What the Housing Stimulus Means to Homeowners
Posted at 9:39 AM, Feb. 20, 2009
There is plenty of controversy surrounding the latest plan from President Obama. In a nutshell, his goal is to stop the impending slide of homevalues due to forclosures and reign in the current housing stock. By doing so, we increase demand and credit with flow once again.
Many of these changes include allowing Freddic Mac and Feddie Mae to back loans at more than an 80% loan to value ratio when they already own them. This helps those current homeowners looking to get out of loans with bad terms or refinance at a lower interest rate. This has been pretty much impossible up until now given homes have dropped in value. Read the whole story here.
The New Good Faith Estimate
Posted at 10:22 AM, Nov. 18, 2008
How exciting, as of January 2010, the Federal Government will issue a new, easier to read and understand version of the Good Faith Estimate provided to mortgage applicants. This new version promises to put into clear and concise terms the break down of the program(s) the applicant is interested in and what the bottom line will be. Great news!!
Read courtesy of Steven Levitt (Guaranteed Rate):
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How The New Good Faith Estimate Form Can Help You Save Money On Your Mortgage
Posted: 14 Nov 2008 09:45 AM CST
To help demystify the mortgage process, the federal government is giving the much-maligned Good Faith Estimate document a makeover. Effective January 1, 2010, the current, 2-page form will be replaced by a new, easier-to-understand version, spanning 3 pages.
The biggest strength of the new Good Faith Estimate is that it uses everyday English to explain how the mortgage works. For example, in one section titled "Loan Summary", the Good Faith Estimate specifically answers:
- What is your interest rate?
- Can your interest rate rise?
- Does your loan have a prepayment penalty?
Using today's disclosures, the answers are spread across 3 separate forms.
In addition, the new-look Good Faith Estimate identifies what charges are legally allowed change at the time of settlement, and how a mortgage applicant can opt for higher fees in exchange for a lower mortgage rate, and vice versa.
These educational elements are lacking from the current model.
But for all of its clarity, the Good Faith Estimate doesn't address the issue of suitability. As in, is this the right loan for the right borrower? The new Good Faith Estimate won't prevent homeowners from choosing "bad loans" -- it will only educate them about the loan's facts.
For suitable advice -- as always -- talk with a trusted mortgage professional who will both listen to your needs and help you make plans for them. Getting the "best terms" on an unsuitable loan can be far worse that getting great terms on a loan that fits.
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What Mistakes Not To Make
Posted at 4:15 AM, Mar. 24, 2008
If you are shopping for a mortgage loan, take head and not make these mistakes that could halt approval from a lender.
1. Disregarding Your Credit Reports. This is critical. Find out your FICO score and make any and all necessary repairs to improve it. You will pay dearly if you overlook this component.
2. Overborrowing. Just because a creditor will give you a limit of $25,000 doesn't mean you should take it. This is a credit card example, but frankly, applies to your home loan as well. Don't take buying a new home as an opportunity to furniture shop as well, namely if you are doing it on credit.
3. Changing Your Job. This is not the time to find your passion in life.
4. Cutting Down on Credit Cards. Paying down your credit card debt is important, but closing accounts when you are establishing mortgage worthiness is a no-no, especially if it is cards that have a long history with you.
5. Moving Your Money. While you are shopping for a loan, don't decide you are unhappy with your current bank. Keep your money seasoned and in place until after you have closed on your new home.
The Loan Limits
Posted at 6:11 AM, Feb. 27, 2008
As a reminder, Congress has approved a temporary raise to the conforming loan limits which means that Freddie Mac and Fannie Mae can purchase and guarantee to $729,750. This will only last until December 31, 2008. After that, properties over the current limit of $407K will go back to jumbo loan conditions and terms.
Risk-Based Interest Rates
Posted at 3:17 AM, Feb. 13, 2008
Well here comes the backlash for all those with less than perfect credit scores. The government-backed entities that control the secondary market, Freddic Mac and Fannie Mae, have now imposed fees (or points) to borrowers who are less than desireable in terms of credit risk. So, even though there are still speciality financing programs available, for A paper loans, buyers will be paying an additional fee or interest rate hike if they fall below the margin. Every bank is different, so consult with your local lender with how this affects you!
The following information has been provided courtesy of Marianne Mandel of Integra Financial Group.
The Changes for New Loans
All Fannie Mae and Freddie Mac loans will now be risk based interest rates based on credit scores. It will only affect loans with 70% LTV (loan to Value) or greater and borrowers with 679 or lower credit score. The tier will look something like this:
660-679
640-659
620-639
619 or lower
I can’t say exactly what the hits will be to the borrower because its to the wholesale pricing (or Yield spread), but basically one can assume that the lower the score, the higher the rate. For example someone with a 680 plus credit score and a 90% LTV can obtain a rate of 6%, with a 660-679 score your rate could be between 6.25% and 6.375%, with a 640-659 score your rate could be between 6.375% and 6.625% , with a score of 620-639 your rate could be 6.625% to 7.00% and with a score of 619 or lower your rate could be 7.00% to 7.25%. It’s difficult to speculate what the rate difference is exactly because banks price loans differently everyday, but ¼ to 3/8ths per tier is a somewhat accurate calculation. This means that now more than ever are credit scores important in your financial profile.
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Marianne Mandel, Senior Loan Consultant, 773-792-0000 ext. 22
6565 N. Avondale Suite 200, Chicago, Il 60631
Mention this blog and get your FREE credit analysis!
Federal Rate Cuts
Posted at 11:48 AM, Jan. 31, 2008
Here is some insight from our in-house mortgage expert Ben Bibat regarding the recent Fed cuts and how that translates to you, the consumer.
Historic Fed Move Cuts Both Ways for Borrowers
Hot on the heels of its surprise inter-session rate cut of 75 basis points last week, the Federal Reserve cut key interest rates again, the fifth straight cut since September 2007. In its statement last week, the Fed said it had decided to cut the federal funds rate "in view of a weakening of the economic outlook and increasing downside risks to growth." In other words, economic data suggests the US is on the brink of recession, and the Fed is acting accordingly.
Who benefits from this cut?
If you have a loan that is directly tied to the Prime Rate, you will see an immediate benefit. Home equity lines of credit (HELOCs) and variable rate charge cards are the types of loans that will have an interest rate reduction on their next statement.
What does this mean for long-term rates?
Long-term mortgage rates, the lowest we've experienced in years, could actually increase after today's cut, based on historical performance and recent trends.
So if you're waiting for long-term rates to fall further, don't count on it. Your best chance to lock in the lowest rates since 2005 is now. Getting your application in process now will allow you to capture a great rate before it's too late.
What REALLY moves mortgage rates?
Fixed-rate mortgage rates aren't directly tied to Fed interest rate moves. Instead, they tend to follow in the direction of other long-term government bond yields, such as the 10-year Treasury, which historically moves in accordance with the economic outlook and in advance of Fed actions. The performance of Mortgage Backed Securities, issued by Fannie Mae and Freddie Mac, is what really determines long-term mortgage rates.
How does the economic stimulus package fit into the picture?
The economic stimulus package from Congress and the White House could be a double-edged sword for borrowers. Combined with recent Fed actions, the package could create inflation and bring about higher long-term interest rates.
On the positive side, conforming loan limits are likely to be raised from the current $417,000 to upwards of $625,000. This means great potential savings for purchase and refinance candidates who live in 20 high-cost areas across the country.
What should you do next?
If you're unsure how the rate-cut or the proposed legislation affects your mortgage, don't worry, you're not alone. There's no one-size-fits-all answer. Give us a call right away. We'll review your mortgage and see what, if anything, can or should be done to make the most of your individual financial goals and needs.
Benjamin Bibat
Vice President
PHH Home Loans
1457 W. Belmont Ave.
Chicago, IL. 60657
Direct/Fax 312-635-4111
Cell 773-750-2095
email: ben.bibat@phhonline.com
website: ben.bibat.phhchicago.com
To refinance or not to refinance, that is the question!
Posted at 4:55 AM, Mar. 16, 2007
My guest writer today is a wonderful Mortgage Broker (I personally use her!) who offers sound advise about whether or not to refinance.
To refinance or not to refinance, that is the question!
I receive dozens of phone calls from clients every week asking whether they should refinance their current home loans. There are many factors to take into consideration when refinancing and rates aren’t the only thing to consider. In fact the state of Illinois and several other states now require to all borrowers to sign what is called a “Tangible Benefits Disclosure” when refinancing. Under Illinois law, the new or refinanced loan must show reasonable, tangible net benefit to the borrower after taking into account the terms of the new and existing loans, the cost of the new loan and the borrower’s personal circumstances. Here are 5 reasons to refinance that make sense and offer a tangible benefit!
1) The obvious, but not the only reason to refinance, is to lower your interest rate and save money! If your in an Adjustable Rate Mortgage (ARM) and your rate has just adjusted or is about to adjust in the next few months, chances are your mortgage rate will adjust significantly higher. It’s time to consider refinancing into a Fixed rate or a new ARM, depending on your circumstances.
2) Another thing to consider is whether your credit score has greatly increased since you purchased your home. If your credit score was below 680, you had a bankruptcy or other derogatory credit, chances are that the interest rate you signed for was a little bit higher. Now is the time to check your score and see if you can refinance at a lower rate.
3) Consolidate your 1st and 2nd mortgages into one loan or get rid of Private Mortgage Insurance (PMI). If you purchased a home and put no money down or less than 20% down, you likely have a 1st and 2nd combo loan also known as an 80/20 or 80/10/10 or you might be paying PMI. Now is the time to speak to a mortgage consultant and consolidate the 1st and 2nd loans or rid yourself of PMI and lower your monthly payments substantially.
4) Payoff those high interest credit cards. In January 2006, credit card companies doubled their minimum monthly payments from 2% to 4%. This means that if you had a credit card balance of $10,000 and payment of $200, your increased payment is now $400. If you were to refinance at a rate of 6% and payoff the $10,000 credit card debt, your payment would only increase some $60 per month.
5) Cash out your equity for home improvements or pay for college tuition. Instead of borrowing the money from credit cards or financing with home improvement companies, use the equity in your home to finance any needed home improvement projects. Also, if your children are nearing college age and you don’t have enough money socked up for tuition, consider setting up a college fund with the equity in your home.
When calling your Mortgage Consultant, check the above 5 points to determine whether there is a “tangible benefit” of refinancing your current loan; however, an experienced Mortgage Consultant will take the time to review your current terms verses the new terms and will show you what makes sense for your personal needs.
6565 N. Avondale
Chicago, IL 60631
773-792-0000 phone
773-792-0002 fax
Marianne@integraloan.com
www.Integraloans.com
Marianne Mandel
Sr. Loan Consultant
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