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March 9th, 2012
Many homebuyers in the mid-2000s took advantage of buying a home with no money down (100% financing). In 2005, half of all mortgages were structured this way. But after the real estate meltdown in 2007, Fannie Mae and Freddie Mac stopped offering these loans to reduce risk. As a result, many potential homebuyers without enough cash for a down payment were frustrated.
After this policy change by Fannie Mae and Freddie Mac, the general public and most real estate agents assumed the days of no money down were gone forever. But as the recession grew, as depression loomed, and as obsession with home ownership waned, TWO mortgage programs still offered 100% financing and continue to do so today.
The United States Dept of Agriculture (yes the same one’s who certify our beef) and the Department of Veteran’s Affairs provide 100% financing to those who are eligible. The key phrase is “for those who are eligible”. USDA loans are for properties that are located in designated areas are a considered rural by the USDA and have income limitations. VA loans are for eligible veterans only and not the general public. Since the 9/11 attacks that drew us into war, there are now many veterans who qualify for this program.
“What? I didn’t know you can buy a home with no money down!” most realtors exclaim. “Yes, you still can,” I am happy to reply. Even though there are limitations and particular qualifications to these two programs, it is good to know that for those homebuyers who fit the profile, no money down is alive and well.
Posted by Carey Hollander
Posted in down payment | No Comments »
March 1st, 2012
Here we go again – the FHA is raising the upfront mortgage insurance premium (UFMIP) by 0.75 percent effective April 1, 2012.
Don’t try to adjust your computer screen; this is NOT a regurgitated blog entry nor an April Fools joke. Truly, I am not infatuated with FHA mortgage insurance, but the premiums just continue to rise, and you need to know.
Hey, don’t blame the messenger …
And did I also mention that the monthly mortgage insurance premium (MIP) is increasing by 0.10 percent? Well, it is.
The Federal Housing Administration (FHA) has seen its capital reserves dissipate over the past few years with a growing number of mortgage defaults and payouts on insurance claims, and this increase will bolster its capital cushion, congressionally mandated at two percent. But that’s only half the truth.
While the UFMIP increase may be based on the dwindling capital reserves, the increase in the MIP is funding the payroll tax cut approved by Congress for January and February. Isn’t it wonderful how all individuals with new mortgages will now incur this expense for as long as 30 years?
So what do these increases really mean? On a $200,000 FHA mortgage, the upfront increase will add $1,500 to the initial loan amount. The rise in the MIP will increase payments by $25 per month, or $300 per year.
Although the added burden may seem minimal, the MIP for this same $200,000 mortgage would have cost about $100 less per month as recently as October 2010.
And yet another blow to our incipient housing recovery, and no one is laughing at this joke.
Posted by Dan Ranck
Posted in mortgage insurance | No Comments »
February 24th, 2012
A revival in the housing market must occur for the overall economy to fully recover. Based on my professional experience, this might be the year. 2012 is off to a good start: The sales staff at our bank has seen an uptick in mortgage applications, and all my real estate colleagues have noticed an increase in inquiries, walk-ins, home showings and offers.
Check this out: A real estate agent friend called me last week and asked me if I could be at his office at 6:30 pm to qualify one of his customers. The day before my appointment, he called again to ask if I could meet another customer at 7:15 pm and a third at 8 pm. Of course, I agreed, and indeed, three new potential homebuyers were pre-approved.
So why are people coming off the sidelines now than the previous three years? Here are some contributing factors:
• Record low rates: A lower mortgage rate means lower payments, making loans more affordable.
• Low home prices: Home prices are hovering at 2001 levels, 30 percent lower than their high point in 2006.
• Potential homebuyers are finally “getting it.” It takes time for people to digest the latest trends and recognize it’s a great time to buy a home.
• Warm winter: Home sales usually decline in the winter because snow hides landscaping and building defects. The potential for hazardous weather conditions can also prevent home buyers from shopping. However, in the Northeast, this winter has been warm, with little snow and without any major storms.
So maybe, we are actually seeing a recovery. Maybe, 2012 will be the year people cite as an end to the Great Recession. “From your mouth to God’s ears,” as my Grandma used to say.
Posted by Carey Hollander
Posted in mortgage market | No Comments »
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.”
Posted by Dan Ranck
Posted in Client relationships | No Comments »
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
Posted in reverse mortgages | No Comments »
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
Posted in private mortgage insurance | No Comments »
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 »
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