About Judith Weiner

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Four Ways the 2009 Economic Stimulus Plan Benefits Home Owners & Buyers

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Four Ways the 2009 Economic Stimulus Plan Benefits Home Owners and Buyers

There are four primary sections of the 2009 economic stimulus plan that could be very beneficial if you own or are buying a home.

Benefit #1 - Expansion of Home Improvement Tax Credit
The tax credit for making energy efficient home improvements is now 30% of the cost of the improvements up to a maximum of $1,500. This means that if the improvements cost you $4,500, you would receive a tax refund of $1,500 when you file your tax returns. Eligible improvements include energy efficient exterior doors and windows, insulation, heat pumps, furnaces, central air conditioners and water heaters. Generally, your home improvement contractor and/or the manufacturer selling the improvements issues a certification that clarifies whether the improvements meet the necessary
standards for energy efficiency. Most modern windows, furnaces, and air conditioners meet these requirements. If you've been holding off on making some of these improvements, now is a great time to get a move on it -especially with all the great deals that are being offered!

Benefit #2 - Expansion of First-time Home Buyer Tax Credit
The tax credit available to first time home buyers was increased from $7,500 to $8,000 for homes purchased between January 1, 2009, and December 1, 2009. Also, the credit no longer needs to be paid back as long as you live in the home without selling it for at least 3 years. The previous version of the credit expired on July 1, 2009, and required home buyers to pay the funds back over a 15 year time frame. The income limitations remain the same ($75,000 for single tax payers claiming the full credit and $150,000 for married tax payers), as do most other qualification requirements. Also, the credit remains refundable. This means that first-time home buyers who owe less than $8,000 in taxes for the year are still eligible for the full $8,000 credit when they file their tax returns. In that case, the IRS will write you a check for the difference between $8,000 and your actual tax bill. In fact, the credit can be claimed on your 2008 tax returns that you file by April 15, 2009, even if you buy the home in 2009. There is one catch, however: if you bought the home in 2008, the credit remains $7,500, and it still needs to be paid back over a 15 year timeframe beginning in 2011 when you file your 2010 returns.

Benefit #3 - Higher Reverse Mortgage Loan Limits
The loan limits for FHA-insured reverse mortgages have been increased to $625,500 across the entire country -not just the higher cost areas. The previous limit was $417,000 across the country. This is especially important because the FHA program is virtually the only game in town as private and jumbo reverse mortgage programs have nearly all evaporated. This coincides with another little-known change in the reverse mortgage arena: the availability of reverse mortgages on home purchase transactions. This is a fantastic opportunity for senior citizens to buy a new home and live mortgagepayment-free without having to wait for their old home to sell. Seniors could also use this strategy to buy a new home and turn the old home into a rental or otherwise wait for market conditions to improve before trying to sell the old home.

Benefit #4 - $729,750 FHA and Conforming Loan Limits Restored in High Cost Areas
The $729,750 maximum loan limit had been in force throughout 2008, but was reduced to $625,500 in 2009. The economic stimulus plan restores the $729,750 maximum. This makes higher cost homes more affordable - especially in the coastal housing markets that tend to have higher than average home values. It is always advisable to consult with a Certified Mortgage Planning Specialist TM (CMPS®) when navigating today's turbulent mortgage and real estate marketplace. Call me for names of mortgage brokers.

Foreclosure Fraud Video

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View this Freddy Mac video to get the low down on Foreclosure Scams.

Judith Weiner's Home News - July 2009

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Judith Weiner's Home News July 2009

What Are You Listening For?

Two friends were in downtown Manhattan, walking near Times Square, during the noon lunch hour. The streets were filled with people, cars were honking their horns, taxicabs were squealing around corners, sirens were wailing, and the sounds of the city were almost deafening. Suddenly, one of the friends said, "I hear a cricket."

"What?" his friend laughed. "You must be crazy. You couldn't possibly hear a cricket in all of this noise!"

"No, I'm sure of it," the first friend said, "I heard a cricket." He listened carefully for a moment, and then walked across the street to a big cement planter where some shrubs were growing. He looked into the bushes, beneath the branches, and sure enough, he located a small cricket. His friend was utterly amazed.

"That's incredible - you must have superhuman ears!"

"No," said the first friend. "It all depends on what you're listening for. And that depends on what's really important to you. Here, let me show you." He reached into his pocket, pulled out a few coins, and discreetly dropped them on the sidewalk.

And then, even with the noise of the crowded street still blaring, they noticed every head within 20 feet turn and look to see if the money that tinkled on the pavement was theirs.

"See what I mean? It all depends on what's important to you."

Did you just hear a cricket?

Can You "Think" Your Way To Fitness?

If you're out of shape and want to do something about it, a new study in the Journal of Applied Behavioral Research has found that how you think about your health is key to a healthy lifestyle.

The study looked at people who said they either didn't exercise, or exercised inconsistently. The researchers asked some of the participants to list "reasons" why they should increase their levels of exercise and cardiovascular fitness. Other participants were asked to list "actions" they could take to increase their exercise and fitness, like joining a gym or working out with someone they knew. The researchers found that after eight weeks, the participants who were asked to think of actions increased their exercise, while those who were asked to merely list reasons to exercise made no improvement. Motivating yourself to better health may be easier, say the researchers, if you think of what you could be doing rather than why you should be doing it.

How To Handle Anger

We all get angry. Sometimes justifiably, other times irrationally. Regardless of the situation, there are some things we can do to prevent our anger from escalating into unconstructive thinking and behavior. The American Psychological Association offers these tactics for controlling anger:

Change the way you think. If your inner thoughts are filled with cursing or grisly scenarios, you might be overly dramatic about the situation. When this happens, instead of thinking, "This is the last straw - everything is awful!" it might help to tell yourself, "I am frustrated, and that's understandable considering the circumstances. But it's not the end of the world. Staying angry is not going to fix this."

Try to get a more balanced perspective. The world is not out to get you, though it may feel like it in this case. Ask yourself what it is that you want. The answers might be fairness, appreciation, agreement, another person's willingness to do things your way. Remind yourself that everyone wants these things; everyone is hurt and disappointed not to get them. Ask yourself if you're being too demanding - because angry people tend to demand things, and when their demands are not met, they tend to get even angrier.

Remember that not every problem has a solution. Sometimes things are just hard, and trying to come up with a solution when there really isn't one will only add to your frustration. Instead, you'll be better off determining what the problem is, then facing it and figuring out how to handle it.

Don't jump to conclusions. When you're angry, your conclusions can be off-base. Slow down and think carefully about what you want to say. Try to avoid becoming defensive and fighting back.

Defuse your anger with humor. Humor can help you confront your problem constructively. If you feel like calling someone a name, for instance, try to visualize what you're calling that person - literally. Sometimes it can make you laugh and break the tension.

Change your surroundings. Give yourself a break. If something is really driving you crazy, and you can avoid the situation, then you'll be doing yourself a favor if you give yourself some downtime. If your child's room is a mess and it's getting on your nerves, close the door and don't look at it. If a cubicle mate is trying your patience, find a reason to go to another department or do some of your work elsewhere in the office.

Quick Canadian Quiz

In honor of July 1, Canada Day, can you name Canada's 10 provinces and three territories?

Provinces: Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, Quebec, and Saskatchewan; territories: Northwest Territories, Nunavut, and Yukon.

Do Kids' Drinks Contain Caffeine?

Just because a child doesn't drink cola doesn't mean what he or she drinks is caffeine-free. While coffee is the leading source of caffeine intake among adults, soft drinks are the largest source of caffeine intake for children.

Seventy percent of all soft drinks contain caffeine. Though most people are aware that cola contains caffeine, consumers are less aware that a number of non-cola beverages - including root beer, orange and cream sodas, and lemon-lime drinks - contain caffeine amounts similar to those found in cola. In North America, it's estimated that 80 to 90 percent of adults and children habitually consume caffeine.

Culture And The American Tourist

A tour bus full of Americans arrives at Runnymede, England.

They gather around the tour guide who says, "This is the spot where the barons forced King John to sign the Magna Carta."

A man pushes his way to the front of the crowd and asks, "When did that happen?"

"1215," the guide answers.

The man looks at his watch and says, "Shoot! Just missed it by half an hour."

Side-Impact Airbags Save Lives

About one-third of vehicle occupant deaths occur during side-impact collisions, but side airbags that protect the head and chest greatly reduce these deaths, say researchers at the Insurance Institute for Highway Safety. Side airbags that protect drivers' heads alone are reducing deaths by 37 percent - even in cars struck by SUVs and trucks. Airbags that protect only the chest and abdomen are reducing deaths by 26 percent.

What's Your Learning Style?

Long after we've received our formal education, our learning style continues to affect our lives. It colors how we process information: during a meeting, while out with friends, when watching the news on TV. And it colors your interactions with your supervisor.

If you're given verbal instructions on a new process, for instance, is it easy for you to remember them? Are you able to successfully apply them? Or are your chances of success better if the instructions are written out? Or if someone shows you how to do it rather than tells you how?

Each example above is a learning style, and the one you prefer is usually the one you have the most success with. Knowing your learning style can help you in any listening situation - at the doctor's office, in a music lesson, and on the job. If you're not sure what your learning style is, visit one of these Web sites and take the free online assessment test. It will help you understand how big a part your learning style plays in your life:

· www.learning-styles-online.com

· www.chaminade.org/inspire/learnstl.htm

Share your results with all the people with whom you have important work relationships. By taking advantage of your learning style at work, you will be able to prevent misunderstandings and mistakes, speed up your productivity, and reinforce the confidence you need to be successful.

What Is it?

It's free, but it's priceless. You can't own it, but you can use it. You can't keep it, but you can spend it. Once you've lost it, you can never get it back.

What is it? Time.

Three Thoughts For Independence Day

July 4 is U.S. Independence Day, and here are thoughts from three U.S. Presidents from three different centuries:

How little do my countrymen know what precious blessings they are in possession of, and which no other people on earth enjoy! - Thomas Jefferson (1743-1826)

…That this nation, under God, shall have a new birth of freedom, and that government of the people, by the people, for the people, shall not perish from this earth. - Abraham Lincoln (1809-1865)

Let every nation know, whether it wishes us well or ill, we shall pay any price, bear any burden, meet any hardship, support any friend, oppose any foe, to assure the survival and success of liberty. - John F. Kennedy (1917-1963)

Understanding Your Credit Score

Your credit rating may not determine your ultimate destiny, but it's important in many ways. How do those credit agencies like Equifax, Experian, and TransUnion figure your score? A New York Times article breaks the numbers down:

Payment history. This is the biggest component, looking at whether you pay your bills on time to any organization that reports information to a credit bureau. This can include medical bills, parking tickets, even library fines.

Outstanding loans. How much money do you owe the bank, or any other creditor? Is it a large percentage of the total loan or credit available? For example, maxing out your credit cards will bring your score down.

Credit history. This component looks at how old your accounts are and how much activity they've seen. Longstanding accounts that you've paid off consistently have a more positive impact on your rating.

New accounts. Applying for lots of new credit cards can look as if you're having trouble paying your current bills and can trigger a drop in your numbers.

Type of credit. This accounts for about 10 percent of your score. Agencies look at how well you manage installment debt, like a mortgage, and also revolving debt, like your credit card payments. Paying off the balance regularly is better for your score than just making the minimum payment.

Don't Depend On Email

Communication is more than words, as emotional intelligence expert Dan Goleman illustrated in a New York Times column.

Goleman was negotiating via email with a publisher whom he had met face-to-face only once. Goleman thought the details were working out just fine, and was surprised when one day the publisher sent him a note: "It's difficult to have this conversation by email. I sound strident, and you sound exasperated."

Exasperated? Goleman had no idea he was coming across that way. A quick phone call cleared everything up, and it taught him a valuable lesson: Sometimes we need the full range of information that can come only from looking someone in the eyes or hearing the sound of his or her voice.

Why Step Out Of Your Comfort Zone?

The truth is that our finest moments are most likely to occur when we are feeling deeply uncomfortable, unhappy, or unfulfilled. For it is only in such moments, propelled by our discomfort, that we are likely to step out of our ruts and start to search for different ways or truer answers. - M. Scott Peck

Cultivating Creativity

Advertising genius Alex Osborn integrated creativity with everything he did - every day. Considered the "father of brainstorming" (a term he helped coin in 1939), Osborn devoted his life to promoting and teaching creative thinking. And the fiercest enemy of creativity, he believed, was criticism: "Creativity is so delicate a flower that praise tends to make it bloom, while discouragement often nips it in the bud. Any of us will put out more and better ideas if our efforts are appreciated."

It's Summer: Hot Dog!

The history of the hot dog stretches all the way back to the 9th century B.C. when sausage was mentioned in Homer's Odyssey, according to the National Hot Dog & Sausage Council. But honest-to-goodness frankfurters didn't roll around till the late 1600s in Germany. Some believe that the sausages were first called "dachshunds" or "little dogs" because they resembled the shape of a dachshund.

Today we know them as hot dogs, and this year we'll eat enough of them at major league ballparks to stretch from RFK Stadium in Washington, DC to AT&T Park in San Francisco. If that doesn't impress you, on Independence Day Americans will eat enough hot dogs to stretch from DC to L.A. five times over. And from Memorial Day to Labor Day - considered "hot dog season" by hot dog enthusiasts - Americans will consume 818 hot dogs every second!

Walk A Mile In Their Shoes

Is there someone in your life who just naturally seems to irritate you? Do you sometimes say, "I can't stand Joe (or Ann or Uncle Michael)? He's so arrogant (or lazy or nosy)!" If so, you're probably no different from the majority of people in the world.

What can be dangerous about this, though, is that such feelings can lead to destructive and unproductive behavior - especially when your assessment of the "Joes" in your life has no factual basis. One of the best ways to befriend an "enemy" is to look at the world from his or her perspective. You may discover that there's a reasonable explanation for the behavior that drives you crazy. Once you understand where the other person is coming from, it's easier to find common ground.

Quotes

Horse sense is what keeps horses from betting on what people will do.

- Author Unknown

If I set for myself a task, be it so trifling, I shall see it through. How else shall I have confidence in myself to do important things?

- George Clason

People often say that motivation doesn't last. Well, neither does bathing - that's why we recommend it daily.

- Zig Ziglar

The Truth About The Housing Market

5 Real Estate Myths For Buyers

In today's uncertain market, fear runs rampant on both the buying and selling sides of the fence. Many myths need debunking. Here are five untruths held by buyers.

Myth #1: The loner the house is on the market, the more you can negotiate.

When buyers ask, "How long has this property been on the market?" they think "six months" means they can negotiate the price down. It more often means the seller is stubbornly holding on to their price.

Myth #2: The sellers today are desperate

Most aren't. Always ask why the sellers are selling. It's the key to finding how motivated and anxious they are. (I'm being transferred to Dallas) is a very different answer than (We'd like to find something bigger.) The first homeowner is hot to trot.

Myth #3: You can't buy a home today with less than 20 percent down.

FHA loans require only 3.5% down, and you can even ask the seller to pay the closing costs.

Myth #4: You need good credit to get a good loan.
Once again, the FHA to the rescue! They often lend money to buyers with less than perfect credit.

Myth #5: You shouldn't buy before prices have bottomed.

You can't sharp shoot the real estate market. Once you identify the "bottom," prices have already moved up.

Source: Barbara Corcoran (BarbaraCorcoran.com)

Rate Lock Duration

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The Truth About Appraisals

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The Truth About Appraisals
Knowing the Guidelines Solves the Mystery

The appraisal process often baffles consumers. They may feel that their home is worth a higher dollar amount, and so the appraised value doesn't always make sense to them. It is important to know that the appraiser is completely independent from lenders, buyers, sellers, and Real Estate Agents, and that the guidelines to which they adhere are dictated by the Uniform Standards of Professional Appraisal Practice (USPAP) and Fannie Mae. In most states, the mortgage lenders must also disclose the purpose of the appraisal, as each transaction carries its own set of rules.

In essence, these important guidelines help appraisers put a fair market value on homes based on comparable sales in the same area, and the home must be bracketed in size and value.

For example, there is no set dollar figure associated with a great view, pool, spa, bathroom upgrades, etc. If a homeowner installs a custom pool that cost them $30,000, but the local marketplace supports the value of a pool at $15,000, then that item will be bracketed as [$15,000] on the appraisal.

Upgrades can usually be expressed at a higher percentage of their value in newer homes because the only way to obtain those upgrades was to put more money into the cost of building the home. On the other hand, the upgrading or remodeling of an older home is rarely reflected in full in the final appraisal. This is because typically 25-40% of the project involves demolition and the fixing of issues that aren't uncovered until the project has already begun, such as plumbing or wiring that may need updating.

Ultimately, the value of the upgrades must be supported by comparable examples within the same marketplace. These comparisons must be drawn from current market activity within the last six months. This is a safeguard to prevent appraisers from attaching too high a value to the home in question, and opening up the appraisal for review. This guideline further states that appraisers can only base their opinion on the value of homes that have actually closed escrow.

As a loan professional, I make a point to follow the appropriate guidelines at all times. This promotes a good relationship with the lender, and helps to create easier and much smoother closings for my borrowers.

Greg Schneider
V.P. Residential Lending
PHH Home Loans
Phone: (847)686-0158
Fax: (847)686-0158
gxschneider@cbburnet.com
http://www.GregSchneiderOnline.com

Choosing a Fixed Rate Loan

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What Is a Prepayment Penalty?

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A prepayment penalty is a fee charged to borrowers that make full payment on their mortgage, or pay off a substantial portion (generally anything exceeding 20% of the total loan amount), ahead of schedule. This is a clause written into some contracts to protect the lender's book of business in exchange for providing a lower interest rate, or for providing financing to a high-risk borrower.

Prepayment penalties vary with different lenders, but generally apply to a one-, two-, three-, or five-year period of time. This fee can be expressed as either a specific number of months' interest or a percentage of the outstanding balance. A 'hard' prepayment penalty applies to either the refinance or the sale of a property. A contract written with a 'soft' prepayment penalty permits the borrower to sell their property without incurring a penalty, but does restrict refinancing for a set period of time. It is important for the consumer to know that a prepayment penalty is the borrower's choice and should never be considered a requirement!

Make sure you are working with a reputable loan professional who is aware of your long-term plans before consenting to sign off on an agreement that includes a prepayment penalty! Always ask for a written evaluation of your loan options.

What Is "Seller Rent-Back"?

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In home purchase transactions, there are many times when the buyer and the seller are simply unable to agree upon a specified closing date. The Real Estate Agent involved can negotiate a 'rent back' period that is agreeable to both parties. This means the transaction technically closes, the loan for mortgage financing is funded, and ownership of the property is transferred into the buyer's name. However, the buyer does not take occupancy of the property until several days later. Instead, the buyer sets up a rental agreement in which the property is leased back to the seller for a temporary period that everyone has agreed upon.

While this strategy is fairly common, it is important to make sure the seller is not occupying the property in a lease agreement for more than 30 days* after the close of the purchase transaction. This would constitute a big problem for the new homeowner. After 30 days, the lender would view this as a non-owner occupied purchase, and it would cause the terms of the loan to change radically.

*This requirement can vary depending upon the lender. Always verify that the timeframe is permissible prior to drafting such an agreement.

Ways to improve a Credit Score

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With identity theft on the rise, consumers are becoming increasingly aware of the importance of reviewing their credit reports. However, their thoughts about credit and its long-term impact upon their financial future typically end there until it's time to apply for a home loan. A credit score is used to evaluate how likely a borrower is to repay their loan. There are several actions a person can take to impact their score. Here are a few to keep in mind.

If someone has a credit card which has a high balance, while their remaining credit cards have low or zero balances, it's best to distribute the debt across the cards in order to change the ratio of debt to available credit.

Many consumers believe that they should close an existing credit card account if the card is inactive. It's better to keep the account open and use it periodically in order to take advantage of its contribution to their long-term credit history.

With the flood of credit card offers that come in the mail, it may be tempting to open new accounts. However, these "pre-approved" offers are not approved until the companies run a credit report which will temporarily impact the applicant's credit score. In addition, experts recommend that a person maintain between two to five credit card accounts, total, so it's best to avoid accumulating too many.

There are several factors that contribute to a credit score. But by observing the tips above, as well as making payments on time and keeping balances as low as possible, a consumer is sure to achieve superior results.

High Credit Score = Low Mortgage Rate

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Credit scoring was developed in the 1960s as a means to determine whether or not consumers were likely to repay their loans. The score ranges from 350 to 850 with a higher score being extremely favorable. Essentially, a high credit score translates into lower interest rates for the borrower.

There are five factors that comprise the credit score. Payment history accounts for 35% of the score; outstanding credit balances have a 30% impact; credit history makes up 15%, type of credit factors at 10%; and inquiries influence the score by 10%. This gives the lender a snapshot of an individual's sense of financial responsibility and ability to pay back loans.

There are many quick tricks to improve the credit score, and I can provide borrowers with more information on this subject. If necessary, I guide them to a reliable resource for credit remediation. If a borrower has to pay a higher interest rate to close a loan, the tarnished credit rating will begin to improve once mortgage payments are made on time and in full. If that is the case, my team and I will be on the watch to alert the borrower when an opportunity arises to refinance and get a lower interest rate.

The Home Equity Line of Credit

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The Home Equity Line of Credit

Home equity lines of credit have become increasingly popular, and there are many types of loan programs available in this genre. This type of credit line is not meant for day-to-day expenses as a credit card would be, however, many consumers use their home as collateral to obtain an equity line of credit to pay for higher ticket items such as educational expenses or home improvements.

Borrowers may want to compare the advantages of a traditional second mortgage over an equity line of credit. But they should not compare these programs based on the Annual Percentage Rate (APR) alone. The APR in an equity line of credit is based only on the periodic interest rate, and does not include other charges such as points, maintenance fees or transaction fees. Conversely, a second Trust Deed takes all points, fees, and other charges into account when calculating the APR.

If someone you know is interested in an equity line of credit or a traditional second loan on their mortgage, I can provide them with a spreadsheet to compare available loan programs to review with their financial advisor.

Preparing Your House for the Market

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If you're selling your home, make sure your home has "curb appeal." Remember, you can't change a first impression. If your home looks like a diamond in the rough, think about putting a small investment into cleaning up the outward appearance.

Imagine that you are seeing the property as a potential buyer. You'll want to do a little yard work - clear away dead shrubbery, and trim your trees and lawn. Weed the flower beds or plant some flowers that will bloom in season. Make sure the driveway is not stained, and if you can't afford to paint the home entirely, at least make sure the front door and immediate entryway is immaculate.

Fresh and clean are still the keywords to making a good first impression once the potential buyer walks through the door. Unless a particular window is facing an eyesore or a neighboring building, open the drapes and let the sun shine in! Put your dog in the back yard or garage so he's not jumping on the new people who just walked in.... they might have allergies! There is much you can do to improve the look of your home, without investing a great deal of money.

Dealing with Debt After Retirement

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Dealing with Debt After Retirement

Reverse mortgages designed to help "house rich, cash poor" seniors meet their day-to-day expenses have gained popularity. Equity is taken out of the home, so debt increases and equity diminishes over time, (unless the property value increases and offsets this use of equity).

Many lenders offer reverse mortgages, and most are set up so that there is no monthly payment as long as the owner or co-owner(s) reside in the home. There are no minimum income requirements, and most plans allow the owner to retain title to the property until they have lived in a different permanent residence for at least 12 full months, sell the property, die, or the end of the loan term is reached.

The Home Equity Conversion Mortgage (HECM) is the only type of reverse mortgage insured by the Federal Housing Administration (FHA). Even if the original loan on the home was not an FHA loan, the reverse mortgage can be.

Seniors should first consider all their options and take a realistic look at monthly expenses. The AARP warns not to take too big of a chunk out of home equity, as this may affect the ability to collect Social Security Income (SSI). As an alternative, the retired home owner can consider downsizing to a smaller dwelling, or relocating to a less expensive neighborhood. Visit http://www.aarp.org for more information.

Rate Lock Duration

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Lock durations can vary for mortgage financing, but most lenders lock in the interest rate for 60 days from the date the loan application is submitted. As long as the loan is closed within that lock-in period, the lender honors the agreed upon interest rate.

Some consumers are misled by advertising that quotes unrealistically low rates based on 15- or 30-day lock durations. This is called 'short-pricing.' The lender basically knows the borrower doesn't have time to meet their conditions and have all the necessary paperwork in order within that brief time period. As a result, the lender is not obligated to honor the low rate that was listed in their advertising.

For simple refinance transactions, a 45-day lock-in period is more realistic. For purchase transactions, which are typically much more complex, you're much safer going with a 60-day lock, even though the interest rate might be a little higher than the rate you see quoted on billboards and the Internet.

Borrowers should make sure they have a written rate lock agreement, and allow themselves a reasonable amount of time to close their loan. I prefer to lock in all my clients as soon as their application is filed, rather than gamble with predicting short-term interest rate movement. My team and I focus more on assisting clients with long-term goals and management of their mortgage debt to secure a strong financial future.

The Difference Between Pre-Qualification and Pre-Approval

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Pre-qualification is the first step in obtaining mortgage financing. A potential borrower answers a few questions to provide the loan consultant with a quick snapshot of the borrower's income, existing debt, accumulated savings and whether or not there is a co-borrower. Signature(s) allow the loan consultant to run a credit report and begin to determine what loans are good candidates for this particular client. However, there are literally thousands of loan programs available. It is important for the loan professional to know the long-term financial objectives of the prospective homeowner.

Pre-approval is a written documentation that proves the borrower has full support of a lender. It means the form 1003 Uniform Residential Loan Application has been completed and reviewed by an underwriter. Based on the borrower's income, debt ratio and savings, the underwriter will provide a dollar amount this borrower is eligible for. Now the borrower has the convenience of shopping for a home in the price range agreed upon by the lender.

Pre-approval allows potential homeowners to shop as cash buyers, and that means negotiating power. The seller will take an offer from a pre-approved shopper much more seriously and may even accept a lower bid because they know the financing is in place and the deal is secure.

What Constitutes Closing Costs?

Posted at 12:51 PM, Jan. 20, 2007

Closing costs are expenses that cover fees associated with the transfer of property ownership, fees paid to state and local governments, and the costs of obtaining a mortgage loan. Some of these fees are negotiable, and could be paid by either the buyer or the seller. Some costs are one-time fees (non-recurring closing costs, such as title search, termite inspection, appraisal, etc.); while other fees such as homeowner's insurance or property taxes are things you will expect to continue to pay on a regular basis as a homeowner.

As part of the loan selection process, your mortgage consultant should be giving you some idea of how much money you should have in reserve to cover your end of these costs. The Real Estate Settlement Procedures Act (RESPA) requires the lender to provide you with a Good Faith Estimate within three days of the submission of your loan application.

RESPA also states that as a home buyer, you have the legal right to request a copy of the HUD-1 Settlement Statement 24 hours before your closing is scheduled. The HUD-1 clearly defines all closing costs, including those that are to be paid by the buyer and the seller. It's a good idea to have both of these forms before your closing so you can compare the estimated costs to the actual costs before you finalize your transaction.

PMI deductible for many homeowners

Posted at 12:49 PM, Jan. 20, 2007

How Adjustable Rate Mortgages Work

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During the last decade, Adjustable Rate Mortgages (ARMs) have increased in popularity among consumers. These days, few homeowners (especially first-time buyers) remain in their homes for more than seven years. In this case, it often makes sense to get an adjustable rate mortgage with a lower rate, especially one with a 5-year or 7-year fixed portion, since they won't have the loan long enough to be concerned about rate fluctuation.

Adjustable Rate Mortgages have three main features: Margin, Index, and Caps. The Margin is the fixed portion of the adjustable rate. It remains the same for the duration of the loan. The Index is the variable portion. This is what makes an ARM adjustable. Margin + Index = Interest Rate.

It's important to understand that there are many different indices: The 11th District Cost of Funds (COFI), the Monthly Treasury Average (MTA), The One Year Treasury Bill, the Six Month Libor, etc. Each index has its own strengths and weaknesses; some are slow moving, others are more aggressive.

The third and final component of Adjustable Rate Mortgages is Caps. Caps limit how much the rate can fluctuate over time. Annual Caps limit changes to the annual rate, whereas Life Caps provide a worst case scenario over the life of the loan.

What Is Title Insurance?

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Title insurance is a policy that is usually issued by a title company to protect the lender against something that might have happened in the past, rather than something that might occur in the future. In essence, an extensive search of public records is conducted by the title company to validate who has held title to the property in the past. The lender wants to know if there are any liens, judgments or easements on the property that they should be aware of.

But title insurance also guards against hidden risks or unknown factors that might cause an encumbrance at some point in the future, such as unknown heirs, forged deeds or wills, misinterpreted wills, false impersonation of the true owner of the property, deeds signed over by persons of unsound mind, or defects in the recording of past titles. Title insurance covers the cost of the title search, and any legal fees that may result from any dispute over past property ownership. It is required by the lender and paid for by the buyer.

The smart home buyer will also purchase title insurance to protect their own interests. This is a one-time premium that protects the buyer or their heirs, as long as they retain an interest in the property.

What is Negative Amortization?

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A negative amortization loan is an adjustable rate mortgage that allows the consumer to tap into home “equity” by offering several monthly payment options. Up to an additional 25% of the original loan amount is available to the borrower.

This flexibility works well for consumers who have seasonal income or want more control over their cash flow. However, the borrower must have some degree of financial discipline. Each month, the borrower will choose to make a fully amortized payment, an interest-only payment, or a low introductory rate payment.

A fully amortized payment is larger, and includes payment toward principal + interest. The interest-only payment is lower, but no part of that mortgage payment goes toward the principal. The borrower is simply keeping their head above water.

The third option is where negative amortization comes into play. If the consumer chooses to make the low introductory rate payment, the interest is not sufficiently covered for that month. The balance of interest owed is then tacked back on to the principal, thus increasing the mortgage debt.

Smart consumers can use these payment options to their advantage, but should have a full understanding of how adjustable loans work. They should also know that once the maximum loan amount has been reached, the lender will immediately increase the payment amount to the fully amortized rate.

The ABC's of Radon in Illinois

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The ABC’s of Radon in Illinois

Test Your Home Today

Test your home for radon today. Radon, an indoor air pollutant, is a colorless, odorless radioactive gas. Radon comes from naturally occurring uranium in the soil. The only way to tell how much radon you have in your house is to TEST.

BE AWARE

 The USEPA estimates that approximately 13% of lung cancer deaths are radon related. The remaining 87% of lung cancer deaths are related to smoking. The USEPA has also concluded that smokers are at higher risk from radon. The USEPA recommends that indoor radon levels be below 4 picocuries per liter of air.

Do You Know Where Radon Comes From?

Most radon enters a home because of air pressure and temperature differences between the home and the outside air. When air is vented from buildings by natural or powered ventilation, radon and other soil gases are drawn in from the surrounding soil through openings between the house and the soil.

Elevated radon levels have been found throughout Illinois which is made up of 3 zones. Lake and Cook Counties are in zone 2 where Moderate to High levels of Radon can be found. People residing in zone 2 and zone 3 may tend to dismiss radon as a health risk. But, elevated radon levels (4.0 pCi/L or more) occur in these areas just as they do in zone 1. Don’t be fooled. Test for radon. The only way your family can know whether you have an elevated radon level is to test for it.

Where Do You Obtain Kits?

• Kits may be available at your county health department, local extension office, hardware store, or home improvement store. • Call the Illinois Emergency Management Agency (IEMA)-Division of Nuclear Safety Radon Program at 1-800-325-1245 for a list of laboratories that sell radon kits, or visit our website at www.state.il.us/iema. • IEMA also has a list of measurement professionals who can test for you. For consumer protection, the Radon Industry Licensing Act (RILA) requires measurement professionals who test for radon and mitigation professionals who reduce radon in structures to be licensed by IEMA.

 If your home has elevated radon, IEMA has a list of licensed radon reduction contractors (mitigators) who can fix your radon problem. IEMA recommends hiring a licensed mitigator because they have the proper equipment, specialized training and technical skills needed. Using a professional can offer peace of mind. Don’t let radon be a problem in your house.

Where Do You Get Information About Radon?

Courtesy of:  The Illinois Emergency Management Agency-Division of Nuclear Safety Radon Program, 1035 Outer Park Drive, Springfield, Illinois 62704, Radon Information Line:1-800-325-1245 and at www.state.il.us/iema