There are numerous websites that I have come across where homeowners or potential homeowners attempt to get answers to their mortgage or real estate related questions.   Some are actual Real Estate related sites like ActiveRain or Trulia.  Others are networking sites like LinkedIn.  Still others are general Q&A sites like Yahoo Answers.    On these sites, the quality of answers vary, and answers are often given by someone with little or no experience, someone who wants to earn points, or someone who just wants to promote their own business.  Don’t get me wrong, it is possible to get an accurate answer, the problem is that is is difficult to sift through the responses and determine which is correct and what is not.

As a new feature to Mortgage411Center, I am going to post some of the more common mortgage related questions that I’ve found, along with my responses.    Now, I’ve noticed that mortgage questions tend to fall into one of two categories.  First there are questions from people who are already in the process of getting a mortgage, but for some reason are having trouble getting their questions asnswers from the current loan officer.   My responses to these types of questions are always the same.  If you don’t feel comfortable asking your loan officer a question, or you cannot get him on the phone, or he is not answering your emails,  you probably should not be doing business with this person.  

The second type of question comes from people who are looking to buy a home or refinance a mortgage and are looking for information before they start the process.  While some of these questions can be answered online, when we  start to get into specifics,  it is time to find a loan officer to help you along with the process, preferrably one who does take your calls and respond to your emails (see above).

Have a mortgage related question.  Email us at info@mortgage411center.com.

Coming up next: Can I Refinance my Mortgage and Get a Rate Under 5% Without Paying Points or Other Charges?

Come on now , isn’t anyone in the White House doing their job?  Or is the treasury department, who is having a hard time filling other positions, in need of a webmaster as well?  Isn’t there an intern or someone to check things like this?   I’m wondering if we should trust that the rest of the information is accurate when there is one glaringly obvious mistake right there on the front page?

Now really, can we be expected to  take the government’s initiative to help homeowners avoid foreclosure  seriously when the website looks like it was created by somebody’s little brother?

Why is this important?

• In today’s declining real estate market there are many people who either bought while prices were high, put little or no money down, or both and currently do not have a lot of equity in their homes.  Changing the loan to value ratio from 95% to 85% is going to severely limit the number of people who are able to refinance.  To put it in terms of numbers, say you own a home worth $220,000.  Currently you would be able to refinance as long as the new loan amount doesn’t exceed $209,000 ,  under the new rules that changes  to $187,000.  Even if the value of your home has not declined, if you bought it with only a 5% downpayment you would not be able to refinance with an FHA cash-out loan since you would not meet the new LTV requirements.

• Cash-out does not necessarily mean that the borrower is getting a check  (cash) at closing.  It simply means that more than the balance of the mortgage and closing costs are included in the new loan amount.  While you may not think that you need to or may not want to do a cash-out refinance, you may have to do a cash-out refinance if you have other liens against the property which need to be paid or you have other outstanding loans, credit card bills etc which will need to be paid in order to qualify for the loan.

• FHA loans have less strict credit standards than conventional loans, and the terms are generally more favorable.  This new rule is going to hurt those who probably could use the help the most.

Please note, you may have also heard about the President’s new mortgage plan that will allow homeowners to refinance up to 105% of the value of your home.   This may be an option for homeowners with little to no equity BUT this option does not allow for cash-out at all no matter what the loan-to-value.   What I am seeing is that many people who are unable to afford their mortgage payment also have other debts that they have incurred which is making it difficult for them to qualify for a new loan.  Since this program prohibits cash-outs which could otherwise be used to pay down the debts, the pool of borrowers who can qualify for this program is limited.

Bottom line.  If you are thinking about refinancing to lower your mortgage payment and have been putting it off and know that you do not have perfect credit, 20% equity in your home, or have other outstanding bills that need to be paid you better act now!

• The tax credit is for first-time home buyers only, a first-time buyer is defined as someone who has not owned a home in the past three years .
• The tax credit does not have to be repaid. This is a change from last year’s tax credit which was basically an interest-free loan, repaid over 15 years.
• The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.   So someone purchasing a $60,000 home would only receive a $6,000 credit, while someone purchasing a $300,000 home would only receive the $8,000 maximum.
• The credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009.
• Single taxpayers with modified adjusted gross incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.  Those with incomes over that amount may still qualify for a partial tax credit.

As you can see this is a great incentive for those who are considering purchasing a home this year, but are unsure if now is the right time to take the path to homeownership.  For more reasons why 2009 may be a great time to buy,  please read:

Why 2009 is the Time to Buy

Why 2009 is the Time to Buy - Part 2

Remember, before you even begin to look at houses you should contact a mortgage professional to get pre-approved for a loan,  so that you will be sure you qualify and so you will know exactly how much home you can afford. 

Please contact us with any questions or to get started today.

The  Homeowner Affordability and Stability Plan

The government’s new plan, which was unveiled last week, is supposed to help 7-9 million homeowners stay in their homes.  However, many, including supporters of the President , have criticized the plan, stating that it is not designed to help home owners who need it the most.  Their are two components to the plan - the refinance portion and the loan modification portion.  The refinance portion is only available for homeowners who owe up to 5% more than their home is currently worth , have a loan guaranteed by Fannie Mae or Freddy Mac , and are not currently behind or their mortgage.    The modification portion is available to homeowners who are behind on their mortgage, regardless of whether the loan is guaranteed Fannie or Freddie.  Please note, that while the government is offering incentives for lenders to participate in this program, it is completely voluntary.  Furthermore, it is anticipated that there is going to be a backlog at most lenders, as homeowners are rushing to try to take advantage of the program, so if you are in danger of losing your home, you may not get immediately relief.  This program is also only available to borrowers with conventional mortgages, therefore it will not help the many homeowners with FHA or VA loans.

Refinance your Loan

If you do not owe more than your home is currently worth and are not behind on your payments but are still feeling the pinch, it is possible to refinance you loan, either through your current lender or a different lender.   Please note that not all lenders offer the same types of loan products so it is possible that you may be turned down by one lender yet approved for a loan with another.  Ideally you want to shop with a lender that has access to a full range of products, including government sponsored loans like FHA.  

Loan Modifications

There are many companies out there that are offering loan modifications.  Many charge a hefty fee and promise results that they are not able to attain.   Yet there are also  companies out there that are legitimate and can help you save your home.   The problem is that it is difficult to ascertain the good from the bad. 

There are also those who are of the opinion that homeowners should contact the lender and attempt to get a loan modification themselves.  However, unless you are able to get a hold of the correct department or speak to the right person you may not get very far.  Besides, most banks are not staffed to handle the current flow of customers who are seeking loan modifications, if you search the interent you will read countless accounts of files being lost, agreed upon terms being changed, and general frustration with the overall process.

I’m Still Confused.  Which is the Right Option for Me?

Please note, the options listed above were made assuming that you wish to stay in your current home.  However, you may wish to sell and in that case you should contact a Realtor, preferrably one with experience in shortsales in the event that you owe more than your home is currently worth.  Other options include deed in lieu of foreclosure (basically giving the home back to the bank - contact your lender).  This option will have a negative effect or your credit although it is not looked at as bad as a foreclosure. 

If you can no longer afford to pay your mortgage, your best bet as a first step is to contact your current lender and try to work something out with them.  They will best be able to tell you if you are able to take advantage of any of the three options listed above, either the govenment’s new plan, a loan modification, or a loan refinance.   If you current lender is unable or unwillling to help, or perhaps is just too busy to be able to help you, then the next step is to contact us.  As mentioned before, not all lenders offer the same types of loan programs,  therefore it pays to get a second opinon.  You may still be able to refinance you loan, even if your current lender turns you down.  If you do not qualify to refinance, we can refer you to legitimate companies that can help you modify your loan, so that your payments are more affordable.

If you have any questions on how you can make your mortgage loan more affordable and keep your home,  feel free to contact us.

VA’s Home Loan Program is for veterans and active duty military personnel and certain members of the reserves and National Guard. VA’s program provides an excellent product and benefit for those individuals who have served or are serving to protect our families and our nation, as well as giving them a form of financing that will allow real estate professionals to sell more homes. To be eligible, a veteran must only have served 90 days of more of active duty.

If you are unfamiliar with the program, there are several advantages to using VA’s Home Loan Program not the least is that it allows a veteran who qualifies income and credit-wise to purchase a primary residence without putting money down towards the sales price, as long as the sales price does not exceed the appraised value. Veterans do, however, need money towards closing costs and the earnest money deposit. Closing costs may be paid by the seller however, making it possible to get into a home with no money out of pocket as the earnest money can be refunded at closing.

Here are some special items of interest about VA Loans:

•  
  • VA does not have a maximum loan amount. However, lenders do sell loans on the secondary mortgage market, so they will generally limit loans to $417,000 ($625,500 in Hawaii, Guam, Alaska and U.S. Virgin Islands) with no down payment. With a down payment, loans may exceed these amounts.
  • The veteran does have to qualify income and credit wise. (* see note below)
  • The veteran does have to occupy the home as their primary residence.
  • The veteran does not have to be a first time home buyer and may reuse his/her benefit. (subsequent usage could mean higher funding fee)
  • The lender, not VA, sets the interest rate and discount points, so they may vary from lender to lender.
  • There is no private mortgage insurance, but VA does charge an up front VA funding fee, which may be financed. The exception to this is that if a veteran is in receipt of VA service connect disability payments each month, he or she does not have to pay a VA funding fee.
  • The seller can pay for closing costs. There is a requirement that seller concessions do not exceed 4%, but only certain items are considered as part of the concession; i.e., payment of pre-paids, VA funding fee, payoff of credit balances or judgments on behalf of the veteran, funds for temporary buydowns (not discount points).
  • The veteran is not allowed to pay for the wood destroying insect (termite) report; it is generally paid by the seller. The veteran is also not allowed to pay the processing, underwriting or tax service fees, nor are they allowed to pay part of the escrow closing fee. These are normally paid for by the seller.
  • VA does not approve the majority of loans. The majority of transactions are handled directly by the lender with little VA intervention.

VA also required the following on any purchase agreement: “It is expressly agreed that, notwithstanding any other provisions of this contract, the purchaser shall not incur any penalty by forfeiture of earnest money or otherwise of be obligated to complete the purchase of the property described herein, if the contract purchase price or cost exceeds the reasonable value of the property established by the Department of Veterans Affairs. The purchaser shall, however, have the privilege and option of proceeding with the consummation of this contract without regard to the amount of the reasonable value established by the Department of Veterans Affairs.”

* Please note that VA uses two methods for qualification purposes. The primary method of evaluating a veteran’s income is the residual income method. Under this method, the underwriter determines that a veteran has sufficient income to cover day-to-day living expenses after paying housing expenses, taxes, and other debts such as car payments and credit card payments. This is very important, a loan can be approved by the automated underwriting system but if the residual income is insufficient, it could later be denied. VA also uses a debt-to-income ratio method like many programs. However, VA uses only one ratio which is the ratio of total debt (both housing and other debt) to income.

VA loans are one of the best ways to get into a home with no money down. The rates are comparable with conventional rates and overall is often the best way for a veteran to purchase a home. Call me today to find out what we can do for you for a no money down Federal VA Mortgage Loan.

First some facts:

1) It is estimated that about 93% of Americans are not behind on their mortgages. So this plan is geared toward only 7% of the population.

2) According to the fact sheet: This is a “new program that will provide the opportunity for 4 to 5 million responsible homeowners who took out conforming loans owned or guaranteed by Freddie Mac and Fannie Mae to refinance through the two institutions over time“.

3) There are lenders and companies that are already successful in getting loans modified for homeowners without the intervention of the government and do not leave tax payers responsible with the tab.

My main problem with the plan is that the government should not be involved in the business decisions of banks and lending institutions and that the true responsible homeowners (the 93% who are not behind on their payments) should not be footing the bill.   However, that is only a matter of opinion.  The fact of the matter is that those who may truly need assistance may not be able to get it, and those who did make bad decisions may still be able to get bailed out. 

As stated above the President’s new program is only available to homeowners with loans owned or guaranteed by Freddie Mac and Fannie Mae. Now I don’t expect the average homeowner to understand the significance of that statement, and I would guess that our government doesn’t really understand it either. However, the fact that the program is only limited to loans guaranteed by those two institutions means that that there will be no help to borrowers who have non-conforming loans also known as subprime mortgages.  Subprime mortgages were often given to borrowers with credit problems and carried higher interest rates.  While one can make the argument that perhaps these borrowers should not be helped out, one must also note that there are many cases of borrowers who were placed into so-called subprime mortgages when they really could have qualified for a conforming loan.   It has also been stated that the reason it is important to prevent foreclosures, is that even borrowers who are able to pay their mortgage suffer when foreclosures in their neighborhood cause declining home values.   Yet, this program does nothing to offer assistance to borrowers that perhaps have a much greater risk of facing foreclosure, which seems a little contradictory .

Furthermore, I notice that the statement equates Fannie Mae and Freddie Mac loans with responsible borrowers and conforming loans. This is misleading as well. A loan can still be considered “conforming” yet still be a stated income, low down payment or an adjustable rate mortgage. That is, it is entirely possible that a borrower who has a conforming mortgage was not really “responsible” and bought more home than he could afford.

As you can see determing the “responsible borrowers” is not as easy as the governement’s plan makes it out to be. However, even if we are operating on the assumption that only borrowers with conforming loans should be able to take advantage of the program, should all conforming borrowers be classified as responsible? Should a person who lost his job and wants to continue to collect unemployment checks be included as part of the responsible borrowers simply because he as a Fannie Mae loan? Should the Realtor or Mortgage Loan Officer whose income greatly dropped because of the economy yet refused to get a part-time job to make ends meet be helped out as well? What about those who took the path to homeownership even though they had no savings to rely on or emergency funds set aside in case the they lost their jobs or income?

Which leads me to wonder, why the sudden government interest in helping “responsible” people anyway.  Should we now overlook the fact the foreclosure problem in the housing market was caused in part by the government insisting that banks make loans to less than qualified borrowers?  Should we all be picking up the tab for other people bad luck or bad decisions?   One thing is certain, we are probably going to see a lot more of these bumper stickers going around:

Get yours too by clicking here.

Written by Michelle Chamberlain www.mortgage411center.com

This is not only a problem online, but it also occurs in speaking with customers on a day to day basis.  Out of habit, mortgage loan officers tend to  rely on mortgage speak , forgetting that the customer probably has no idea what the loan officer is saying.   Here are some typical examples:

• If you purchase this home, your PITI will be $1254.76 per month.
• You will have to pay PMI on your loan since your LTV is higher than 80%.
• Because of your FICO, your interest rate is going to be 6.5%.

Allow me to translate.

PITI stands for Principal Interest Taxes and Insurance.  It is basically the amount that you will pay to the mortgage company each month.  Most online mortgage calculators where you plug in the loan amount and interest rate will only give you the amount of Principal and Interest (PI).  But the PITI is the true cost of the loan.

PMI stands for Private Mortgage Insurance.  You will have to pay this if your LTV (that’s loan to value) is greater than 80%.  For example if you are buying a $100,000 house  with a downpayment of $10,000 you would have a loan amount of $90,000 while your home is worth $100,000.  The ratio of your loan to value is $90,000/$100,000 or 90%.  PMI protects the lender in case you go into default.  It is not to be confused with homeowners insurance which you are also required to pay but which protects the homeowner in the event something were to happen to the house.

FICO stands for Fair Issac Corporation which developed the most widely used credit score.   Your lender may refer to your credit score as a FICO score, even if he uses a slightly different model.   Generally, the higher your FICO score the lower your interest rate and vice versa.

To learn more about some common mortgage terms and their meaning please view our mortgage glossary.  Before you know it, you’ll be talking like a loan officer too or at least you’ll be able to understand the mortgage process a little better.

As a mortgage professional, I am seeing a large increase in the number of homeowners looking to refinance their mortgage loan. They have all heard about the current low interest rates and want to take advantage of them. Right now, I have enough refinances to keep me busy for the foreseeable future. I have no need to market to prospective homebuyers, but I am. There are a lot of great incentives to buy right now and I don’t want anyone to miss out on these opportunites. To learn why read the previous post, A New Home For the New Year - Why 2009 is the Time to Buy.

However, I am not the only mortgage professional who thinks it is time to buy. Tennessee Mortgage Professional Danny Thornton thinks it is Time to get off the fence, and shares with us the new commercial from the National Association of Realtors with the same message. I like the commercial so much I have posted it on my own website and am sharing it here as well.

My only complaint is that the commercial should have advised potential homebuyers to get preapproved for a mortgage loan, before talking to a Realtor. What good is convincing potential homebuyers to get off of the fence and buy a home only to find out they don’t qualify for a mortgage loan in the first place?

If you think 2009 is the time to buy and are ready to get off the fence and into your own home visit www.aboveallmortgage.com.

Why should you buy in 2009?

1) Mortgage interest rates are at an all time low and lower rates mean lower payments.

2) Home prices have dropped making homes more affordable. In some areas there are real bargains.

3) Excess inventory make this a buyer’s market, and sellers may be more willing to negotiate.

4) First time homebuyers may be eligible for a tax credit of up to $8000 on homes purchased before December 31, 2009.

5) The combination of these factors actually make buying a home now a wiser choice than at the peak of the market when there was a frenzy to outbid other potential buyers on already overpriced homes, no additional incentives to buy, and the lingering fear that the bubble would one day burst.

6) Waiting for the market to reach the bottom is a bad idea. The only way to know when we’ve truly reached the bottom is when home prices start to go back up.

For those who are thinking about buying but may still be “on the fence”, you may need to ask yourself “Is It Time to Develop a Sense of Urgency?”, and consider taking advantage of these opportunities before it is too late. For those who are ready to act, the first step to purchasing your new home is to contact a mortgage professional to learn more about the loan process, find out how much you can afford, and to get pre-approved. Getting pre-approved before you start looking for homes will show that you are a serious and qualified buyer and will give you an advantage when you decide to make an offer on a home.

Visit www.aboveallmortgage.com to take the first step to becoming a homeowner in 2009.