So the last couple weeks I mentioned FHA and VA to help those borrower are Vets. But other than Vets, borrowers with very little money to work with in the past have used FHA. Great way to go if needed. But to be Honest unless their credit scores are lower or a unique circumstance, FHA with all the increases is very expensive what to go.
Conventional loans are the game now. It is about 90% of my business. ( 1 year ago it was the other way around.)
Up to $417,000 we can do 3% down. Yes condo’s too.
10% down over $417,000 to $625,500.
We even have 80/10/10 loans again (piggybacks)
But did you know: the lender or the borrower can pay upfront premium for Mortgage Insurance?
Therefore eliminating the monthly PMI. Yes the rate will be a bit higher or the borrower would have to come in with more money. But 3% down with no Mortgage Insurance? Savings can be huge! No refi needed down the road when rates are higher, might even help qualify.
Our Advisors know that refinancing can lower their clients’ monthly mortgage payment and reduce the total amount of interest that they will pay on their home. With interest rates at an all-time low, it may seem like a no-brainer to refinance.
But Landmark’s top Advisors tell clients that before they jump on the "refi" bandwagon to secure a new loan for their home, they should know the pros and cons, as there are some situations when refinancing might not be worth it. Our Advisors become more of a consultant than an order taker. So what's the biggest benefit of refinancing today? A lower interest rate. With rates this low (mid-3’s on a 30-year), it's no wonder that some 3.3 million people refinanced their mortgage in 2012. Borrowers are advised to take into consideration how much it costs to refinance, and how long it will take to recoup the costs. If the savings will outweigh the costs, scoring a lower interest rate is great reason to refinance. Depending on the borrower’s financial situation, refinancing to adjust the length of their mortgage and in effect, their monthly payments, could offer significant benefits. Just like paying off credit card debt in one year versus five years, shortening the loan term means they will pay less total interest on the mortgage.
On the other end of the spectrum, if they're having trouble making payments and are looking for a way to reduce their monthly payments, refinancing could help with that, too. Landmark Advisors tell clients that they could go from a 15-year mortgage, for example, to a 30-year term and thereby lower the amount that needs to be paid per month. The other big perk is they can lock in a fixed-rate loan for security purposes. Now is a great time to let go of the uncertainty of an ARM in favor of a loan with a fixed rate that will never change.
However, like most things that seem too good to be true, there are some pitfalls. The biggest is they will have to pay closing costs (and prepayment penalties), which most view in their minds as the amount it costs to refinance their home. According to the Federal Reserve, closing costs can add up to 3 to 6 percent of the outstanding principal of their loan, and include application fees, loan origination fees, and appraisal fees, among other things. The costs and penalties add up, but if they calculate that their savings from refinancing will outweigh these closing costs, then they're in the clear. Our Advisors make sure to do their due diligence and help their borrowers consider their options wisely.
Our Landmark Advisors often run up against appraisal issues. Appraisals are often major stumbling blocks for those looking to refinance their homes. Often, appraisals come back too low - low enough not to support the new loan. Fortunately, in many areas in the 580/680 corridor, home values have started to stabilize and appreciate, but we still like to educate our clients on some of the issues.
First, remember that appraisals are based on recent sales prices of comparable properties. And in rising price markets, those sales prices might not be high enough to support the newest deals. A few weeks ago the federal government issued new rules aimed at improving the appraisal process as it pertains to high-interest mortgages on rapidly appreciating homes, but those rules don't go into effect for a year, and don't apply to most conventional loans.
Our Advisors tell borrowers that if they're going to do minor renovations, start with the kitchen and bathrooms. Wood floors, landscaping and an enclosed garage can also drive up appraisals. Improvements and additions made below grade, such as a finished basement, do not add to the overall square footage of your house – although basements are not as common here as in other parts of the U.S. A basement renovation that cost will recoup roughly 66 percent of that in added home value. That's not as good as an attic bedroom, which will recoup 73 percent of its cost. Even similar bedrooms typically count for more if they are upstairs instead of downstairs.
We tell our clients that if they've put money into the house, prove it using before-and-after photos, and/or a well-defined spreadsheet of what was spent on each renovation. Landmark's clients who are refinancing shouldn't forget to highlight all-important structural improvements to electrical systems, heating and cooling systems - which are harder to see, but can dramatically boost an appraisal. If your town has recently seen exciting developments, such as upscale restaurants, museums, parks or other amenities, make sure your appraiser knows about them. Even jaded appraisers can be swayed by a good looking yard. That advice holds true indoors, too. Get rid of some clutter and it makes the home appear larger. Finally, don't follow the appraiser around when they are there!
The government has released HARP3.0 , buying mortgage back securities and have agreed to keep rates lower going into 2015. In the mean time a new Guarantee-Fee from Fannie Mae took full effect with investors.
What is this fee? A guarantee Fee ("g-fee") is an amount charged by MBS providers (i.e. Fannie Mae, Freddie Mac) to protect against credit-related losses in their portfolio. Grrrr....
So rates are a wash. Actually increased rates a tad. I like to call it a housing tax.
Just wanted to let you know what is going on behind the scenes in mortgages not pretty. Believe me more to come.
With that said we're closing loans... paper works a nitemare for the borrowers but if they can weather the storm they are getting screaming good rates..screaming good value for the homes and no end in site.
We are all hustling to get people into homes let's keep the peddle to the metal and create a GREAT 4th quarter for ourselves.
Late last week we all saw the Federal Open Market Committee announcing Quantitative Easing 3 (nicknamed QE3, which has since changed in some sources to QE Unlimited. But although security prices rose for those backed by mortgages (versus "regular" Treasury securities), many rate sheets barely budged. Although Landmark improved our rates, why did some lenders not change their rates?
The FOMC's announced plan of attack was partly designed to ease further the cost of mortgages, but many lenders did not change their rates, saying they were already backlogged, and they just don't have the staff to process any increase in business.
So in the near term, the FOMC's move may have little impact on lending. One Wall Street analyst said, "Very little of that is likely to make it through immediately to consumers. There's nothing that will force mortgage originators themselves to lower the rates that they're offering to consumers. Right now they have their hands pretty full in terms of the pipeline and managing paperwork and making loans. These folks are busy. There's not a bunch of people on long cigarette breaks."
But Landmark Mortgage Group's rates did indeed improve. That being said, our Advisors are telling clients to plan on processing times that will take several weeks. Many pieces of the business required for a residential loan to close, such as appraisals, are backlogged, slowing things down. And in today's compliance and regulatory-heavy environment, ensuring that the loan process is done accurately is of paramount importance.
In the long run, low rates cannot but help the housing market and the economy in general. But it will take a while. Regardless, be sure to check with a Landmark Advisor for current rates, prices, and programs – you will be pleasantly surprised.
Many of you may find it surprising that private mortgage insurance companies seem to be coming back to the real estate finance arena in a big way. With the availability of conventional financing with as little as 3% down, this should not be too surprising. In June 2012, over 34,000 policies were issued nationwide, which was the highest monthly amount in over 3 years. Yet some MI companies that were big players 5-10 years ago are no longer operating, but plenty like MGIC and Radian are prospering these days.
For a home buyer looking to put less than 20% down on their purchase transaction, they now have the option to do a one-time PMI buyout where they take an interest rate that's slightly higher than market (usually .250%-.375%). Considering that PMI is no longer tax-deductible yet mortgage interest is (in most cases) this is making more and more sense to buyers in this situation.
Here's an example of how it works: a buyer wants to put 10% down and discovers that his monthly PMI payment will be $200 or $2400 per year. His Landmark mortgage advisor explains to him that the buyer could pay a one-time PMI premium of $7200 at the close of escrow, though the rate would be .250% higher ($50/mo) than if he exercised the option to pay monthly PMI.
The monthly savings is still $150 for the loan option with the higher interest rate (due to no monthly PMI), which saves him $1800 per year. Simple math shows that this buyer would make back the $7200 up-front PMI premium in 4 years, and he was able to slightly increase his tax deductions during that time. The cherry on top is that in most instances, the mortgage advisor can cover the bulk of the initial PMI premium. This makes the decision even easier for the buyer.
For those of you who may need to refinance, but, would like to avoid having to “income qualify” there are still some other Lending alternatives that we could explore for you. A phone call or appointment with your Mortgage Advisor is the way to find out what will work best for your personal situation.
Our Landmark Advisors have been scratching their heads, "How low is a 'record low' rate, exactly?" According to Freddie Mac's latest mortgage interest rate survey, it's 3.75% for a 30-year fixed rate loan, down from 3.78% and marking the fifth consecutive week of record lows. For 15-year fixed rate loans, the average was 2.97%, which is the first reading under 3% in the 21 years that Freddie Mac has been tracking 15-year loans.
Due to a still-sluggish housing market, however, the borrowers that are tending to take advantage of these low rates have been those who are refinancing rather than purchasing homes. Less than 25% of mortgages are actually used to buy property, according to the Mortgage Bankers Association. The numbers here in the 680/580 area vary by town, but are pretty close to that.
The fact is that the bulk of mortgages are being used to refinance means that shorter term mortgages of 15 to 20 years are enjoying increased popularity. At the height of the housing bubble in 2006, refinances were keen to extract as much equity as they could (think 30-year interest-only loans), and short-term mortgages comprised a mere 10% of all refinances. As more Baby Boomers move towards retirement, there's a trend towards shorter-term loans that can be paid off to coincide with that timing, even if it means putting down larger monthly payments. Some borrowers are even putting cash in when they refinance to get their balances down to the maximum amount for which those record low rates area available.
As for how common this practice is, in the first quarter of 2012, Freddie Mac recorded that 31% of refinancing borrowers had opted to shorten their loans terms—not the majority, but nonetheless a substantial portion. And our Landmark Advisors are indeed seeing that trend.
For some of our Landmark clients, refinancing is difficult. Underwriting and appraisal requirements have increased. For borrowers that do meet the increasingly stringent requirements, however, today's record-low rates offer an unusually good opportunity, and, when taking advantage of the current conditions, there are a few tactics they can keep in mind.
Having a solid credit score is crucial when it comes to qualifying for refinancing, and this usually means 740 or above. Credit issues aren't the sole premise of low-income borrowers either, as people with high credit scores who miss payments have more to lose, so to speak. It's best to be aware of any problem areas and start repairing credit well before the qualification process begins. Our Landmark Advisors remind their borrowers that they are legally entitled to three free credit report from Equifax, Experian and TransUnion, respectively, every 12 months, which is a good place to start.
In terms of other qualifying factors, things are generally easier for borrowers who have at least 20% equity and who have worked the same job for at least the last two years, unless they're self-employed.
And we remind our clients that we offer several different products. Even though the national average for interest rates is at an historic low, not all loans on offer are equal. Some of the larger institutions are also raising rates due to their pipelines nearing capacity; raising rates is meant to cut back on the volume of loans they have to process while giving profits a boost.
In addition to their products, different banks will have different loan costs. Origination fees for a $200,000 loan can range from under $200 to $2,000, and obtaining the numbers from a variety of lenders can serve as a useful bargaining chip. As your advisor!
Earlier this week, President Obama announced that for FHA home loans originated prior to June 1, 2009, the up-front mortgage insurance premium (UFMIP) for streamlined refinance transactions would decline to 0.1% from 1.0% and the annual fee would drop from 1.15% to 0.55%. A quick calculation shows that on a $400,000 home loan that a borrower would save $3600 ($4000 - $400) on the UFMIP alone.
Some industry insiders have suggested that loan prepayment speeds will pick up as a result. However I'm not convinced that many homeowners with FHA mortgages will be able to take advantage of the program changes, given that roughly two-thirds of all FHA-insured 30 year fixed mortgages were originated AFTER the above mentioned cutoff date.
More importantly, what about all the people who have already secured an FHA streamline refinance over the past couple year that now cannot take advantage of these new rules? Once again it seems that people who acted quickly to make life better (refinanced already) get the short end of the stick as they appear to be stuck with the 1% UFMIP factor and the monthly 1.15% mortgage insurance factor. Those who procrastinated or those who already have a decent rate are the ones left to possibly benefit. We can only hope that everyone who streamline refinanced this year will eventually have their MIP reduced, so that they too can enjoy greater monthly savings.
Below is a link regarding some of the additional details of the program:
Landmark Mortgage Group is a division of Opes Advisors and licensed by the CA Dept. of Real Estate, Real Estate Broker license 01458652 and NMLS 235584. Equal Opportunity Lender.