10 04, 2017

Adjustable vs. Fixed: Which is Best for You?

By |April 10th, 2017|Categories: Rates|0 Comments

Adjustable vs. Fixed: Which is Best for You?

Wikileaks has been in the news a lot lately, hasn’t it? So-called “leaks” used to be perhaps an occasional event but today the leaks seem to be much more frequent as well as, well, juicy.

The problem Wikileaks has is credibility. Yes, the reports are released to the media but it’s difficult to determine whether or not the leak is authentic or just a smoke screen for something else.

If you’re buying a home or refinancing a mortgage it may also be a bit confusing when determining whether or not a fixed rate is better or an adjustable rate mortgage. Unfortunately, you won’t see a Wikileaks report about which is better. But then again you don’t have to.

Fixed rate mortgages typically range from 10 to 30 years in five year increments. Your mortgage lender can offer a 10 year fixed, 15, 20, 25 and 30.

 

Certain portfolio loans can be as long as 40 years. Lenders don’t really have any preference over which term you select but in general the longer the term of the loan the lower the monthly payment. The shorter the term, the higher the monthly payment but with shorter terms the total amount of interest paid is much, much less.

Adjustable rate loans in today’s market are hybrids. A hybrid is in fact an adjustable rate loan but there is an initial fixed rate period before the loan turns into a loan that can adjust once per year. These initial fixed rate terms are typically offered in 3, 5, 7 and 10 year periods.

What is the allure of a hybrid? A hybrid will offer a slightly lower rate compared to a fixed rate loan. So, which should you choose?

Your loan officer will ask how long you intend to keep the property you’re thinking of financing. If you’re long term, it might be better to select a low fixed rate that can’t change at any time in the future.

If you’re pretty sure your short term, then a lower-rate hybrid mortgage is probably your best bet. No one can ever tell the future, but if your future sees you in your next home then a fixed rate locks in today’s rates for the life of the loan.

28 03, 2017

When to Stop Renting

By |March 28th, 2017|Categories: Real estate|0 Comments

Poor Tony Romo. Once the unchallenged leader of the Dallas Cowboys, he remained on the bench last season and lost his starting job to a rookie. It’s not entirely Tony Romo’s fault as his benching initially came as a result of injuries as well as the stellar play of the new rookie QB.

Tony is getting up in years and while there are rumors there are trades in the mix at some point Tony Romo, like other NFL stars getting up in years need to think about not playing any longer. Maybe it’s time to stop. And if you’re a renter and have been for some time, maybe you too need to take a serious look at buying and not renting. When do you know it’s time to stop renting?

It’s fair to say you won’t wake up one day and think to yourself, “I’m going to stop renting and go buy a place of my own.” No, instead it’s a gradual process. There can be various hints and nudges that eventually move you to the decision to buy.

For example, a coworker is excited she’s moving into her very first home. You wonder how she could afford to buy her own place because you know you make more than she but yet here you are. You’re a renter and she’s a homeowner. If she can buy a home, then why can’t you?

It’s also a good time to think about renting when your landlord sends you an email and lets you know, again, your rent will be going up for the next year. It’s no secret that rental rates in various parts of the country and especially in California are still on the rise while property values are following suit. And speaking of property values, the longer you wait, the higher your rent will be and the more it will cost to get into a home.

If this sounds familiar, it’s time to pick up the phone and speak with a loan officer who can walk you through the process of buying your first home. You can find out how much your monthly payments will be and you can compare that to what your payment is now. In addition, you’ll know how much money you will need when you go to the closing table.

You will be a homeowner someday. Is that time now, or later?

17 03, 2017

Happy St. Patrick’s Day!

By |March 17th, 2017|Categories: Loans|0 Comments

Benefits of FHA Loans

St. Patrick’s Day, officially referred to as the Feast of Saint Patrick is held every year on March 17, the day of St. Patrick’s death in 461 AD. And whether you’re “unofficially” Irish or celebrate St. Patrick’s in a more serious manner, it seems everyone is wearing green that day.

And we all know the reason we wear green and it’s because we don’t want to get reminded we’re not and get a friendly “pinch” from a friend or co-worker. There’s definitely a benefit having green in your wardrobe on that day. And just like wearing green on St. Patrick’s Day has its benefits, so too do FHA loans. What are the benefits of an FHA loan?

One of the reasons so many first time buyers use an FHA loan to buy and finance a home is the low down payment required. FHA loans only ask for a down payment of 3.5% of the sales price. Unless you’re eligible for a VA home loan there’s probably not a better option than the FHA choice. Anyone can apply for an FHA loan regardless of previous service.

FHA loans also carry an inherent guarantee toward the lender. Approved FHA lenders like making these loans and one of the reasons is this guarantee that is included with all FHA loans. If the loan ever goes into default the lender is compensated for the loss as long as the loan was approved using FHA guidelines. This guarantee is funded by an upfront mortgage insurance premium that is rolled into the final loan amount and an annual premium that is paid in monthly installments.

The down payment and closing costs do not have to come from the buyer’s own funds. FHA guidelines allow for a family member or qualified non-profit to provide all or part of the funds needed in order to close on an FHA loan.

Finally, FHA loans allow for the presence of an unoccupied co-borrower’s income to be used to help qualify. This is especially helpful when buyers expect an increase in income down the road but for right now need a little help qualifying.

10 01, 2017

Papers Please!

By |January 10th, 2017|Categories: Loan Process|0 Comments

The Documents You’ll Need for your Preapproval

Do you still have your old collection of vinyl records? Over the years, vinyl has been making a comeback for audiophiles everywhere and while studios today digitally record a performer’s music, there’s something special about the sound coming from a vinyl record. It just can’t be replaced.

For those that do appreciate vinyl records, you remember how the record slipped out of the sleeve, you carefully held the record by its edges and looked at the list of songs that appear in order on the record label.

When you prepare for a mortgage preapproval, you too will receive a list of items you’ll need to provide the mortgage company before a preapproval can be issued. What are those items?

Income Documentation. If you’re not self-employed, you can expect to provide documentation of your gross monthly income in the form of your most recent paycheck stubs. Whether you get paid once per month, the 1st and the 15th or every other week, you’ll need to have documented at least 30 days of income. You can also expect to provide your two most recent W2 forms.

If you’re self-employed, you’ll be asked to provide both personal and business federal income tax returns from the previous two years as well as a year-to-date profit and loss statement. This P&L is typically something you can do on your own but sometimes a lender will ask for one prepared by a certified public accountant.

Asset Documentation.  You’ll need to show you have enough funds readily available for a down payment and associated closing costs and this is accomplished by providing your most recent bank statements or investment accounts where the funds you will be using are kept.

Authorization Form.  When you first submit a loan application your lender will also ask that you sign a borrower’s authorization form. This is a blanket form that allows a lender to contact various third parties for information needed to close your loan.

Instead of obtaining a separate authorization form for employment information or a credit report, your authorization form is signed once and used multiple times by your mortgage company.

Finally, note that while all loans are approved in much the same manner regardless of the applicant, no two borrowers are ever exactly alike which means you might be asked for more information as the loan progresses toward a final approval.

But as long as you document your income, assets and your credit report is reviewed, your loan preapproval is soon to follow.

4 01, 2017

Working Together: A First and Second Loan

By |January 4th, 2017|Categories: Loans|0 Comments

Working Together: A First and Second Loan

The movie Top Gun, starring Tom Cruise was released in 1986 and for those that appreciate aerial combat, the movie is a real treat. It also gave the common viewer an inside look at how fighter aircraft operate in battle and in training. Cruise’s character nicknamed “Maverick” is the fighter pilot with his RIO, Goose.

A RIO is a Radar Intercept Officer that flies in the back seat but both the pilot and RIO work together. Mortgage loans also come in two different types, a first and a second. And while there is no real danger associated with a mortgage loan, they both have their own roles.

A first mortgage is the one used to finance the purchase. A first mortgage lien can be a conventional or a government-backed loan and may or may not require a down payment.

Conventional loans do require a down payment while government-backed loans such as VA, FHA and USDA have lower down payment needs, or in the case of a VA and USDA loan, no down payment at all. A first mortgage is also recorded as a superior lien that takes priority of any subsequent second lien.

A second lien can be taken out simultaneously with a first mortgage and is often used alongside a conventional loan in order to avoid mortgage insurance. Conventional loans will require a mortgage insurance policy if the loan amount is greater than 80% of the sales price or appraised value, whichever is lower.

A buyer can put down 10% and take out two loans, a first and a second. The first lien would be at 80% of the sales price while the second at 10%. Lenders refer to this structure as an “80-10-10” loan.

The first lien takes priority over the second, which subordinates its rights to the first lien. Should the loan ever go into foreclosure, the first lien will be paid off first with any remaining funds used to settle the second lien.

So too when the property is sold, the first lien is paid and then the second. If you’re looking at conventional loan options and want to come to the closing table with as little as possible but want to avoid mortgage insurance, your loan officer can put together a combination of two loans to accomplish your goal.

3 01, 2017

Why Preapproval Matters

By |January 3rd, 2017|Categories: Loan Process|0 Comments

Being Prepared: Why Preapproval Matters

Without a doubt the hottest female comic actor today is Tina Fey.  She first came onto the scene back in the 1990s working with the improve group, The Second City and later as a sketch artist on NBC’s Saturday Night Live. She remained there for eight years before leaving the group and tackling more work on screen.

Today, she’s a regular on television and online commercials daily but all of her success didn’t come by accident. She prepared, studied and was ready for the opportunity when it came around. If she wasn’t prepared when the gig came up, someone else may have taken her place.

That’s why those who are thinking about buying a home work with a lender well before it’s time to shop for a home. Without proper preparation, someone else may get the home instead.

 

Proper preparation with regard to home loans means having your financials already reviewed and at the mortgage company. Instead of having a general conversation over the phone about your overall financial picture, if complete a loan application and obtain your preapproval letter, you’ll be able to make an offer immediately with the seller knowing your financing is already lined up.

What can you expect when getting your preapproval letter?

Your loan officer will ask that you complete a loan application and then provide documentation regarding your income and assets. For a preapproval, you’ll be asked to provide your most recent pay check stubs covering a 30 day period along with W2s from the past two years.

Bank statements will also be needed showing you have enough funds in the bank for a down payment and closing costs. Your loan officer will also pull a credit report and credit scores. In essence, all your loan application needs at this stage is a property and you nor your seller will have to worry about getting approved.

If the seller looks at two offers and one has a preapproval letter attached and one does not, which offer to you think the seller will take? That’s right- yours. The one with the preapproval letter.

28 12, 2016

Mortgage Myths

By |December 28th, 2016|Categories: Loans|0 Comments

Myths About Mortgages Everyone Thinks Are True

If you haven’t watched the Game of Thrones, we wonder where you’ve been. GOT has snared the general cable customer with its storytelling of a medieval fantasy epic.

The actors who portray the various characters as well as the directing sometimes lead viewers to temporarily transcend their belief and actually think the characters are real. But they’re not. As good as the story is portrayed, it is still a myth, at best.

A good myth, but a myth nonetheless. Another place to look for myths that just don’t seem to go away has to do with financing a home. For those that have never obtained a home loan or haven’t for quite some time, may be reaching their own conclusions which are keeping them from buying.

Perhaps the most pervasive myth is how much someone needs for a down payment.

No, it’s not 20%. This 20% down requirement applies to conventional loans but even these mortgages accept a down payment as low as 3.0% when accompanied with a monthly mortgage insurance policy. Government-backed loans such as VA, FHA and USDA require little to nothing down as well.

Another myth is the concept of a prequalification. A prequalification and a preapproval are indeed two different animals and if you only have a prequalification letter in your hand, it’s very possible your real estate agent will ask for you to return to your lender and get the preapproval letter which requires a review of income, credit and assets.

One of the more common myths is that all mortgage lenders are alike. That’s not true. While most mortgage companies can access most mortgage loan programs there are lenders who can specialize in a certain market segment or have access to a loan product not many other lenders even know about.

Finally, there is a pervasive myth that buyers today can’t get a mortgage due to their supposed credit history. That’s a big mistake.

Mortgage lenders use an automated underwriting system and can pick up certain loan programs that can fit a borrower’s profile, even with credit that’s not exactly perfect.

The point with this misconception, is to let a loan officer determine whether or not you can qualify for a mortgage. Don’t simply rely on some website somewhere as you try and qualify your own situation.

27 12, 2016

Choosing A Mortgage Type: Which Character is Best For You?

By |December 27th, 2016|Categories: Loans|0 Comments

Choosing A Mortgage Type: Which Character is Best For You?

American actor Christopher Walken has appeared in more than 100 films and television shows and is still one of the most sought-after performers in Hollywood. He can really get into character in his films with such a wide range of profiles from his performance in The Deer Hunter to the Wedding Crashers.

Walken certainly can play a wide range of characters. For consumers, the mortgage market may also seem like a wide range of choices. So much so it might be a bit overwhelming at first. But once you understand the basics, it’s really very simple.

Mortgage loans today are all fully amortized. That means each month when a payment is made a portion goes toward principal and a portion to interest that is due the lender.

Whether the loan is a fixed rate, a hybrid or a variable, the loan will be paid off over time with regular payments. The difference will be how long the loan will be as well as whether or not the rate is fixed or can change.

Typical loan terms range from 10 to 30 years in five year increments. Loans are offered in 10, 15, 20, 25 or 30 years. The longer the loan term, the lower the monthly payment. Everyone wants a lower payment but the tradeoff with a longer term is more interest is paid to the lender over time.

With a fixed rate loan, the monthly payment will never change. A variable rate can change based upon the terms of the note with the most common adjustment possible once per year.

A hybrid loan is in fact a variable rate loan but is fixed for a predetermined period of time, such as three or five years. A hybrid loan will have a slightly lower start rate compared to a fixed rate over the same loan term but at the end of the initial fixed period the loan turns into an adjustable rate mortgage for the remaining life of the loan.

That’s really about it. Loans are available in different loan terms and the rate either can or can’t adjust during the course of the mortgage.

15 12, 2016

What if….?

By |December 15th, 2016|Categories: Loans|0 Comments

What If Mortgages Didn’t Exist?
On TV, on your laptop and your mobile device, it’s a good bet you’ll soon run across the American actor, Alec Baldwin. From early films Beetlejuice to The Hunt for Red October, Alec Baldwin today has his face nearly everywhere. Or so it seems anyway.

He starred for years in 30 Rock and appears in the Mission Impossible series. He does multiple commercials touting various products and services. And he’s funny, too. But what would it be like if Alec Baldwin didn’t exist?

Well, you wouldn’t see his face any longer nor would you experience his witty charm that has endeared him to his fans worldwide. It just doesn’t seem possible to imagine a world without Sir Alec. But what in the world would it be like without mortgages?

That’s an interesting thought, isn’t it? What would happen if there were no mortgage loans? First, home and property ownership would only be reserved for the very wealthy who could easily pay cash for a home. That would also mean there would be many more renters than owners. That would also mean real estate would be owned by corporations and private investors who pool their money together to buy real estate.

If mortgages didn’t exist, there would be fewer buyers and more renters which would increase the number of renters overall. Higher rental demand would also lead to higher rents.

The notion of no mortgages was nearly a reality in the early parts of the 1920s and 1930s. Back then, there were no universal lending guidelines that banks followed. Banks could make up most any approval guideline they wanted to. Fair Credit and Anti-Discrimination laws were still well into the future.

A buyer might be able to get a loan for a home but it would be for a very short term and require a down payment of 50% or more. Without a universal mortgage platform, the markets created more renters and kept most at bay. That is until the introduction of various government-backed mortgages such as VA and FHA loans.

Once these guidelines were introduced, mortgages became more commonplace and easier to qualify for. But without a mortgage market, more than likely you and I would be renters until we saved up enough cash to buy a home.

7 12, 2016

Don’t Get Scammed

By |December 7th, 2016|Categories: Interesting Info|0 Comments

Top Contractor Scams and How to Avoid Them

If you’re a Saturday Night Live fan, and who isn’t these days, you know that over the years the ever-changing cast who perform comedic acts live on stage in New York City is often the starting point for many a career for today’s comics.

While the acts are scripted they are often injected with a little impromptu humor thrown in. But mostly they follow the script. Others that follow the script are a few contractors that have no intention of providing what you want but only to take your money.

Here are some contractor scams you need to look out for.

This might have already happened to you but if it hasn’t, it’s when someone unannounced knocks at your door offering to do some home repair because they’re in the neighborhood and are finishing up some work for a nearby neighbor. Many times they have some leftover materials from the previous job and are willing to cut you a discount.

Perhaps the salesperson is offering you a one-time deal that is going to expire today and it won’t be available tomorrow. Such high pressure tactics are only used by unsavory folks who have nothing more in mind than taking a deposit from you and you never hear from them again.

Further, they offer another discount if you pay today in cash. Or, the contractor wants to use your home as a “model” home in the neighborhood and in turn will offer a discount as long as you’re willing to give them a good referral.

The contractor will walk through your home for a “free” inspection while an associate is wandering through other areas of your home, stealing from you.  Or, the contractor will identify an alleged “problem” that needs to be fixed right away that you were unaware of.

All of this can be avoided by first asking whose home in the neighborhood they’re working on. This usually gets rid of them at the outset. Don’t sign any contracts and certainly don’t give them any money whatsoever. If you’re intrigued and begin to consider the pitch, get estimates from other licensed contractors. When they come out to inspect your “problem” it’s very likely there is none.