Posts Tagged ‘mortgage’

The Simplest Loan Around – Part 3

September 8, 2016

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Continuing the FHA streamline refinance theme… Here’s an example.  I’m currently talking with Confidential.  Confidential is self-employed.  Confidential’s spouse, Anonymous, recently took a new all-commission sales job. 

With a standard mortgage, the income and employment verification for Confidential and Anonymous would be very tedious at best, and they likely may not qualify.  Underwriters want to see a 24 month history of income for self-employed persons.  And they will average the 24 month income to determine the borrower’s current monthly income.  That hurts self-employed borrowers whose incomes are growing.  But those normal underwriting concerns do not apply to the FHA Streamline Refinance!

The interest rate on Confidential and Anonymous’ current mortgage is 4.75%.  That is high by today’s standards.  The good news is that they bought their home with a FHA loan several years ago.  I quoted Confidential and Anonymous a new FHA interest rate at less than 3.5%, and we expect to lower their monthly payment by over $220!  Given the closing costs for the loan, this refinance will pay for itself in less than a year.  After that, they are saving over $2,500 per year!

Streamline Definition

I’m not worried about this loan being approved in spite of the fact that Confidential and Anonymous are self-employed and they cannot provide the standard 24 month income history.  And we don’t have to fret about an appraisal value.  They have made all FHA mortgage payments on time, and this refinance will reduce their payment by over 15%.  They qualify for what might be the easiest loan around – the FHA Streamline Refinance.

So how do you determine if a refinance is right for you?  There are many considerations, but we have a couple of rules of thumb:  (1) If you can lower your payment by $100 per month or more, and (2) if the refinance will “pay for itself”* in 36 months or less, then you may want to investigate refinancing options.  (*Divide the loan closing costs by the estimated monthly savings to calculate how many months will pass before the savings cover the entire cost of the refinance.  If this time period is 3 years or less, then refinancing may be a good option for you.)

If you want to lower your current monthly payment by taking advantage of current low, low mortgage interest rates, contact me here at Dunwoody Mortgage.  I will take the time to help you understand all of the options available to you, and I will coach you to make the best financial decision possible for you and your family.

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Relaxing Criteria for Condo Mortgages

June 19, 2015

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Considering buying a condo now?  Your timing is good then.  In recent months, mortgage market makers Fannie Mae and Freddie Mac have loosened the lending requirements for condo purchases.  You can buy a condo with a credit score as low as 620 and a down payment of 5% or more.

Understand that the underwriting process is still different for a condo purchase, but the standards are being relaxed now.  As with single family home purchasers, underwriters will review the credit score, available assets, income, and debt of condo purchasers.

In addition, underwriters review the financial stability of the complex in which the condo is being purchased.  Condo complexes assess HOA (home owners association) dues to fund expenses such as maintenance for buildings and common areas, utilities, insurance, reserves for replacing large items like roofs and parking lots, etc.  When the economic crisis hit, owners at many condo complexes became delinquent on their dues payments, causing financial difficulties for the complexes themselves.  In reaction to this, lenders imposed tighter restrictions on condo underwriting.  Now lenders are relaxing these standards.

When underwriting the condo complex, the lender will require documentation from the complex management as follows:

  1. A completed condo questionnaire reporting details about the complex.
  2. Current year HOA budget.
  3. Master insurance policy.

Condo Photo

Below are some key condo criteria that the underwriters consider.  The underwriters will likely deny your condo loan if the complex fails to meet any one of these items:

  1. At least 10% of the annual HOA budget set aside for reserves.
  2. No more than 10% of the units owned by a single individual or corporation.
  3. No more than 20% of the units used for commercial space.
  4. No more than 15% of the homeowners more than 60 days past due on their monthly HOA dues.

Bottom line, if you want to buy a condo in a well-managed complex that meets the above criteria, it has a good possibility of being approved; but it will require some extra work as compared to buying a single family home.  I have financed multiple condos in the last few months and we have not experienced any issues with underwriting.  If you are looking to buy a condo in Georgia, I can help you get started!

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Time to Refinance?

March 3, 2015

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In recent weeks, interest rates dropped to their lowest levels since May 2013, causing the refinance business to jump significantly.  Interest rates have climbed a bit since late January, but for some people, now is still a great time to refinance.  So how do you know if refinancing may help you?  If any of these conditions apply to you, you may want to consider refinancing:

  1. If you have a conforming loan (not FHA and not jumbo) and you can lower your rate by 0.5%.
  2. If you have a FHA loan obtained between 2010 and January, 2015 – even if you obtain a new FHA loan, FHA mortgage insurance premiums have declined significantly – this may lower your payment significantly.
  3. If you pay mortgage insurance on your home loan, you can look to refinance to a lower rate and possibly drop your insurance payment depending on how much your home has appreciated since you bought it.
  4. If you have a jumbo loan and can lower your rate by 0.25%.

To refinance you will incur closing costs.  Even if the closing costs are rolled into the loan balance you still ultimately pay those costs over time.  So you need to determine if your monthly savings is worth the closing costs you will pay.  We calculate your breakeven point in months by dividing your refinancing costs by the savings on your monthly payments.

You need to ensure that refinancing will benefit you financially.  Consider this question first…”How long do you plan to stay in this home?”  If your breakeven point is after you think you will move out of the home, it’s probably best for you not to refinance.  If your breakeven point comes before the date you think you will move, then you should consider refinancing.

Not sure if refinancing is a good option?  That’s OK.  Contact us here at Dunwoody Mortgage.  We will ask you a few questions, and then we can determine your monthly mortgage savings and calculate your breakeven point.  We can discuss your options and, if refinancing makes sense for you, we will pursue it and give you the best possible rate, competitive closing costs, and outstanding customer service.  You have nothing to lose.

Don’t miss this opportunity.  Call us now before rates go back up!!

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MMMM….Mortgage Cake

June 5, 2014

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When you are looking to buy a home, one primary consideration is, “What interest rate will I pay for my mortgage?”  I’ll borrow the saying “have your cake and eat it too” in order to explain.

Truth is mortgage interest rates fluctuate daily, and can change multiple times in a single day.  So when do you lock the rate? Now you’re faced with a dilemma and must ask yourself:

  • “If I don’t lock and rates go up, my monthly payment will be higher.”
  • “If I lock today and rates go down, I will miss the chance to have a lower monthly payment.”

This is one case in life – when working with the right lender – you can actually have your cake and eat it too!  Get out your fork and napkin while I explain.

The base layer of your cake is a quick description of a rate lock.  You lock the interest rate for the period of time you need to close on your home.  Options include 15, 30, 45 days, etc.

The next layer of your rate lock cake is the fact that when you lock, your interest rate will not increase even if market rates rise significantly before you close.  You are locked in and won’t pay more as long as you close within your lock window.  You’ve just addressed the first horn of your dilemma.

Now the sweet icing on your rate lock cake…some lenders, like the ones we at Dunwoody Mortgage represent, offer interest rate “float down” options.  If rates improve before you close, you can have the opportunity to “float down” to a lower mortgage interest rate at no cost to you – dilemma solved!!

Financing your new home purchase with Dunwoody Mortgage can protect you against rate increases and decreases. Your dilemma is solved as you don’t have to worry about when to lock OR what if rates improve!  If you are looking to buy a home in the state of Georgia, and want this kind of interest rate security, then give me a call.  I would love you help you have your cake and eat it too.

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refinance Q and A podcast

August 10, 2010

Interest rates are at historic lows and many home owners are looking to take advantage of these rates. So, did you refinanced your mortgage before rates dropped to their current levels? Are you considering refinancing your mortgage now?

If so, then this recent podcast I recorded might be helpful for you. Below is a brief transcript of the Q & A interview, but listen to the entire podcast for more of details on when to refinance and options that are available.

Q: When is a good time to refinance a mortgage?

A: There is no exact rule of thumb because it depends on a client’s specific situation. That said, once the interest rate is a half point lower than their current rate, it is worth the time to make a call to learn about available options.

Q: What factors should one consider when refinancing?

A: The primary determining factor will always be how long one plans to remain in the home. If a refinance could save you $200 a month BUT the break even point (closing costs / monthly savings) is 24 months AND you plan to move in a year, then the numbers indicate it might not make sense to refinance. I have found that most clients can safely estimate the next 3 years, so if the break even point is 36 months or less, people tend to move forward with the refinance.

Q: Please explain no closing cost loans?

A: In truth, no closing cost loans do not exist. There are always closing costs, it just depends on how one wants to pay them. Here are some of the options:
– pay closing costs at the table (only happened once in my career)
– roll closing costs into the loan amount (most common way to refinance)
– agree to a higher than market value interest rate and “pay no closing costs”

By agreeing to a higher interest rate, the lender will provide the funds to cover the closing costs for the refinance. The borrower may not pay for the closing costs at the closing table, but will pay more each month over the life of the loan because they agreed to a higher rate for the refinance. In some shape or form, the borrower will “pay” for closing costs – either up front OR every month they make a mortgage payment.

Q: Should one go with an ARM or Fixed mortgage?

A: The answer goes back to how long someone plans to stay in the home. ARMs are currently in the mid to low 3’s. If you only plan to stay in the home another, say 4 years, a 5 year ARM would be fixed for all the years this person plans to remain in the home and might be a better option (and today a better rate) than going with a fixed mortgage.

In short, answer the question “how long do you plan to remain in the home?” and it is easier to find the loan program that is best for you!

Q: Any loan programs available for home owners underwater on their mortgage?

A: Yes, the US government passed a bill called Making Homes Affordable for home owners who acquired their current mortgage prior to February 2009. There are some specific items a borrower must meet to qualify, but is a great program for those that do qualify. I’ve blogged about this loan program in the past, and will be glad to answer any questions about the Making Homes Affordable program.

For more information on getting prequalified to refinance your existing mortgage (if you are in Georgia), don’t hesitate to contact me!

Beware if your Adjustable Rate Mortgage is LIBOR Based!

May 26, 2010

Everyone has read it in the newspapers and heard it on the television, the debt and banking problems of Greece, Spain and Europe. Everyone wonders how it will affect the United States or more importantly, me! The affect has been positive on the United States mortgage rates because everyone is moving their money to US debt since it looks to be much more stable than European debt.

If you are a homeowner and enjoyed the wonderful low rate of an adjustable rate mortgage, be very careful. If your ARM is a LIBOR arm, all indications is your rate will be increasing very soon. The LIBOR is Europe’s equivalent of the Treasury. As the European banking system continues to struggle, the LIBOR will continue to increase to take into account the risk associated with the potential of default of debt. In the short-term, borrowing costs are climbing faster for European banks than American and the cost of insuring against default on debt issued by European financial firms is climbing.

The possibility exists this event could have significant upward pressure on the LIBOR rates which will result in you LIBOR based ARM to increase in the next adjustment period. If we have a catastrophic event occur in Europe’s banking system, it will significantly affect your LIBOR based ARM. Do miss out on the opportunity to refinance your home on a fixed rate mortgage while rates are low. A storm looks to be brewing in Europe that could affect your payment.

Fannie Mae HomeStyle Rehab Loan

May 21, 2010

I regularly receive requests for loan programs that will allow borrowers to make repairs on a home and roll those costs into the loan. Due to the financial crisis and the risky nature of these loan programs, conventional rehabilitation loans virtually disappeared.

The only consistent option was the FHA 203k program, which is a great loan program, but only allows cosmetic/non-structural repairs on a buyer’s primary residence. It would be great if there was a program that allowed both buyers and investors the flexibility needed to do more than just cosmetic repairs… and now there is!

Introducing the Fannie Mae HomeStyle loan program. This is a renovation program like the FHA 203k program, and they share some similar traits.

  • Both programs allow for cosmetic remodeling/repairs
  • The funds needed for the work on the property is rolled into the loan
  • Available on primary residences for purchases & refinances
  • Work must be completed by a licensed contractor

There are similarities, but definitely note the differences. Fannie Mae HomeStyle:

  • Available for borrowers (10% minimum downpayment) and investors (20% minimum downpayment) on purchases and refinances
  • Structural repairs/changes/improvements allowed
  • Luxury items such as pools, hot-tubs, fences, etc. allowed
  • minimum repair amount of $5,000 required

FHA 203k:

  • only 3.5% down payment required
  • No minimum repair amount required
  • Available for primary residence purchases & refinances only
  • No structural repairs/upgrades OR luxury items allowed
Who can benefit from either of these loan programs? Anyone looking for a loan program that will allow you to knock out a wall or two OR investors looking for a way to cover remodeling costs OR even someone looking for a way to pay for carpet and paint in their new home.
If this is you, program options are now available! Don’t hesitate to contact me to learn more or get prequalified for either of these great programs.

3% down and no PMI

April 22, 2010

Yes, you read that correctly. Conventional loan, 3% down, no private mortgage insurance, and to top it off… no appraisal required! The program is known as HomePath Mortgage by Fannie Mae and is available to borrowers looking for a primary residence OR an investment property.

Investors using the HomePath Mortgage program need a 15% down payment, but will not be required to get private mortgage insurance or an appraisal on the investment property. Also, the limit on the number of total properties financed in an investors name is waived.

Fannie Mae designed this loan program to facilitate the sale of their foreclosures. There are numerous properties available, and you can search for them here. However, before you find a home and get ready to submit an offer, remember this is a foreclosed property and there are some things to keep in mind:

  • the property is purchased “as is”
  • the property may require some repairs
  • definitely get an inspection!
  • no contingency offers (on the sale of a current home) allowed

All offers must include a prequalification letter. If you are looking to get prequalified, learn more about interest rates this program, total monthly payments, etc., feel free to call or email me. It would be glad to help you through the mortgage process!

Happy Tax Day: Just Write it Off (Jerry).

April 15, 2010

The mortgage business is actually quite straight-forward.

The underwriters who work in the business and the bankers who control the business of lending people hundreds of thousands of dollars are generally methodical, detail oriented, by-the-book, risk-adverse, kind of people.

In an effort to ditch the stuffy-banker image, six or eight or ten years ago, mortgage brokers started marketing the idea of “creative financing” . . . and “creative financing” was supposed to mean that as a broker, I can do loans that the bank can’t do = stated-income loans, no-doc loans, 80-10-10’s, 100% financing, stated-income stated-asset loans, interest-only loans, etc.  However, too many mortgage professionals (the brokers doing the loans and some of the wholesale account reps whose companies were buying the loans) took the word “creative” to mean something a little (a lot) different.  I know, because I lost the business of a handful of borrowers over the years (13 years, ouch) because I was not willing to be “creative” . . . as in, borrower: “well, can’t you just ignore _____ [this or that].”

The over-creativeness of the mortgage business (by the way, don’t look at me) and the crazy-liberal mortgage underwriting guidelines of the past few years (can you believe there used to be a “stated income W2 loan” available?  The lender realizes that the borrower is W2, but will allow them to state their income for qualifying purposes.  I never did one, but referred to them as the “liar loan”) are in large part to blame for the economic debacle that the U.S. is current experiencing (NOT predatory lending — which is what the media and D.C. may want you to believe).

Uh . . . I thought we were going to talk about tax returns??  Sorry.  Keep reading . . .

So, most people understand that the mortgage underwriting pendulum has swung — guidelines are more strict, lenders are more credit score sensitive, downpayment requirements are higher, etc.  BUT, for some reason, most people are surprised (and often quite angry) to find out that there is NO room for creativity when it comes to tax returns.

Your tax returns are your qualifying income.  End of story.

“Well . . . ,” you ask ” . . . what about write-offs?”

With the exception of depreciating assets (which we can add back to qualifying income) and health insurance costs (which can be added back) and a few other things that can be added back to someone’s income for qualifying purposes— a “write-off” is really just a cost of doing business.  If you were selling widgets and made $100 per widget, but it cost you $25 to make the widget (a $25 loss per $100 made), it wouldn’t be fair for the IRS to tax your income at $100 per widget.  Your income would only be taxed at $75 per widget.

So, if you “write-off” the cost of business travel, food and entertainment, or mileage for work, or advertising costs, website design, etc., those costs are costs of doing business.  In other words, if your business made $80,000 in gross receipts (income), but it cost you $20,000 in business expenses (in write-offs) to make the $80,000 . . . then your qualifying income (the income left-over and available to make the mortgage payment and pay the bills) equals $80,000 — $20,000 = $60,000.  The underwriter determines from your tax returns, that in order for you to make $80,000, you have to spend $20,000.

Now, if you made more than $80,000 OR if you actually spent less than $20,000 . . . well . . . it may be that you or your accountant is . . . well . . . more than simply creative.

Are you a Fan? Be a (facebook) Fan!

April 14, 2010

You can now keep up me on my new fan page — “Jeffrey My Mortgage Guy” — so if you are a fan (of me, your mortgage guy), be a fan!! 

C’mon . . . make it “facebook official.”

If you don’t have a facebook account, you need one.

My wife resisted the whole idea for a few months last year, until I finally created her an account (with her permission, of course); and a few of my friends have “refused” to get facebook accounts, only to succumb to the social pressure a few weeks/months later.  At this point, with facebook’s 400 million users, any stubbornness to be “on” facebook is well, just stubborn. 

Do it.  Please.  🙂