Credit Management During the Holidays

By Toni Ryan, Synergy One Lending

Holiday shopping is fun (and stressful) at best but if planned well, it will not affect your credit score.
Below are some important reminders when spending during the holiday season:

Tip #1 - Don't sign up for new credit unless the savings is substantial. Many stores promote 0% interest on a purchase if you sign up for their credit card. This application will result in a credit inquiry which can affect your score negatively – do not add new credit unless the savings is substantial.

Tip #2 - Do not put all your purchases on one credit card – Unless you plan to pay off the balance when the payment is due, charging more than 35% of the total credit allowed, can lower your credit score significantly.

Tip #3 - Always pay at least $5 more than your minimum monthly payment each month. If you cannot pay down your balance, always pay a little more.  This action, although it seems minor, can actually improve your credit score. Credit ratings are based, in part, on behavior patterns. A person who pays more than the minimum payment is less likely to pay late or overcharge.

These are simple actions that help to keep you in control of your credit and thoughtful of your spending.
Wishing you all the joy the Holiday Season can bring!

Should You Add Solar Panels?

By Toni Ryan, Princeton Capital

"Going Solar" is a hot phrase! If you're considering solar, review some of the pros and cons:

The Pros of Adding Solar Panels to Your Home
• Lower Electric Bill  - Depending on the size of your home and your electricity use, adding solar panels to your home can reduce your monthly bill.
• Installation Costs are Lower than Ever - Since 2011, the cost of installing solar panels has dropped by 60%. There are also federal and local tax credits & subsidies to help lower the upfront setup costs.
• Flexible Purchase Options - Due to the increased interest in solar energy, there are more companies to choose from for installing solar panels  more ways to afford the installation. You can choose to lease, buy or finance. There are also energy assistance programs such as mPower that tie the payment for the solar in with your real estate taxes. It is important to make sure than any financing option has a lower payment than your average electricity bill to ensure that you are saving money.

The Cons of Adding Solar Panels to Your Home
• Not a Simple "Quick Fix" - You will need a professional who can recommend proper panel size and placement as well as install additional wiring that is necessary for energy conversion and use. There are concerns that damage done to a roof during installation may result in water leaks.
• Hefty Upfront Cost - The national average of panel installation is $17,000. This can be a lot of up-front expense for many homeowners who will need to have a long-term plan to stay in the home to see overall savings.
• Increase in Insurance Premium - If you decide to add solar panels, expect to see your homeowner’s insurance premium increase to cover the potential replacement of these fixtures.
• Leased Panels Don't Add Appraised Value - If you choose to lease solar panels, keep in mind that you don't own the panels. Appraisers will not add value for the solar panels when assessing your home’s value because the panels are not owned and permanent fixtures to the home.
• Financed Panels May Turn-Off Buyers (& Lenders) - When you secure a loan to pay for your solar panels and then decide to sell your home - the new buyers must be willing to not only buy your home but also take over the solar panel loan. This can make it difficult for some buyers who may fail to qualify or who don't like the terms of your solar loan. Many lenders will not lend with a PACE

program (example mPower) in place which collects the payment through your home’s real estate tax bill because this is recorded as a tax lien. To sell or refinance, this loan would need to be paid off.
• Added Maintenance & Repair Requirements - Just like any appliance or fixture, there is necessary maintenance and cleaning required. As the panels age, there will also be necessary repairs to keep everything in working order.
 
Hopefully, this information helps you make a more informed decision about adding solar panels to your home. Remember to explore all the options to making your home more energy efficient before you decide. Often upgrading windows, appliances and caulking can add more value to your home and lower your energy bill with less cost. When in doubt, talk to a mortgage professional about your unique situation.

10 Credit Do's and Don'ts to Remember Prior to Getting a Mortgage Loan

By Toni Ryan, Princeton Capital

How can a fully approved loan get denied for funding after the borrower has signed loan docs? Simple, the underwriter pulls an updated credit report to verify that there hasn't been any new activity since original approval was issued, and the new findings kill the loan.
This generally won't happen in a 30 day time-frame, but borrowers should anticipate a new credit report being pulled if the time from an original credit report to funding is more than 60 days. Purchase transactions involving short sales or foreclosures tend to drag on for several months, so this approval / denial scenario is common.
Why this happens?
It's can be an ugly cycle where by the buyer receives an approval and thinks everything is OK so they make a credit impacting decision (buys new car, furniture, runs up credit card balance).
The lender's Funder pulls new credit report right before they fund the loan to check for changes. The Funder sees the new credit or larger balances and denies the loan.
What do you need to know?
In the hopes of stemming the senseless slaughter of perfectly acceptable loan approvals, check the “Ten Credit Do's and Don'ts” List below to help ensure a smoother loan process. These tips don't encompass everything a borrower can do prior to and after the Loan Pre-Approval process, however they're a good representation of the things that will most likely help or hurt an approval.

1.   DO continue making your mortgage or rent payments
2.   DO stay current on all accounts
3.   DO keep the balances on your credit cards at less than 35%
4.   DON'T make a major purchase (car, boat, big-screen TV, furniture, etc…)
5.   DON'T open a new credit card
6. DON'T close any credit card accounts
7.   DON'T open a new cell phone account
8. DON'T consolidate your debt onto 1 or 2 cards
9. DON'T pay off collections (especially old ones!)
10. DON'T take out a new loan

Follow these Do's and Don'ts for a smoother mortgage approval and funding process.
Just remember this simple tip: Wait until AFTER the loan closes for any major purchases, loans, consolidations, and new accounts and always consult your loan professional for advice before you make any changes.

Bad Credit? Let’s Fix It!

By Toni Ryan, Princeton Capital

Fact: Poor credit history and a bad credit score can have a serious impact on your life. No one wants bad credit but sometimes mistakes happen. Sometimes factors like medical bills, job loss and tragedy influence our financial profile in ways we never could have predicted. Bad credit can happen to anyone.

Factors that Damage Credit
First let’s clarify what can lower your credit score and damage your credit profile.
• Excessive Debt: If your credit cards are maxed and you have several loans, your debt profile is probably contributing to your low score
• Late Payments: The credit bureaus note any 30, 60, 90 & 120 day payment lates. It is essential that you pay your bills on time.
• Dormant Credit: A dormant credit card is an account that has infrequent or no use. In some cases, if an account has no activity for a period of time, issuers may close the account which revokes future charging privileges. Dormant accounts may not have additional debt but they also don’t help your credit score.
• Collections: If you fail to make a payment or pay off your account – the creditor may send your account to collections. This severely affects your score. Make sure to work closely with your mortgage or credit professional regarding paying off collections. Note: Collections on federal loans such as student loans will prevent you from getting financing from most (if not all) lenders.

Get Familiar with Your Credit History
It’s time to take charge of your credit profile and the first step to doing this is by getting familiar with your credit profile. You are entitled to a free copy of your credit report from the following credit bureaus:
• Experian  • TransUnion  • Equifax
Please note that many of the advertised credit reporting companies will charge you fees. The law entitles you to a free credit report so use a site like annualcreditreport.com. You will notice that you the actual credit score is not included in the report. This is because credit scores differ between different kinds of financing. For example: a credit score for an auto loan might differ from a mortgage loan. The score is not really what’s important here. Review your credit report for any errors and misinformation. It is your job to ensure your credit report is correct.

Start Establishing & Using Your Credit Wisely
If you don’t have any or enough credit – it’s time to get some. Apply for a secured credit card (usually requires a deposit) that reports to the credit bureaus mentioned above. Don’t apply for too many cards at once as this can harm your score but make sure you are managing at least 3 cards.
Once you have your credit cards or with the cards you currently have – start using them wisely. You should use your card regularly and pay off all or most of your bill every month to start showing that you can effectively manage your finances.
This article with a harsh fact and now to end on another one: Repairing your credit takes time and discipline. Is it worth it? YES! Negative history will not go away overnight but you can do it and when you see that shining credit score at the end of the road, you’ll know just how powerful it really is. Good Luck!

First-Time Home Buyer Programs with Down Payment Assistance

By Toni Ryan, Princeton Capital

There are several programs available that assist the first time homebuyer in purchasing their first home.  These programs provide up to 105% financing at low rates and allow for higher debt to income ratios.  The eligibility requirements include a minimum of a 640 middle credit score, zero interest second mortgages with deferred payments to cover the down payment and closing. There are maximum household income requirements so it is important to check with your mortgage professional regarding income and property eligibility.

• CalPLUS Conventional Program

The CalPLUS Conventional program is a first mortgage loan insured through private mortgage insurance on the conventional market. This loan is fully amortized for a 30-year term and is combined with the CalHFA Zero Interest Program (ZIP) for down payment assistance only.

• CalHFA FHA Program

The CalHFA FHA program is an FHA-insured loan featuring a CalHFA fixed interest rate first mortgage. This loan is fully amortized for a 30-year term and can be combined with the California Homebuyer's Downpayment Assistance Program (CHDAP).

• Cal-EEM + Grant Program

The Cal-EEM + Grant program combines an FHA-insured Energy Efficient Mortgage first mortgage loan with an additional Cal-EEM Grant, making energy efficient improvements even easier. The interest rate on the Cal-EEM is fixed throughout the 30-year term.

• Placer County First Time Home Buyer Assistance Program (FTHB)

This program is designed to promote home ownership for low-income, first time homebuyers. The assistance is in the form of a deferred loan (second mortgage), due and payable upon sale, default or transfer of property. The amount of assistance cannot exceed $100,000 and no more than forty percent (40%) of a home's value. The maximum sales price shall not exceed $300,000 for single family homes and $185,000 for condominiums. The combined loan to value cannot exceed 97%. This program does require the buyer to have 3% of the sales price for a down payment but those funds can be a gift from a family member.
Additionally, be sure to ask your lender if you qualify for the Mortgage Credit Certificate Tax Credit Program (MCC). This MCC Tax Credit program is a federal credit which can reduce potential federal income tax liability, creating additional net spendable income which borrowers may use toward their monthly mortgage payment. This program may enable first-time homebuyers to convert a portion of their annual mortgage interest into a direct dollar for dollar tax credit on their U.S. individual income tax returns. Borrowers would need to seek the advice of a financial professional.
The options are available to make homeownership a reality. Not all mortgage lenders offer these programs so check with a trained mortgage professional to understand your choices.
Prices are affordable and rates are low. Now is the time to take advantage of the assistance available and buy a home.

Federal Reserve Says Lending is Getting Easier

By Toni Ryan, Princeton Capital

Yahoo News recently reported that buying a home is actually getting easier. According to Ellie Mae research, in July 2014, out of all mortgages that were applied for - 67% actually closed. This is a major increase from the last year when the rate of mortgages that closed was at 53%. According to the president of Ellie Mae, Jonathan Corr, this is due, in part, to lenders easing their qualifying standards.
Does this mean that if you were turned down for a home mortgage in the last few years that you should reapply? Corr says, “Yes - depending on your circumstances, your chances of approval may have increased.”
Yahoo attributes this increased flexibility in the lending industry to 3 key factors:

1. Lower Credit Score Requirements - Many lenders have lowered the required credit scores to qualify for a mortgage. In July 2014, the average score for qualification was 727 - which may still seem high however in the past few years, that number has hovered around 750. The study also found that 32% of closed loans had an average FICO score of less than 700 which is 25% more loans than previous years.

2. Higher Debt-to-Income Allowances - Lenders assess your risk by considering your debt and income ratio. For example, if your gross income was $5,000 and all of your debt payments came to $1,500 - your DTI would be 30%. According to the study, as of July 2014, the average DTI for closed mortgages stood at 37% - up from last year. This means lenders are more confident in the economic recovery and people’s ability to stay solvent to allow for little more debt. Corr adds that, like credit scores, this is an average and should not worry those with slightly higher DTIs. He believes that borrowers with a DTI of 40% or even 43% can qualify.

3. Fewer Investor Overlays - An investor overlay is essentially a stricter standard imposed by a lender or bank even though it’s not required by the government. For example, FHA mortgages are insured by the government and might have guidelines that require 3.5% down and a minimum credit  score of 580. However a lender offering an FHA loan might have an overlay that requires a minimum score of 620. This doesn’t contradict the FHA guidelines, but traditionally these overlays are added due to economic fears & defaulted loans. Thanks to the strengthening housing market, lenders are imposing less stricter overlays which allow more options for borrowers.
As you can see - 2015 is looking to be a great time to apply for a home mortgage. Keep in mind that everyone’s financial picture is different which is why it is essential to work closely with your mortgage professional to develop a strategy and identify all of your options.

How Does a Home Appraisal Work?

By Toni Ryan, Princeton Capital

During most real estate transactions, it will be necessary to have a home appraisal completed. This formal process of evaluation is the most effective, un-biased way to determine the current value of a home for everyone involved in the transaction. While the concept might not seem confusing, there are several misconceptions that can make the process seem complicated. Understanding what the appraiser does and how their evaluation plays a role in your financing can make the transaction easier.

Home values fluctuate because of a variety of factors including supply, demand and regional influences. A home appraisal determines the current market value of a property on the date the inspection is completed. Since this value will be used by the lender to determine the loan amount, an approved, reputable appraiser must be hired to complete the evaluation. It is important to note that the formal appraisal report is filed with a national bureau when financing is being used from FHA, FNMA and Freddie Mac. The report and the property value is registered with the national database and kept on file for six months. This keeps buyers and sellers from “shopping around” for a different value.

The lender will order the appraisal from a separate third party appraisal vender. The appointment for the real estate appraiser to visit your property (or the property you're looking to buy) is set by the assigned appraiser with you or the real estate agent.

There are some key things to prepare for to insure you receive an accurate appraisal for your home:

• Major repairs - water damage and broken structures need to be repaired. 
• Health & Safety Issues - bare wiring, mold, damaged stairs will need to be restored to safety standards. Smoke and CO2 detectors must be present and in working order. 
• In-progress Construction - all work should be completed. 
• Excessive Clutter - the appraiser must get a clear view of the basic structure. 

It is suggested to be present while the appraiser is at the home. By law, your loan officer cannot be present and cannot speak to the appraiser.

There are several methods and formulas utilized to calculate the final home value. Prices of other similar homes that have recently sold in the area are assessed and adjustments are made for features that are not the same. A Cost to Re-build the home in today's market is also included.

If the appraised value is at or above the expected value - this is good news! If the value comes in below expectations, most sellers and homeowners experience concern.  Always talk to your realtor and loan officer to find out all of your options. A home appraisal is a vital piece of the process when buying or refinancing a home

*Always check with your mortgage professional for acceptable extenuating circumstances and any other changes that may have changed to the  programs listed since this printing.  

Buying After a Short Sale

By Toni Ryan, First Priority Financial

Good News! Changes in lenders' guidelines have reduced the waiting period for buyers who wish to purchase a home after experiencing a short sale. Maintaining good credit since, paying all bills on time in the last 12 months, saving a down payment (as little as 3.50% to 20% down payment), and of course, having income to qualify for a loan make it possible to buy a house in as little as 12  to 36 months.
 
FHA announced on August 15, 2013 that the wait period will be reduced to one year under FHA's Back to Work Program. Borrowers with as little as 3.50% down payment after having a short sale, bankruptcy, or foreclosure can apply. This is subject to guidelines such as having experienced an Economic Event which is beyond your control that resulted in a Loss of Employment or Loss of Income. Note: If you were delinquent on a prior FHA loan, you will not be able to buy after one year with this FHA program.
   
Conventional financing will allow a home purchase after two years with a 20% down payment .  Only have 10% down payment?  The wait time is 4 years.
   
Veterans can apply for 100% financing with a VA loan after a short sale with a 2 year wait period.. Other factors may apply so check with your local mortgage professional for all the details and then begin on the road to home ownership again.

Loan Options for Buying a Home in 2014

By Toni Ryan, First Priority Financial

There are many home loan types to consider when seeking financing to purchase a home.  The loan you choose will have a long term effect on your financial picture so it is important that you understand your options before you commit.
• Fixed Rate Mortgages
Fixed rate mortgages are probably the most popular loan due to the fact that the payment stays the same throughout the life of the loan. Each monthly payment is comprised of a portion to pay the principle of the loan and the interest on that loan.  Many times the monthly payment can include the payment for the taxes and insurance due on the home.  The payments continue for a pre-determined time after which the home is paid off.  The most common terms are 30 year and 15 year.
• FHA Loans
An FHA loan is insured by the government so and additional insurance premium fee is included in the monthly payment and at the time of the loan funding.  These loans are attractive because the down payment requirement is 3.5% of the home value and the rates are often lower.
• FHA HECM (Reverse) Mortgages
FHA  also allows homes to be purchased using an FHA reverse mortgage as long as the borrowers are age 62 or older.  This loan allows the buyer to put approximately 30% down and have no monthly principle and interest payment as long as they live in the home as their primary residence.
• VA Loans
 These loans are like FHA in that they are insured by the government.  These programs are available to veterans who have served in the Armed Forces.  The key feature to this loan is that there is no down payment required.
• Adjustable Rate Mortgages
These loan options have a pre-determined period with a fixed interest and fixed monthly payment. These periods are usually 5, 7 or 10 years. At the end of this period, the interest can adjust based upon the market index that the loan is tied to and therefore the monthly payment can increase.  Borrowers must be cautious when entering into these loan programs but this option can be a useful tool to keep payments lower for a period of time, before which the buyer knows that they may be moving or selling.
This information is general in nature and only a licensed mortgage professional can give you the specifics that will fit your individual situation.  Knowing the options that are available is important to making one of the most important financial decisions easier.

Is a Reverse Mortgage Right for Me?

By Toni Ryan, First Priority Financial

Have you asked yourself this question? The Home Equity Conversion Mortgage (HECM) is FHA's reverse mortgage program. This plan enables a homeowner 62 years of age or older to withdraw some of the equity in their home.  The HECM is a safe plan that can give older Americans greater financial security. Many seniors use it to supplement Social Security, meet unexpected medical expenses, make home improvements or purchase a home with NO monthly payment. 

Basically, the equity that you built up over years of making mortgage payments can be paid to you.  However, unlike a traditional home equity loan or second mortgage, HECM borrowers do not have to repay the HECM loan until the borrowers no longer use the home as their principal residence or fail to meet the obligations of the mortgage.  You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing. This usually requires a 35 to 40% down payment but the senior will not have a monthly pinciple and interest payment and will not be tying up as much liquid cash as when they purchase a home for all cash.

      To be eligible for a FHA HECM, the FHA requires that you be a homeowner 62 years of age or older, own your home outright, or have a low mortgage balance that can be paid off with proceeds from the reverse loan, and you must live in the home.A big question for many borrowers is "Will we still have an estate to leave our heirs?"When the home is sold or no longer used as a primary residence, the cash, interest, and other HECM finance charges must be repaid.  All proceeds over the amount owed belong to your spouse or estate.  This means any remaining equity can be transferred to the heirs.  No debt is passed along to the estate or heirs.

It is important to note that your still retain ownership of your home and you can refinance out of a reverse mortgage as long as there is equity remaining in your home.

If you and your spouse are 62 or older and would like to access the equity in your home without an monthly payment for any reasons and be assured that you can remain in your home until you choose to move or do not meet the requirements which include home maintenance, and the ability to pay taxes and insurance, then the FHA Home Equity Conversion Mortgage is a positive option to consider. Contact a knowledgeable mortgage consultant to discuss all your options.

Understanding Advertised Mortgage Rates

By Toni Ryan, First Priority Financial

Ads for home loan offerings are everywhere. Online, on TV, driving down the street, or listening to the radio, mortgage loans are probably the most common advertisement.
Banks and mortgage companies promise that they will do whatever they can to offer homeowners the lowest mortgage payment. It is important to understand the rate market and that it is constantly changing   daily and often hourly.  When you see an ad from a bank or mortgage lender that offers a lower rate, or gives you one solid payment figure based on a certain loan amount, you should be skeptical. In fact, most banks and lenders usually offer rates to just bring you in the door, though you may never actually be offered the advertised rate.
A mortgage program and it's subsequent payment is so complex that it is difficult to actually advertise one fixed mortgage rate or payment specific to a borrower without thoroughly interviewing the borrower. There are too many factors that will influence a homeowner's interest rate. The advertisements are examples based upon the highest credit score, low loan amounts, the home, etc.  
So what do you do?  Do your homework.  Ask family friends and co-workers who they used when they last refinanced or purchased a home.  Make calls and interview the loan officer to see if they listen to your needs and have your best interest in mind.  Do not let your credit be pulled but instead ask for the rates based upon a 680 credit score and a 740 score, loan amount versus value of your home and whether you are wanting cash out from the equity of your home.  These factors will allow you to compare options equally. Also ask for the lowest rate program and the lowest fee program based upon the above factors. The lowest rate may not be in your best interest so it is important to know all the facts.  A little time now can save you a lot of money and frustration later.
Rates are still low and equity in existing homes is rising so the time to evaluate your current mortgage or purchase a home is still great.  Connect with a lending professional who can guide you through the choices, educate you on the rate market trends and listen to your needs.  Your mortgage loan is a critical component in your financial picture so partner with a professional you can trust.

The Truth About Loan Modifications

By Toni Ryan, First Priority Financial

Loan Modification is not a new process but it has many new meanings in today's economic market.  Achieving a Loan Modification may take the strength of Superman to achieve but once completed, can allow a family to keep their home.
    How is this accomplished? The lender changes or alters the terms of your current mortgage loan which restructures the payment. The original mortgage agreement can be changed in one or all of the following ways:
1.    Extending the repayment term of the loan to as long as 40 years
2.    Lowering the interest rate
3.    Changing/lowering the prinicple balance owed
4.    Forebearance where the lender will wait to a later date for the back payments owed
    The most common modifications have involved lowering the interest rate and extending the repayment time.  The Making Homes Affordable Plans (often referred to as HAMP) reduce the rate and or extend the repayment term to create a payment no more than 38% of the homeowners' current income.
    It is important to note that rarely does the lender reduce the principle of the loan but if they do, this reduction is only given in increments, usually after payments have been made on time for a specific term of the loan.  For example, if a $99,000 reduction was approved, the lender would lower the amount owed by $33,000 after payments were completed on time for the first 36 months, then another $33,000 after 72 months and the last $33,000 with on-time payments at the 10 year mark.
    Forebearance usually comes into the option when the homeowner is more than 60 days late in their payments.  Forebearance is a special agreement between the lender and the borrower to delay foreclosure, the term means “hold back”.  In the agreement, the lender delays his right to foreclose giving the borrower time to catch up on his scheduled payment.
    As an example, if a homeowner owed $400,000 on his home and he had not made his mortgage payments for the last 6 months due to lowered wages.  The lender may lower the interest rate and place the back payments in a forebearance account.  The payment created would fit within the 38% of his wages today and would include a portion to pay off the forebearance account. Often times, the interest rate may be fixed for 5 years and then raise by 1% for year 6 and become fixed at today's going rates in year 7 through the end of the term.
    The lenders do not want to take back the home, they just want the debt owed to be paid.  A loan modification is designed to create terms to enable the homeowner to repay the debt they originally committed to when they entered into the loan.  Check with your tax consultant as well as a mortgage specialist for all your options during this difficult time.

Home Mortgage: Don't Ruin Your Finance Chances

By Toni Ryan, First Priority Financial

How can a fully approved loan get denied for funding after the borrower has signed loan docs? Simple! At the end of the transaction, the underwriter pulls an updated credit report to verify that there hasn't been any new activity since original approval was issued and the new findings kill the loan. This generally won't happen if closing in a 30 day time-frame, but borrowers should anticipate a new credit report being pulled if the amount of time from an original credit report to funding is more than 60 days.
To help ensure a smooth loan process, here are some credit Do's and Don'ts. These tips don't encompass everything a borrower can do prior to and after the Pre-Approval process, however they're a good representation of the things most likely to help or hurt an approval.
1. DO continue making your mortgage or rent payments
2. DO stay current on all accounts
3. DON'T make a major purchase (car, boat, big-screen TV, etc…)
4. DON'T open a new credit card
5. DON'T close any credit card accounts
6. DON'T open a new cell phone account
7. DON'T consolidate your debt onto 1 or 2 cards
8. DON'T pay off collections
9. DON'T take out a new loan
Keep in mind that the mortgage financing process has changed over the last few years and lenders have become more strict. When in doubt: Wait until AFTER the loan closes for any major purchases, loans, consolidations, and new accounts &  ALWAYS consult with your loan professional regarding advice and the strategy for closing your loan.

Then & Now - Lending Has Changed

By Toni Ryan, First Priority Financial

If you have you tried to get a purchase or refinance mortgage loan recently - you might have noticed a new trend: It has gotten MUCH harder. Lenders are growing increasing picky and demand more out of borrowers today than every before to secure home financing. Why? It is important to understand that the lending market has changed since the financial meltdown. Prior to the recession, there were many institutions and small banks who negotiated loans and retained them in their portfolio as investments.  What’s changed? Today almost all loans are sold to one of the top FOUR banks: Wells Fargo, Citigroup, Chase, and Bank of America - Each with specific requirements which change frequently (sometimes DAILY!).  Just like in any industry  the fewer the players, the tighter the rules.

Added to fewer options are the new regulations coupled with the high incidence of fraud. It has become more costly for most institutions to keep and service a loan.  The profit is made by packaging a loan and selling it (to one of the above banks) within10 days of that loan closing. This profit is greatly reduced when a file is held longer than 10 days due to documentation issues. Profit decreases further if the institution must keep the loan because an issue with the file cannot be resolved. 
 To avoid delays when selling the loan, companies require more documentation that is as current as possible. This requirement, which often changes as new issues arise, is the primary reason most borrowers experience frustration.  Social security numbers are verified with the government as well as the filing of two years of tax returns.  Gone are the days of just giving copies of your documents.

The second issue is the turn around time to close a loan.  Interest rates are low so lenders are busy.  The lender will prioritize a purchase loan over a refinance because there is a deadline - this means refinances always take longer.  Once all documents are gathered and verified and the appraisal has been competed, the loan file is then placed in underwriting.  This can be take 4 to 7 business days.  Often a request for more information is received with the approval which adds more time as well.  Then when all items are satisfied, documents are drawn, prepared, signed, sent back for review and then funds are sent to the escrow company. Be wary of promises of “10 days to close” - this usually means 10 days AFTER all documentation is collected upfront and all verifications are completed

While it is a difficult process, the rewards are great as we experience the lowest rates in 50 + years.  It helps to know the process so you are prepared. The investment in time is a fact in today's market and you are not alone. Connect with a knowledgeable mortgage professional to aid in the process. Then sit back, take a deep breath and BE PATIENT!

Mortgage Trends: Rates Going Lower?

By Toni Ryan, First Priority Financial

Rates are low and there are many programs to allow homeowners the opportunity to lower their monthly payments and buyers to buy homes.  So that's good right?  Yes, but be prepared to spend some time to get the rate you want especially if you are refinancing.
 You are not alone, many borrowers are trying to accomplish their dream of a rate in the 3+% range  lenders, title companies, appraisers, inspectors, etc are all busy.  It is important to note that the priority is to close the loan for a purchase above the loan for a refinance.  Having said that, many of the low rate lenders are quoting 20 day turnaround  times  that is 20 business days.  The file must be complete and have the finished appraisal to be submitted.  Turn times change daily as the work load changes so be patient.
 The fear is often that rates will increase and one will “miss out”.  Most experts are predicting lower rates or no change in rates until mid 2013.  Often times, files placed in underwriting are seeing lower rates than they would have, if they had locked loans at two to three weeks ago so “time is on their side”.
 It is important to note the trends over the years.  Just like gas prices go up right before Memorial Day and Labor Day, rates go down in the fall and early winter.  The best advice  Now is the time to complete the loan file to be prepared to take advantage of the trends as well as the daily lows that occur each week.  Good things come to those who are patient and observant.

Understanding Mortgage Rates

By Toni Ryan, First Priority Financial

Mortgage rates are in the news more than ever.  Consumers read about the economic factors that cause mortgage rates to change but understanding those factors and really how they affect the rates is often difficult to discern.  The discussion often includes the Federal Reserve Board Chairman speaking, the national debt figure, the GDP, PPI and CPI to name a few terms but either way, it sounds like a different language  So what affects rates and why aren’t they more stable?

 There is no secret formula, the mortgage rates, like the stock market are dictated by investor emotion and mass media hype. If you ignore the news reports and do a little investigating on your own and align with a mortgage professional to get their input, you will be able to take advantage of the market just like the pros.
 The economic data and reports that are released at various times during the month can cause the rates to fluctuate.  Keep in mind that investors buy the bonds that mortgage rates are based upon, just like they buy stock.  Put simply, one can see that if the stock market is doing well then often bonds are not doing well because the money is being used to purchase stock and not bonds.  If bond activity is low, mortgage rates are higher.  If bonds are selling well because economic fears are high and the investor is looking for more stability, then the mortgage rates often go down.

 For example, when economic reports come out stating that the US economic recovery is slowing, or that the European countries are facing economic crisis and China’s economy is slowing, then investors seek a more stable home for their investment dollars which is the US Bond, specifically the 10 year note which sets mortgage rates. As of this writing of July 25th, the experts are expecting the mortgage rate to drop.  It is important to understand that just as volatility drives the rates down, it can drive them up.  Therefore if Europe comes to a sustainable agreement regarding their economics and China makes aggressive changes in policy, the opposite can occur because emotion ultimately drives the purchasing.

 Today rates are low. Will rates go up and if so how much?  No one knows but the trend is that there will not be any major changes through the end of the year. Daily “deals” are there to be gotten by watching the reports.  Work with a professional who has the understanding and technology to take advantage of the emotions of the market to lock a rate for your benefit.

 

Using a Mortgage Broker vs Bank

By Toni Ryan, First Priority Financial

If you are in the market to buy a home, chances are you'll need a mortgage. Who offers the best option – the bank or the mortgage broker? There are distinct differences to be aware of when making a choice.
• The Bank
The bank offers a variety of programs that they have created based upon their financial return.  Their loan officers are employees who sell those specific mortgages to you. There programs are priced based upon the bank’s costs, ie overhead, etc. If your circumstances fit the specific guidelines, then you will be granted a loan.  This works for clients with great credit, money for down payments and low risk factors. If you do not fit into the guidelines set forth, then there are no options to offer. Special income issues, unusual properties and personal loan requirements are often not considered.
• Mortgage Brokers
Mortgage brokers bring together lenders and borrowers. They usually work with dozens or even hundreds of lenders, not as employees, but as a kind of scout.
They find and evaluate home buyers, analyzing each person's credit situation to determine which lender is the best fit for that person's needs. The broker has choices of lenders so they can search for the most competitive pricing.  They are not tied to one ratesheet. If there are unique circumstances, the broker can fit a lender to those needs. A good mortgage broker can find a lender for just about any type of credit or situation.
 Make your choice based upon your personal needs.  While the best loan terms are important, service is critical. Both a bank and the broker are held to the same laws so always ask for a quote in writing to compare fees and costs. Ask questions about expected time-frames and the loan process. Check with family and friends who have recently bought a home, for lender and broker referrals.  Taking out a home mortgage is an important part of your financial picture – find an expert to fit your needs.

Buy a Home with No Monthly Payment

By Toni Ryan, First Priority Financial

Borrowers age 62 and older can qualify for a reverse mortgage either on their existing home or to purchase a new home.  Reverse mortgages were developed to give seniors the ability to stay in their home or purchase a home without a monthly mortgage payment.

A reverse mortgage works opposite of a typical mortgage (referred to as a “forward” mortgage) in that the interest from the monthly payment is added to the total loan amount owed hence what is owed goes up, in “reverse” rather than down, as in a regular mortgage. The idea is that as the home increases in value over time, the amount due stays at a level below this value.

Our current economy has shown that values are not guaranteed - but not to worry.  The owner can stay in the home as long as they want, as long as they live on the premises, even if more is owed than the home is worth.  If they decide to move, or their family takes over the property, then if the home is worth more than the loan, it can be sold or refinanced to pay the loan.  If the home is worth less than what is owed, then it is deeded back to the lender.  Mortgage insurance guarantees that the homeowner and or their heirs will not be responsible.
 The requirement is up to 60% equity in an existing home or as a down payment. No credit or income qualifications.  This is a great financial tool.  Check it out!

House Under Water? Lifesaver Coming!

By Toni Ryan, First Priority Financial

New guidelines for the Home Affordable Refinance Program (HARP) were released by Fannie Mae and Freddie Mac on November 15th, 2011.  The goal of expanding HARP is to allow borrowers who are upside-down on their homes or who have little equity to refinance at today's low interest rates. The hope is that this will both stabilize the housing market and boost the overall economy, by putting extra dollars in the pockets of consumers who are likely to spend them. Not everyone who is underwater will qualify for HARP 2.0. Below is a summary of the basic requirements:
1. The loan must be owned or guaranteed by Fannie Mae or Freddie Mac (See how to find who owns your loan below)
2. The loan was sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
3. The loan was not refinanced under HARP previously, unless it is a Fannie Mae loan that was refinanced under HARP from March through May, 2009.
4. The loan's current loan-to-value (LTV) is greater than 80%.
There are several changes to  the HARP program that give the program greater accessibility to more borrowers As long as your new HARP monthly payment is not more than 20% greater than your current payment, specific credit and income guidelines do not apply. The lender will have to determine that the borrower is an “acceptable credit risk” (and what that means is yet to be determined). A HARP lender can approve a loan that has one late mortgage payment in past 12 months, as long as it did not take place in the last six months. Your HARP loan could be approved, regardless of how recently a borrower filed bankruptcy or experienced a foreclosure. HARP loans are no longer restricted only to owner-occupants.
 
 Although applications may be submitted for new HARP 2.0 mortgages now, many lenders believe the bulk of HARP mortgages will not be approved until March, 2012. Both Fannie and Freddie must update their automated loan underwriting/approval software by March, 2012. Until then, lenders may approve HARP mortgages by manually underwriting the loans. 
 To see if you qualify for a lower rate - check the following websites to see who owns your loan: www.FannieMae.com/loanlookup and www.FreddieMac.com/mymortgage   Take control - Call your mortgage professional for further details.

Mortgage: What is FHA Financing?

By Toni Ryan, First Priority Financial

Do you  have questions about FHA….but didn't know where to ask.  The question “What is FHA?” was searched on the internet 235,000 times nationally last month so 'wondering minds want to know'.
 FHA stands for the Federal Housing Administration which is part of HUD (Department of Housing and Urban Development).  FHA has been helping people to purchase homes since 1934 by insuring the loan which allows lenders to offer the homebuyer better terms.  The FHA insured loan offers low down payments, low closing costs and often easier credit qualifications thus allowing more people to purchase a home. There is an initial insurance premium payment which is added to the loan and then a monthly premium payment included in your monthly mortgage payment.  This “insurance” covers the lender if the homeowner cannot make their loan payments and defaults on the loan.
 Buy Your First Home - FHA loans have programs for the first time homebuyer with a down payment as low as 3.5% of the purchase price.  Closing costs can often be financed in the loan. FHA rates are extremely competitive and the insurance can be dropped when the loan on the property reaches approximately 78% of its total value and after 60 months.
 Buy a Fixer-Upper  FHA has loan programs referred to as a 203K which will allow a buyer to purchase a home, fix it up and include all the costs in one loan.  If you own a home and you want to remodel or repair it, you can refinance what you owe and add the cost of repairs in one loan. Financial Aid for Seniors  If you are age 62, live in your home and either own it outright or have a low balance, a reverse mortgage may be an answer. A reverse mortgage (HECM) is a special type of home loan that lets you borrower the equity in your home and convert it into cash. But unlike a traditional home equity loan, no repayment is required until the borrower(s) no longer use the home as their principal residence or fail to meet the requirements of the mortgage. You can also use this type of loan to purchase a primary residence if you are able to use cash on hand to pay the equity requirements. A large down payment may allow you to own the home with no monthly payment.
 FHA also has programs that allow homeowners to make their homes more energy efficient as well as mobile homes and manufactured housing financing.  Options are available to allow homebuyers to take advantage of the current housing market and low rates.  Check with an FHA loan specialist and find out how you can use this program to reach your goals.