Rising Mortgage Fees = Rising Closing Costs

Alert. If you do not have a FICO Score 680 or higher and cannot put down a sizable down payment you’re being squeezed in the mortgage market. Fannie Mae and Freddie Mac are charging fees much higher than before to borrowers with lower scores and down payments of less than 30%. Unfortunately these are borrowers that were once considered “prime” credit applicants. Mortgage insurers like MGIC and PMI Group are raising premiums on consumers who have low down payments and scores mid-to upper 600s. Both penalties total thousands of dollars, payable either at settlement or in higher interest rates. Example if you qualify for a loan for 300,000.00 and your credit score is 675 and your LTV (Loan To Value) is 75% with a 25% down payment the additional cost will be 2,250.00 per loan. In today climate of finance the mortgage fallout and rising cost to loans are being passed on to us the consumer placing more strain on our economy and housing sector.

Read more!

5 Ways To Restore The Mortgage Market

With the mortgage industry struggling mightily here are 5 creative ways to fixing the mortgage market. Shared Appreciation a few banks offered this mortgage in the 1970s, but the Internal Revenue Service never clarified whether the payments to outside investors could be view as tax-deductibles interest, which left homebuyers nervous. The way it works a homeowner agrees to share the profit on the home if he sales at a profit. This idea is popular in Australia. Hedge with a short sale the homeowner would short a regional index of home prices. The bank would hold the futures position in escrow; it could reduce its risk of losing money. If the homeowner had to sell, he’d make enough on the short sale to cover the decline in value of his home. Offer Puts the homeowner would buy insurance against a decline in regional home prices. Vary duration, not monthly payments keep payments fixed, translate a higher interest rate into a longer mortgage term. Treasury inflation-protected mortgages these mortgages would have monthly payments that creep up slowly even in times of fast-rising interest rates. This is very similar to TIP bonds. Some states prohibit these mortgages

Read more!

Escrow And The Way It Works

Buying or selling a home (or other piece of real property) usually involves the transfer of large sums of money. It is Important that the transfer of these funds and related documents from one party to another be handled in a neutral, secure and knowledgeable manner. For the protection of buyer, seller and lender, the escrow process was developed. As a buyer or seller, you want to be certain all conditions of sale have been met before property and money change hands. In part escrow functions work like well oiled machine. One party engages in the sale, transfer or lease of real or personal property with another person delivers a written instrument, money or other items of value to a neutral third person, called an escrow agent or escrow holder. The third party (the escrow officer) waits for the completion of a specified event or the performance of a specified condition to finally disperse money or other items.The escrow holder responsibilities are to carry out the written instructions given by the principals. This means receiving funds and documents necessary to comply with those instructions, completing or obtaining required forms and handling final delivery of all items to the proper parties upon the successful completion of the escrow. In order for escrow to close successfully all documents need to place in the escrow holder care. This includes loan documents, tax statements, fire and other insurance policies, title insurance policies, terms of sale and any seller-assisted financing, and requests for payment for various services to be paid out of escrow funds. If the transaction requires new financing it is the buyer or the buyer’s agent to make the necessary arrangements. Documentation of the new loan agreement must be in the hands of the escrow holder before the transfer of property can take place. Once all instructions in the escrow have been carried out, the closing can take place. For example all outstanding funds are collected and fees such as real estate commissions, termite inspection title insurance premiums are paid. Finally when closing sellers and buyers should stay in close contact with their realtor to make sure all instruction are being met during escrow.

Read more!

Advice to Buyers: Spend Cautiously Before Closing

Homebuyers beware. Please do not throw your debt ratio out of whack before the close of escrow. Many deals fall through simply because of inopportune spending. A mortgage that you were previously approved of by a lender before closing can drastically change due to excessive debt. Lenders are pulling credit history and credit scores within a week of a buyer’s schedule closing date just to make sure nothing major has change. What the lender doesn’t want to see is a huge run-up of credit-card debt or other loans. Some lenders may require for you to sign a statement affirming that there has been no change in your finances and employment that will affect your ability to repay the loan back. Accumulating debt before closing can cause your credit score to change and the lender may longer be willing to lend money at the rate promised, or maybe not at all. My advice is to wait to do that shopping after closing.

Read more!

Credit Crunch No Sweat. FHA Is The Way To Go

FHA was established in 1934 and is a part of the US DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD). A loan can be Conventional, FHA or VA.
Meaning who is insuring the loan. Conventional loans are insured by PMI (private mi companies), FHA is insured by HUD, VA loans are insured by the Veterans Administration.

FHA was established to make home purchasing easier to qualify than conventional. FHA ARE FULL DOCUMENTATIN LOANS. With the changing in underwriting for Subprime Loans, FHA is a valuable option.
For the following reasons:
. 1. FHA loans are not FICO DRIVEN. The client can have a FICO score under 600, or no score or no credit.
2. FHA loans allow down payment assistance from other programs as seconds
3. FHA has a 3% down requirement (REGARDLES IF IT IS 1 – 4 UNIT BLDG)
4. You do not have to be A FIRST TIME BUYER, If you own 3 units, you can purchase a SFR
5. No counseling required, No Income Restrictions, No Property Location Restrictions
6. The entire down can be a GIFT
7. Seller can pay of to 6% of ALL CLOSING COSTS INCLUDING TAXES, INSURANCE OR INTEREST
8. FHA ALLOWS UP TO 85% LTV CASH OUT ON REFINANCES AND 100% ON NO CASH OUT
9. FHA allows clients to buy if it has been 3 years since a Foreclosure, and 2 years since a chapter 7 and 1 yr while in a chapter 13 (if all payments were made on time)
10. FHA allows a STREAMLINE REFI, for existing FHA borrowers, low costs,
No appraisal, No Proof of Income only Mortgage Rating, No Cash Out, No Credit Check


FHA LIMITS as of September, 07 (SUBJECT TO INCREASE SHORTLY))

Los Angeles, Long beach, Glendale One Family $362,790, Two Family $464,449
Three Family $561,441 and Four Family $697,696 (Orange and Riverside Counties will be different)

The limits change throughout the US.

**THE SELLER IS NOT REQUIRED TO PAY BUYER FEES, FHA CHARGES A 1.5% UPFRONT MIP WHICH WILL BE FINANCED IN THE LOAN AND A PORTION REFUNDED UPON THE REFINANCE OR SALE OF PROPERTY.
NO PREPAYMENT PENALTY (WHEN THE LOAN IS PAID OFF FHA WILL CHARGE INTEREST TO THE END OF THE MONTH).



.


Read more!

Foreclosure 911 Help!!!

In case you have been living underneath a rock the mortgage industry has been getting hammered by the subprime fallout. Adjustable Rate Mortgages has been on the rise and homeowners have not been able to keep pace with their increased interest rates. So what’s next you have not made a mortgage payment in the last three or four months your lender files a NOD (Notice Of Default) it can be devastating news, but don’t throw in the towel yet. Here are some viable options to consider . 1 Refinance- Obtain a new loan to pay off the one in default
2 Foreclosure Consultant- Seek the services of a Financial Advisor or investment counselor. For a fee they will prevent lienholders from enforcing or accelerating the note, or help reinstate the, or get an extension or last but least arrange a loan or advance for funds for the owner.
3 Deed-In-Lieu- You can deed the property to directly to the lender in exchange for canceling the secured debt.
4 Litigate- You can dispute the validity of the foreclosure by filing an action, restraining and enjoining the foreclosure.
5 Bankruptcy- You can file chapter 13
6 Sale- Owner sales property before Trustee Sale
7 Walk- You can just simply vacate all together when lender completes foreclosure.


Here is a website I encourage taking a look at www.foreclosureuniversity.com It goes into in-depth details about foreclosures and the information is free. It contains a foreclosure flow chart, explains short sale, and foreclosure laws
.


Read more!

Shorten your mortgage by paying a little extra each month

Mortgagors have an agreed date for payment each month with their lender with a grace period of a few days. Some mortgagors would prefer to pay half of their monthly payment 15 days prior and the remainder on the due date. Your lender says this can done, but through a third party company, which will charge you a sign up fee for several hundreds of dollars plus a monthly fee. There are third party companies for a fee that will deduct from your checking or saving account half of your regular principal and interest payment every two weeks. This will equate to 13 monthly payments for 12 months, thus shortening your note by at least 7 years and saving a huge amount of money. Here’s the catch you can do this yourself at not extra charge. Simply divide your monthly mortgage principal and interest by 12 and add that amount to your monthly mortgage payment. Example your mortgage payment is $2400 a month divide that amount by 12 resulting in $200.00 this is the amount you will pay to shorten your note. Your lender will have to accept your payment as well and this is how you can shorten your mortgage.

Read more!

Why Can't I Get a Loan?

Your credit score, (also known as your FICO score) is extremely important. Your credit score determines what you can or cannot purchase and how much it will cost you. For example, you qualify for a home loan but your qualifying interest rate is through the roof. This is because your FICO score from Experian, TransUnion, and Equifax suggest that your rate should be higher due to poor credit history.


Wait did you check you FICO score before applying for that home loan? This should be the first step before applying for a loan. The second step is to order your credit report from the three credit reporting agencies. Your FICO (Fair Isaac Corporation) score determines the amount of interest that you would pay on a particular loan. It is safe to say that you need to know your FICO score and determining factors that makeup your credit score to make sound financial decisions.

The factors that make up your FICO score are paying your bills on time, how much you owe, types of credit, and the number of new credit applications a person has applied for. Obviously paying your bills on time is very important. No lender wants to lend their money to someone who is unable to pay their bills on time. How much you owe is factored against how much you make. If you make $50,000 a year and you are $30,000 in debt, then this will hurt your credit score. The types of credit are also critical when your credit score is determined. Secured credit cards and home loans are definitely better than unsecured credit cards and other types of credit of this nature. Lastly, the amount of new credit applications can cause harm to your FICO score. When you apply for so much new credit, a lender may see this as sign that you may be going through financial hardships and thus acquiring credit to help the situation.

Let me share one of my experiences with you. Eight years ago I had a somewhat of a decent credit score between 670-690, yet I was being denied credit. I could not figure out what was going on. After doing some research I found out my problem. Although I paid a collection bill about 10 months earlier the damage was done. The account reflected as paid but it was recent and it affected my credit score tremendously.

The best remedy for a better FICO/credit score is consistency. Paying your bills on time will raise your credit/FICO score. It makes a world of difference between buying and renting a home. An example of this is two people applying for a 30yr mortgage. A person with a FICO score of 600 will have an average interest rate of 9.422%. Another person with an FICO score of 750 will get an average rate of 6.195% on a 30yr mortgage loan. That is close to $300.00 a month difference on a $216,000 loan.
From my experience in selling homes and buying homes for my clients, in today’s market you would benefit immensely from having a FICO score as high as possible. It could be the difference of calling yourself a homeowner or a renter.

Please respond if you have any questions or comments or other helpful information that I may include with this topic.

For more information, visit the websites below.
www.myfico.com
www.freecreditreport.com



Read more!