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February 16th, 2012
Valentine’s Day – Love is in the air. Flowers, candy, romantic dinners – all memorable ways to celebrate your relationship with your significant other.
It may be easy to create memories with a personal relationship, but what makes a business relationship memorable?
When buying a home or refinancing your existing one, you often establish a close relationship with your loan originator. An experienced originator focused on your needs, with open communications, can make the process smooth and worry-free.
In any relationship, communication is the key, and this is especially true with business relationships. The mortgage process has become more intricate and uncertain in the past year, with grueling documentation requirements and a volatile economy. Loan originators should set proper expectations upfront to ease this process for you.
When initiating a mortgage application, you should get a checklist of required documentation from your originator as a useful overview and to ensure a complete understanding of the process.
Documents such as pay stubs and bank statements will always need to be updated with the most recent information since the mortgage process can take 30-to-60 days. By reviewing the dates of current ones, your originator can calculate when updated versions will be available and communicate that with you.
As your originator learns of milestones achieved during the loan process, you should be informed as well as notified about any changes in the timeline. Despite the difficulty of predicting the finalization date (with the exception of purchase settlements), failure to share information with you every step of the way can damage the relationship.
An attentive and communicative originator will make your mortgage experience “An Affair to Remember.”
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February 11th, 2012
As more baby boomers enter their retirement years, many of them are either struggling financially or are forced to alter their lifestyle. If a senior citizen owns a home or condo (compliant with HUD standards), then a reverse mortgage could provide the ultimate security blanket.
Reverse mortgage loans are based on the equity in the recipient’s home and do not require any monthly payments. The debt increases over time (compared to a traditional mortgage where the debt decreases over time); the minimum age to qualify is 62; and the home must be occupied as the primary residence. Seniors can choose from three different loan options:
1. Lump sum: One large payment to the homeowner at a fixed rate.
2. Line of credit: Monthly payments given to the homeowner at a variable market rate.
3. Combination of 1 and 2
Because there are no monthly payments, a reverse mortgage can provide needed cash for almost any reason including home improvements, medical expenses or nursing care. Even if there is an existing mortgage on the property, a borrower can refinance to replace the traditional mortgage and its monthly payments with a reverse mortgage without any payments. In all cases, the homeowner will continue to pay property taxes and insurance.
In fact, a senior can even purchase a home using a reverse mortgage. The typical reverse buyer is downsizing and wants to buy the new home without paying cash or taking out a traditional mortgage. In a reverse mortgage purchase, buyers can keep at least half of their assets intact without any monthly mortgage payments.
Before obtaining a reverse mortgage, seniors should consult with their attorney, tax advisor or local Agency for Aging.
Posted by Carey Hollander
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February 2nd, 2012
Let me first make it clear that I am NOT declaring my candidacy for President of the United States. This is not a campaign speech. I am not seeking the endorsement of a billionaire real estate mogul.
However, here a few interesting facts about me:
• I have created jobs.
• I have reduced and eliminated debt.
• I have strengthened the economy.
• I have fueled the housing market.
• I have improved the lives of lower, middle and upper-class Americans.
• I have helped Americans save money.
Not to be conceited, but some presidents and presidential candidates cannot make the same claims.
So, should I toss my hat in the ring? I think not.
But as a loan originator, my primary focus is working with clients to improve their current financial situation or lifestyle so they find themselves in a better place when my job is done.
This includes helping renters fulfill their dreams by becoming home owners while still increasing their net worth for the future. When homes are purchased, jobs are created, the economy is strengthened, the housing market is revived, and lives are improved.
Working with existing homeowners to reduce their current mortgage interest or leverage their equity also creates jobs, reduces or eliminates debt, strengthens the economy, improves lives and encourages saving money for a rainy day.
So with loan originators contributing so much to an economic recovery, why does the government seem, all too often, to inhibit mortgage lenders and ultimately reduce opportunities for prospective homebuyers and owners?
Ask the candidates.
Maybe I should re-think my opening statement…
Posted by Dan Ranck
Posted in Uncategorized | No Comments »
January 27th, 2012
When prospective homebuyers start shopping, their realtors will usually require them to obtain a pre-approval letter from a reputable mortgage lender to ensure their customer is qualified and will be able to complete the transaction.
However, some pre-approvals can end up causing heartache when a loan is later declined. Why? Because inexperienced loan officers (LOs) may lack sufficient knowledge about various loan programs and underwriting guidelines, which could render their pre-approval to be completely invalid.
So how can realtors or homebuyers determine whether the pre-approval has been completed properly? First, they should check the credentials and experience of their mortgage professional.
Second, they should check the terms and assumptions of the pre-approval:
• Does it list all borrowers’ names?
• Does it state what rate was used to qualify?
• Does it mention the tax figure for calculations?
• Does it include the homeowners insurance and/or private mortgage insurance?
• Does the letter state a review of the borrower’s credit, income and assets was completed?
A vague pre-approval may augur future difficulties and may evidence a lack of proper qualification. With a little upfront checking, realtors and homebuyers can protect themselves and reap the benefits of a successful closing in the end.
Posted by Carey Hollander
Posted in pre-approval letters | No Comments »
January 19th, 2012
Since 2007, many mortgages were originated as low down-payment loans with either monthly private mortgage insurance (conventional) or a mortgage insurance premium (FHA). Borrowers pay fees for this insurance until they build at least 20 percent equity in their homes.
In 2006, federal legislation was enacted to help borrowers with PMI or MIP by making these fees tax deductible. The write-off varied based on income; however, it did provide a critical benefit for many homeowners.
In the blink of an eye and with very little media attention, this valuable deduction ended at the end of the year and will increase annual mortgage costs by $1,000 or more, primarily for middle-income and first-time buyers with many other financial burdens.
In addition, as part of the of temporary extension of the payroll tax cut, fees will now be raised on all conventional mortgages guaranteed by Fannie Mae and Freddie Mac, and the FHA will increase the monthly mortgage insurance premium, resulting in several thousand dollars more in costs over the life of the loan.
At a time when housing plays such a critical role in our national economic recovery, the government continues to reduce the benefits of homeownership while increasing costs both to buyers and those looking to refinance.
Despite these developments, many other benefits endure such as historically low interest rates, favorable pricing and overall savings compared to renting.
Posted by Dan Ranck
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January 12th, 2012
Normally, private mortgage insurance (PMI) is required when the equity on a property is less than 20 percent. PMI insures banks against payment defaults and has allowed homebuyers to purchase property sooner since less money is required.
A new benefit automatically provides job loss protection insurance at no extra cost for individuals who include PMI when purchasing or refinancing their homes. This insurance offers peace of mind should you become involuntarily unemployed and still need to make the mortgage payment. Here’s how it works:
• If an involuntary job loss occurs, the borrower would need to
notify the job loss protection provider.
• The provider can pay up to $2,000 a month for up to three months (includes principle, interest, taxes and insurance) for a job loss occurrence.
• The benefit period extends for three years after the loan closes, and the provider can pay an additional three months of payments during this period if a second job loss occurs.
• The borrower is vested 60 days after the closing, and there is a 30-day waiting period from the date of involuntary employment.
• On joint borrower loans, the payment is prorated based on the combined incomes.
New and improved programs and policies continue to roll out to provide additional benefits to homeowners. Let’s hope these improvements hasten our economic recovery and add to our individual prosperity.
Posted by Carey Hollander
Posted in private mortgage insurance | No Comments »
January 5th, 2012
A new year brings a fresh start to both individuals and businesses. The first few weeks are generally spent solidifying goals and business plans formulated in late December, often consisting of achievement-oriented targets. But sadly, far too many of these noble resolutions fail to be met.
Why?
As the saying goes, “people don’t plan to fail, they fail to plan.” Many people develop an overarching vision to transform their lives through education, career advancement, increased income or the perennial desire to lose weight.
The failure comes from a lack of planning to reach these goals.
As a loan originator, I could try to increase personal production by 30 percent. If I provided $10,000,000 in volume last year, that works out to $13,000,000 in 2012. So it’s time to roll up my sleeves and get to work. Sounds simple, right?
Not so fast …
What I am going to change to reach that goal? If I work just as hard as last year, should I expect to make it?
Absolutely not. As the saying goes, “the definition of insanity is doing the same thing twice and expecting different results.”
Thus, I need to develop a new plan, a step-by-step roadmap with a clear process-oriented understanding. It’s not rocket science, but it must be applied to give you a fighting chance to reach your objective.
Unless you follow this basic principle, you will end up in the same place as last year, and you will fulfill the classic definition of insanity.
Here’s to a successful 2012 in all you do!
Posted by Dan Ranck
Posted in Client relationships | No Comments »
December 29th, 2011
Real estate professionals often discuss why more people aren’t looking to buy homes right now. With home prices comparable to 2002 and rates to the 1950’s (can you say “time travel?”), home ownership hasn’t been this affordable in decades.
So what’s the hold up? Several factors are influencing potential buyers:
• Job loss or fear of job loss. Many people have been negatively impacted by the economic downturn. Until the “jobs issue” is resolved, and confidence in our economy is restored, many potential homebuyers will continue to remain on the sidelines and let “opportunities of a lifetime” slip by.
• Fear of continued real estate depreciation. Some people are hesitating in case home values continue to drop. The folks in this category are really missing the boat.
First of all, waiting to buy will likely cost them more in the long run because rates will only increase in the future, and higher rates affect the cost of home ownership more than home value. Secondly, the real estate market fluctuates. We are reaching the bottom of this down cycle; thus, during the next few years, property values will begin to increase. Finally, home ownership involves settling down and belonging to a community, unlike a stock where you monitor your return on investment each year.
• Fear of not qualifying for a mortgage. Everyone hates rejection, and some people prefer to pay rent to avoid the possibility of being declined for a mortgage. However, credit is slowly easing these days, and those who can document their qualifications are receiving loans as a matter of course. Today’s mortgage world requires a greater degree of documentation and diligence than the early 1990’s, but make no mistake, banks are lending!
With home prices down and interest rates at 50-year lows, now is the time to buy your dream home. “There is nothing to fear but fear itself.”
Posted by Carey Hollander
Posted in mortgage market | No Comments »
December 22nd, 2011
This time of year, everyone seems focused on giving or receiving gifts. In the mortgage world, “gifting” occurs all year long. However, in gifting for a home purchase, the number of details to unwrap far exceeds a simple ribbon and colorful paper.
Although some mortgage programs require little or no money down to buy a home, buyers can generally expect to need some cash upfront when making a home purchase. First-time home buyers may find challenges in meeting down payment and closing costs, and many of them turn to relatives and friends for a little help.
In the mortgage gifting process, homebuyers receive cash for the purpose of purchasing a home with no expectation of repayment. Generally speaking, a buyer cannot borrow funds for down payment or closing costs; therefore, when using a gift, proper documentation must be provided.
The process is often called “sourced and seasoned.” In other words, you must verify where the funds came from, their provision as a gift, and their deposit in your bank account well before the settlement date. The gifting party will also need to sign a legal form documenting the transfer of funds with no expectation of repayment.
As a home buyer, you must disclose any gift to your mortgage lender early in the process. However, any qualified mortgage professional should ask you to do so anyway since an attempt to avoid full disclosure of gifted funds constitutes mortgage fraud.
Following the proper guidelines for gifting provides a great tool for home buyers who are short of funds, with benefits extending both during the holiday season and all year long.
Happy Holidays!
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December 15th, 2011
When buying a property, the monthly mortgage payment is primarily determined by the size of the down payment and the interest rate. Homebuyers frequently ask about the most economical way to obtain the lowest payment, and almost always I recommend a rate buy-down (paying a discount fee to lower the rate).
Let’s take a look at two variations of a case study to illustrate why:
Case Study
A customer is purchasing a home for $500,000 with a $100,000 down payment but does not want the monthly payment to exceed $1,800.
• Variation #1: A 30-year fixed rate of four percent with zero discount points would yield a monthly mortgage payment of $1909.66, $109.66 more than the customer’s limit. If the customer decided to put more money down to make their payment $1,800, then the mortgage would need to be $377,000, requiring an additional $23,000 down payment.
• Variation #2: The customer is willing to pay a discount fee to reduce the rate and thereby reduce the mortgage payment. The interest rate would then need to equal 3.5 percent to yield a payment of $1796.18. To obtain a rate of 3.5 percent, the customer would need to pay 2.75 percent in discount points, and that translates to an $11,000 discount fee. Thus, buying down the rate costs $12,000 less than putting more money down.
When buying a home, the consumer is faced with many decisions such as the above with major economic implications. Consulting a mortgage professional in advance generally represents the best course of action.
Posted by Carey Hollander
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