HARP 2.0 refinance program, FHA Streamline refinance

Succeeding in Today’s Lending Environment

Since the implementation of Dodd-Frank back in 2010, lenders have had to deal with a lot more compliance when making a mortgage loan. And the real frustration in all this is with home buyers. They don’t understand, and they don’t like the compliance hoops.

Now, 4 year into the new normal, some lenders are getting it, while others are still struggling.Young couple moving in new house

And by ‘getting it’, I mean that some lenders have succeeded in putting systems in place to comply with government mandates, and have raised their heads above the fray to once again focus on what is really important: The Customer Experience.

While some companies still stand behind the “We have to be compliant with government mandates“, what the customer hears is “We care more about not being slapped by the government than we do about you“.

I am not belittling the real impositions of staying compliant (translation: staying in business by not being fined out of existence by the government oversight group, the CFPB). That is very real for lenders. I just completed my 8 hours of annual continuing education that is now mandated. I get it. Nearly all the material in the 8 hours is memorizing and distinguishing between various government laws and regulations. They want to make sure we know every nuance of a whole bunch of otherwise meaningless acronyms and sub-paragraphs: ECOA, Reg Z, RESPA, TILA, HMDA, FCRA, Gramm-Leach-Bliley…and several others that just don’t quite come to mind.

What is not covered except in brushing by the topic: How to actually better serve you, the home buyer who is taking out a mortgage with us.

No, that each lending company has to figure out on our own.

Some have done so, and really figured it out. The few.

Others have managed to strike a semblance of balance, with the emphasis should there be a leaning, on keeping the government happy. While there are others who simply have not raised their heads out of the government compliance jungle to recognize that there is a consumer at the other end who is looking for a decent experience.

So when you start your mortgage shopping process, you want to look for the traditional goal, good rates and fees. But you also want to add the new component of mortgage comparison: Does this lender have their focus back on me, the consumer; or are they still trying to figure out how to keep the government happy?

The rate is important, as you will be paying that mortgage for years, and you do not want to over-pay. The company focus is equally important, as you want to competently arrive at the closing table…without the added new ulcer that you may get without that.

For the record, our policy is to make sure we deliver on three things that we find are normally most important to the home buyer:

  1. Close one time: because we know there is nothing worse than having movers, utilities and days off that you then have to scramble to change around.
  2. Communication:  Wondering where you are in the loan process and whether you will close on time or not is, at best, nerve-wracking, and at worst, just plain wrong.
  3. Closing Cost Guarantee: The bait-and-switch tactics should have no place in lending. And while they are largely a thing of the past, since ‘those’ guys got out of the industry for the most part; sometimes mistakes are made on the original estimates. You should look for a lender who, if a mistake is made and costs increase from the original estimate, will stand by their word and honor that and cover the difference themselves.

And, here, that is what we do. We close on time, with no surprises and with regular communication during the loan process. That is the least we can do for you, our customer.


The Fed and Mortgage Rates

Mortgage interest rates hit their highest point in two years this week.

And that has a lot of people wondering what higher rates would do to the rebounding housing market. ‘If rates increase too much, will that taper demand and cause housing to lead us into another recession?’ goes the thinking.

And rates are rising because the Fed has been mulling over and speaking about ‘tapering’ the buying of both Treasuries and Mortgage Backed Securities (MBS), through the Quantitative Easing buying program. Essentially, the Fed has been subsidizing mortgage rates to help the housing market to find solid footing again.

Well, a couple of credible sources recently have advocated for the Fed to taper the buying of Treasuries; but continue or even step up the buying of MBS, so that the housing market continue it’s recovery.

Here is a excerpt from a Fox News story on the topic:

The Federal Reserve should concentrate its unconventional monetary stimulus on mortgage asset purchases, according to a new study released on Friday, ditching Treasury bond buys which the authors say have not had much of an effect.

If this plan were to be implemented, we would certainly see another rally and mortgage rates falling back to the low 4’s on a 30 year fixed rate. Perhaps we could see the 3’s again.

For now, it looks like rates are up a little. But historically still very, very low.

And, as always, if I can help you with a free pre-approval, just click here to get started.



How Much Home Can I Afford?

Certainly one of the most common questions that I get.

And the answer can be found from one of two directions. (Hint: I prefer you take the second option).

Maxing Your Debt to Income (DTI) Ratio

This is the first approach that banks will take. And it looks something like this – adding up all of your debt, including:

  • Monthly housing payment(s), including the new proposed payment for what you are about to buy
  • Monthly minimum credit card payments
  • Monthly child support or alimony
  • Monthly car payments for a car loan or lease
  • Monthly payments to an installment loan such as a furniture loan or a timeshare

Combined, lenders like to see that totaling 36% of your gross income, or income before taxes are taken out.

That said, with automated underwriting, quite often a conventional loan will be approved at 45% of your gross income; and other loans such as FHA can be approved as high as 50% or slightly more of your gross monthly income.

That can present an opportunity or a problem.

In some cases, for example, only one spouse will apply for the loan, and therefore a lender only uses that one income to qualify. Pushing 45% of that one income can be fine on the household budget, considering both spouses are working and bringing in an income. It’s not really a strain on the family budget.

But where that is not the case, stretching to what the bank may approve you for at 45 or even 50% of your gross income can leave you ‘house poor’ with no room in the budget to save and invest.

Figuring Your Budget for the House

This is the way I recommend, and the way I consult with those who come to me to get pre-approved for a home loan.

The best way is to lay out your budget: income – expenses. Then back into the number that you are comfortable with as a house payment, making sure to leave 10% or more for saving and investing. Leave a margin, in other words, to save.

Example: Let’s take a couple, the Jones, who make $7,000 income per month. After doing their budget, they find that they would be comfortable with a house payment of up to $2500/month, which comes out to about 36% of their total monthly income.

Knowing that taxes and insurance and possibly PMI will be part of that $2500 monthly, Mr. & Mrs. Jones figure that they should allot about $500 of that payment to the taxes and insurance piece, leaving them $2000 to work with.

Well, that allows for about a $390,000 loan amount, considering they take out a 30 year fixed rate loan at 4.5%. And assuming they have 10% down payment to put down on the house, that allows for a purchase price of about $430,000.

Now, taxes and insurance costs vary depending on the county and the area and the property type. But if you know the max total payment that you are comfortable with, then you can take the real numbers and back into the purchase price fairly safely.

As always, I enjoy working with my blog readers to help finance your new home. You can request a free rate quote by clicking here. Or, just call me at 1-800-MY-LOANS (1-800-695-6267).

Mortgage Insurance Options


I hear it all the time, “I don’t want a loan with PMI” (i.e. Private Mortgage Insurance).

And you shouldn’t. Or, should you?

First a definition. PMI is an insurance policy which insures the lender on a high loan to value mortgage in case of borrower default.

And in normal-speak, that means that a lender is comfortable making a mortgage with something less than 20% down payment from the buyer, so long as that lender is insured against possible losses due to default.

Sounds good for the lender, not taking any chances. Hmmph!

Let’s turn the tables and see what it looks like from your perspective.

What Mortgage Insurance does for the home buyer is allow one to put less than 20% down payment, thus conserving cash as reserves; and in many cases allowing home ownership where it may not be attainable for a long period of time if they would need to save the 20% down.

And on conventional loans, only 3% down is necessary. The PMI allows for that.

That said, the PMI can be a significant part of the payment each month, until you have enough equity that it will be cancelled.

And there is a way around that – especially for a home buyer with very good credit.

Many lenders won’t mention this, but there exists a Single Premium MI – whether lender paid or borrower paid up front.

This is very simple. Instead of adding the MI to your monthly payment, it is ‘bought out’ up front, at closing. The home buyer can do this by paying the fee at closing, and get the same interest rate and still have no monthly MI. Or, the seller can contribute enough to closing costs to buy out the MI, depending on what is negotiated on the contract and the amount of down payment the buyer is bringing.

Or, the lender can increase the interest rate a little, and use the premium pricing on the loan to buy out the MI.

So, if you are looking at buying a home and don’t want to put 20% down, then explore the options of pre-paying the Mortgage Insurance. From a monthly payment perspective, you will be glad that you did.

Click here to request a free pre-approval; or just call us at 1.800.MY.LOANS (1.800.695.6267)


Rate Rise to Highest Point in Nearly 5 Years

UPDATE 7/1: After hitting highs of nearly 5% in some cases, rates have settled back and we have seen slight improvements in rate each day over the past week. That trend is continuing today.


Well, Fed Chairman Bernanke started the lowest period of mortgage rates in history when announcing the purchase of Mortgage Backed Securities (MBS) by the Fed in December, 2008.

It is only fitting that he should usher in the end of that era. And I think it’s here.

As yields in mortgage bonds sink, the corresponding rates rise. And look at this chart – focusing especially on the past three days from Wednesday to Friday. By those of us watching this as it progressed day after day, I guess seeing all the red on the chart made it easy to compare this to a bloodbath. It was.


From the top of the chart where rates hit their lowest point of the year in early May, they were then fighting to keep at two potential resistance levels – until last Wednesday afternoon.

In terms of actual rate, a best execution (i.e. high credit score, lower Loan to Value, etc) 30 year fixed rate in early May would be 3.375%. Friday same best execution would be 4.625%.

For those of us in the industry watching this, it was a very, very big move in a short time. The largest 3 day move in rate that I have witnessed in my career.

But what does it mean for you, or your friends and family? You know, for those who are looking at buying a home in the near future?

Simple. Sooner is better than later to buy.

You see, Bernanke indicated that the Fed would slow the purchase of MBS by the end of this year, and taper off the buying completely by mid-2014.

So, with this big a move higher in rate in so short a period of time, it is somewhat likely that we may see rates improve a bit, before getting worse yet. That would be my guess.

And buying a home with rates in the mid-4’s will still be looked at as a terrific rate in a few years time, where the historical average would be closer to 7%.

If you have been considering buying a home, then let’s get started. Click here to request a free pre-approval, or just call me at 1.800.MY.LOANS (1.800.695.6265).

A Smooth Purchase Loan for Your New Home

I meet home buyers all the time who are nervous about the buying process. Especially about getting a mortgage approved and closed on time.

And while I have heard some very unfortunate stories of delayed closings, moving trucks ready with nowhere to go, and even last minute denials; that does not have to be the case.

Young couple moving in new houseNo, that does not have to be the case at all. In fact…(and don’t laugh here, I’ll show you…) getting a mortgage today can be enjoyable. Here’s how to prepare to make it a pleasant and even memorable experience.

  1. Take and hour, and gather everythingThis part is on you, and trust me that it will make the whole process go so much smoother, you will be happy, happy that you invested the time. You see, the outset is where the whole process can start off right and have the best chance for success, or not. Your lender will give you a complete list of items needed. We do. And the list should be tailored to you and your situation. For example: Let’s say you own rental property and are using that rental income to qualify – we’ll need two years tax returns, all pages. What if you receive child support and are using that income to qualify – we’ll need the complete divorce decree. That will be on the list (or should be), and you should take a good hour, put on Pandora to your favorite station, and just gather and scan. Your life will be so much the better if you do, as opposed to piecemealing the list a little at a time.
  2. Rely on Service Providers to help: If you have a Financial Planner who helps manage your investments – just ask him or her to email the quarterly statements directly to the Loan Officer, or in my team’s case, to the Loan Coordinator. You should be given a good introduction to the team, so you will know who to copy to ask them to send it directly. Similarly, if you have a CPA who prepares your taxes, they normally have easy access to electronic copies of your returns. Asking that person to email the copies over is a lot easier than standing over a photocopier for 10 minutes – then moving to the fax to repeat the effort.
  3. Use a direct lender, especially if the closing & moving date is hard and fast. And, I know I may get a bit of flack from mortgage brokers out there for this point, but I have colleagues in the industry who themselves complain that when they broker a loan – meaning they put the loan file together then send it to another company to underwrite and approve, things just don’t always go smoothly. A direct lender sets up the file with you, and the same company underwrites, approves and prepares the closing package. That will go a long way to ensuring you close on time, and communication will be smooth throughout the process.
  4. Check off Milestones to Closing: There are several distinct steps toward getting to closing. Why not enjoy the ride and celebrate a bit as each one comes in and is accomplished. The first is completing the loan application and getting the docs in, followed by seeing the appraisal has been ordered, then received, and moving toward a final approval (the big celebration), and reviewing the Settlement Statement for closing. We use a really neat system to keep everyone involved appraised as each step toward the final closing is complete. Well, along with weekly status update calls, so you know where you are and can track the progress.
  5. Review Loan Options in light of your larger financial goals: This may not seem like fun at a glance, but when you are taking on the largest single debt – the mortgage – that most people see in their lives, then couching that in terms of your short, mid and long term financial goals is very clarifying. If your youngest is in the 4th grade, and you love the new school system, then you are quite likely to be in this house for 8 or 9 years. As attractive a rate as the 5/1 ARM is right now, it is probably not the best loan once it begins to adjust in year 6. Or, if you are planning on retiring in 18 years, then a 15 or a 20 year fixed rate would probably be better than a 30 year fixed rate loan. A simple discussion with your loan officer can be very enlightening.

A mortgage is not a scary process. Not if you commit to your part up front, and work with a direct lender who is competent a his part along the way.There is a lot to be said for competency in this housing market right now. And there is enough out there that you will find a mortgage team to help you enjoy the process to closing on your new home.

And, I consider my team to be just that, competent and caring. If we can help you with your home loan, I think you will enjoy the process and the result of an on time closing with no surprises, just a pleasant journey to get there.

If we can help, call me at 1.800.MY.LOANS (1.800.695.6267), or just click here to request a free rate quote.

Time to Refinance Out of Your A.R.M. Loan

Some homeowners have already gotten out of their Adjustable Rate Mortgages (ARM). Others have seen how low they have gone, and have stayed in the ARM, enjoying super low rates.

I suspect that time is about to end soon.

First, the reason. We heard Fed Chairman Bernanke say a couple weeks ago that there will be an end to the Fed’s buying mortgage backed securities (MBS), i.e. subsidizing the housing market by keeping rates low. (That is something we all knew; but to hear him say it aloud sparked a bit of a sell-off, causing rates to rise).

Couple that with the earlier indication that when unemployment reached 6.5%, that the Fed would then cease subsidizing MBS. And indications are that the economy seems to be improving.

Next, What this Implies. All that was said above affects only fixed rate mortgages directly – and when the government stops subsidizing mortgage rates, then fixed rates will rise. The conclusion for the homeowner is that if a fixed rate refinance is on the agenda, then now is the time to move; not after rates rise.

But that would not directly affect your existing ARM loan. Most ARMs are tied to the LIBOR or another index. They adjust based on a simple formula: Variable Index + Fixed Margin = New Rate.

Here’s an example today of a typical ARM loan:
LIBOR Index (0.68920%) + Margin (2.25%) = New Rate (3.0%). And 3.0% on a mortgage is quite nice.

But, as rates in general increase – supposedly due to a bettering of the economy, then short term rates such as the Fed Funds Rate, Prime and LIBOR will increase as well. And if we go back to June of 2006, just before the housing crunch took hold, the LIBOR was at 5.7660%. Here’s what that adjustment would look like:
LIBOR Index (5.7660%) + Margin (2.25%) = New Rate (8.125%). Ouch!


That means the time is now: So, with changes on the horizon with the government indicating that it may cease subsidizing rates, now is a good time to switch from the ARM to a fixed rate. I predict a year from now you will be very happy that you did.

Click here to request a free rate quote; or just call me at 1.800.MY.LOANS (1.800.695.6267).

Your Home is Not an Investment

A question I am asked quite often is “Should I view my home as an investment?

And my simple answer is: No.

But I am getting ahead of myself.

We are told by many that the home mortgage is the largest indebtedness that most of us will take on in our lives. So it feels like an mortgagelenderatlanta.cominvestment, with hundreds of thousands of dollars that look like a mature 401(k) balance.

And, some experts will say that we need to take out the largest and longest mortgage possible, and invest the difference. Others disagree, holding we should take out a short, 15 year fixed rate loan and pay it off as quickly as possible. Here is a post on the 15 year vs 30 year loan debate.

So it is easy to get confused and wonder.

I do a couple hundred home loans every year, and have seen just about every scenario. So with that experience, here is my take.

Your home is not an investment. Your home is shelter, security, a place to live.

Assuming you accept this premise, it still allows you a lot of leeway to structure debt around your home in many ways. As an example, if you are a disciplined saver/investor, and have the habit of putting some money away every month, then taking out a long term mortgage is a great way to go, especially now with fixed rates this low.

On the other hand, if you are nervous about the risk of investing right now, then plunk down the extra dollars on the mortgage and get it paid off in full. Nothing wrong with that, because it is true that there is risk in investing in the stock market, even with conservative strategies. And some economists put that risk higher now than in years past. There is no risk in paying off the mortgage. (And opportunity cost is not a risk, just a path not chosen under this option).

So a long term mortgage investing the difference or a short term aggressive strategy to pay the thing off are both okay. Here is my bottom line, though, no matter which option you choose: by the time your retire, have the home paid off.

That is important. Most of us will live on less income in retirement than we make now, while working. So to keep the same or similar lifestyle, we need to have less expense as well. So, choose the strategy that best suits you for the mortgage now; but don’t compromise on making sure it is paid in full by a comfortable retirement age.

Let me know if I can help you with your mortgage loan. Click to request a free rate quote. Or, just call me at 1.800.MY.LOANS (1.800.695.6267).


How Much House Can You Afford?

An important question for every home buyer to answer for themselves, this question of ‘how much house can I afford‘ has come to the forefront since the housing bubble burst and news reports everywhere have focused on those stretching to buy too much house.

I saw a lot of that stretching back then. Now, if anecdotal evidence is anything, I am seeing very prudent home buyers who are asking themselves this question very seriously, “just how much home can we afford“.

Well, last week an article about this very topic came out in Yahoo Homes. And, I was humbled to have been a source for this article on figuring how much home you can afford.

The author, Terrance Loose, began the article by setting the stage:

Are you thinking of buying a home, but not sure exactly how much home you can afford? It’s an important question. After all, there’s no return policy on houses. So if you bite off more mortgage than your bank account can chew, it could have a big impact on your life – not to mention your sleep patterns.

You don’t want to be lying awake worrying about your loan payment. We call it the pillow test. If you’re up all night worrying about it, you probably bought too much house,” says Jim Duffy, a mortgage banker with Cole Taylor Mortgage. [emphasis added]

So, in following the flow of the article, let me highlight the 4 steps to take to make sure you are buying a home that is comfortable for your budget.

First Calculate your debt-to-income ratio:

And this is simply done, quoting the article in Yahoo:

“Things that are included in the debt-to-income ratio for most people are anything that shows up on your credit report, such as student loan payments, credit card payments, car notes. Also, the mortgage you plan to get will be factored in,” says Duffy. He also notes that alimony and child support count as well. Things like groceries, life insurance, and tennis lessons, however, don’t count.

And here is a handy calculator to use to mortgage calculate your own debt to income ratio.

Next Check Your Credit Report

Here the score is not as important as just reviewing to make sure everything on your credit report appears fairly accurate. And the best place to do that, for free, is by requesting your credit report at Annual Credit Report.com.

My advice here is to not spend too much time on this. If you are ready to get pre-approved for your mortgage, then call me and we can take the initial application and review your report together.

If you are certain that it needs work; then you could go to the above link to get your report, and be sure to check out Clean Slate Credit Services, a group that I highly recommend who will help you correct items that need it; but will also council you on establishing  good, active credit lines – important today for qualifying for a mortgage.

Third, Factor in Private Mortgage Insurance (if applicable)

And here is the quote from the Yahoo article:

First, what it is: Private mortgage insurance, or PMI as it is commonly referred to, is an insurance that protects the lender against you defaulting on your mortgage, according to “A consumer’s guide to mortgage refinancings” published by the Financial Reserve Board (FRB). The FRB says lenders usually make you pay PMI when your down payment is below 20 percent.

According to the FRB, the estimated cost of PMI is about $50 to $100 per month. However, Duffy says it can be substantially more since the formula for figuring PMI varies with everything from loan size to loan type, and even how little of a down payment you make. So it can range anywhere from .5 percent of the mortgage amount to 1.5 percent of the mortgage amount – per month.

Finally, Add in Property Taxes & Homeowners Insurance

Again, from the article on Yahoo:

We know – more insurance. And taxes are kind of a bummer, too. But it’s certainly best to plan for them now rather than calculating them during a bout of stress-induced insomnia.

First, let’s talk about homeowner’s insurance. According to the FRB, your mortgage lender will require you to carry this insurance. It protects you against physical damage to the house by fire, wind, vandalism, and other causes.

As for the cost of home insurance, the FRB estimates a cost of $3.50 per $1,000 of your home’s purchase price. So, for a $375,000 home, it would be about $1,312 annually. Divide that by 12 months – because Duffy says that often this cost is added to your monthly mortgage payment – and it comes to about $109 per month.

Now on to your property taxes. These of course vary widely depending on not only the assessed value of your home, but also the county your home is in, says Duffy.

I think it was a very good summary of the ways to calculate how much home you can afford. And, it is always a pleasure and an honor to be quoted as the expert source for national media outlets.

More importantly, I hope that it is a help for you in determining your budget and home purchase plans. I want to help, and please click here to request a free rate quote. Or, just call me, at 1.800.MY.LOANS (1.800.695.6267).

The Case to Buy a Home Now

I have spoken several times on the blog about how home affordability is at an all time high, making now the right time to buy a home.

Since a picture is worth a thousand words, let’s look at this in terms of what some remember, and all the rest of us have heard about, which is back when mortgage rates were in double digits in the early 80’s.


Courtesy: http://www.estateofmindinc.com/
Courtesy: www.estateofmindinc.com

Amazingly, you can purchase a median priced home today for a lower payment than the same home would have cost 30 years ago. This is even more amazing when we consider that with inflation, that payment is a much smaller percentage of average income than it was back then.

This won’t last forever. Interest rates are historically low and once the economy improves or the Fed takes its proverbial foot off the gas pedal, mortgage rates will rise once again. As can be seen above, high rates back in the early 80’s made housing much less affordable than it is today. While we will not likely see a return to those lofty levels, even small increases in rates can make for big changes in what you can qualify for today.

Are you ready to take advantage of record affordability?

Click here for a free rate quote. Or, call 1.800.MY.LOANS (1.800.695.6267)