less than good condition or if it need repairs. On a refinance, a bank will not lend over the as is value of the house. One may want to make an addition that will drastically increase the value of the house upon completion but right now as is, the value is lower so there is not enough equity to do a cash out. On a purchase, it’s almost the same. The bank will not lend over the purchase price because of work that will be done.
How does one finance these renovations? In today’s credit and lending climate, the builders and contractors don't have any venues for rehab/repair/construction funds. The days of the easy Home Equity Lines of Credit are gone.
The FHA 203k is a great option. Let me explain some the details of how this loan works and what are the options that you may have.
The 203K loan is a rehab/construction/repair loan. It does not finance new construction. If you buy a home and tear it down to build a new home, you must build on the original foundation. You can modify, enlarge it etc. but you cannot buy a lot and build a new home.
It will not finance luxury items like a swimming pool, hot tub etc
You can borrow from as little as $5,000 up to the FHA limits in our area. On a one family home, the limit in our area of $729,000. The home must be owner occupied, primary residence, not a second home, vacation home or investment property. It can be a 1-4 family or a mixed-use property if the applicant lives in the residential unit.
A normal mortgage has 2 steps. This loan is a 3 step process.
Step 1: Credit. Every loan has a credit portion; this is the analysis and approval of the applicants credit, income and assets
Step 2. The appraisal portion, every loan requires and appraisal. This is provided to the bank so that the bank can make a decision if the collateral is acceptable
Step 3. Construction/rehab/repair. This is unique to the 203K. The bank evaluates the scope of the job and bases the loan on an “after improved value”.
Very basically, the way this loan works is, the bank lends up to 96.5% of the after improved value, basing the loan on the purchase price + the rehab cost. For example, if you buy a home for $300,000 and then you want to do $150,000 renovation, and the after improved value is 450,000, under the 203K program you would get a mortgage of up to $434,250. At closing, the seller would get the $300,000 (purchase price) and the rest of the money would go into an escrow account to be disbursed as needed during the rehab period.
For more information on 203K loans and other loan products contact a local mortgage professional who knows the in’s and out’s of FHA financing. The key to a successful mortgage experience is the professional that you work with.
Tuesday, November 9, 2010
BI Weekly Mortgages
I am on the radio weekly where I do a 15 minute program. In that program I discuss current mortgage trends, tips, the current interest rate environment and I address different mortgage ideas and questions. Last week someone asked me a question regarding a bi-weekly mortgage and whether it is a good idea. It turns out that this was a topic that a lot of the listeners were interested in and since this is offered to almost everyone who has a mortgage I thought it would be a good topic to discuss today, in the Front Page.
First of all, what is a bi-weekly mortgage? A bi-weekly mortgage is your PITI payment (Principal, Interest, Taxes and Insurance) divided in half and then each ½ payment is paid every 2 weeks.
The theory behind it is that a lot of people get paid on a bi-weekly schedule so it would be easier to divide the mortgage payments to match the paychecks and then a home owner could pay the mortgage payment from that check that came in.
The benefit was/is that since there are 52 weeks in a year, there would be 26 mortgage payment installments, which equals 13 payments a year instead of the normal 12 annual installments. By doing the bi-weekly mortgage, the homeowner would seamlessly pre- pay their mortgage loan and finish a 30 year fixed rate loan in 23 years because all additional payments that are made to a mortgage loan are credited towards the principal and the homeowner would be accelerating their principal payments on this schedule and therefore their mortgage would finish that much quicker.
So now: How much does it cost to set it up? Should a homeowner do the bi-weekly mortgage? What happens if you don’t want to continue the bi-weekly schedule?
Some banks will set up the bi-weekly payment initially. Most banks do not. You close on a normal 12 month annual installment mortgage and then after closing the servicing company whom you will be paying your mortgage payments to will send you an offer to convert your loan to a bi-weekly. There is usually a fee of $300-$400.
I must admit that I am not a great fan of bi-weekly mortgages, at least for every one. While it works for some people very well, it also can really tighten a homeowner’s monthly budget. When people by a home they are sometimes very tight and to make the mortgage payment monthly is not easy. While a bi-weekly sounds good, it is an extra payment. This can cause people to fall into credit card debt or to be constantly slightly short which is very stressful on a family. I believe that the most important thing to healthy family finances is not how long you will be paying your mortgage or even how low your interest rate can be, if you took a 20 or 15 year loan instead of a 30 year loan, but to keep the monthly payments manageable; Even if it means never prepaying your mortgage. When the bank approves you for a mortgage, they aren’t factoring babysitting, dry cleaning,lawn service etc. We have to be even more careful not to put ourselves in situations that are financial recipes for failure from the get go.
If you did start a bi weekly and you find that it isn’t working for you, you can back out of the program, but you have to let your mortgage company know. You can’t just sop paying the bi weekly payment. If you miss a biweekly payment you will have to pay a late charge and it will be reported as a late mortgage payment on your credit report.
I met with a new client on Sunday who want to refinance. They are currently in a bi-weekly mortgage. They asked me not to set it up again be-weekly. He said it was working great for him until he lost his job last year. Now in his new job where he is a school guidance counselor, besides him taking a pay cut, he gets paid 10 months a year, twice a month ( the 15th and 30th of every month), not every other week (bi-weekly). In the summer he gets paid for a summer program in one lump sum for the whole summer. He finds it very difficult to manage his finances with the bi weekly. On the flip side I have another client, buying a luxury townhouse condo along the Hudson River and she said she only wants a bi-weekly!!
First of all, what is a bi-weekly mortgage? A bi-weekly mortgage is your PITI payment (Principal, Interest, Taxes and Insurance) divided in half and then each ½ payment is paid every 2 weeks.
The theory behind it is that a lot of people get paid on a bi-weekly schedule so it would be easier to divide the mortgage payments to match the paychecks and then a home owner could pay the mortgage payment from that check that came in.
The benefit was/is that since there are 52 weeks in a year, there would be 26 mortgage payment installments, which equals 13 payments a year instead of the normal 12 annual installments. By doing the bi-weekly mortgage, the homeowner would seamlessly pre- pay their mortgage loan and finish a 30 year fixed rate loan in 23 years because all additional payments that are made to a mortgage loan are credited towards the principal and the homeowner would be accelerating their principal payments on this schedule and therefore their mortgage would finish that much quicker.
So now: How much does it cost to set it up? Should a homeowner do the bi-weekly mortgage? What happens if you don’t want to continue the bi-weekly schedule?
Some banks will set up the bi-weekly payment initially. Most banks do not. You close on a normal 12 month annual installment mortgage and then after closing the servicing company whom you will be paying your mortgage payments to will send you an offer to convert your loan to a bi-weekly. There is usually a fee of $300-$400.
I must admit that I am not a great fan of bi-weekly mortgages, at least for every one. While it works for some people very well, it also can really tighten a homeowner’s monthly budget. When people by a home they are sometimes very tight and to make the mortgage payment monthly is not easy. While a bi-weekly sounds good, it is an extra payment. This can cause people to fall into credit card debt or to be constantly slightly short which is very stressful on a family. I believe that the most important thing to healthy family finances is not how long you will be paying your mortgage or even how low your interest rate can be, if you took a 20 or 15 year loan instead of a 30 year loan, but to keep the monthly payments manageable; Even if it means never prepaying your mortgage. When the bank approves you for a mortgage, they aren’t factoring babysitting, dry cleaning,lawn service etc. We have to be even more careful not to put ourselves in situations that are financial recipes for failure from the get go.
If you did start a bi weekly and you find that it isn’t working for you, you can back out of the program, but you have to let your mortgage company know. You can’t just sop paying the bi weekly payment. If you miss a biweekly payment you will have to pay a late charge and it will be reported as a late mortgage payment on your credit report.
I met with a new client on Sunday who want to refinance. They are currently in a bi-weekly mortgage. They asked me not to set it up again be-weekly. He said it was working great for him until he lost his job last year. Now in his new job where he is a school guidance counselor, besides him taking a pay cut, he gets paid 10 months a year, twice a month ( the 15th and 30th of every month), not every other week (bi-weekly). In the summer he gets paid for a summer program in one lump sum for the whole summer. He finds it very difficult to manage his finances with the bi weekly. On the flip side I have another client, buying a luxury townhouse condo along the Hudson River and she said she only wants a bi-weekly!!
Sunday, October 17, 2010
Schedule A
What is on the schedule A of your tax return that impacts the mortgage approval?
On schedule A is the itemized deductions and un-reimbursed employee expenses. This is a concept that I never had to deal with in the past, but last month alone 4 clients of mine were negatively impacted by the non re-imbursed expenses. What this means is that if the client is a w-2 earner, we still have to deduct these "un-reimbursed expenses. This impacts your approval. I now actually asked to see a tax return prior to issuing a pre-approval letter. The worst thing would be for me to pre-approve a client and then a realtor will spend time showing them homes and negotiating a purchase of the home of their dreams and then to find out well into the process, that they don't qualify!!
On schedule A is the itemized deductions and un-reimbursed employee expenses. This is a concept that I never had to deal with in the past, but last month alone 4 clients of mine were negatively impacted by the non re-imbursed expenses. What this means is that if the client is a w-2 earner, we still have to deduct these "un-reimbursed expenses. This impacts your approval. I now actually asked to see a tax return prior to issuing a pre-approval letter. The worst thing would be for me to pre-approve a client and then a realtor will spend time showing them homes and negotiating a purchase of the home of their dreams and then to find out well into the process, that they don't qualify!!
Wednesday, September 1, 2010
Mortgage Rates May Be Low, But They’re Tough To Pin Down — Especially This Week
Vacation days contribute to jumpy mortgage rates
Mortgage rates are low right now but pinning them down this week could be a challenge. As Labor Day Weekend nears and Wall Streeters take their head-start on the holiday, trading volume will fall, which will cause mortgage rates to get jumpy.
As mortgage rates change, so does the long-term cost of owning a home. Every 1/8 percent adjustment changes a household budget.
Meanwhile, the relationship between “vacation days” and mortgage rate volatility is an interesting one; based more in scarcity than market fundamentals.
Rates tend to get volatile near holidays because of two inter-related facts:
1. Conforming mortgage rates are based on the price of mortgage-backed bonds
2. Mortgage-backed bonds can’t trade without a buyer and a seller at a specific price
So, as the week progresses and more traders leave for their respective “extended” 3-day weekends, there’s fewer buyers and sellers left on Wall Street to connect for a trade. As a result, mortgage bond prices move across larger gaps than on a “normal” day which, in turn, translates into faster, larger changes in rates.
This phenomenon can be exaggerated during periods of economic uncertainty — like what we’re in now — and, furthermore, there’s a bevy of important data set for release this week including the FOMC Minutes, inflation data, and August jobs figures.
In other words, rates would have been volatile without the vacation week. The presence of Labor Day just piles on.
Mortgage rates may rise this week, or they may fall. Either way, if you have a chance to lock something favorable and within your budget, consider doing it. Rates are at all-time lows and likely won’t last.
Mortgage rates are low right now but pinning them down this week could be a challenge. As Labor Day Weekend nears and Wall Streeters take their head-start on the holiday, trading volume will fall, which will cause mortgage rates to get jumpy.
As mortgage rates change, so does the long-term cost of owning a home. Every 1/8 percent adjustment changes a household budget.
Meanwhile, the relationship between “vacation days” and mortgage rate volatility is an interesting one; based more in scarcity than market fundamentals.
Rates tend to get volatile near holidays because of two inter-related facts:
1. Conforming mortgage rates are based on the price of mortgage-backed bonds
2. Mortgage-backed bonds can’t trade without a buyer and a seller at a specific price
So, as the week progresses and more traders leave for their respective “extended” 3-day weekends, there’s fewer buyers and sellers left on Wall Street to connect for a trade. As a result, mortgage bond prices move across larger gaps than on a “normal” day which, in turn, translates into faster, larger changes in rates.
This phenomenon can be exaggerated during periods of economic uncertainty — like what we’re in now — and, furthermore, there’s a bevy of important data set for release this week including the FOMC Minutes, inflation data, and August jobs figures.
In other words, rates would have been volatile without the vacation week. The presence of Labor Day just piles on.
Mortgage rates may rise this week, or they may fall. Either way, if you have a chance to lock something favorable and within your budget, consider doing it. Rates are at all-time lows and likely won’t last.
Monday, August 30, 2010
What’s Ahead For Mortgage Rates This Week : August 30, 2010
What’s Ahead For Mortgage Rates This Week : August 30, 2010
Existing Home Supply (July 2009 - July 2010)Mortgage markets improved last week despite a major mortgage bond sell-off Friday afternoon. Prior to the jump, conforming mortgage rates had cut new, all-time lows by Thursday, only to lose up to 0.250 percent on the last day of the week.
Meanwhile, the same type of news that drove rates lower Monday through Thursday also contributed to rates rising Friday — revised projections for the U.S. economy.
Early in the week, “bad” news piled on which, in turn, lowered expectations for the economy and pushed mortgage rates down:
* Existing Home Sales dropped 27% from June
* Single-Family New Home Sales dropped 12% from June
* Purchases of “big ticket” items plunged
Then, on Friday, two events revised the market’s expectations back higher:
* Q2 GDP was revised lower, but not as low as had been expected
* Fed Chairman Ben Bernanke said the economy will keep expanding through the end of the year and into 2011
When Chairman Bernanke talks, markets listen. His comments about the U.S. economy helped fuel that late-Friday surge in mortgage rates last week.
This week, the momentum could continue — depending on the data.
There’s a lot for markets to digest this week including key inflation figures from the government; home value data from Case-Shiller; Fed Minutes from the Federal Reserve; and, the always-important jobs report due Friday.
Since April, mortgage rates have been on a downward trajectory and that may continue this week. Or, it may not. If you own a home and haven’t talked to your loan officer about a refinance, now is as good a time as any — rates are at historic lows and could rebound at any time.
Last June, mortgage rates rose 1.125% in 10 days. Under the right circumstances, it could happen again.
Existing Home Supply (July 2009 - July 2010)Mortgage markets improved last week despite a major mortgage bond sell-off Friday afternoon. Prior to the jump, conforming mortgage rates had cut new, all-time lows by Thursday, only to lose up to 0.250 percent on the last day of the week.
Meanwhile, the same type of news that drove rates lower Monday through Thursday also contributed to rates rising Friday — revised projections for the U.S. economy.
Early in the week, “bad” news piled on which, in turn, lowered expectations for the economy and pushed mortgage rates down:
* Existing Home Sales dropped 27% from June
* Single-Family New Home Sales dropped 12% from June
* Purchases of “big ticket” items plunged
Then, on Friday, two events revised the market’s expectations back higher:
* Q2 GDP was revised lower, but not as low as had been expected
* Fed Chairman Ben Bernanke said the economy will keep expanding through the end of the year and into 2011
When Chairman Bernanke talks, markets listen. His comments about the U.S. economy helped fuel that late-Friday surge in mortgage rates last week.
This week, the momentum could continue — depending on the data.
There’s a lot for markets to digest this week including key inflation figures from the government; home value data from Case-Shiller; Fed Minutes from the Federal Reserve; and, the always-important jobs report due Friday.
Since April, mortgage rates have been on a downward trajectory and that may continue this week. Or, it may not. If you own a home and haven’t talked to your loan officer about a refinance, now is as good a time as any — rates are at historic lows and could rebound at any time.
Last June, mortgage rates rose 1.125% in 10 days. Under the right circumstances, it could happen again.
Home Affordability Rankings For 225 Metropolitan Statistical Areas
Home Affordability Rankings For 225 Metropolitan Statistical Areas
Home Affordability - Top and Bottom 5 markets 2010 Q2
With home prices holding firm and mortgage rates still dropping, home affordability is reaching new heights.
According to the quarterly Home Opportunity Index as published by the National Association of Home Builders, more than 72 percent of all new and existing homes sold between April-June 2010 were affordable to families earning the national median income.
It’s a slightly higher reading as compared to last quarter, and the second highest reading in the survey’s history.
As with all aspects of real estate, however, home affordability varies by locale.
For example, 97.2% of homes sold in Syracuse were affordable for families making the area’s median income, earning the New York city its first “Most Affordable Major City” designation. Indianapolis was the first quarter winner.
On the opposite end of the spectrum, the “Least Affordable Major City” title went to the New York-White Plains, NY-Wayne, NJ area for the 9th consecutive quarter. Just 19.9% of homes are affordable to families earning the local median income, down 1 percent from last quarter.
The rankings for all 225 metro areas are viewable on the NAHB website but regardless of where you live, buying a home is as affordable as it’s ever been in history. Furthermore, because home values are in recovery and mortgage rates may rise, the market is ripe for those in the market to buy a home.
All things equal, buying a home may never be this inexpensive again. If you were planning to purchase later this year, you may want to move up your time frame.
Home Affordability - Top and Bottom 5 markets 2010 Q2
With home prices holding firm and mortgage rates still dropping, home affordability is reaching new heights.
According to the quarterly Home Opportunity Index as published by the National Association of Home Builders, more than 72 percent of all new and existing homes sold between April-June 2010 were affordable to families earning the national median income.
It’s a slightly higher reading as compared to last quarter, and the second highest reading in the survey’s history.
As with all aspects of real estate, however, home affordability varies by locale.
For example, 97.2% of homes sold in Syracuse were affordable for families making the area’s median income, earning the New York city its first “Most Affordable Major City” designation. Indianapolis was the first quarter winner.
On the opposite end of the spectrum, the “Least Affordable Major City” title went to the New York-White Plains, NY-Wayne, NJ area for the 9th consecutive quarter. Just 19.9% of homes are affordable to families earning the local median income, down 1 percent from last quarter.
The rankings for all 225 metro areas are viewable on the NAHB website but regardless of where you live, buying a home is as affordable as it’s ever been in history. Furthermore, because home values are in recovery and mortgage rates may rise, the market is ripe for those in the market to buy a home.
All things equal, buying a home may never be this inexpensive again. If you were planning to purchase later this year, you may want to move up your time frame.
Monday, August 23, 2010
What’s Ahead For Mortgage Rates This Week : August 23, 2010
Mortgage markets stalled last week in back-and-forth trading as Wall Street grappled with weak housing data, falling builder confidence, and worsening jobs numbers nationwide.
Because markets were volatile, rate shopping was challenging.
Conforming mortgage rates did managed to make a new all-time low last Thursday but quickly gave up those gains. Most of Friday afternoon was spent in the red and, as a result, for the second straight week, mortgage rates failed to fall overall.
But, although last week’s action puts a damper on this summer’s mortgage rate rally, the Refi Boom is still going strong.
According to Freddie Mac, as compared to April 8 when mortgage rates touched their recent high-point, pricing is hugely improved across 3 popular loan products.
30-year fixed : Then, 5.21%; Now, 4.42%
15-year fixed : Then, 4.52%; Now, 3.90%
5-year ARM : Then, 4.25%; Now, 3.56%
As an example of potential savings, a homeowner with a $250,000 30-year fixed rate mortgage would save $96 per month at today’s rates as compared to April’s.
Over the life of a loan, that’s a savings of $34,560.
This week, it’s unlikely that the Refi Boom will meet its end, but that doesn’t mean you should wait for rates to fall further. Mortgage rates tend to change quickly and without notice, and should rates rise, you may find that you’ve missed the market bottom.
If today’s rates appeal to your finances and budget, consider locking something in and moving forward.
Because markets were volatile, rate shopping was challenging.
Conforming mortgage rates did managed to make a new all-time low last Thursday but quickly gave up those gains. Most of Friday afternoon was spent in the red and, as a result, for the second straight week, mortgage rates failed to fall overall.
But, although last week’s action puts a damper on this summer’s mortgage rate rally, the Refi Boom is still going strong.
According to Freddie Mac, as compared to April 8 when mortgage rates touched their recent high-point, pricing is hugely improved across 3 popular loan products.
30-year fixed : Then, 5.21%; Now, 4.42%
15-year fixed : Then, 4.52%; Now, 3.90%
5-year ARM : Then, 4.25%; Now, 3.56%
As an example of potential savings, a homeowner with a $250,000 30-year fixed rate mortgage would save $96 per month at today’s rates as compared to April’s.
Over the life of a loan, that’s a savings of $34,560.
This week, it’s unlikely that the Refi Boom will meet its end, but that doesn’t mean you should wait for rates to fall further. Mortgage rates tend to change quickly and without notice, and should rates rise, you may find that you’ve missed the market bottom.
If today’s rates appeal to your finances and budget, consider locking something in and moving forward.
Tuesday, August 17, 2010
Higher (And Lower) FHA Mortgage Insurance Premiums Start October 4, 2010
FHA mortgage insurance premiums ready to change for the second time this year, the FHA is modifying mortgage insurance.
Beginning with FHA case numbers issued on or after October 4, 2010, the FHA is changing its upfront and annual mortgage insurance premium structure.
Under the new terms, assuming a 30-year fixed rate FHA mortgage with at least 5 percent equity:
* Upfront MIP drops to 1.000% of the amount borrowed from 2.250%
* Annual MIP increases to 0.850% of the amount borrowed from 0.500%
For homeowners, this switch in MIP decreases the upfront cost of an FHA-insured mortgage, but increases the loan’s long-term costs.
Using a $100,000 mortgage as an example, upfront MIP falls to $1,000 from $2,250; monthly MIP jumps to $70.83 from $41.67. The FHA expects the change will yield an additional $300 million in premiums monthly.
The update is a huge win for the FHA whose reserve funds are self-proclaimed to be “perilously low”. The extra monies should help recapitalize and stabilize the government group.
The FHA is on pace to back 1.7 million loans this year.
For the majority of refinancing FHA homeowners and home buyers, the MIP change is neither good nor bad — the borrowing landscape will just looks a bit different. Most people procuring an FHA loan are not choosing between the MIP costs, but are taking the loan because they are putting less than 10% and/or their credit score is low, as low as 620 and/or they have other qualifying specifics that FHA will be okay with and other programs will not. While the loans will be less expensive to procure, they will cost more to carry each month, and therefore more difficult to qualify for.
It may be wise to get your FHA case number before October 4, for example, depending on your time frame in the home and the expected life of the mortgage. Or, it may be better to wait until after October 4 to apply.
If you’re unsure of how the new FHA mortgage premiums will impact your mortgage, be sure to call or email me for help and advice.
NOTE : The FHA originally announced an implementation date of September 7. It was subsequently amended to October 4, 2010.
Beginning with FHA case numbers issued on or after October 4, 2010, the FHA is changing its upfront and annual mortgage insurance premium structure.
Under the new terms, assuming a 30-year fixed rate FHA mortgage with at least 5 percent equity:
* Upfront MIP drops to 1.000% of the amount borrowed from 2.250%
* Annual MIP increases to 0.850% of the amount borrowed from 0.500%
For homeowners, this switch in MIP decreases the upfront cost of an FHA-insured mortgage, but increases the loan’s long-term costs.
Using a $100,000 mortgage as an example, upfront MIP falls to $1,000 from $2,250; monthly MIP jumps to $70.83 from $41.67. The FHA expects the change will yield an additional $300 million in premiums monthly.
The update is a huge win for the FHA whose reserve funds are self-proclaimed to be “perilously low”. The extra monies should help recapitalize and stabilize the government group.
The FHA is on pace to back 1.7 million loans this year.
For the majority of refinancing FHA homeowners and home buyers, the MIP change is neither good nor bad — the borrowing landscape will just looks a bit different. Most people procuring an FHA loan are not choosing between the MIP costs, but are taking the loan because they are putting less than 10% and/or their credit score is low, as low as 620 and/or they have other qualifying specifics that FHA will be okay with and other programs will not. While the loans will be less expensive to procure, they will cost more to carry each month, and therefore more difficult to qualify for.
It may be wise to get your FHA case number before October 4, for example, depending on your time frame in the home and the expected life of the mortgage. Or, it may be better to wait until after October 4 to apply.
If you’re unsure of how the new FHA mortgage premiums will impact your mortgage, be sure to call or email me for help and advice.
NOTE : The FHA originally announced an implementation date of September 7. It was subsequently amended to October 4, 2010.
What’s Ahead For Mortgage Rates This Week
Retail Sales (August 2008 - July 2010)Mortgage markets worsened last week, putting a pause on the mortgage rate rally that dates to mid-April. Mortgage rates rose across ct last week and home affordability suffered.
The Refi Boom remains in full effect, but rates are not as dazzling as they were a week ago.
It’s somewhat strange that mortgage rates rose last week given the heavy dose of negative-bending news.
* The Federal Reserve noted that the economy “has slowed“
* New unemployment claims rose to a 6-month high
* Retail sales — excluding auto sales — rose less than expected
Mortgage rates often to fall on such news, but last week, they rose. The biggest reason was weak demand on a new 30-year bond issuance from the government. In turn, that weakness spilled over into mortgage bonds, which pushed rates up.
This week, mortgage rates could rise or fall — it depends on how new data influences market sentiment.
* Monday : Home builder confidence survey
* Tuesday : Housing Starts and Building Permits; Producer Price Index
* Thursday : Jobless claims; 2 Fed members make speeches
Keep a close eye on the housing-related data early in the week. It’s widely believed that housing will lead the economy forward so a rebound in home builder confidence, or a jump in building permits, for example, should push rates even higher. Weakness
In the meanwhile, if you haven’t called or contacted me regarding a refinance, consider reaching out this week. Rates are lower than they’ve ever been in history and more people are getting financing than the news would have you believe. You can’t know until you ask so make that call today.
The Refi Boom remains in full effect, but rates are not as dazzling as they were a week ago.
It’s somewhat strange that mortgage rates rose last week given the heavy dose of negative-bending news.
* The Federal Reserve noted that the economy “has slowed“
* New unemployment claims rose to a 6-month high
* Retail sales — excluding auto sales — rose less than expected
Mortgage rates often to fall on such news, but last week, they rose. The biggest reason was weak demand on a new 30-year bond issuance from the government. In turn, that weakness spilled over into mortgage bonds, which pushed rates up.
This week, mortgage rates could rise or fall — it depends on how new data influences market sentiment.
* Monday : Home builder confidence survey
* Tuesday : Housing Starts and Building Permits; Producer Price Index
* Thursday : Jobless claims; 2 Fed members make speeches
Keep a close eye on the housing-related data early in the week. It’s widely believed that housing will lead the economy forward so a rebound in home builder confidence, or a jump in building permits, for example, should push rates even higher. Weakness
In the meanwhile, if you haven’t called or contacted me regarding a refinance, consider reaching out this week. Rates are lower than they’ve ever been in history and more people are getting financing than the news would have you believe. You can’t know until you ask so make that call today.
Thursday, August 12, 2010
The Client Who Just Didn’t Listen
Imagine that!! Well we just closed a loan that was a classic case of Murphy’s-law coupled with simple non-compliance by our client, but despite these obstacles the closing took place this week. This is a true story and the purpose is to let all you readers know what NOT to do when applying for a mortgage, going through the mortgage process and buying a home.
It all started with a home going up for sale and my client offering full price. A bidding war ensued and my client eventually bought the house $50,000 over asking price.
The client was buying it together with their parents. The client made a minimal amount and the bulk of the income was from the non-occupying co borrower. It was a simple straightforward file. The down payment was coming from a HELOC, the income was supported by w-2 and pay-stubs and all the #’s worked.
We began processing the file. This was February 2010. We asked for the 2009 w-2 and 2008 tax returns. We got the 2008 w-2, no tax returns and no 2009 w-2. Meanwhile we did the appraisal.
Finally the 2009 w-2 is faxed in. it showed $49,000 while the previous year showed $96,000!! His paystubs showed a weekly salary that would eventually total to $100,000. What happened? He told us that he took a sabbatical? Problem is, he wasn’t a Professor!!
Part of a mortgage file entails numerous verifications and re-verifications of employment. Well my processor called the job to verbally verify that he still works there, and the probability of continued employment and we were floored. Everything fell into place. This is how the conversation went:
Meridian Processor: Hello, I am calling from Meridian Mortgage and I would like t speak with someone who can verify employment for Mr._________.
Receptionist: I can do that.
Meridian Processor: Great, What is his current position?
Receptionist: Manager
Meridian Processor: Fine. What is his probability of continued employment?
Receptionist: What do you mean, of course, he is the BOSS!! He owns this company!!
Well that explained everything, but we had a major problem. If you are self employed and your income is reduces, we can only use the lesser amount with a GREAT and I mean a GREAT explanation as to why this happened and that the income will not continue to slide.
When I asked the client, why he never told me he was self employed and why he tried to hide the information by not providing me with tax returns, he said “someone once told him that for a mortgage, you never tell anyone that you are self employed”. Bad advice! In 2010, you cannot hide that information, we do pull a 4506T, transcripts of tax returns that would clue us in!!
The whole file was a series of bumps and valleys. The icing on the cake was a day before the closing, the client was supposed to prove that he withdrew his money from the Home Equity Line of Credit and deposit it in his checking account for the closing. When he gave us his bank statement printout, there wee numerous smaller deposits (ex. Supposed to withdraw $80,000 instead there were 5 deposits between $15,000 and $20,000 each) It turns out he borrowed the money from a friend because he thought it would be easier for us to close because he wouldn’t have additional debt. This basically just delayed the closing for another week while we worked out this issue.
Anyway they closed and now we are busy as ever closing loans. The lesson is, you must trust and be honest with your mortgage professional. A seasoned mortgage professional will guide you and work out the kinks in your mortgage and you will have a smoother closing !!
Now with rates in the low 4 percent range, we are handling loads of refinances and purchases. Find out about the 0 cost refinance!!
It all started with a home going up for sale and my client offering full price. A bidding war ensued and my client eventually bought the house $50,000 over asking price.
The client was buying it together with their parents. The client made a minimal amount and the bulk of the income was from the non-occupying co borrower. It was a simple straightforward file. The down payment was coming from a HELOC, the income was supported by w-2 and pay-stubs and all the #’s worked.
We began processing the file. This was February 2010. We asked for the 2009 w-2 and 2008 tax returns. We got the 2008 w-2, no tax returns and no 2009 w-2. Meanwhile we did the appraisal.
Finally the 2009 w-2 is faxed in. it showed $49,000 while the previous year showed $96,000!! His paystubs showed a weekly salary that would eventually total to $100,000. What happened? He told us that he took a sabbatical? Problem is, he wasn’t a Professor!!
Part of a mortgage file entails numerous verifications and re-verifications of employment. Well my processor called the job to verbally verify that he still works there, and the probability of continued employment and we were floored. Everything fell into place. This is how the conversation went:
Meridian Processor: Hello, I am calling from Meridian Mortgage and I would like t speak with someone who can verify employment for Mr._________.
Receptionist: I can do that.
Meridian Processor: Great, What is his current position?
Receptionist: Manager
Meridian Processor: Fine. What is his probability of continued employment?
Receptionist: What do you mean, of course, he is the BOSS!! He owns this company!!
Well that explained everything, but we had a major problem. If you are self employed and your income is reduces, we can only use the lesser amount with a GREAT and I mean a GREAT explanation as to why this happened and that the income will not continue to slide.
When I asked the client, why he never told me he was self employed and why he tried to hide the information by not providing me with tax returns, he said “someone once told him that for a mortgage, you never tell anyone that you are self employed”. Bad advice! In 2010, you cannot hide that information, we do pull a 4506T, transcripts of tax returns that would clue us in!!
The whole file was a series of bumps and valleys. The icing on the cake was a day before the closing, the client was supposed to prove that he withdrew his money from the Home Equity Line of Credit and deposit it in his checking account for the closing. When he gave us his bank statement printout, there wee numerous smaller deposits (ex. Supposed to withdraw $80,000 instead there were 5 deposits between $15,000 and $20,000 each) It turns out he borrowed the money from a friend because he thought it would be easier for us to close because he wouldn’t have additional debt. This basically just delayed the closing for another week while we worked out this issue.
Anyway they closed and now we are busy as ever closing loans. The lesson is, you must trust and be honest with your mortgage professional. A seasoned mortgage professional will guide you and work out the kinks in your mortgage and you will have a smoother closing !!
Now with rates in the low 4 percent range, we are handling loads of refinances and purchases. Find out about the 0 cost refinance!!
Tuesday, August 10, 2010
Home Values Within 12.5 Percent Of April 2007 Peak, Nationwide
According the Federal Home Finance Agency’s Home Price Index, home values are now off just 12.5 percent from their April 2007 peak nationwide. This, after a half-percent monthly increase in prices in May, on average.
Given the state of the market since April 2007, the Home Price Index results are a positive for both the housing market and the economy, but we have to remember that May’s half-point increase is an average, and not specific to a particular area.
In contrast to “national markets”, the real estate markets in which you and I live are decidedly local. It’s a major difference and the distinction renders the Home Price Index somewhat less important.
After all, the HPI doesn’t account for housing activity in individual neighborhoods like Bedstuy , nor does it track value across cities like Monsey. Instead, it summarizes data in giant chunks of geography.
A quick look at the HPI regional data proves the point. Of the HPI’s 9 tracked regions, only one was within one-tenth of one percent of the national, half-point average. The others varied by as much 1.3 percent.
As a sample:
* Mountain Region : + 1.7 percent
* New England : + 0.2 percent
* South Atlantic : +1.0 percent
And this is on a regional basis. The HPI’s applicability to state, city and neighborhood markets is even less appropriate.
Real estate values cannot be captured in a national survey. For home buyers and seller, what matters is the economics of a block, on a street, in a neighborhood. That type of granularity can’t be tracked in a report like the Home Price Index.
The best place to get that data is from a local real estate agent that knows the market well.
Given the state of the market since April 2007, the Home Price Index results are a positive for both the housing market and the economy, but we have to remember that May’s half-point increase is an average, and not specific to a particular area.
In contrast to “national markets”, the real estate markets in which you and I live are decidedly local. It’s a major difference and the distinction renders the Home Price Index somewhat less important.
After all, the HPI doesn’t account for housing activity in individual neighborhoods like Bedstuy , nor does it track value across cities like Monsey. Instead, it summarizes data in giant chunks of geography.
A quick look at the HPI regional data proves the point. Of the HPI’s 9 tracked regions, only one was within one-tenth of one percent of the national, half-point average. The others varied by as much 1.3 percent.
As a sample:
* Mountain Region : + 1.7 percent
* New England : + 0.2 percent
* South Atlantic : +1.0 percent
And this is on a regional basis. The HPI’s applicability to state, city and neighborhood markets is even less appropriate.
Real estate values cannot be captured in a national survey. For home buyers and seller, what matters is the economics of a block, on a street, in a neighborhood. That type of granularity can’t be tracked in a report like the Home Price Index.
The best place to get that data is from a local real estate agent that knows the market well.
A Simple Explanation Of The Federal Reserve Statement (August 10, 2010 Edition)
Putting the FOMC statement in plain EnglishToday, in its first meeting in 6 weeks, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged.
The Fed Fund Rate remains at a historical low, within a prescribed target range of 0.000-0.250 percent.
In its press release, the FOMC said that, since June, the pace of economic recovery “has slowed”. Household spending is increasing but remains restrained because of high levels of unemployment, falling home values, and restrictive credit.
Today’s statement shows less economic optimism as compared to the prior year’s worth of FOMC statements dating back to June 2009. The Fed is looking for growth to be “more modest in the near-term” than its previous expectations.
Weaknesses aside, the Fed highlighted strengths in the economy, too:
1. Growth is ongoing on a national level
2. Inflation levels remain exceedingly low
3. Business spending is rising
As expected, the Fed re-affirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period”.
There were no surprises in the Fed’s statement so, as a result, the mortgage market’s reaction to the release has been neutral. Mortgage rates in ct are unchanged this afternoon.
The FOMC’s next meeting is scheduled for September 21, 2010.
The Fed Fund Rate remains at a historical low, within a prescribed target range of 0.000-0.250 percent.
In its press release, the FOMC said that, since June, the pace of economic recovery “has slowed”. Household spending is increasing but remains restrained because of high levels of unemployment, falling home values, and restrictive credit.
Today’s statement shows less economic optimism as compared to the prior year’s worth of FOMC statements dating back to June 2009. The Fed is looking for growth to be “more modest in the near-term” than its previous expectations.
Weaknesses aside, the Fed highlighted strengths in the economy, too:
1. Growth is ongoing on a national level
2. Inflation levels remain exceedingly low
3. Business spending is rising
As expected, the Fed re-affirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period”.
There were no surprises in the Fed’s statement so, as a result, the mortgage market’s reaction to the release has been neutral. Mortgage rates in ct are unchanged this afternoon.
The FOMC’s next meeting is scheduled for September 21, 2010.
Tuesday, August 3, 2010
What Does It Mean To Escrow Taxes And Insurance?
The fiscal responsibility of a homeowner — extends beyond the mortgage’s basic principal and interest repayments. Homeowners are also responsible for the real estate taxes on the home and its insurance premiums, too.
Failure to pay taxes can lead to foreclosure, and failure to insure is breach of your mortgage contract.
As a homeowner, you have a choice about how you manage your real estate tax and insurance bills. You can choose to pay them from your own bank account when the bills come due, or you can choose to pay 1/12 of the annual bill to your mortgage servicer each month, and then let your servicer pay the bills on your behalf when they come due.
Not surprisingly, servicer's prefer the latter method — it reduces two major lender risks:
1. That the home’s real estate taxes go delinquent and are sold to a third-party
2. That the home endures catastrophic damage during a lapse of insurance coverage
In theory, when the servicer is paying the bills, the home’s taxes are always current and the home’s insurance is always paid. This method of managing taxes and insurance is commonly called “escrowing”.
To calculate a home’s monthly escrow payment is simple. Just take the sum of the annual real estate tax bills and insurance bill, then divide it by 12 months in the year.
As a example, a $4,000 annual tax bill with a $800 insurance policy = $4,800 annually = $400 paid into escrow monthly. These monies are collected as part of the regular mortgage payment along with the mortgage’s scheduled principal + interest payment.
Homeowners choosing to escrow tend to get the lowest rate, lowest fee loans. This is because lenders often charge a premium to “waive escrow” (i.e. pay their own taxes and insurance). Escrow waiver fees vary between banks, but can range up to half-percent of the amount borrowed. The larger the loan, the stiffer the penalty in dollar terms.
Choosing to waive escrow can also raise your mortgage rate by up to 0.250 percent.
If you’re unsure whether escrowing is right for you, Call me and we will discuss it. There’s good reason to go either route depending on your profile.
Failure to pay taxes can lead to foreclosure, and failure to insure is breach of your mortgage contract.
As a homeowner, you have a choice about how you manage your real estate tax and insurance bills. You can choose to pay them from your own bank account when the bills come due, or you can choose to pay 1/12 of the annual bill to your mortgage servicer each month, and then let your servicer pay the bills on your behalf when they come due.
Not surprisingly, servicer's prefer the latter method — it reduces two major lender risks:
1. That the home’s real estate taxes go delinquent and are sold to a third-party
2. That the home endures catastrophic damage during a lapse of insurance coverage
In theory, when the servicer is paying the bills, the home’s taxes are always current and the home’s insurance is always paid. This method of managing taxes and insurance is commonly called “escrowing”.
To calculate a home’s monthly escrow payment is simple. Just take the sum of the annual real estate tax bills and insurance bill, then divide it by 12 months in the year.
As a example, a $4,000 annual tax bill with a $800 insurance policy = $4,800 annually = $400 paid into escrow monthly. These monies are collected as part of the regular mortgage payment along with the mortgage’s scheduled principal + interest payment.
Homeowners choosing to escrow tend to get the lowest rate, lowest fee loans. This is because lenders often charge a premium to “waive escrow” (i.e. pay their own taxes and insurance). Escrow waiver fees vary between banks, but can range up to half-percent of the amount borrowed. The larger the loan, the stiffer the penalty in dollar terms.
Choosing to waive escrow can also raise your mortgage rate by up to 0.250 percent.
If you’re unsure whether escrowing is right for you, Call me and we will discuss it. There’s good reason to go either route depending on your profile.
Monday, August 2, 2010
What’s Ahead For Mortgage Rates This Week : August 2, 2010
Mortgage markets improved last week, pushing mortgage rates lower for the 6th time in seven weeks.
Since April, rates in have been on a downward path, spurring refinances in most markets and sparking the start of a Refi Boom.
Last week, 3 key stories played a role in falling rates:
1. Demand was strong for U.S. government debt
2. Emerging concerns of a Japan-style deflation in the U.S.
3. Personal Spending since late-2007 was shown to be less than previously thought
Of the three, it’s the measured drop in Personal Spending for which rate shoppers and home buyers in Brooklyn should watch. Drops in spending slow down the economy which, in turn, tends to pull mortgage rates lower.
Long-term, deflation could be a drag on rates, too. For now, though, it’s just a conversation among academics and economists.
This week, mortgage rates could move up or down — a lot hinges on the results on July’s Non-Farm Payrolls report.
More commonly called “the jobs report”, Non-Farm Payrolls hits the wires Friday at 8:30 AM ET. Markets are expecting a 75,000 net loss of jobs last month. If the actual number is higher, mortgage rates should rise. If the actual number is lower, mortgage rates should fall.
With the jobs numbers not due until Friday morning, expect choppy trading through Thursday’s market close. There’s a handful of economic data set for release including Personal Consumption Expenditures (Tuesday), Pending Home Sales (Tuesday) and Jobless Claims (Thursday). Each has the potential to move mortgage rates.
The Refi Boom is ongoing but when it ends, it will end in a hurry. If you’ve been thinking about a refinance, contact your loan officer about your options sooner rather than later.
Since April, rates in have been on a downward path, spurring refinances in most markets and sparking the start of a Refi Boom.
Last week, 3 key stories played a role in falling rates:
1. Demand was strong for U.S. government debt
2. Emerging concerns of a Japan-style deflation in the U.S.
3. Personal Spending since late-2007 was shown to be less than previously thought
Of the three, it’s the measured drop in Personal Spending for which rate shoppers and home buyers in Brooklyn should watch. Drops in spending slow down the economy which, in turn, tends to pull mortgage rates lower.
Long-term, deflation could be a drag on rates, too. For now, though, it’s just a conversation among academics and economists.
This week, mortgage rates could move up or down — a lot hinges on the results on July’s Non-Farm Payrolls report.
More commonly called “the jobs report”, Non-Farm Payrolls hits the wires Friday at 8:30 AM ET. Markets are expecting a 75,000 net loss of jobs last month. If the actual number is higher, mortgage rates should rise. If the actual number is lower, mortgage rates should fall.
With the jobs numbers not due until Friday morning, expect choppy trading through Thursday’s market close. There’s a handful of economic data set for release including Personal Consumption Expenditures (Tuesday), Pending Home Sales (Tuesday) and Jobless Claims (Thursday). Each has the potential to move mortgage rates.
The Refi Boom is ongoing but when it ends, it will end in a hurry. If you’ve been thinking about a refinance, contact your loan officer about your options sooner rather than later.
Monday, July 19, 2010
Pre approval..Why?
The third week of July has brought once again record low interest rates. Getting a mortgage in 2010 is different than in prior years. It takes expertise to navigate the mortgage process. The key to a successful and great mortgage experience is EDUCATION. When I meet with a potential client I take the time to educate them on what to expect and I review all of their paperwork so that we can prepare for whatever would come up. Home buying, especially the first time homebuyer is the foundation to the healing of the economy. When someone buys a home, they move, they fix the home and garden, etc. They use the services of contractors, gardeners, and movers. They shop at hardware stores, furniture stores and the vast and sundry retail and discount stores that sell household items. This causes an economic ripple affect that’s stimulates the economy. Buying a home, though, can be real scary especially today with all the negative news. A first time homebuyer may be scared to take themselves this huge step.
The questions that come up are often, are, what does it mean to be “qualified” for a mortgage? How can a mortgage professional determine if a person(s) qualifies for a loan?
What does the process entail? What steps can a person take to ensure that they will qualify for the best mortgage rate available? How can a person determine if they are being approved for the best mortgage program possible? Why is it important to know what your taxes will be and why is it important to have your credit checked?
Well let’s start with the basics. When you are thinking about buying a house it is very important to first be pre qualifies/pre approved for a mortgage. This is important for the buyer but even more important to the seller. For the buyer because they should know if they can get a loan before they look for a home and spend money on inspections and attorneys etc. For the seller, I believe it is actually more crucial. When a seller accepts an offer, they take their home off the market. They sign contract with their potential buyers. If those buyers don’t get a mortgage, they have lost precious time in marketing their home. They have lost the opportunity of showing the home to a broader range of potential buyers. This can cause for the seller to lose thousands and tens of thousands of dollars. I recently closed a mortgage loan for a buyer who purchased a home for $540,000. This home had been in contract previously with an unqualified client. The home had been off the market for 6 months while the buyer tried to get a mortgage, The attorney for the buyer kept on requesting commitment extensions. The buyer actually had applied to three lenders and was turned down by all three. The seller was in a terrible financial situation. They had to move to another city. The husband had been out of work and finally got a job. It was for less money and he could not commute. Their credit had been compromised; they couldn’t afford to keep the house. It had originally been under contract for $610,000. It was 10 years old, 3,600 square foot colonial. They put it back on the market for a “quick sale” and my customers purchased the home for $540,000 as long as they guaranteed a 30-day closing.
The questions that come up are often, are, what does it mean to be “qualified” for a mortgage? How can a mortgage professional determine if a person(s) qualifies for a loan?
What does the process entail? What steps can a person take to ensure that they will qualify for the best mortgage rate available? How can a person determine if they are being approved for the best mortgage program possible? Why is it important to know what your taxes will be and why is it important to have your credit checked?
Well let’s start with the basics. When you are thinking about buying a house it is very important to first be pre qualifies/pre approved for a mortgage. This is important for the buyer but even more important to the seller. For the buyer because they should know if they can get a loan before they look for a home and spend money on inspections and attorneys etc. For the seller, I believe it is actually more crucial. When a seller accepts an offer, they take their home off the market. They sign contract with their potential buyers. If those buyers don’t get a mortgage, they have lost precious time in marketing their home. They have lost the opportunity of showing the home to a broader range of potential buyers. This can cause for the seller to lose thousands and tens of thousands of dollars. I recently closed a mortgage loan for a buyer who purchased a home for $540,000. This home had been in contract previously with an unqualified client. The home had been off the market for 6 months while the buyer tried to get a mortgage, The attorney for the buyer kept on requesting commitment extensions. The buyer actually had applied to three lenders and was turned down by all three. The seller was in a terrible financial situation. They had to move to another city. The husband had been out of work and finally got a job. It was for less money and he could not commute. Their credit had been compromised; they couldn’t afford to keep the house. It had originally been under contract for $610,000. It was 10 years old, 3,600 square foot colonial. They put it back on the market for a “quick sale” and my customers purchased the home for $540,000 as long as they guaranteed a 30-day closing.
Wednesday, July 14, 2010
Mandatory Loan Fees Keep Borrowers From Getting Their Absolute Lowest Rate
Conforming mortgage rates may be posting all-time lows this week, but that doesn’t mean you’ll be eligible for them. You may have already called your loan officer and found this out the hard way.
It’s because of a federally-mandated mortgage-pricing scheme known as “loan-level pricing adjustments”.
In effect since April 2009, loan-level pricing adjustments are changes to a loan’s base rate and/or fee structure based on that loan’s inherent risk to Wall Street. It’s similar to auto insurance pricing adjustment in that a sports car, all things equal, will cost more to insure than a comparably-priced minivan.
More risk, more cost.
In mortgage lending, loan risk can be loosely grouped into 5 categories. Mortgage applications in Brooklyn featuring any of the five traits are subject to price adjustments:
Credit Score (i.e. the borrower’s FICO is below 740)
Property Type (i.e. the subject property is a multi-unit home)
Occupancy (i.e. the subject property is an investment home)
Structure (i.e. there is a subordinate/junior lien on title)
Equity (i.e. mortgage insurance is required by the lender)
Furthermore, loan-level pricing adjustments are cumulative.
A 3-unit investment home will face larger adjustments than an owner-occupied 3-unit home, for example. It’s these adjustments that explain why you may not be eligible for the rates you see advertised online and in the newspapers — your particular loan may be subject to this risk-based pricing that raises your mortgage rate and closing costs.
The government’s loan-level pricing adjustment schedule is public information. See what your lender and how your loan quote is made at the Fannie Mae website. Or, if you find the charts confusing, just call or email me for help with interpretation.
It’s because of a federally-mandated mortgage-pricing scheme known as “loan-level pricing adjustments”.
In effect since April 2009, loan-level pricing adjustments are changes to a loan’s base rate and/or fee structure based on that loan’s inherent risk to Wall Street. It’s similar to auto insurance pricing adjustment in that a sports car, all things equal, will cost more to insure than a comparably-priced minivan.
More risk, more cost.
In mortgage lending, loan risk can be loosely grouped into 5 categories. Mortgage applications in Brooklyn featuring any of the five traits are subject to price adjustments:
Credit Score (i.e. the borrower’s FICO is below 740)
Property Type (i.e. the subject property is a multi-unit home)
Occupancy (i.e. the subject property is an investment home)
Structure (i.e. there is a subordinate/junior lien on title)
Equity (i.e. mortgage insurance is required by the lender)
Furthermore, loan-level pricing adjustments are cumulative.
A 3-unit investment home will face larger adjustments than an owner-occupied 3-unit home, for example. It’s these adjustments that explain why you may not be eligible for the rates you see advertised online and in the newspapers — your particular loan may be subject to this risk-based pricing that raises your mortgage rate and closing costs.
The government’s loan-level pricing adjustment schedule is public information. See what your lender and how your loan quote is made at the Fannie Mae website. Or, if you find the charts confusing, just call or email me for help with interpretation.
Monday, July 12, 2010
Is a Pre approval more important for the buyer or the seller?
The second week of July has brought once again record low interest rates. Getting a mortgage in 2010 is different than in prior years. It takes expertise to navigate the mortgage process. The key to a successful and great mortgage experience is EDUCATION. When I meet with a potential client I take the time to educate them on what to expect and I review all of their paperwork so that we can prepare for whatever would come up. Home buying, especially the first time homebuyer is the foundation to the healing of the economy. When someone buys a home, they move, they fix the home and garden, etc. They use the services of contractors, gardeners, and movers. They shop at hardware stores, furniture stores and the vast and sundry retail and discount stores that sell household items. This causes an economic ripple affect that’s stimulates the economy. Buying a home, though, can be real scary especially today with all the negative news. A first time homebuyer may be scared to take this huge step.
The questions that come up are often, are, what does it mean to be “qualified” for a mortgage? How can a mortgage professional determine if a person(s) qualifies for a loan?
What does the process entail? What steps can a person take to ensure that they will qualify for the best mortgage rate available? How can a person determine if they are being approved for the best mortgage program possible? Why is it important to know what your taxes will be and why is it important to have your credit checked?
Well let’s start with the basics. When you are thinking about buying a house it is very important to first be pre qualifies/pre approved for a mortgage. This is important for the buyer but even more important to the seller. For the buyer because they should know if they can get a loan before they look for a home and spend money on inspections and attorneys etc. For the seller, I believe it is actually more crucial. When a seller accepts an offer, they take their home off the market. They sign contract with their potential buyers. If those buyers don’t get a mortgage, they have lost precious time in marketing their home. They have lost the opportunity of showing the home to a broader range of potential buyers. This can cause for the seller to lose thousands and tens of thousands of dollars. I recently closed a mortgage loan for a buyer who purchased a home for $540,000. This home had been in contract previously with an unqualified client. The home had been off the market for 6 months while the buyer tried to get a mortgage, The attorney for the buyer kept on requesting commitment extensions. The buyer actually had applied to three lenders and was turned down by all three. The seller was in a terrible financial situation. They had to move to another city. The husband had been out of work and finally got a job. It was for less money and he could not commute. Their credit had been compromised; they couldn’t afford to keep the house. It had originally been under contract for $610,000. It was 10 years old, 3,600 square foot colonial. They put it back on the market for a “quick sale” and my customers purchased the home for $540,000 as long as they guaranteed a 30-day closing.
So we all agree that a pre approved client is crucial for the seller. What do I do when I pre approve my clients?
Firstly, I ask lots of questions.
I need to know what is going on. I ask detailed income questions and asset questions. I run a mortgage credit report, which pulls credit from 3 bureaus, Trans Union, Experian and Equifax. I get the clients credit scores and I review it carefully. Once I have the Income information, and the asset information and I know the debt information, I use estimated tax and insurance figures to calculate a proposed mortgage payment that the client can afford. I then figure out based on this information what is the maximum mortgage amount that this client can borrow.
There are a lot of variables. What if the taxes are higher than we estimated? And what if they are lower? What if something changes with the income or the assets? I once had a client that gave $20,000 to a sibling to pay for brain surgery on their nephew, which wasn’t covered completely by insurance. Now the client was putting less money down. It is so important to have an open dialogue with the clients and all other parties involved.
A question that often comes up is, why do you need to know the taxes? I can pay them myself? Or who chooses the insurance agent? As far as the taxes, even if you pay them your selves, I have to calculate them as part of your monthly payment, because they need to paid and you must qualify to pay them. As far as insurance, you choose your own agent.
For people reading this article, I have handy free information upon request, on “How to chose a Realtor”, “How to chose Home Inspector”, “How to improve and maintain your credit score” and a very handy “Complete Homebuyers Guide”.
If you have any questions regarding any mortgage issue, contact Ann Zeilingold, Branch Manager of First Meridian Mortgage Corp. Licensed Mortgage Banker NY, NJ, CT, PA banking departments. 1609 Route 202, Pomona NY 10970. 845-354-9700
The questions that come up are often, are, what does it mean to be “qualified” for a mortgage? How can a mortgage professional determine if a person(s) qualifies for a loan?
What does the process entail? What steps can a person take to ensure that they will qualify for the best mortgage rate available? How can a person determine if they are being approved for the best mortgage program possible? Why is it important to know what your taxes will be and why is it important to have your credit checked?
Well let’s start with the basics. When you are thinking about buying a house it is very important to first be pre qualifies/pre approved for a mortgage. This is important for the buyer but even more important to the seller. For the buyer because they should know if they can get a loan before they look for a home and spend money on inspections and attorneys etc. For the seller, I believe it is actually more crucial. When a seller accepts an offer, they take their home off the market. They sign contract with their potential buyers. If those buyers don’t get a mortgage, they have lost precious time in marketing their home. They have lost the opportunity of showing the home to a broader range of potential buyers. This can cause for the seller to lose thousands and tens of thousands of dollars. I recently closed a mortgage loan for a buyer who purchased a home for $540,000. This home had been in contract previously with an unqualified client. The home had been off the market for 6 months while the buyer tried to get a mortgage, The attorney for the buyer kept on requesting commitment extensions. The buyer actually had applied to three lenders and was turned down by all three. The seller was in a terrible financial situation. They had to move to another city. The husband had been out of work and finally got a job. It was for less money and he could not commute. Their credit had been compromised; they couldn’t afford to keep the house. It had originally been under contract for $610,000. It was 10 years old, 3,600 square foot colonial. They put it back on the market for a “quick sale” and my customers purchased the home for $540,000 as long as they guaranteed a 30-day closing.
So we all agree that a pre approved client is crucial for the seller. What do I do when I pre approve my clients?
Firstly, I ask lots of questions.
I need to know what is going on. I ask detailed income questions and asset questions. I run a mortgage credit report, which pulls credit from 3 bureaus, Trans Union, Experian and Equifax. I get the clients credit scores and I review it carefully. Once I have the Income information, and the asset information and I know the debt information, I use estimated tax and insurance figures to calculate a proposed mortgage payment that the client can afford. I then figure out based on this information what is the maximum mortgage amount that this client can borrow.
There are a lot of variables. What if the taxes are higher than we estimated? And what if they are lower? What if something changes with the income or the assets? I once had a client that gave $20,000 to a sibling to pay for brain surgery on their nephew, which wasn’t covered completely by insurance. Now the client was putting less money down. It is so important to have an open dialogue with the clients and all other parties involved.
A question that often comes up is, why do you need to know the taxes? I can pay them myself? Or who chooses the insurance agent? As far as the taxes, even if you pay them your selves, I have to calculate them as part of your monthly payment, because they need to paid and you must qualify to pay them. As far as insurance, you choose your own agent.
For people reading this article, I have handy free information upon request, on “How to chose a Realtor”, “How to chose Home Inspector”, “How to improve and maintain your credit score” and a very handy “Complete Homebuyers Guide”.
If you have any questions regarding any mortgage issue, contact Ann Zeilingold, Branch Manager of First Meridian Mortgage Corp. Licensed Mortgage Banker NY, NJ, CT, PA banking departments. 1609 Route 202, Pomona NY 10970. 845-354-9700
Sunday, June 6, 2010
A Co-Signor or Co-Borrower-The Inside Story
The most common question that I was asked this past week was "What are the consequences of co-signing for someone else’s mortgage"?
In 2010, if a someone looking to buy a home and they do not qualify because their income is too low, a non occupying co-borrower is a great solution, but it does come with serious responsibilities for the co-borrower and serious concerns for the home purchaser.
The first thing to address is the term "co-signor" vs. "Co-borrower". When you sign for someone else you are co-borrower with equal ownership and equal responsibility to repay the loan. It is not like the traditional co-signor relationship where if the loan were to default then you have to step up to the plate and pay it back, you are equally responsible. That means that the loan is on your credit report, if it is late, then you will be reported as late.
Let us answer the questions that come up:
How will this affect my credit?
This loan will be listed on your credit along with all of your other debts. If it is paid on time it will build your score. If it is paid late, it will harm your score.
Will only 1/2 the loan be my responsibility and only that portion be on my credit report?
Since you are an equal; partner in this mortgage debt, your credit report will reflect the entire liability, just like the primary borrower.
If I want to buy a house in the future, Will I be able to qualify for another mortgage if this mortgage is on my credit report?
If the loan is being paid on time, and the other party’s check is paying the loan and you can prove 12 months canceled checks from the other party, then this debt is excluded from the debt ratio. Now this is a current mortgage qualification guideline. As we have seen in the last 18 months there have been tougher restrictions on qualifications for a mortgage, so this may change, although I haven’t heard anything yet.
For how many years am I responsible
You are responsible for as long as the loan lasts.
If I have a co borrower, what happens if something happens to me, will they now "inherit" or "own" my house?
This is a great question. My answer is to speak to your attorney. There can be issues and they should be addressed up front. Your attorney should advise you on these sensitive issues.
How will this debt affect my debt-to-income ratio on other credit that I may have?
This debt will be on your credit report and can affect your ability to get credit.
Will I be considered a “First Time Home Buyer” if I am a co-borrower?
Some First time home-buyers programs only check to see if you have claimed the mortgage interest deduction on your tax return. So if you aren’t paying the mortgage and you do not claim the interest, you may still qualify. I would say that you should go into this assuming that you wouldn’t qualify and if you want to buy a home down the road, look into each available program at that time.
If I have poor credit, will a co-borrower with great credit help me?
We qualify customers based on the lower middle score of all the borrowers. So while a co-borrower with great credit is great, it won’t mitigate the fact that your credit is poor.
Who is the best candidate to be a non-occupying co-borrower?
In my opinion, someone who is very close to you, preferably a close family member like a parent or grandparent.
If you have any questions regarding any mortgage issue, contact Ann Zeilingold, Branch Manager of First Meridian Mortgage Corp. Licensed Mortgage Banker NY, NJ, CT, PA banking departments. 1609 Route 202, Pomona NY 10970. 845-354-9700 or azeilingold@yahoo.com.
In 2010, if a someone looking to buy a home and they do not qualify because their income is too low, a non occupying co-borrower is a great solution, but it does come with serious responsibilities for the co-borrower and serious concerns for the home purchaser.
The first thing to address is the term "co-signor" vs. "Co-borrower". When you sign for someone else you are co-borrower with equal ownership and equal responsibility to repay the loan. It is not like the traditional co-signor relationship where if the loan were to default then you have to step up to the plate and pay it back, you are equally responsible. That means that the loan is on your credit report, if it is late, then you will be reported as late.
Let us answer the questions that come up:
How will this affect my credit?
This loan will be listed on your credit along with all of your other debts. If it is paid on time it will build your score. If it is paid late, it will harm your score.
Will only 1/2 the loan be my responsibility and only that portion be on my credit report?
Since you are an equal; partner in this mortgage debt, your credit report will reflect the entire liability, just like the primary borrower.
If I want to buy a house in the future, Will I be able to qualify for another mortgage if this mortgage is on my credit report?
If the loan is being paid on time, and the other party’s check is paying the loan and you can prove 12 months canceled checks from the other party, then this debt is excluded from the debt ratio. Now this is a current mortgage qualification guideline. As we have seen in the last 18 months there have been tougher restrictions on qualifications for a mortgage, so this may change, although I haven’t heard anything yet.
For how many years am I responsible
You are responsible for as long as the loan lasts.
If I have a co borrower, what happens if something happens to me, will they now "inherit" or "own" my house?
This is a great question. My answer is to speak to your attorney. There can be issues and they should be addressed up front. Your attorney should advise you on these sensitive issues.
How will this debt affect my debt-to-income ratio on other credit that I may have?
This debt will be on your credit report and can affect your ability to get credit.
Will I be considered a “First Time Home Buyer” if I am a co-borrower?
Some First time home-buyers programs only check to see if you have claimed the mortgage interest deduction on your tax return. So if you aren’t paying the mortgage and you do not claim the interest, you may still qualify. I would say that you should go into this assuming that you wouldn’t qualify and if you want to buy a home down the road, look into each available program at that time.
If I have poor credit, will a co-borrower with great credit help me?
We qualify customers based on the lower middle score of all the borrowers. So while a co-borrower with great credit is great, it won’t mitigate the fact that your credit is poor.
Who is the best candidate to be a non-occupying co-borrower?
In my opinion, someone who is very close to you, preferably a close family member like a parent or grandparent.
If you have any questions regarding any mortgage issue, contact Ann Zeilingold, Branch Manager of First Meridian Mortgage Corp. Licensed Mortgage Banker NY, NJ, CT, PA banking departments. 1609 Route 202, Pomona NY 10970. 845-354-9700 or azeilingold@yahoo.com.
Friday, May 21, 2010
Here's a handy list of 10 things you can do to kill your chances of getting a loan today. And the 1 strategy that you need, to insure a smooth closing
1. The house just needs too much work.
This applies to REO's, foreclosures, and short sales... sure they're good deal, but the financing can be rough. Any broken windows, bad appliances, leaking roof, water damage, obvious mold, health or safety issues, structural problems and of course any liens.
2. Low Appraisal
Appraisal used to be a "rubber stamp"... those days are long gone and best forgotten. Today, appraisers are trying hard to "prove up" your purchase price... and standards have become tougher (good!). If the appraiser can't, in good faith, shore up your purchase price... they're just not gonna. Re-negotiations (post appraisal) are becoming much more common.
3. Borrower has too much debt.
Back in the day, large debt/income ratios were given a "blind eye"... no more. 35-40% debt ratios are the top end... the guidelines have become very tight... and if your buyer does qualify... make sure they don't make any large purchases just prior to closing, as many lenders are pulling credit just before closing... and if something has changed.... weee doggies, lookout!
4. Buyer is self-employed.
Lenders today are looking for 2 years of tax returns for those who are self employed. And they look at you cross-eyed if your income is declining. Real income will not be used (such as a Waiter who doesn't report all his tips)... they're going to be based on the income shown on your tax return.
5. Borrower has just started being paid by commission only.
In an effort to save money, some companies have switched their long term employees to commission. Lenders will not count commissions unless they can show a history of at least 2 years.
6. Your tax return doesn't match your IRS transcript.
Oh, this is a fun one. Used to be that you submitted a printout of your tax return, and the lenders just "believed" you. Sometimes they would pull a copy of the return for their files, but only after closing. Today, they are pulling transcripts prior to closing, and if they don't match up.. .(in other words, you "doctored" your printout)... that's fraud, and the deal is off, the loan is dead. (And keep in mind that lying on a mortgage application is a federal offense, punishable by time in your local penitentiary!!)
7. You can't get PMI.
Again, PMI (Private Mortgage Insurance) used to be a "given"... no more. There are only two or three PMI companies nationwide, and they are picky, picky, picky. It is possible, today, to be approved for your loan, and yet denied PMI. Your credit needs to be good... you need to have low debt, and the better your down-payment, the happier they are.
8. The condominium has issues.
Lenders are looking closer and closer at condo budgets, reserves and their general financial health. They're concerned about any pending litigation, and upcoming special assessments. Lenders have recently been pushing condo boards to increase their Fidelity bond... enough to cover at least 3 months of residents not paying their assessments. And they're taking a hard look at any owners (other than the developer) who owns more than 10% of the units.
9. You haven't allowed enough time for your loan processing.
All of these tighter guidelines are causing long approval times. The loan papers are often only good for 90 days or so... and if you get to that deadline, and have to rework the papers, that could cause a delay. If you're purchasing a HUD property... a delay could cost you the property entirely. Allow plenty of time for short-sale approvals, and even for standard mortgages. Realtors need to be hands-on with the lender and loan officers.
10. You don't have all the necessary financial paperwork.
Lenders are looking for more documentation than ever. They want to see Bank Statements, verification of large deposits or gifts, earnest money and rent checks. They may ask for letters of explanation on credit inquiries, missed or late payments, income fluctuations. Make sure to have all your ducks in a row.
The one good defensive strategy to insure a smooth closing is to work with a good mortgage banker.
Here are 10 reasons why and to whom:
1. A mortgage banker that is preferably local or understands your local market
2. A mortgage banker that is small enough to have a localized AMC (Appraisal Management Company)
3. A mortgage banker that is experienced and therefore capable of structuring your mortgage loan
4. A mortgage professional that is not on a salary, and therefore they have a vested interest in their own success as opposed to just doing their current job with the sole intent to climb the corporate ladder
5. A mortgage professional that invests in the community at large
6. A mortgage professional that understands the markets and is educated, SELF educated!
7. A mortgage banker that has choices; they don't just sell to one bank so they are more flexible in their underwriting
8. A mortgage professional that is connected to national resources in regard to training, industry news, education and other like professionals
9. A mortgage professional that educates their clients in advance so that the necessary financial paperwork is in order
10.A proactive mortgage professional who thinks of solutions before the problem occurs.
This applies to REO's, foreclosures, and short sales... sure they're good deal, but the financing can be rough. Any broken windows, bad appliances, leaking roof, water damage, obvious mold, health or safety issues, structural problems and of course any liens.
2. Low Appraisal
Appraisal used to be a "rubber stamp"... those days are long gone and best forgotten. Today, appraisers are trying hard to "prove up" your purchase price... and standards have become tougher (good!). If the appraiser can't, in good faith, shore up your purchase price... they're just not gonna. Re-negotiations (post appraisal) are becoming much more common.
3. Borrower has too much debt.
Back in the day, large debt/income ratios were given a "blind eye"... no more. 35-40% debt ratios are the top end... the guidelines have become very tight... and if your buyer does qualify... make sure they don't make any large purchases just prior to closing, as many lenders are pulling credit just before closing... and if something has changed.... weee doggies, lookout!
4. Buyer is self-employed.
Lenders today are looking for 2 years of tax returns for those who are self employed. And they look at you cross-eyed if your income is declining. Real income will not be used (such as a Waiter who doesn't report all his tips)... they're going to be based on the income shown on your tax return.
5. Borrower has just started being paid by commission only.
In an effort to save money, some companies have switched their long term employees to commission. Lenders will not count commissions unless they can show a history of at least 2 years.
6. Your tax return doesn't match your IRS transcript.
Oh, this is a fun one. Used to be that you submitted a printout of your tax return, and the lenders just "believed" you. Sometimes they would pull a copy of the return for their files, but only after closing. Today, they are pulling transcripts prior to closing, and if they don't match up.. .(in other words, you "doctored" your printout)... that's fraud, and the deal is off, the loan is dead. (And keep in mind that lying on a mortgage application is a federal offense, punishable by time in your local penitentiary!!)
7. You can't get PMI.
Again, PMI (Private Mortgage Insurance) used to be a "given"... no more. There are only two or three PMI companies nationwide, and they are picky, picky, picky. It is possible, today, to be approved for your loan, and yet denied PMI. Your credit needs to be good... you need to have low debt, and the better your down-payment, the happier they are.
8. The condominium has issues.
Lenders are looking closer and closer at condo budgets, reserves and their general financial health. They're concerned about any pending litigation, and upcoming special assessments. Lenders have recently been pushing condo boards to increase their Fidelity bond... enough to cover at least 3 months of residents not paying their assessments. And they're taking a hard look at any owners (other than the developer) who owns more than 10% of the units.
9. You haven't allowed enough time for your loan processing.
All of these tighter guidelines are causing long approval times. The loan papers are often only good for 90 days or so... and if you get to that deadline, and have to rework the papers, that could cause a delay. If you're purchasing a HUD property... a delay could cost you the property entirely. Allow plenty of time for short-sale approvals, and even for standard mortgages. Realtors need to be hands-on with the lender and loan officers.
10. You don't have all the necessary financial paperwork.
Lenders are looking for more documentation than ever. They want to see Bank Statements, verification of large deposits or gifts, earnest money and rent checks. They may ask for letters of explanation on credit inquiries, missed or late payments, income fluctuations. Make sure to have all your ducks in a row.
The one good defensive strategy to insure a smooth closing is to work with a good mortgage banker.
Here are 10 reasons why and to whom:
1. A mortgage banker that is preferably local or understands your local market
2. A mortgage banker that is small enough to have a localized AMC (Appraisal Management Company)
3. A mortgage banker that is experienced and therefore capable of structuring your mortgage loan
4. A mortgage professional that is not on a salary, and therefore they have a vested interest in their own success as opposed to just doing their current job with the sole intent to climb the corporate ladder
5. A mortgage professional that invests in the community at large
6. A mortgage professional that understands the markets and is educated, SELF educated!
7. A mortgage banker that has choices; they don't just sell to one bank so they are more flexible in their underwriting
8. A mortgage professional that is connected to national resources in regard to training, industry news, education and other like professionals
9. A mortgage professional that educates their clients in advance so that the necessary financial paperwork is in order
10.A proactive mortgage professional who thinks of solutions before the problem occurs.
Thursday, May 20, 2010
Reality Mortgage Episode: The Appraisal that Baffled the Realtors and Confused the Buyers
This story unfortunately is typical in 2010.The perfect home, the perfect buyer, anxious sellers and friendly realtors.The clients signed contract, were putting 20% down and then they applied for their mortgage. They applied at a bank branch of a well-known bank.An appraisal was ordered and guess what: it came in 100,000 short.The realtors called a very respected local appraiser who told them that the value was clearly there and the other appraisal was off the mark.All my stories have happy endings.Since my AMC (Appraisal management Company) only uses LOCAL appraisers, the deal came to me and I was able to appraise it, commit it and lock the rate at 4.75%!! I can’t tell you how important it is to apply to a local mortgage professional, who has a vested interest in their reputation.I have built my reputation for the past 22 years as a professional who gets the job done right, efficiently, timely and with great rates and service to my clients. Unlike the employee of a local bank branch that is taking mortgage applications now because that is his/her job description until they climb the next rung on the corporate ladder, I am here to stay.
Wednesday, May 12, 2010
Reality Mortgage Episode: The Mortgage Broker Who Couldn’t
This client signed contract in February. It was 9:30 in the evening on April 21, when I got the frantic call. It was from desperate Realtor, with a frantic client on the other line. The client went to a mortgage broker who was referred to them by a family member. He was working on their loan, requesting documents and more documents, but they never got a commitment or even ordered their appraisal. Well, the closing date on the contract was supposed to be in 2 days April 23rd, and this Broker said, I don’t think that you can get a loan. Well I met this couple at 2:00 the next afternoon. It took me 5 days and I was able to get an extension on their closing date, order an appraisal, get a commitment and the closing is scheduled for this Friday!!!
Tuesday, May 11, 2010
Education, the Key to a succesful Home Buying Experience
The second week of May has brought once again record low interest rates. Getting a mortgage in 2010 is different than in prior years. It takes expertise to navigate the mortgage process. The key to a successful and great mortgage experience is EDUCATION. When I meet with a potential client I take the time to educate them on what to expect and I review all of their paperwork so that we can prepare for whatever would come up. Home buying, especially the first time home-buyer is the foundation to the healing of the economy. When someone buys a home, they move, they fix the home and garden, etc. They use the services of contractors, gardeners, and movers. They shop at hardware stores, furniture stores and the vast and sundry retail and discount stores that sell household items. This causes an economic ripple affect that’s stimulates the economy. Buying a home, though, can be real scary especially today with all the negative news. A first time home-buyer may be scared to take themselves this huge step.
There are so many things to consider. That’s why a home-buyer seminar in our area is so crucial. Education is key and valuable information is priceless.
What you will learn at the First Time Home-buyer’s Seminar:
1. Credit. The importance of a good credit score. The components of your credit score and multiple strategies on how you can boost your credit score. A difference between one point on your credit score can cost you on a $400,000 mortgage an additional $4,000 up front and over $90,000 over the life of the loan!!
2. Processes and Procedures: What do you do first? What steps do you need to take when you decide to explore the possibility of purchasing a home? How do you choose a Realtor? A mortgage Professional? Who else do you need to contact?
3. The Mortgage: What is a pre-approval? What is a Pre-qualification? What information do you need to obtain this document? What paperwork do you need to save and how much money should you be prepared to spend on this purchase? All these questions will be answered
4. Budgeting: When you buy a home it is very important to learn how do budget. Doing a simple budget will make it very clear if you are ready to buy.
5. The benefits of home-ownership. Understanding the tax deductibility factor of mortgage interest.
I am please to announce that I am holding another Home Buyers Seminar, to be held on June1, at the Finkelstein Memorial Library, 7:00 pm at 24 Chestnut Street, Spring Valley, NY 10977. Please RSVP 845-354-9700 or azeilingold@fmm.com.
There are so many things to consider. That’s why a home-buyer seminar in our area is so crucial. Education is key and valuable information is priceless.
What you will learn at the First Time Home-buyer’s Seminar:
1. Credit. The importance of a good credit score. The components of your credit score and multiple strategies on how you can boost your credit score. A difference between one point on your credit score can cost you on a $400,000 mortgage an additional $4,000 up front and over $90,000 over the life of the loan!!
2. Processes and Procedures: What do you do first? What steps do you need to take when you decide to explore the possibility of purchasing a home? How do you choose a Realtor? A mortgage Professional? Who else do you need to contact?
3. The Mortgage: What is a pre-approval? What is a Pre-qualification? What information do you need to obtain this document? What paperwork do you need to save and how much money should you be prepared to spend on this purchase? All these questions will be answered
4. Budgeting: When you buy a home it is very important to learn how do budget. Doing a simple budget will make it very clear if you are ready to buy.
5. The benefits of home-ownership. Understanding the tax deductibility factor of mortgage interest.
I am please to announce that I am holding another Home Buyers Seminar, to be held on June1, at the Finkelstein Memorial Library, 7:00 pm at 24 Chestnut Street, Spring Valley, NY 10977. Please RSVP 845-354-9700 or azeilingold@fmm.com.
Friday, April 30, 2010
Announcing First Time Home-Buyers Seminar
The governments tax credit incentive is over today. April 30 is the deadline to have a fully signed contract. This doesn’t mean that the purchasing of homes is over. The first time homebuyer is the foundation to the healing of the economy. When someone buys a home, they move, they fix the home and garden, etc. They use the services of contractors, gardeners, and movers. They shop at hardware stores, furniture stores and the vast and sundry retail and discount stores that sell household items. This causes an economic ripple affect that’s stimulates the economy. Buying a home, though, can be real scary especially today with all the negative news. A first time homebuyer may be scared to take themselves this huge step.
There are so many things to consider. That’s why a homebuyer seminar in our area is so crucial. Education is key and valuable information is priceless.
What you will learn at the First Time Home-buyer’s Seminar:
1. Credit. The importance of a good credit score. The components of your credit score and multiple strategies on how you can boost your credit score. A difference between one point on your credit score can cost you on a $400,000 mortgage an additional $4,000 up front and over $90,000 over the life of the loan!!
2. Processes and Procedures: What do you do first? What steps do you need to take when you decide to explore the possibility of purchasing a home? How do you choose a Realtor? A mortgage Professional? Who else do you need to contact?
3. The Mortgage: What is a pre-approval? What is a Pre-qualification? What information do you need to obtain this document? What paperwork do you need to save and how much money should you be prepared to spend on this purchase? All these questions will be answered
4. Budgeting: When you buy a home it is very important to learn how do budget. Doing a simple budget will make it very clear if you are ready to buy.
5. The benefits of homeownership. Understanding the tax deductibility factor of mortgage interest.
I am please to announce that I am holding two First Time Home Buyers seminars. One on Tuesday evening, May 11 at my office, 7:00pm at 1609 Route 202, Pomona NY 10970 and the second on June1, at the Finkelstein Memorial Library, 7:00 pm at 24 Chestnut Street, Spring Valley, NY 10977. Please RSVP 845-354-9700 or azeilingold@yahoo.com.
There are so many things to consider. That’s why a homebuyer seminar in our area is so crucial. Education is key and valuable information is priceless.
What you will learn at the First Time Home-buyer’s Seminar:
1. Credit. The importance of a good credit score. The components of your credit score and multiple strategies on how you can boost your credit score. A difference between one point on your credit score can cost you on a $400,000 mortgage an additional $4,000 up front and over $90,000 over the life of the loan!!
2. Processes and Procedures: What do you do first? What steps do you need to take when you decide to explore the possibility of purchasing a home? How do you choose a Realtor? A mortgage Professional? Who else do you need to contact?
3. The Mortgage: What is a pre-approval? What is a Pre-qualification? What information do you need to obtain this document? What paperwork do you need to save and how much money should you be prepared to spend on this purchase? All these questions will be answered
4. Budgeting: When you buy a home it is very important to learn how do budget. Doing a simple budget will make it very clear if you are ready to buy.
5. The benefits of homeownership. Understanding the tax deductibility factor of mortgage interest.
I am please to announce that I am holding two First Time Home Buyers seminars. One on Tuesday evening, May 11 at my office, 7:00pm at 1609 Route 202, Pomona NY 10970 and the second on June1, at the Finkelstein Memorial Library, 7:00 pm at 24 Chestnut Street, Spring Valley, NY 10977. Please RSVP 845-354-9700 or azeilingold@yahoo.com.
Tuesday, April 13, 2010
The 11th Hour Closing Miracle! Reality Mortgage Episode
I have mentioned in the past that the 60 day credit expiration date is just NOT enough time to close a mortgage. Well we had a loan that closed literally by the skin of it's teeth!!
Client wanted to do a cash-out for home improvement, new deck, bathroom etc. We ran his credit, told him he could get a loan and then he looked for contractors, tiles, fixtures etc. Being that I run a pro-active office I checked his credit 15 days before the expiration date and guess what: his score had dropped 70 points!! Yikes!! He no longer would be able to get a loan...and so...the race was on!!! Quickly we rushed an appraisal which in HVCC time is 3 days. We submit the file with a few days to spare subject to the appraisal coming in. The underwriter is okay with the file and then, a double whammy! The appraiser says that there is mold in the basement and the roof may have a soft spot! It is Friday. D-Day is Wednesday. We get a contractor, a mold inspector and a roofer in over the weekend. Monday, The underwriter requests a re inspection from the appraiser. We order a rush!! Tuesday, appraiser (HVCC) doesn't go to the house. After hollering at the Appraisal management company, whose employees don't take any personal responsibility, the appraiser goes to the home Wednesday at 2PM. We have to close that day or else!! The appraiser sends us his paperwork at 6 pm. The underwriter cleared the file at 6:15. Docs were done at 6:45pm and we closed 8pm!!
This one really went down to the wire!!
Client wanted to do a cash-out for home improvement, new deck, bathroom etc. We ran his credit, told him he could get a loan and then he looked for contractors, tiles, fixtures etc. Being that I run a pro-active office I checked his credit 15 days before the expiration date and guess what: his score had dropped 70 points!! Yikes!! He no longer would be able to get a loan...and so...the race was on!!! Quickly we rushed an appraisal which in HVCC time is 3 days. We submit the file with a few days to spare subject to the appraisal coming in. The underwriter is okay with the file and then, a double whammy! The appraiser says that there is mold in the basement and the roof may have a soft spot! It is Friday. D-Day is Wednesday. We get a contractor, a mold inspector and a roofer in over the weekend. Monday, The underwriter requests a re inspection from the appraiser. We order a rush!! Tuesday, appraiser (HVCC) doesn't go to the house. After hollering at the Appraisal management company, whose employees don't take any personal responsibility, the appraiser goes to the home Wednesday at 2PM. We have to close that day or else!! The appraiser sends us his paperwork at 6 pm. The underwriter cleared the file at 6:15. Docs were done at 6:45pm and we closed 8pm!!
This one really went down to the wire!!
Monday, April 12, 2010
Top 10 Myths About Reverse Mortgages
Most older Americans know about reverse mortgages but misconceptions abound
Reverse mortgages continue to grow in popularity and in a recent survey senior citizens said they understood reverse mortgages better than they did any other home-loan product. But, there are still myths and misinformation about these unique loans.
Myth 1. - The bank takes the house OR the borrower can lose the house.
With a reverse mortgage, the borrower retains title to the home throughout the life of the reverse mortgage. The borrower cannot, as a result of the reverse mortgage be forced out of his or her home, as long as property charges, such as taxes and insurance, are paid and the home is maintained in reasonable living condition.
Once the last borrower permanently moves out of the home, the loan must be repaid. Most properties secured by reverse mortgages still have equity when a maturity event occurs and therefore the borrower or his/her heirs choose to sell the home to repay the loan and preserve this equity for the benefit of the borrower or his/her estate.
Myth 2. - The home must be paid off or be debt-free to qualify for a reverse mortgage.
Reverse mortgages convert home equity into cash. As long as there is sufficient equity in the property, the homeowner may be eligible for a reverse mortgage. In fact, many seniors use a reverse mortgage to pay off an existing mortgage in order to eliminate a required monthly mortgage payment.
Myth 3. - When a reverse mortgage becomes due, the bank sells the home.
The borrower is in control of the home and retains title, not the bank or lender. So while it’s common for the borrower or the heirs to sell the home to repay the loan, it’s a decision the borrower or his heirs make. The borrower or the heirs might also refinance the home in order to repay the loan.
Myth 4. - It’s cheaper to move to a smaller house.
While this strategy might be right for different reasons, seniors need to analyze their costs carefully before making this assumption. The process of selling a home and moving into a new home can be expensive. The typical real estate commission of 6% on a $300,000 home would be $18,000. Add moving costs, and the undertaking to find a new home and the decision is not as simple.
Myth 5. - Children want the home or don’t feel comfortable with a reverse mortgage.
Seniors are encouraged to talk with their children about reverse mortgages. Many baby boomers are faced with trying to plan for their retirement and pay for their children’s education. Often, the children of many seniors are happy that their parents have a financial solution available to help them live more independently and financially secure.
Myth 6. - The borrower could end up owing more than the home is worth.
Two of the great safeguards for reverse mortgages are that they are structured so that the borrower or his estate can never owe more than the value of the home upon repayment. In addition, the HECM products are insured by the Federal Housing Administration, an arm of the U.S. Department of Housing and Urban Development (HUD).
Myth 7. - Reverse mortgage proceeds will impact Social Security and Medicare benefits.
A reverse mortgage will generally not affect regular Social Security payments or Medicare benefits. Depending upon the borrower’s situation, a reverse mortgage may affect benefits one receives, if any, from the Federal Supplemental Security Income (SSI) program, or state-administered programs like Medicaid. It is recommended that the borrower speak with his or her financial advisor and appropriate governmental agencies.
Myth 8. - There are restrictions on how the money is used.
Actually there are no restrictions. The cash proceeds from the reverse mortgage can be used for any purpose. It is recommended that the borrower speak to a financial advisor. Many seniors have used reverse mortgages to travel, pay off debts, help their kids, make a luxury purchase or just live more comfortably.
Myth 9. - Once the proceeds are received, taxes will need to be paid.
The cash proceeds from a reverse mortgage are tax free because it is already your money. It is recommended that the borrower consult with a financial advisor.
Myth 10. - Reverse mortgages are only for seniors in need, or for the ‘house rich, cash poor.’
The reverse mortgage is an excellent financial planning tool that has been used by homeowners from all walks of life to enhance their retirement years. Increasingly, lenders are seeing interest and growth among jumbo reverse mortgages geared toward borrowers whose homes exceed the FHA lending limits, which peak below $400,000. Many seniors with multi-million dollar homes are using reverse mortgages as part of their estate or legacy planning in conjunction with advice from financial advisors
Reverse mortgages continue to grow in popularity and in a recent survey senior citizens said they understood reverse mortgages better than they did any other home-loan product. But, there are still myths and misinformation about these unique loans.
Myth 1. - The bank takes the house OR the borrower can lose the house.
With a reverse mortgage, the borrower retains title to the home throughout the life of the reverse mortgage. The borrower cannot, as a result of the reverse mortgage be forced out of his or her home, as long as property charges, such as taxes and insurance, are paid and the home is maintained in reasonable living condition.
Once the last borrower permanently moves out of the home, the loan must be repaid. Most properties secured by reverse mortgages still have equity when a maturity event occurs and therefore the borrower or his/her heirs choose to sell the home to repay the loan and preserve this equity for the benefit of the borrower or his/her estate.
Myth 2. - The home must be paid off or be debt-free to qualify for a reverse mortgage.
Reverse mortgages convert home equity into cash. As long as there is sufficient equity in the property, the homeowner may be eligible for a reverse mortgage. In fact, many seniors use a reverse mortgage to pay off an existing mortgage in order to eliminate a required monthly mortgage payment.
Myth 3. - When a reverse mortgage becomes due, the bank sells the home.
The borrower is in control of the home and retains title, not the bank or lender. So while it’s common for the borrower or the heirs to sell the home to repay the loan, it’s a decision the borrower or his heirs make. The borrower or the heirs might also refinance the home in order to repay the loan.
Myth 4. - It’s cheaper to move to a smaller house.
While this strategy might be right for different reasons, seniors need to analyze their costs carefully before making this assumption. The process of selling a home and moving into a new home can be expensive. The typical real estate commission of 6% on a $300,000 home would be $18,000. Add moving costs, and the undertaking to find a new home and the decision is not as simple.
Myth 5. - Children want the home or don’t feel comfortable with a reverse mortgage.
Seniors are encouraged to talk with their children about reverse mortgages. Many baby boomers are faced with trying to plan for their retirement and pay for their children’s education. Often, the children of many seniors are happy that their parents have a financial solution available to help them live more independently and financially secure.
Myth 6. - The borrower could end up owing more than the home is worth.
Two of the great safeguards for reverse mortgages are that they are structured so that the borrower or his estate can never owe more than the value of the home upon repayment. In addition, the HECM products are insured by the Federal Housing Administration, an arm of the U.S. Department of Housing and Urban Development (HUD).
Myth 7. - Reverse mortgage proceeds will impact Social Security and Medicare benefits.
A reverse mortgage will generally not affect regular Social Security payments or Medicare benefits. Depending upon the borrower’s situation, a reverse mortgage may affect benefits one receives, if any, from the Federal Supplemental Security Income (SSI) program, or state-administered programs like Medicaid. It is recommended that the borrower speak with his or her financial advisor and appropriate governmental agencies.
Myth 8. - There are restrictions on how the money is used.
Actually there are no restrictions. The cash proceeds from the reverse mortgage can be used for any purpose. It is recommended that the borrower speak to a financial advisor. Many seniors have used reverse mortgages to travel, pay off debts, help their kids, make a luxury purchase or just live more comfortably.
Myth 9. - Once the proceeds are received, taxes will need to be paid.
The cash proceeds from a reverse mortgage are tax free because it is already your money. It is recommended that the borrower consult with a financial advisor.
Myth 10. - Reverse mortgages are only for seniors in need, or for the ‘house rich, cash poor.’
The reverse mortgage is an excellent financial planning tool that has been used by homeowners from all walks of life to enhance their retirement years. Increasingly, lenders are seeing interest and growth among jumbo reverse mortgages geared toward borrowers whose homes exceed the FHA lending limits, which peak below $400,000. Many seniors with multi-million dollar homes are using reverse mortgages as part of their estate or legacy planning in conjunction with advice from financial advisors
Monday, March 29, 2010
10 Questions You Must Ask Before Purchasing A Condominium Unit
10 Questions You Must Ask Before Purchasing A Condominium Unit
To borrow from a famous phrase, not all condominiums are created equally. Some condominiums are very well run; some are quite poorly run and underfunded. Buyers interested in purchasing a condominium unit must do their homework: not only about the condition of the individual unit they are interested in purchasing, but on the financial health and governance of the condominium as a whole. Remember, you are buying into the entire project as much as you are the unit, and your decision will impact your daily living and your ability to re-sell.
Here are the 10 questions buyers should ask when deciding to purchase a condominium unit:
1. What is the monthly condominium fee and what does it pay for? The monthly condominium fee can range quite dramatically from condominium to condominium. The fee is a by-product of the number of units, the annual expenses to maintain the common area, whether the condo is professionally managed or self-managed, the age and condition of the project, and other variables such as litigation. For budgeting and financing you need to know the monthly fee and exactly what you are getting for it.
2. What are the condominium rules & regulations? Condominium rules can prohibit pets, your ability to rent out the unit, and perform renovations. Make sure you carefully review the rules and regulations before buying. Needless to say, the buyer's attorney should review and approval all condominium documents, including the master deed, declaration of trust/by-laws, covenants, unit deed and floor plans to ensure compliance with state condominium laws as well as Fannie Mae and FHA guidelines, as necessary.
3. How much money is in the capital reserve account and how much is funded annually? The capital reserve fund is like an insurance policy for the inevitable capital repairs every building requires. As a general rule, the fund should contain at least 10% of the annual revenue budget, and in the case of older projects, even more. If the capital reserve account is poorly funded, there is a higher risk of a special assessment. Get a copy of the last 2 years budget, the current reserve account funding level and any capital reserve study.
4. Are there any contemplated or pending special assessments? Special assessments are one time fees for capital improvements payable by every unit owner. Some special assessments can run in the thousands, others like the Boston Harbor Towers $75 Million renovation project, in the millions. You need to be aware if you are buying a special assessment along with your unit. It's a good idea to ask for the last 2 years of condominium meeting minutes to check what's been going on with the condomininium.
5. Is there a professional management company or is the association self-managed? A professional management company, while an added cost, can add great value to a condominium with well run governance and management of common areas.
6. Is the condominium involved in any pending legal actions? Legal disputes between owners, with developers or with the association can signal trouble and a poorly run organization. Legal action equals attorneys’ fees which are payable out of the condominium budget and could result in a special assessment. In most states, you can run a search of the condominium association in the court database to check if they've been involved in recent lawsuits.
7. How many units are owner occupied? A large percentage of renters can create unwanted noise and neighbor issues. It can also raise re-sale and financing issues with the new Fannie Mae and FHA condominium regulations which limit owner-occupancy rates. If your buyer is using conventional financing, check if it is a Fannie Mae approved condo. If FHA financing, check if it's an FHA approved condo. (Thanks Lou Corcoran for the links)
8. What is the condominium fee delinquency rate? Again, a signal of financial trouble, and Fannie Mae and FHA want to see the rate at 15% or less.
9. Do unit owners have exclusive easements or right to use certain common areas such as porches, decks, storage spaces and parking spaces? Condominiums differ as to how they structure the “ownership” of certain amenities such as roof decks, porches, storage spaces and parking spaces. Sometimes, they are truly “deeded” with the unit, so the unit owner has sole responsibility for maintenance and repairs. Sometimes, they are common areas in which the unit owner has the exclusive right to use, but the maintenance and repair is left with the association. Review the Master Deed and Unit Deed on this one.
10. What Does The Master Insurance Policy Cover? The condominium should have up to $1M or more in coverage under their master condominium policy. For buyer's own protection, they should always buy an individual HO-6 policy covering the interior and contents of the unit, because the master policy and condo by-laws may not cover all damage to their personal possessions and interior damage in case of a roof leak, water pipe burst or other problem arising from a common area element. Ask for a copy of the master insurance policy and don't forget to check the fine print of the by-laws. Sometimes, there's language that would hurt a unit owner in case of a common area casualty. Condominiums over 20 units should also have fidelity insurance to protect against embezzlement.
Often a standard condominium questionnaire will answer all or most of these questions. In Mass., where I practice, this isn't required by law, nor is a seller disclosure. If not, be prepared to generate this list and incorporate it into your Offer to Purchase or Purchase and Sale Agreement, as the case may be in your home state.
Either way, do not have your buyer put earnest money down until satisfactory answers are received. Good luck and happy condo hunting to you and your buyers!
To borrow from a famous phrase, not all condominiums are created equally. Some condominiums are very well run; some are quite poorly run and underfunded. Buyers interested in purchasing a condominium unit must do their homework: not only about the condition of the individual unit they are interested in purchasing, but on the financial health and governance of the condominium as a whole. Remember, you are buying into the entire project as much as you are the unit, and your decision will impact your daily living and your ability to re-sell.
Here are the 10 questions buyers should ask when deciding to purchase a condominium unit:
1. What is the monthly condominium fee and what does it pay for? The monthly condominium fee can range quite dramatically from condominium to condominium. The fee is a by-product of the number of units, the annual expenses to maintain the common area, whether the condo is professionally managed or self-managed, the age and condition of the project, and other variables such as litigation. For budgeting and financing you need to know the monthly fee and exactly what you are getting for it.
2. What are the condominium rules & regulations? Condominium rules can prohibit pets, your ability to rent out the unit, and perform renovations. Make sure you carefully review the rules and regulations before buying. Needless to say, the buyer's attorney should review and approval all condominium documents, including the master deed, declaration of trust/by-laws, covenants, unit deed and floor plans to ensure compliance with state condominium laws as well as Fannie Mae and FHA guidelines, as necessary.
3. How much money is in the capital reserve account and how much is funded annually? The capital reserve fund is like an insurance policy for the inevitable capital repairs every building requires. As a general rule, the fund should contain at least 10% of the annual revenue budget, and in the case of older projects, even more. If the capital reserve account is poorly funded, there is a higher risk of a special assessment. Get a copy of the last 2 years budget, the current reserve account funding level and any capital reserve study.
4. Are there any contemplated or pending special assessments? Special assessments are one time fees for capital improvements payable by every unit owner. Some special assessments can run in the thousands, others like the Boston Harbor Towers $75 Million renovation project, in the millions. You need to be aware if you are buying a special assessment along with your unit. It's a good idea to ask for the last 2 years of condominium meeting minutes to check what's been going on with the condomininium.
5. Is there a professional management company or is the association self-managed? A professional management company, while an added cost, can add great value to a condominium with well run governance and management of common areas.
6. Is the condominium involved in any pending legal actions? Legal disputes between owners, with developers or with the association can signal trouble and a poorly run organization. Legal action equals attorneys’ fees which are payable out of the condominium budget and could result in a special assessment. In most states, you can run a search of the condominium association in the court database to check if they've been involved in recent lawsuits.
7. How many units are owner occupied? A large percentage of renters can create unwanted noise and neighbor issues. It can also raise re-sale and financing issues with the new Fannie Mae and FHA condominium regulations which limit owner-occupancy rates. If your buyer is using conventional financing, check if it is a Fannie Mae approved condo. If FHA financing, check if it's an FHA approved condo. (Thanks Lou Corcoran for the links)
8. What is the condominium fee delinquency rate? Again, a signal of financial trouble, and Fannie Mae and FHA want to see the rate at 15% or less.
9. Do unit owners have exclusive easements or right to use certain common areas such as porches, decks, storage spaces and parking spaces? Condominiums differ as to how they structure the “ownership” of certain amenities such as roof decks, porches, storage spaces and parking spaces. Sometimes, they are truly “deeded” with the unit, so the unit owner has sole responsibility for maintenance and repairs. Sometimes, they are common areas in which the unit owner has the exclusive right to use, but the maintenance and repair is left with the association. Review the Master Deed and Unit Deed on this one.
10. What Does The Master Insurance Policy Cover? The condominium should have up to $1M or more in coverage under their master condominium policy. For buyer's own protection, they should always buy an individual HO-6 policy covering the interior and contents of the unit, because the master policy and condo by-laws may not cover all damage to their personal possessions and interior damage in case of a roof leak, water pipe burst or other problem arising from a common area element. Ask for a copy of the master insurance policy and don't forget to check the fine print of the by-laws. Sometimes, there's language that would hurt a unit owner in case of a common area casualty. Condominiums over 20 units should also have fidelity insurance to protect against embezzlement.
Often a standard condominium questionnaire will answer all or most of these questions. In Mass., where I practice, this isn't required by law, nor is a seller disclosure. If not, be prepared to generate this list and incorporate it into your Offer to Purchase or Purchase and Sale Agreement, as the case may be in your home state.
Either way, do not have your buyer put earnest money down until satisfactory answers are received. Good luck and happy condo hunting to you and your buyers!
Thursday, March 18, 2010
Credit Reports Expire in 60 Days. Realtors Be(a)ware!!
So now credit reports expire after 60 days. it really just isn't enough time!! let us say we pre-qualify a client and they have a home in mind and they just need to know if the numbers work. All is cool. it takes let us say 3 days to get an offer accepted and a home inspection scheduled. Contracts are signed by the buyer and seller within another week. we are now 1 1/2 weeks into the transaction. the client applies for a mortgage. Because of the new disclosure rules we can't spend the clients money for 3 days, so there is a 3 day delay on the ordering of the appraisal, and it takes another week to come back. We are now 3 to 4 weeks from the credit report. Now we can submit the file for underwriting. Unless the closing is too take place right away and there are absolutely NO issues with the title, seller moving out, client needing more documentation... your client most probably is closing in another 3 to 5 weeks. more than 60 days! As a mortgage professional I educate all my clients not to use their credit cards, make any large purchases or allow someone to check their credit. The problem is that even if my clients follow my instructions to the letter, what if something happens beyond their control,or what if they made a mistake, a poor error in judgment? and trust me I have tons of stories like this. I have one this week in my office, the clients score went down 75 points because he forgot to mail in his car payment and he had a 30 day late. we had to get this file closed in 7 days (closing is tomorrow).
In my office we are running credit at the 45 day point. This way if there is a problem we can do a rush closing or be able to fix the problem. i can just imagine what the Realtors would say if a closing was canceled because the credit tanked within a few days of closing, and I wonder if the client would be entitled to his down payment back if he had already provided a mortgage commitment to the seller.
There is legislation just waiting to pass which will require a credit report to be run within 3 days of a closing to insure that no new credit was initiated. I just can't wait to see how many deals die and how many rate locks will be blown because of changed credit circumstances!!
In my office we are running credit at the 45 day point. This way if there is a problem we can do a rush closing or be able to fix the problem. i can just imagine what the Realtors would say if a closing was canceled because the credit tanked within a few days of closing, and I wonder if the client would be entitled to his down payment back if he had already provided a mortgage commitment to the seller.
There is legislation just waiting to pass which will require a credit report to be run within 3 days of a closing to insure that no new credit was initiated. I just can't wait to see how many deals die and how many rate locks will be blown because of changed credit circumstances!!
Sunday, March 7, 2010
New Condo Approval Rules. A must read for realtors seriuos about their business.
New FHA Condo Approval Rules!
Realtor s who are serious about their business must be aware of these new guidelines!!
In 2010, not to offer FHA financing on a condominium is in effect eliminating a huge chunk of buyers. In today's tough mortgage and Real Estate environment you must expose the property to all possible buyers.
Lots of condo's serve the first time home buyers. FHA is Crucial.
FHA allows for 3.5% down payment. Conventional programs require a minimum of 10% but in some areas 25% down payments
FHA will allow for lower credit scores.
FHA came out with new guidelines on Condo Approvals. We have had notice about this already in the end of 2009 but for the most part they went into effect 2/2/10. There used to be an approved list of approved condo’s on the HUD website. If a condominium complex was approved, then we could do an FHA loan. If a condominium complex was not approved, we were also able to do “spot approvals”. Spot approvals are individual approvals of a condo within a non-approved condominium complex.
Now the spot approval has been done away with and we have to check with the FHA to see which condo complexes are on their new list. A little note, a lot of condo’s that were on the FHA approved lists are no longer because an existing approved condo complex has to have been approved prior to October 2008 in to be on the new approved condo list on FHA connection. All others have to go through a complete condo complex approval process.
What that means is that no longer can we rely on closing an FHA mortgage on a condo quickly. An FHA case # cannot be issued until the complex is approved which means appraisals can’t be ordered.
What FHA has done, is simplify the approval process for condo complexes. There are 2 ways of approving a complex. DELRAPs or HRAPs. DELRAP means that an FHA approved lender’s DE underwriter will go through the documentation and issue a condo approval. This is the condo complex approval, not just this one unit. This is unfortunately impractical for the most part, since if HUD later on determines that there was any error in this approval, that Lender is responsible for every condo that closed based on this bank’s DELRAP approval, even if it closed with a different lender and no bank wants that responsibility.
HRAP is the same approval, but HUD issues the approval.
Once the documentation is compiled, it needs to be submitted to HUD. It takes HUD now about 4-6 weeks turn around time to approve the condo. They will be flooded with applications, so it can take longer. Some areas to be concerned about:
Who will pay for the company that facilitates the condo complex approval?
approval?
If a condominium project is in litigation, beware. Any lawsuit would pretty much disqualify a condo association (even if the association is the plaintiff) since they argue that any lawsuit could financially drain the budgets of the associations.
All existing FHA approved condominiums that were approved before 10/2008, the HUD approval will expire on 12/7/2010, When listing a condo, encourage your homeowner's and the Homeowner associations to begin the application process early, I would suggest as early as May/2010.
Here are the NEW changes:
1. Elimination of Spot Approvals
2. Condo Complexes need to re-certify every 2 years
3. Max FHA financing in 50%. After 12/10/10, 30%
4. No more than 15% of homeowners can be in arrears
5. No more than 10% owned by one investor
6. 2-3 unit condos now are allowed (Used to be only 4+ units allowed)
7. Right of first refusal allowed on a case by case basis
8. 30% pre-sale required on New construction. 50% after 12/31/10.
9. No more 1 year waiting period on a conversion
Once a condo project is approved, with each individual mortgage application a new condo questionnaire must be filled out. HUD is making sure that the condo complex fits the following basic criteria:
1. FHA Concentration 50%, and up to (100% on a case by case basis)
2. Investor concentration, 10%
3. Homeowners delinquency not greater than 15%
4. Owner occupancy requirements, 50% min and can exclude REO's from calculation
If homeowners are delinquent, the reserves will be low. If too many investors or renters are in the complex, it will be up-kept at a lesser degree than if Owner Occupants live there and they also don't want to much exposure in any development.
What HUD is trying to do is eliminate poorly manged projects.
Here are some handy links:
To find out if a condominium project is HUD approved visit:
https://entp.hud.gov/idapp/html/condlook.cfm
To access Mortgage Letter 2009-46A: www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-46aml.pdf
To access Mortgage Letter 2009-46B: www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-46bml.pdf
For general FHA information: www.hud.gov
CONDO ACTION PLAN(Approved Condo’s)
CONDO PROJECT IS HUD APPROVED BETWEEN 10/1/2008 – 12/07/2009
http://ow.ly/1fgYZ
CONDO ACTION PLAN (NON Approved Condo’s)
http://ow.ly/1fh2F
REALTOR CONDO QUESTIONNAIRE
http://ow.ly/1fhkF
Realtor s who are serious about their business must be aware of these new guidelines!!
In 2010, not to offer FHA financing on a condominium is in effect eliminating a huge chunk of buyers. In today's tough mortgage and Real Estate environment you must expose the property to all possible buyers.
Lots of condo's serve the first time home buyers. FHA is Crucial.
FHA allows for 3.5% down payment. Conventional programs require a minimum of 10% but in some areas 25% down payments
FHA will allow for lower credit scores.
FHA came out with new guidelines on Condo Approvals. We have had notice about this already in the end of 2009 but for the most part they went into effect 2/2/10. There used to be an approved list of approved condo’s on the HUD website. If a condominium complex was approved, then we could do an FHA loan. If a condominium complex was not approved, we were also able to do “spot approvals”. Spot approvals are individual approvals of a condo within a non-approved condominium complex.
Now the spot approval has been done away with and we have to check with the FHA to see which condo complexes are on their new list. A little note, a lot of condo’s that were on the FHA approved lists are no longer because an existing approved condo complex has to have been approved prior to October 2008 in to be on the new approved condo list on FHA connection. All others have to go through a complete condo complex approval process.
What that means is that no longer can we rely on closing an FHA mortgage on a condo quickly. An FHA case # cannot be issued until the complex is approved which means appraisals can’t be ordered.
What FHA has done, is simplify the approval process for condo complexes. There are 2 ways of approving a complex. DELRAPs or HRAPs. DELRAP means that an FHA approved lender’s DE underwriter will go through the documentation and issue a condo approval. This is the condo complex approval, not just this one unit. This is unfortunately impractical for the most part, since if HUD later on determines that there was any error in this approval, that Lender is responsible for every condo that closed based on this bank’s DELRAP approval, even if it closed with a different lender and no bank wants that responsibility.
HRAP is the same approval, but HUD issues the approval.
Once the documentation is compiled, it needs to be submitted to HUD. It takes HUD now about 4-6 weeks turn around time to approve the condo. They will be flooded with applications, so it can take longer. Some areas to be concerned about:
Who will pay for the company that facilitates the condo complex approval?
approval?
If a condominium project is in litigation, beware. Any lawsuit would pretty much disqualify a condo association (even if the association is the plaintiff) since they argue that any lawsuit could financially drain the budgets of the associations.
All existing FHA approved condominiums that were approved before 10/2008, the HUD approval will expire on 12/7/2010, When listing a condo, encourage your homeowner's and the Homeowner associations to begin the application process early, I would suggest as early as May/2010.
Here are the NEW changes:
1. Elimination of Spot Approvals
2. Condo Complexes need to re-certify every 2 years
3. Max FHA financing in 50%. After 12/10/10, 30%
4. No more than 15% of homeowners can be in arrears
5. No more than 10% owned by one investor
6. 2-3 unit condos now are allowed (Used to be only 4+ units allowed)
7. Right of first refusal allowed on a case by case basis
8. 30% pre-sale required on New construction. 50% after 12/31/10.
9. No more 1 year waiting period on a conversion
Once a condo project is approved, with each individual mortgage application a new condo questionnaire must be filled out. HUD is making sure that the condo complex fits the following basic criteria:
1. FHA Concentration 50%, and up to (100% on a case by case basis)
2. Investor concentration, 10%
3. Homeowners delinquency not greater than 15%
4. Owner occupancy requirements, 50% min and can exclude REO's from calculation
If homeowners are delinquent, the reserves will be low. If too many investors or renters are in the complex, it will be up-kept at a lesser degree than if Owner Occupants live there and they also don't want to much exposure in any development.
What HUD is trying to do is eliminate poorly manged projects.
Here are some handy links:
To find out if a condominium project is HUD approved visit:
https://entp.hud.gov/idapp/html/condlook.cfm
To access Mortgage Letter 2009-46A: www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-46aml.pdf
To access Mortgage Letter 2009-46B: www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-46bml.pdf
For general FHA information: www.hud.gov
CONDO ACTION PLAN(Approved Condo’s)
CONDO PROJECT IS HUD APPROVED BETWEEN 10/1/2008 – 12/07/2009
http://ow.ly/1fgYZ
CONDO ACTION PLAN (NON Approved Condo’s)
http://ow.ly/1fh2F
REALTOR CONDO QUESTIONNAIRE
http://ow.ly/1fhkF
Realtor Condo Association Questionnaire
Realtor Condominium Questionnaire
Date: _____________________
Condominium Project Name
___________________________________________
Address
__________________________________________________
Primary Condo Contact person
________________________________________
Primary Condo Contact Telephone Number
______________________________
Primary Condo Contact E-mail Address
________________________________
Type of Condo Project: ____ Proposed ___ Under Construction ____ Existing ___ Conversion
Total Number of Units: ____Total Number of Phases: ____ Number of Units in Phase:______
Number of Units for Sale: ____ Number of Units Sold: ____ Number of Units Rented: _____
What is the total number of units with FHA insured mortgages? ________________________.
Does any single entity own more than 10% of the total units in the project? 0 YES 0 NO
If project has 10 or less units, does any single entity own more than 1 unit? ___ YES ___ NO
How many owners are in arrears on association fees? (more than 30 days past due) _________.
How many units are owner occupied?
_____________________________.
Is the developer/builder in control of the Homeowners’ Association (HOA)? ___ YES ____ NO
Date of transfer:
__________________________________________________
Date: _____________________
Condominium Project Name
___________________________________________
Address
__________________________________________________
Primary Condo Contact person
________________________________________
Primary Condo Contact Telephone Number
______________________________
Primary Condo Contact E-mail Address
________________________________
Type of Condo Project: ____ Proposed ___ Under Construction ____ Existing ___ Conversion
Total Number of Units: ____Total Number of Phases: ____ Number of Units in Phase:______
Number of Units for Sale: ____ Number of Units Sold: ____ Number of Units Rented: _____
What is the total number of units with FHA insured mortgages? ________________________.
Does any single entity own more than 10% of the total units in the project? 0 YES 0 NO
If project has 10 or less units, does any single entity own more than 1 unit? ___ YES ___ NO
How many owners are in arrears on association fees? (more than 30 days past due) _________.
How many units are owner occupied?
_____________________________.
Is the developer/builder in control of the Homeowners’ Association (HOA)? ___ YES ____ NO
Date of transfer:
__________________________________________________
ACTION PLAN: CONDO PROJECT IS NOT CURRENTLY HUD APPROVED
CONDO PROJECT IS NOT CURRENTLY HUD APPROVED
1. Project is required to be fully approved. (For case numbers issued on or after 02/01/2010 - NO MORE SPOT APPROVALS!) .
2. Contact my office for condo assessment to faxed or emailed to management company
4. If qualifies, we will work directly with management company to get necessary documents for processing of HUD approval. R
5. B2B Opportunities… GET ENGAGED!
Contact Ann Zeilingold at azeilingold@fmm.com or 914-260-9000 to get started
1. Project is required to be fully approved. (For case numbers issued on or after 02/01/2010 - NO MORE SPOT APPROVALS!) .
2. Contact my office for condo assessment to faxed or emailed to management company
4. If qualifies, we will work directly with management company to get necessary documents for processing of HUD approval. R
5. B2B Opportunities… GET ENGAGED!
Contact Ann Zeilingold at azeilingold@fmm.com or 914-260-9000 to get started
CONDO ACTION PLAN(Approved Condo’s) CONDO PROJECT IS HUD APPROVED BETWEEN 10/1/2008 – 12/07/2009
CONDO ACTION PLAN(Approved Condo’s)
CONDO PROJECT IS HUD APPROVED BETWEEN 10/1/2008 – 12/07/2009
1. Project will remain on approved list until the 2 year anniversary of the HUD approval. Project must be “Re-certified” by HUD prior to 2 years from the date of the HUD approval or it will be terminated from the list. ** Deadline for Recertification published on HUD website.
2. Mark calendar to begin re-certification process in May/June of 2010 or 2011.
3. Make contact with management/developer/Homeowners association to alert them about significant changes. B2B Opportunities.
4. Remember, re-certifications will be subject to new guidelines. If there are issues with approvability, it should be managed pro-actively.
CONDO PROJECT IS HUD APPROVED PRIOR TO 10/1/2008
1. Re-certification is required on or before 12/07/2010.
2. Mark calendar to begin re-certification process in May/June 2010.
3. If qualifies, you will need to get engaged directly with management company to begin process and to gather necessary documents for processing of re-certification.
4. B2B Opportunities … GET ENGAGED!
Contact Ann Zeilingold at azeilingold@fmm.com or 914-260-9000 to help you facilitate the approval process.
CONDO PROJECT IS HUD APPROVED BETWEEN 10/1/2008 – 12/07/2009
1. Project will remain on approved list until the 2 year anniversary of the HUD approval. Project must be “Re-certified” by HUD prior to 2 years from the date of the HUD approval or it will be terminated from the list. ** Deadline for Recertification published on HUD website.
2. Mark calendar to begin re-certification process in May/June of 2010 or 2011.
3. Make contact with management/developer/Homeowners association to alert them about significant changes. B2B Opportunities.
4. Remember, re-certifications will be subject to new guidelines. If there are issues with approvability, it should be managed pro-actively.
CONDO PROJECT IS HUD APPROVED PRIOR TO 10/1/2008
1. Re-certification is required on or before 12/07/2010.
2. Mark calendar to begin re-certification process in May/June 2010.
3. If qualifies, you will need to get engaged directly with management company to begin process and to gather necessary documents for processing of re-certification.
4. B2B Opportunities … GET ENGAGED!
Contact Ann Zeilingold at azeilingold@fmm.com or 914-260-9000 to help you facilitate the approval process.
Doing The Right Thing Feels So good!!
I was faced with a dilemma. I was referred a client by a Realtor. It was a short sale. The Realtor brought me in to handle the negotiation of the short sale. Things were not going right. To make a very long story short, the sellers told me on Friday that they enjoyed working with me but they didn't want to work with their Realtor anymore. They asked me to refer another agent to them to sell their home. They felt that their Realtor was inept and that he had told the city inspectors that there was an abandoned oil tank which basically was the deal killer since upon removal it was determined that the soil was contaminated and we simply ran out of time. The current appraisal expired, the values in the area have gone up, the offer at this point is too low since the appraisals and BPO's support a higher value.
Now I work with a lot of agents and I first told them, yes I definitely can continue to work with them. I had no intention of cutting out the agent, but I wasn't clear to the client. I called a Realtor that I work with who is a top agent in my area and I explained the situation. The current Realtor was a part time agent, a nice guy who worked really hard on this deal. One of the problems was that his office also had the buyer and when things didn't go well in the negotiation, instead of re-marketing the house 3 months ago and selling it to someone else he tried to hold on and ultimately, the seller got hurt because the bank was requiring that she come up with $38,000 to meet their required net. The seller on the other hand wanted out and was afraid to start fresh. I advised her to return the down payment sell it to someone else, and not be afraid that the house wouldn't sell, but she was nervous and couldn't sleep thinking about a possible foreclosure.
My Realtor friend told me that the problem we were having was because the house was undersold. She told me to tell the sellers that the first Realtor worked really hard and that he should re-list the house at the current value and sell it quickly and that I would continue to work with them under these conditions.
I called the sellers into my office on Friday and I told them that I was referred to them by the original Realtor and that I would be very happy to work with them further, but only with that Realtor. We discussed the problems that occurred. I arranged for the original Realtor to sign a new listing agreement with them and he arranged an open house for this afternoon.
So here we were, full circle starting over again and I feel good. What would you have done??
Now I work with a lot of agents and I first told them, yes I definitely can continue to work with them. I had no intention of cutting out the agent, but I wasn't clear to the client. I called a Realtor that I work with who is a top agent in my area and I explained the situation. The current Realtor was a part time agent, a nice guy who worked really hard on this deal. One of the problems was that his office also had the buyer and when things didn't go well in the negotiation, instead of re-marketing the house 3 months ago and selling it to someone else he tried to hold on and ultimately, the seller got hurt because the bank was requiring that she come up with $38,000 to meet their required net. The seller on the other hand wanted out and was afraid to start fresh. I advised her to return the down payment sell it to someone else, and not be afraid that the house wouldn't sell, but she was nervous and couldn't sleep thinking about a possible foreclosure.
My Realtor friend told me that the problem we were having was because the house was undersold. She told me to tell the sellers that the first Realtor worked really hard and that he should re-list the house at the current value and sell it quickly and that I would continue to work with them under these conditions.
I called the sellers into my office on Friday and I told them that I was referred to them by the original Realtor and that I would be very happy to work with them further, but only with that Realtor. We discussed the problems that occurred. I arranged for the original Realtor to sign a new listing agreement with them and he arranged an open house for this afternoon.
So here we were, full circle starting over again and I feel good. What would you have done??
Tuesday, March 2, 2010
Snow Storm Saves Sale!! Reality Mortgae Episode
Word to the wise, if you are purchasing a foreclosure that is winterized, try to arrange for the appraiser to go to the house when the utilities are on. Other wise, you will have to pay for the appraiser to go a second time to certify that the utilities are on and functioning. Dorit Katz, a local REO agent for Realty Teams in Pomona says, "The bank will pay to have the home de-winterized temporarily, once the contract is signed, if there is a clause in the contract subject to a home inspection. Therefore, she suggests having the appraiser go into the house a day after the inspection so that it can be canceled if the home fails inspection."
Last Friday, we were hit with a momma of a snowstorm with very windy conditions causing numerous power outages. Thank You G-D for that storm!!
We had a foreclosure purchase deal in our office. The file was the epitome of "Murphy’s Law". The home “under appraised”. The client’s tax returns were filed late causing a needless denial because the IRS showed no records of any return being filed, which we then reversed. The underwriter questioned the assets and the income because our client was complicated. We worked through all the issues. Our file was 287 pages thick!!! Then we got hit with a deadline. The attorney asked for an extension and was denied. We were informed that the deal was off if this file did not close by February 26, because the foreclosure bank wanted to move on and was actually changing attorneys offices because they had transferred all their unsold properties to another entity. What a Mess!! This all happened On February 19th. The only condition left was that the appraiser had to go to the home to verify that it was de-winterized. A whole chain of events had to happen. The Realtor had to schedule the plumber to do the job, and then we had to schedule the appraiser through a management company, who then had to schedule the appraiser, who then had to submit the report to the Management Company, who after review would email it to me. The earliest we could get the appraiser into the house was Wednesday and the Management Company only gave us the appraisal on Thursday evening. Underwriting cleared the file Friday morning but we couldn’t get the closing documents until Monday or Tuesday. We ran out of time. Then we had SNOW!!
Because of the bad weather and power outages, we got an extension and the file is closing day!! Whew that was a close call!!
I guess the lesson is, To close a mortgage loan today takes not only skill, but also good LUCK!
Last Friday, we were hit with a momma of a snowstorm with very windy conditions causing numerous power outages. Thank You G-D for that storm!!
We had a foreclosure purchase deal in our office. The file was the epitome of "Murphy’s Law". The home “under appraised”. The client’s tax returns were filed late causing a needless denial because the IRS showed no records of any return being filed, which we then reversed. The underwriter questioned the assets and the income because our client was complicated. We worked through all the issues. Our file was 287 pages thick!!! Then we got hit with a deadline. The attorney asked for an extension and was denied. We were informed that the deal was off if this file did not close by February 26, because the foreclosure bank wanted to move on and was actually changing attorneys offices because they had transferred all their unsold properties to another entity. What a Mess!! This all happened On February 19th. The only condition left was that the appraiser had to go to the home to verify that it was de-winterized. A whole chain of events had to happen. The Realtor had to schedule the plumber to do the job, and then we had to schedule the appraiser through a management company, who then had to schedule the appraiser, who then had to submit the report to the Management Company, who after review would email it to me. The earliest we could get the appraiser into the house was Wednesday and the Management Company only gave us the appraisal on Thursday evening. Underwriting cleared the file Friday morning but we couldn’t get the closing documents until Monday or Tuesday. We ran out of time. Then we had SNOW!!
Because of the bad weather and power outages, we got an extension and the file is closing day!! Whew that was a close call!!
I guess the lesson is, To close a mortgage loan today takes not only skill, but also good LUCK!
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