01
FEB
2016

What a Difference One Month Makes :: Wild January

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Let’s go back four weeks. We are fresh off an increase in rates by the Federal Reserve Board and a Holiday Season. We are bracing ourselves for several rate increases in the coming year and a rise in rates on home loans. It took only one trading day for stocks to get our attention. Oil prices continued to move to levels we have not seen for close to a decade during our recession. World economic news made headlines as the stock market in China took a beating.

All of a sudden, rates are coming down as stocks suffer a correction, despite the Fed’s activity. To explain all of this, we go back to two points we have made time and time again in our economic analysis. Number one, the Fed directly affects short-term rates, but does not control long-term rates directly. Certainly, there is an indirect effect on long-term rates resulting from the Fed’s actions. Secondly, you can’t predict the future, period. Even the Fed does not know what is going to happen.

We do know that if this news continues, the Fed’s plan to continue to raise rates may be put on hold. There have been some bright spots. One bright spot has been job creation, though wage growth has been moderate. The other bright spot has been real estate. Soon we will see some news on both. The jobs report is released Friday, and shortly thereafter we will see if consumers are still purchasing homes while some of this turmoil is hitting the markets. It was a real interesting first month of the year, and we are just getting started.

The Monday Market Update

Rates on home loans fell again this past week. Freddie Mac announced that, for the week ending January 28, 30-year fixed rates fell to 3.79% from 3.81% the week before. The average for 15-year loans decreased to 3.07%. The average for five-year adjustables also decreased to 2.90%. A year ago, 30-year fixed rates were at 3.66%, slightly lower than today’s levels.

“The yield on the 10-year Treasury stabilized around 2 percent this week, and the 30-year fixed rate dipped 2 basis points to 3.79 percent. The recent market turmoil has given the Fed pause; as was universally expected, the Fed stood pat this week but kept its options open for a rate increase in March. This week’s housing releases confirmed the momentum of home sales going into 2016. A hesitant Fed, sub-4-percent fixed rates for at least for a little while longer, and strong housing fundamentals should generate a three percent increase in home sales this year.”

Note: As of January 1, Freddie Mac is no longer providing survey data for 1-year adjustables.
Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

07
JAN
2016

Tax Breaks For Owners Extended

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Short Sale and Mortgage Insurance Benefits

Homeowners are among those who will benefit from a $760 billion tax deal that was signed into law in December. The deal includes two very important tax breaks for those who own homes. The law includes a retroactive extension of The Mortgage Debt Forgiveness Act through 2016. This law expired at the end of 2014 and, without an extension, any loan forgiveness achieved in a short sale would have been counted as income for homeowners who sold their homes for less than the amount of their home loan during 2015.

Also extended retroactively until 2016 was the deduction for mortgage insurance payments, which expired at the end of 2014. Borrowers with adjusted gross incomes up to $100,000 can deduct 100% of their payments. Deductions are reduced by 10% for each additional $1,000 of adjusted gross income above $100,000.

The threshold for married borrowers filing separately is $50,000 of adjusted gross income per person. Deductions are reduced by 5% for each additional $500 of adjusted gross income above $50,000. If you have questions regarding your eligibility for these tax breaks, it is suggested you contact your accountant.

If you do not have an accountant to consult, contact us so that we can recommend one.

04
JAN
2016

Happy New Year & The Monday Market Update

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A Fed Year

Seinfeld spent just about a whole episode discussing how late in the year it is appropriate to wish someone “Happy New Year.” We promise this will be our only Happy New Year message. But we do have a similar economic question to ponder as we enter the year. How long until we know what type of affect the Federal Reserve Board raising rates will have on interest rates and the economy?

As we indicated before, some of the effects are immediate. The prime rate was just increased by banks for the first time in almost ten years. For those who have home equity lines of credit on their homes or credit cards based upon their bank’s prime rate, rates will go up immediately. A small increase of .25% on a $10,000 balance amounts to only a few dollars per month. If the Fed continues to raise rates this year, these effects will be multiplied, obviously.

The affect upon real estate is quite different. Most home loans are fixed rates and thus based upon long-term interest rates which don’t necessarily increase at the same pace as the short-term rates the Fed are raising. According to Freddie Mac’s chief economist, Sean Becketti, interest rates should remain at “historically low levels” throughout 2016, in spite of whatever moves the Federal Reserve is expected to make. While any increase in rates on home loans is certainly not good news, we have to remember that rates are still at “historically low levels” as Becketti says, and the fact that the Fed is taking action means they have confidence in the economy. If the economy continues to expand, real estate will continue to thrive as will the economy, despite the Fed’s moves.

The Monday Market Update

Rates on home loans moved slightly higher this past week, with 30 year fixed rates over 4.0% for the first time in five months. Freddie Mac announced that, for the week ending December 31, 30-year fixed rates rose to 4.01% from 3.96% the week before. The average for 15-year loans increased slightly to 3.24%. Adjustables were mixed, with the average for one-year adjustables unchanged at 2.68% and five-year adjustables rising to 3.08%.

Attributed to Sean Becketti, chief economist, Freddie Mac — “In the final week of 2015, Treasury yields jumped, reacting in part to strong consumer confidence in December. In response, the 30-year fixed rate rose to 4.01 percent, ending a 5-month span below 4 percent. After averaging 3.9 percent in the fourth quarter of 2015, we expect the 30-year fixed rate to average 4.7 percent for the fourth quarter of 2016.”

Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

31
DEC
2015

Housing Boom in 2016

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Real Estate to Heat Up?

Do signs point to another housing boom? Perhaps — home sales are poised to zoom to the highest levels since 2006 next year, according to a 2016 housing forecast issued by realtor.com®. Gains in new-home construction and existing home sales are both expected to push total home sales to the highest levels in years. The new-home construction market is expected to see the most gains in 2016, with realtor.com® forecasting a 12 percent year-over-year increase in housing starts and a 16 percent year-over-year growth in new home sales. The gains in existing-home sales are expected to be more moderate, with expectations of a 3 percent year-over-year gain.

“Next year’s moderate gains in existing prices and sales, versus the accelerated growth we’ve seen in previous years, indicate that we are entering a normal, but healthy housing market,” says Jonathan Smoke, realtor.com®’s chief economist. “The improvements we’ve seen over the last few years have enabled a recovery in the existing-home market, but we still need to make up ground in new construction, which we could begin to see in 2016. New home sales and starts will bring overall sales to levels we have not seen since 2006 and will help set the stage for a healthy new home market.” Next year, total sales for existing and new homes are expected to reach 6 million for the first time since 2006.

Source: Realtor.com

28
DEC
2015

Predictions For 2016 & The Monday Market Update

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The Experts Weigh In

As we start a new year, there is no shortage of predictions with regard to the real estate markets. Here is where the experts have weighed in:

Realtor.com®: Home sales are poised to zoom to the highest levels since 2006 next year, according to a 2016 housing forecast issued by realtor.com®. Gains in new-home construction and existing home sales are both expected to push total home sales to the highest levels in years. The new-home construction market is expected to see the most gains in 2016, with realtor.com® forecasting a 12 percent year-over-year increase in housing starts and a 16 percent year-over-year growth in new home sales.

Fannie Mae: “We see consumer spending as the biggest driver of growth moving into 2016,” said Fannie Mae Chief Economist Doug Duncan. “An uptick in average hourly earnings and low unemployment numbers are contributing to a positive outlook for consumer spending. The supply of existing homes remains lean, putting significant upward pressure on home prices. Meanwhile, we expect interest rates to rise only gradually through next year, and an improving income trend should help support affordability.”

Redfin: Housing projections for next year include slowing price increases and sales growth, easier credit, more first time homebuyers and continued inventory shortages. Redfin sees home prices increasing in the 3.5 percent to 4.5 percent range next year.

It looks like the consensus is for moderate real estate growth and moderate interest rate increases, with new home construction and first time buyers leading the way.

The Monday Market Update

Rates on home loans were little changed this past week. Freddie Mac announced that for the week ending December 24, 30-year fixed rates fell one tick to 3.96% from 3.97% the week before. The average for 15-year loans was unchanged at 3.22%. Adjustables were up slightly, with the average for one-year adjustables increasing one tick to 2.68% and five-year adjustables rising to 3.06%. A year ago, 30-year fixed rates were at 3.83%, a bit lower than today’s levels.

Attributed to Sean Becketti, chief economist, Freddie Mac –“Treasury yields dropped slightly as the holidays approached. Rates on home loans remained largely unchanged, with the 30-year fixed rate ticking down a basis point to 3.96 percent. As we mentioned last week, long-term interest rates will not spike in response to the Federal funds rate increase. While we expect the 30-year rate to be above 4 percent in early 2016, we anticipate rates will gradually increase, averaging 4.4 percent for the year.”

Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

23
DEC
2015

Mortgage Insurance Can Be Eliminated

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Automatic Cancellation is Required

Home buyers who can’t put at least 20 percent down usually have to carry private mortgage insurance, often an expensive proposition. One good thing about the insurance, though, is that it doesn’t last forever. Private mortgage insurance protects the lender in the event that a borrower stops making payments before building up much equity in the property. But a borrower who diligently pays down a loan, eventually crossing that 20 percent equity threshold, is no longer considered a big risk, and can expect to be rewarded with cancellation of the requirement. Under the Homeowners Protection Act of 1998, lenders must terminate the insurance after a certain point, something that hadn’t been done consistently before then. The act set the termination date as the point at which the principal balance on the loan is scheduled to reach 78 percent of the original value of the home. In other words, if you buy a home for $100,000 and put 10 percent down, your starting loan balance is $90,000.

Once you have paid enough toward principal that the balance reaches $78,000, the insurance policy should be automatically canceled. A compliance bulletin issued earlier this month by the Consumer Financial Protection Bureau reminded lenders that automatic insurance cancellation is required even if the value of the home has declined from the original value (in other words, the sales price). The law also creates a way to seek earlier cancellation. The cancellation rules do not apply to the low down payment loans backed by the Federal Housing Administration as borrowers must pay insurance for as long as they have an FHA loan if the loan was acquired after June of 2013.

Source: The New York Times

Want to know more about cancelling your mortgage insurance? Contact us about a free mortgage checkup.

21
DEC
2015

The Fed Has Spoken & The Monday Market Update

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The Fed Calms The Markets

In what was one of the most widely telegraphed moves ever, last week the Federal Reserve Board’s Federal Open Market Committee met and decided to raise their federal funds rate by .25%. To say that this move of raising rates was expected is an understatement. The Fed had talked of raising rates for so long that the only surprises which could have come from the meeting was no increase at all or a larger increase.

Actually, the lack of a surprise was in keeping with Fed policy, as it is their goal to be as transparent as possible with regard to their monetary policy. And because there was no surprise, there was no great reaction in the markets. Rates had already risen slightly in anticipation of the decision, but eased a bit afterwards as stocks turned negative as the week came to a close.

As we have been indicating all along, the Fed’s words accompanying their actions would be as important as the Fed’s actions themselves. So what did they say? Here is an excerpt: “The committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.” Thus, the wording was designed to provide further assurance that the Fed is not going to be raising rates rapidly in a knee-jerk reaction. This is good news for those who want to purchase real estate in 2016. Rates are still at historically low levels and the Fed does not want to upset the apple cart too quickly.

The Monday Market Update

Rates on home loans were slightly higher again in the past week going into the Fed’s rate decision. Freddie Mac announced that for the week ending December 17, 30-year fixed rates rose to 3.97% from 3.95% the week before. The average for 15-year loans increased slightly to 3.22%. Adjustables were mixed, with the average for one-year adjustables increasing to 2.67% and five-year adjustables remaining at 3.03%. A year ago, 30-year fixed rates were at 3.80%, a bit lower than today’s levels.

Attributed to Sean Becketti, chief economist, Freddie Mac –“As was almost-universally expected, the Federal Open Market Committee (FOMC) of the Federal Reserve elected this week to raise short-term interest rates for the first time since 2006. We take the Fed at its word that monetary tightening in 2016 will be gradual, and we expect only a modest increase in longer-term rates. Rates on home loans will tick higher but remain at historically low levels in 2016. Home sales will remain strong, but refinance activity should cool somewhat.”

Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

14
DEC
2015

The Fed Meeting Finally Arrives & The Monday Market Update

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Fed Set To Raise Rates?

The Federal Reserve Board’s Federal Open Market Committee meets today and tomorrow. This is the most anticipated meeting of the Fed in almost a decade. It has been exactly seven years since the Fed moved short-term interest rates to close to zero and it has been over nine years since the Fed actually raised short term rates. Now the markets are expecting the Fed to raise rates from these historically low levels once again.

The Federal Reserve has indicated all along that the markets would get plenty of notice before they raise rates. This notice is designed to prevent market shocks. One must remember that the Fed is only raising short-term rates. For example, the Federal Funds Rate is the rate banks charge each other overnight as they balance their holdings. The other rate controlled by the Fed is the Discount Rate, which is the rate they charge banks for borrowing money. All very short-term. The question is–how can these rates affect long-term rates that consumers pay for loans on cars, homes, credit cards and even student loans?

Some rates, such as credit cards which are pegged to the prime rates charged by banks, may go up instantly. Other loans which are based upon longer term rates such as home loans, are not as easy to predict. That is where the markets come in. The markets react to what the Fed may do before they take action. For example, rates on home loans have risen in anticipation of the Fed’s move. Now the markets will listen to what the Fed will say about potential future interest moves. So let’s see what the Fed has to say in addition to whether they raise rates.

The Monday Market Update

Rates on home loans were up slightly in the past week as a reaction to the previous week’s employment data. Freddie Mac announced that for the week ending December 10, 30-year fixed rates rose to 3.95% from 3.93% the week before. The average for 15-year loans increased to 3.19%. Adjustables were also slightly higher, with the average for one-year adjustables increasing to 2.64% and five-year adjustables rising to 3.03%.

A year ago, 30-year fixed rates were at 3.93%, virtually the same as today’s levels. Attributed to Sean Becketti, chief economist, Freddie Mac –“The economy added 211,000 new jobs in November exceeding analysts’ expectations, and the prior two months were revised higher as well. This momentum is likely to cement a decision by the Fed to begin raising interest rates this month. Following the release of the employment report, Treasuries rose 7 basis points and in response the rate on 30-year fixed loans ticked up two basis points to 3.95 percent.”

Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

25
SEP
2015

New Law May Affect Closings

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New Law May Affect Closings

Here comes the Truth-in-Lending/Real Estate Protection Act Integrated Disclosure Rule (TRID) effective date. What does that mean for the consumer and those working within the real estate industry? Starting with applications received on October 3rd of this year, the final closing costs on a home loan must be made available to a consumer purchasing or refinancing a home three business days before closing.

This means that all parties must do a much more judicious job of planning a purchase or refinance transaction. Want to go to closing quickly after signing a contract? The best avenue would be to make sure your application is fully pre-approved by your lender’s underwriters before you make an offer. This strategy also has the potential to make your offer more enticing to sellers because they know you are a serious buyer. It will also be important to make sure all issues are resolved early in the process.

Last minute changes to the contract are much more likely to cause a delay in the settlement date. It is all-important for everyone who is part of the process to work as a team to insure that the transaction flows smoothly without delays.

Contact us for an article explaining the full scope of the changes, including the new integrated disclosures.

25
SEP
2015

The Fall Real Estate Market Update

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The Fall Real Estate Market Update

Let’s take a break from speaking about the Federal Reserve for a week and talk about a more pleasant topic. Thus far this year, the real estate market has been strong. This year continues the sector’s recovery from the recession we suffered almost a decade ago. It has been a long, hard road for the recovery and real estate in particular, but we have seen a slow and steady recovery in the sector for some time. Last month we saw existing real estate sales dip by almost five percent from the previous month, but sales are still up over six percent year-over-year.

We are now in the fall real estate season and it seems that the most important factor holding back sales is lack of inventory in some areas of the country. This lack of inventory makes the ability of builders to gear up to increase production very important. And their major concerns are lack of affordable land and lack of skilled labor. Though lack of inventory, affordable land and skilled workers are real problems, they demonstrate that we have come very far in our recovery.

Instead of complaining about lack of confidence, jobs and available credit, as we were just a few years ago, the problems we face are very different today. They are problems that a stronger economy face. Today, if an attractive home goes on the market at a reasonable price, it more than likely will sell. Thus, if you are thinking about listing your home, conditions are favorable. And if you are thinking about purchasing, today’s low rates still make ownership a bargain. Next week we are sure to be talking about the Federal Reserve again, as the jobs report is released on Friday.

The Market Update

Rates on home loans were lower in the wake of the Federal Reserve Board’s decision not to raise short-term rates. Freddie Mac announced that for the week ending September 24, 30-year fixed rates fell to 3.86% from 3.90% the week before. The average for 15-year loans decreased to 3.08%. Adjustables were also down, with the average for one-year adjustables falling to 2.53% and five-year adjustables down to 2.91%.

A year ago, 30-year fixed rates were at 4.20%, over one-third of one percent higher than today’s levels. Attributed to Sean Becketti, chief economist, Freddie Mac — “Global growth concerns and lackluster inflation convinced the Fed to defer a hike in the Federal funds rate. In response, Treasury yields fell about 9 basis points over the week, with some larger day-to-day swings along the way.

In response, the interest rate on 30-year fixed rate loans dropped by 5 basis points to 3.86 percent. Rates on home loans have remained below 4 percent for 9 consecutive weeks and have remained range-bound between 3.8 and 4.1 percent since May. These low rates have supported strong home sales, and 2015 is on pace to have the highest home sales total since 2007.”

*Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

22
SEP
2015

Planning for a Successful Relocation

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Relocating is always a stressful time for individuals and families. Change is always difficult and it is important to understand that planning can help minimize the stress and interruption of a geographic relocation. There is not one, but many choices you will face and the more educated you are regarding the options and more organized you can be in assessing the information, the smoother the transition will be.

The first goal of any relocation would be to align yourself with experts. Those helping you must not only be experts in their field, but they also should be experts at helping relocatees. Not everyone is equipped to help you from afar. It takes patience, anticipation, technology and knowledge to be qualified as an expert in this area.

Again, there are a multitude of decisions you will have to make which cover an even larger multitude of options. Here are just some of the questions you should be considering…

Will you be renting or purchasing in the new area? This is the most important question you will answer and the answer will in many ways affect the other questions and answers that you will face. Here are other questions which arise from the answer to this question. Within this article, we will assume your goal is to purchase; however, if you are renting some of the same concerns will apply.

  • Do you own a home in your present area and are you going to sell or rent that home?
  • Will you have eligibility for any special financing such as VA as a veteran or active military?
  • What is your time frame for purchasing? For example, perhaps you must sell your present home first.
  • Have you been fully approved by a lender for your new purchase? A pre-approval is defined as a review by a qualified underwriter, not a loan officer opinion letter. The lender will fully vet your cash assets, credit situation and income so you can narrow down your financial choices with regard to your new home. Nothing wastes more time than looking at houses for which you may not qualify. And a full pre-approval will give you negotiating power with regard to the home you will be trying to purchase.
  • Exactly where will you be working? You must assess what kind of housing is available in that immediate area. The proximity from your job to your home may affect everything from the cost of housing to the type of traffic you will face.

What kind of hours will you be working? This might affect whether or not you can rely on public transportation to get to and from work and how far from your job you should consider living.

What is your timeframe for moving? Are you moving quickly or planning ahead for a move sometime in the future? Of course, it always helps to have more time because this gives you more time to explore your options and make better decisions, but in today’s world, sometimes you can’t plan ahead with changes in jobs.

What type of housing do you prefer? Most buyers — especially those with families — would prefer a single family home with a yard. However, in some areas the cost of housing may preclude your first preference, unless you are willing to undertake a longer commute. All decisions come with trade-offs, but it is important to start with your ideals and work from there. Within your choice, there will be several sub-choices as well– from size of the lot to how many bedrooms you need for your family. Do you need a garage and how many cars should it be able to accommodate?

Do you have children, what ages are they and do any of them have special needs? Some school systems are better than others in general and certainly some are better at providing support for children with special needs. What other facilities are important–such as athletics or religious institutions?

Do you have time for a house hunting trip before you relocate? If so, how much time will you be able to allocate? This will allow you to meet with local professionals and your Realtor can plan your activities, including what homes you will be able to see in person as well as areas you can tour.

Do you have access to on-line video technology? This will help if your real estate professional has the ability to help you tour properties “remotely.” This is a great time-saving factor if you don’t have time for a visit or the visit more productive because you can narrow down choices.

Has your real estate and/or mortgage professional put together a relocation package? A package which covers information on the market area and conditions, schools, vendors and more will be very helpful in the planning process.

In general, we would like to quote an important adage–Success is not an Accident. The proper planning of a move will make all the difference in the world with regard to making the move more successful. Selecting the right professionals to help you will be the most important first step.

21
SEP
2015

Purchasing A Home Using Someone Else’s Money

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Despite the fact that homeownership rates in America have eased from record levels in the past ten years, still almost two-thirds of Americans own their own homes.  And the good news is that credit conditions are easing and with latent demand from the Millennial Generation, the numbers are expected to get stronger with regard to homeownership during the next ten years.

Fannie Mae has conducted several American home ownership studies in the past. Among other things, they measured the desires to achieve home ownership and the impediments to achieving these desires. One would think that the major impediments to purchasing a home would be not having enough income to qualify or poor credit histories. In reality, the number one obstacle to becoming a homeowner in America is lack of capital.

Knowing the significance of this obstacle, the industry has done much to make obtaining real estate “cash friendly.” While the surging economy provided much impetus for increasing real estate purchases, industry initiatives have really paved the way to facilitate the whole process.

In this article, we will highlight some of the ways a prospective home purchaser can obtain the capital needed to purchase their first home or even a move-up to a larger home.

Lower down payment programs–In the old days, the VA (open only to active military and vets) and Rural Housing Programs were the only no-down payment options and FHA had a minimal (less than 5.0%) down payment requirement. Then many conventional programs decreased their down payment requirements, however, this trend has reversed itself in the past few years. Today, the VA and Rural Housing Programs still offer no down payment options and FHA is still less than 5.0% down for borrowers with good credit. In addition, some state and local housing agencies have programs that will lend or grant the money for the down payment for qualified low-to-moderate income borrowers.  More recently, Fannie Mae and Freddie Mac have again offered 3.0% down options for first time buyers.

Gifts–Typically a gift from an immediate relative is allowed for a purchase transaction. In the past, only FHA and VA loans allowed what is called 100% Gifts. This term means that the total cash necessary for the transaction is allowed to come from a gift. Conventional programs typically required at least 3% to 5% of the money to come from the purchaser’s own funds–although there are some exceptions for programs for low-to-moderate income borrowers.

Seller Contributions–Some of the money needed for closing costs typically can be paid by the seller in a purchase transaction. On VA loans, the seller can pay all closing costs. On FHA loans, the seller can pay up to 6.0% towards closing costs–but require a small minimum from the borrower’s funds. On minimum down payment conventional loans, the seller can pay up to 3.0% of the sales price towards closing costs.  Recently FHA has proposed lowering their standard 3.0% as well.

Lender-paid closing costs–With the advent of more complex secondary market vehicles, lenders have been able to develop more sophisticated mortgage products. Some of these products lessen the cash needed to purchase by lowering or eliminating the amount of closing costs a borrower has to pay. For example, the purchaser can opt for a higher rate, no-point mortgage which in fact lessens closing costs. An even higher rate may mean that the lender can offer an option which will pay for additional closing costs associated with the home purchase. In effect, the purchaser is financing their costs through a slightly higher interest rate.

Not to be outdone, mortgage insurance companies have offered options which helped lessen cash requirements. Conventional mortgage insurance in the past required an up-front cash payment of more than 1.0% of the sales price. These new options allow the monthly payment to be increased and eliminates the up-front mortgage insurance cost. Another option increases the interest rate and enables the lender to pay the mortgage insurance directly (lender paid mortgage insurance).  These options may allow the mortgage insurance payment to be tax deductible as well, though you are advised to speak with your tax advisor before making this determination.

Loans–Most programs allow the purchaser to borrow the money needed to purchase if the loan is secured against an asset. Some programs, such as VA, might even allow unsecured loans for this purpose.  The most common asset used for this purpose is a purchaser’s retirement account in cases in which the account allows the owner to borrow against the asset.  Additionally, if no payments are required on the loan, this adds another benefit because additional income may not be required for qualification in this special case.

Interested in purchasing a home with the minimum cash required? Contact us for more details regarding these alternatives.

21
SEP
2015

Obtaining the Best Appraisal in Any Market

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This has certainly been an interesting ten years for the housing markets. The prices of homes have been anything but stable during the past decade. Early in the decade they were increasing at a frenetic pace. We then saw a drop in home prices in most areas of the country and the drop was even more precipitous in those areas that experienced the largest increases earlier. In the past few years, home prices have started to recover as well.

No one has been affected more by this “housing valuation yo-yo” than the real estate appraiser. Sworn to identify the accurate value of a property to support mortgage loans that are secured by real estate, the appraiser has to deal with a variety of factors. These factors include all parties of the transaction having a vested interest in supporting the sales price–including the seller and purchaser. The factors also include trying to nail down the right data to support the sale which is increasingly difficult when values are changing rapidly, especially in markets where there are distressed sales. Finally, in the era of tighter financial regulations, agencies have made it more difficult for appraisers to communicate with the participants to obtain up-to-date information for fear that the appraiser will be subject to undue influence.

What does this mean? It means that if you want to obtain the most accurate appraisal of your property, you must be proactive in the process. Here are some tips to help you further your goals in this regard.

Be at the property with your real estate agent when the appraiser visits. Don’t just be there to greet them, be proactive during the inspection. Stay with the appraiser every step of the way and point out features that you feel are important — but don’t get in the way, especially when they are taking pictures. Make sure the appraiser does not miss anything of importance and that all areas are accessible (no locked doors). It is understood that as a homeowner you may not know what is important and what is not important. That distinction does not matter. It is up to the appraiser to decide and if you do not give them all the information, they can’t make a good decision.

Ask as many questions as you can. Does the appraiser have the right boundaries of the property and even the right boundaries of the neighborhood? Does the appraiser know distinctive information about your neighborhood that may make it more attractive, such as distance from schools and other amenities? If you have a recent survey of the property that would help.

You should have copies of other important documents ready to give to the appraiser. These might include the latest tax bill and copies of invoices for any major home improvements. While the cost of every improvement does not necessarily add the same amount to the value, knowing the cost will help the appraiser come up with the most accurate value for each improvement. Do not include routine fixes.

You should also describe anything unusual about the property — both negative and positive — but emphasize the positives. And make sure you get their business card so that you can follow with information and make sure that the person who compiles and signs the report is the same person who viewed the property.

The real estate agent should play a role in providing information. as well. A great determinant of the home’s value will be determined by the use of what is called “comparables.” Comparables are other properties that have sold that will determine the value of your property. If your next door neighbor sold his/her house for “x” dollars just a few weeks ago and their house is the same model, has the same improvements, is the same size and is in the same condition, you can see why this data would be important. On the other hand, even when everything seems to be the same, there can be differences. Perhaps your neighbor had to sell quickly because of a relocation and that means the price was discounted. With so many distressed sales out there, this fact could be very important.

Many times the information available on comparable sales are not accurate. Going back to your neighbor, perhaps you added an extra bedroom that they do not have, but it shows in the data as having that extra bedroom. Beyond the neighbor, this is why the real estate professional is so important. Your agent should know much about these comparables and should actually be suggesting the best comparables for your property.

When the appraisal does not come in at the agreed sales price, this does not mean that you should accept the value. The appraisal is the property of the lender and the purchaser. The lender must provide you with a copy of the document for review. It is important to make sure the value is accurate and the purchaser of the property has a vested interest in determining this as well.

18
SEP
2015

More Prospects Renting Single Family Homes

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Who is likely to buy next?

Research conducted by Freddie Mac indicates that people living in single-family rental (SFR) properties (a house, townhouse, or condo) may be more likely to buy a home than those living in apartments. Freddie Mac’s survey found that overall, about 55 percent of renters in both single- and multifamily properties intend to continue renting in the next three years.

When dividing up the two categories, however, the data indicated that 53 percent of renters in SFR properties intend to buy a house in the next three years compared to just 36 percent of multifamily renters who plan to buy in that period. One factor in deciding when to buy a home is how satisfied the renter is with the rental experience, according to Freddie Mac’s survey. Approximately 68 percent of those satisfied with their rental experience say they intend to continue renting, compared to 32 percent who say they plan to buy a home. A higher percentage of apartment renters (67 percent) than SFR property renters (60 percent) reported being satisfied with the rental experience.

“As we gather data each quarter, we are finding the old perception that renting is something people do until they buy is not always true. The trend shows that satisfied renters are more likely to continue renting, even as we are seeing rising rents in the market,” said David Brickman, EVP of Freddie Mac Multifamily. “Dissatisfaction may drive renters to buy, and we are seeing a slight decrease in satisfaction among single-family renters. We will continue to monitor this for stronger indicators and trends, but for now, the single-family rental home market may be a good place to look to find potential home buyers.”

Source: DS News

 

18
SEP
2015

It’s Official: No Rate Hike

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Listening to the Fed’s Words

Forget about what the Federal Reserve Board did not do for a minute. Let’s talk about what they said. With the Fed, it is usually more likely that their words will be more important than their actions, or lack of action. This has been a very turbulent end of the summer for the markets. Above all, the Fed is interested in restoring calm and especially making sure that their actions do not add to the instability of the markets. And we certainly have had some unstable markets during the past several weeks.

This is exactly why we were expecting “calming words” from the Fed when they made their announcement. Did we get these words? Absolutely. The Fed said that “recent global economic and financial developments may restrain economic activity somewhat.” Two things are important about this statement. First, it is softened by using the word “somewhat,” meaning the Fed does not see a risk of a world-wide economic meltdown. Secondly, the Fed used the words “international or global” more than once. The international issues broaden the scope of the Fed’s focus from just looking at our jobs or inflation numbers.

Bottom line is that the Fed did not raise rates, though they did leave that option open for their last two meetings of the year in October and December. That is good news for the markets and the consumer. The stock market has already been under pressure lately and it did not need the extra pressure of a rate hike. And rates on home loans are likely to stay low in light of the Fed’s decision. We can’t think of better news for the consumer right now.

The Market Update

Rates on home loans were stable again in the past week as the Fed meeting approached. Freddie Mac announced that for the week ending September 17, 30-year fixed rates rose one tick to 3.91% from 3.90% the week before. The average for 15-year loans also increased one tick to 3.11%. Adjustables were mixed, with the average for one-year adjustables falling to 2.56% and five-year adjustables rising one tick to 2.92%.

A year ago, 30-year fixed rates were at 4.23%, close, but still higher than today’s levels. Attributed to Sean Becketti, chief economist, Freddie Mac — “The Treasury market was relatively quiet this week, and as a result rates on home loans barely budged. Inflation fell shy of expectations in August, up 0.2 percent over the past year, but core consumer prices increased 1.8 percent year-over-year. Low rates help to support housing markets, which continue to bring good news.

The National Association of Home Builders’ HMI came in above expectations at 62, which is a ten year high. Even if the Fed decides to raise short-term interest rates, we don’t expect a significant impact on the housing market. We’re still on track for the best year of home sales since 2007. And in contrast to two years ago, when rates spiked in response to the Taper Talk, the economy is in much better shape and markets have been expecting the Fed to act for months. While our outlook incorporates a moderate increase in rates over the next 18 months, rates are likely to remain low by historical standards and should not be a determining factor for most Americans looking to purchase a home.

18
SEP
2015

The RateFlex Advantage

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One of the most perplexing decisions someone has to make when purchasing a home is when to lock in an interest rate on their new mortgage. At McLean Mortgage Corporation we not only provide competitive rate quotes, we also provide an option designed to make the decision easier and less stressful.

Typically a mortgage company provides two options:

  • You can lock in the rate.  That means you are protected against future rate increases as long as you close on time. However, you cannot benefit if rates go down after you lock in your rate.
  • You can float the rate.  That means you are not protected against rate increases, but you get the benefit of rate decreases before settlement.

Our RateFlexSM Program provides a standard rate lock which protects you against rising rates after you sign your purchase contract. McLean Mortgage then goes one step further by allowing you to relock your rate if rates go down. You can relock any time after your loan is approved and up to one week before closing.

This takes the stress out of the decision. You can have the safety of a lock and get a lower rate if the market improves. It is a win-win situation.

Our RateFlexSM  Program requires a small deposit which is credited at settlement. In other words, there is no extra cost to you. The RateFlexSM option is not available for all programs and I can let you know quickly whether you would be eligible for this option.

McLean’s RateFlexSM  Program is just one way we make the process easier for you. If you are ready to start the process we also offer our LoanFirstSM  Pre-approval Program which is designed to give you more negotiating power with regard to contract offers.

 

17
SEP
2015

Golfers Needed! 2015 Annual Charity Golf Classic

October 5th, 2015 :: At Trump National Golf Club

For more information please click on the image below.

Golfers Flyer

15
SEP
2015

Getting a Home Loan Getting Easier

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Home Loans Go High Tech

Applying for a home loan and supplying supporting documents — traditionally one of the most time-consuming, paperwork-intensive and frustrating financial exercises around — increasingly is being automated. That means applicants will find the process easier, faster and, possibly, less expensive than before.

Americans already have embraced online interactions for other financial products and services. They pay bills online, check credit card transactions, buy and sell stocks, adjust 401(k) balances and pull up their credit reports. The vast majority of taxpayers file their tax returns online.

Five years from now, digital applications and document submission for home loans might be just as prevalent, though it isn’t quite there yet. “It’s not as widespread as you might think,” said Rick Hill, vice president of industry technology for the Mortgage Bankers Association. Many people still prefer to meet face to face with a loan officer, especially first-time home buyers.

Even the mortgage-closing process, the final step before homeowners become contractually obligated to their loans, can be improved through technology, according to a report out last week by the federal Consumer Financial Protection Bureau, based on survey results from 1,200 consumers who signed off for their loans in this manner.

Source: USA Today

15
SEP
2015

How About Some Perspective? & The Market Update

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How About Some Perspective?

Last week we talked about how times can change from week-to-week. With regards to the somewhat “disappointing” jobs report released recently, we have to reach back almost a decade to understand how our perspective changes over time. The economy lost approximately 8.7 million jobs during the Great Recession of 2007 to 2009. Since that time, the economy has added over 11 million jobs. The unemployment rate peaked at 10.0% in October of 2009. It currently stands at 5.1%, near the 4.5% bottom it hit before the recession took place.

Keep in mind that this does not mean we have recovered completely. During this time the country has added tens of millions to our population and therefore we have not recovered all jobs lost. Why is this perspective important? Because the Federal Reserve Board will be considering long term trends when they make a decision regarding raising rates this week. Yes, the latest report is important, but not as important as where we are headed. And therein lies the problem. The Fed can’t predict where we are headed either. For that the Fed would need a crystal ball and they don’t have one of those.

Certainly, the gyrations of the stock market will be considered by the Fed. And not only our stock market, but markets all over the world and especially in China. Is our market correction due to the possibility of the Fed raising rates or the fear of an economic slowdown spreading to our shores from overseas? One trend should be noted: short-term rates have risen during the past several weeks and this tells us that the markets are expecting some action from the Fed. Though short-term rates are not as “visible” to the consumer as longer-term rates that determine the value of fixed rate home loans, short-term rates do determine adjustments for those having variable rate home loans and this trend bears watching.

The Market Update

Rates on home loans were stable in the past week. Freddie Mac announced that for the week ending September 3, 30-year fixed rates rose one tick to 3.90% from 3.89% the week before. The average for 15-year loans also increased one tick to 3.10%. Adjustables were mixed with slight changes, with the average for one-year adjustables rising one tick to 2.63% and five-year adjustables falling two ticks to 2.91%.

A year ago, 30-year fixed rates were at 4.12%, close, but still higher than today’s levels. Attributed to Sean Becketti, chief economist, Freddie Mac — “Following a shortened week, rates on home loans were virtually unchanged, inching up 1 basis point to 3.90 percent. The employment report released last Friday provided mixed signals, adding one more note of uncertainty prior to the Fed’s September meeting.

The unemployment rate dropped to 5.1 percent in August, the lowest rate since April 2008, but only 173,000 jobs were added, well below expectations. Wages grew 2.2 percent, a neutral indication at best.” Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

04
SEP
2015

Fannie Mae Makes Home Buying Easier with HomeReady™

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Fannie Mae announced HomeReady™ mortgage, an innovative lending option aimed at helping creditworthy borrowers with lower and moderate incomes have access to an affordable, sustainable home loan. HomeReady will replace Fannie Mae’s MyCommunityMortgage®. HomeReady will help qualified borrowers access the benefits of homeownership with competitive pricing and sustainable monthly payments,” said Jonathan Lawless, Vice President for Underwriting and Pricing Analytics at Fannie Mae. Under the new guidelines, Fannie Mae pricing is favorable and simplified for lender use.

Borrowers will be required to complete an online education course preparing them for the home buying process and providing post-purchase support for sustainable homeownership. For the first time, income from a non-borrower household member can be considered to determine an applicable debt-to-income ratio for the loan, helping multi-generational and extended households qualify for an affordable loan. Other HomeReady flexibilities include allowing income from non-occupant borrowers, such as parents, and rental payments, such as from a basement apartment, to augment the borrower’s qualifying income. First-time and repeat homebuyers can purchase a home using HomeReady with a down payment of as little as 3%.

Fannie Mae will provide additional details to lenders in the coming weeks through an announcement. Fannie Mae anticipates accepting loans under the HomeReady guidelines in late 2015 as well. HomeReady will be available to borrowers at any income level for properties in designated low-income census tracts, and to borrowers at or below 100% of area median income (AMI) for properties in high-minority census tracts or designated natural disaster areas. For properties in remaining census tracts, HomeReady borrowers must have an income at or below 80% of AMI.

Source: Fannie Mae

Interested in purchasing a home? Let us know and we will keep you informed as information about this program becomes available.

04
SEP
2015

Economic Signals Keep Changing

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My How Times Change

You may be thinking that we are talking about how the world has changed over the years. For example, who would have thought that a conversation with our children would most likely occur through texting on a machine that many of us did not even grow up with years ago? Here we are talking about how things change from week-to-week. During the past few weeks we have been illustrating factors before and against a rate increase orchestrated by the Federal Reserve Board, whose “Open Market Committee” meets next week.

On the plus side we had a strengthening economy and the creation of jobs. On the negative side we had a correcting stock market, a stronger dollar, a slowing economy overseas and plunging oil prices. In just a couple of days, the stock market rebounded significantly, we had a significant upward revision in the estimate for our economic growth in the second quarter and oil prices rebounded sharply as well. In a matter of a few days, we went from not at all expecting a rate increase to thinking that a rate increase could happen. Just to make things interesting, a few days later, stocks and oil prices reversed again. If you are confused, think how the Fed must feel considering this decision.

And then came the jobs report. What did the jobs report tell us? Even though the addition of 173,000 jobs was less than expected, the unemployment rate dropped to 5.1%, the previous month number of jobs added was revised upward and wages grew a bit more than predicted. Overall, this report is a positive one for the economy and, therefore, increases the chance of a rate increase next week. Most analysts are putting the chances of an increase at 50-50 right now. Though, one thing we can tell you is that the Fed does not like major uncertainty. And there is plenty of uncertainty out there right now. Too much uncertainty may be the overriding factor determining the results of this decision.

Weekly Market Update

Rates on home loans were slightly higher in the past week. Freddie Mac announced that for the week ending September 3, 30-year fixed rates rose to 3.89% from 3.84% the week before. The average for 15-year loans increased to 3.09%. Adjustables were mixed, with the average for one-year adjustables unchanged at 2.62% and five-year adjustables rising to 2.93%.

A year ago, 30-year fixed rates were at 4.10%, close, but still higher than today’s levels. Attributed to Sean Becketti, chief economist, Freddie Mac — “Fasten your seat belts. It’s going to be a bumpy night,” said Bette Davis in All About Eve. That could just as well have been Janet Yellen, or a specialist at the New York Stock Exchange, or the head of the People’s Bank of China on yet another week with lots of volatility on essentially no new information. The 30-year fixed rate increased, but don’t read too much into that. The Fed took great pains at the Jackson Hole conference to keep all their options open and to avoid making too much — or too little — of the situation in China and the volatility in global equity markets.

This Friday’s employment report is the last piece of significant, solid evidence the FOMC will have to consider before their September decision. The Street appears to be calling it a coin flip. There won’t be a clear direction for rates on home loans until the Fed makes its September decision, at the earliest.” Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

28
AUG
2015

Lower Down Payments Boost Demand

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The Key: Lower Down Payments

Changes in down payment requirements have more influence over home buyers’ willingness to buy than changes in rates, according to a new study published by economists at the New York Federal Reserve. The Fed’s survey of buyers and renters found that the impact of interest rates may be overrated compared to even the smallest changes in down payment requirements.

The study found that dropping the required down payment from 20 percent to 5 percent increases the willingness to purchase, on average, by 15 percent among buyers and 40 percent among renters. On the other hand, decreasing the interest rate on a 30-year fixed-rate loan raised the willingness to purchase a home by only 5 percent, on average.

Buyers showed more influence by down payment changes even though the rate change could save them more money than the lower down payment.

“A key takeaway is that the effect of a change in down payment requirements on housing demand strongly depends on households’ financial situation,” says economists Andreas Fuster and Basit Zafar of the New York Federal Reserve. “For instance, a loosening of down payment requirements will have little effect on the willingness to purchase for a new home of current owners with substantial equity, or of renters with substantial liquid savings. The results also imply that measures such as a loan-to-value (LTV) cap may predominantly affect the lower end of the housing market, and that the effect on house prices will depend on the state of the economy and other asset markets.”

Source: Real Estate Economy Watch

28
AUG
2015

Stocks Make Rate Decision Harder

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The Correction Adds Another Variable

Last week we spoke about the factors the Federal Reserve Board must balance before making a decision about rates. This week we can add one more factor, a stock market correction. This year the Dow peaked at 18,286 in May. When we wrote our column regarding the fact that the markets were due for a correction on July 14, we were still around the 18,000 level. On August 25, the Dow closed at 15,666. That is a drop of well over ten percent, the standard of what is considered a correction.

What is causing the “adjustment”? There are plenty of possible factors, including the more severe drops in international markets, especially China. Other possible factors would be the devaluation of overseas currencies or the specter of coming rate increases. Or it could be, as we mentioned in the July 14 article, that we were just due for a correction. Markets can’t move straight up forever and this run without a correction has been way longer than average.

We also don’t know that the stock market will not bounce right back, which it started to in the middle of last week. But if it doesn’t, we expect a nervous stock market also to weigh on the Fed when they meet in a few weeks and consider a rate hike. The markets do not like uncertainty and there is plenty of uncertainty out there. In the meantime, the stock market’s correction has added the benefit of helping keep rates low for a while longer, giving more time for Americans to enjoy this added benefit. But don’t get too comfortable, because this week’s jobs report is about to add another factor into the mix.

The Market Update

Rates on home loans were lower in the past week. Freddie Mac announced that for the week ending August 27, 30-year fixed rates eased to 3.84% from 3.93% the week before. The average for 15-year loans decreased to 3.06%. Adjustables were mixed, with the average for one-year adjustables unchanged at 2.62% and five-year adjustables falling to 2.90%.

A year ago, 30-year fixed rates were at 4.10%, close, but still higher than today’s levels. Attributed to Sean Becketti, chief economist, Freddie Mac — “Events in China generated eye-catching volatility in equity markets worldwide over the past week. Interest rates also rocked up and down — although to a lesser extent than equities — as investors alternated between flights to quality and bargain hunting among beaten-down stocks. Amidst all this confusion, the 30-year fixed rate dropped to the lowest mark since May and the fifth consecutive week with a rate below 4 percent.

Given the recent volatility, rates could change up or down significantly by the time this report is released. There are indications though that the unsettled state of global markets will make the Fed think twice before taking any action on short-term interest rates in September. If that’s the case, the 30-year fixed rate may remain subdued in the short-to-medium term, providing support for continued strength in the housing sector. Just this week, new home sales were reported to be up 26 percent year over year.”

Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

23
AUG
2015

Kissing Up For A Home

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Flattery Will Get You…

Flattery is a tried-and-true negotiating strategy, but homebuyers in hot markets are making a bizarre art form out of kissing up. In hot markets, it’s common for homebuyers to include a personal appeal along with their offer paperwork and financing details. Usually that means a letter, to introduce the seller to the buyer’s family and wax on about what the buyer loves about the house.

But buyers are stepping up their games: Recent personal entreaties have included YouTube videos and baked goods, says Andrew Vallejo, a Redfin agent. “After they toured the property, they left a note for the seller on the kitchen counter about how much they loved the house,” he says of one recent couple. “The next day they came back and hand-delivered cookies to the seller and to five or six of the seller’s neighbors.”

Cookies might be new, but the offer letter is an old staple of hot markets. There’s plenty of anecdotal evidence to indicate that the strategy works, though only in certain regions. The Internet, meanwhile, is awash with advice for prospective homebuyers. So there’s a good chance that a house-hunter attempting to sweet-talk will be going up against another one with the same strategy, which usually involves a variation on a common theme.

The first step is flattery: “I love those drapes! I won’t change a thing!” The second step is more flattery, by way of aspiration: “Your lovely home is key to the life I want for my family.” These can be powerful sentiments but probably less compelling if the seller is receiving several letters that all say the same thing. Redfin numbers show that during the first six months of 2015, letter-writers were 14 percent more likely to have an offer accepted than would-be buyers who didn’t send a note.
Source: Bloomberg News

23
AUG
2015

The Dollar, Oil Prices and Rates & Weekly Market Update

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Conflicting Factors

For months the markets have been totally focused upon how many jobs are added each month and how this might bring us closer to increases in rates. It is obvious that every month of more than 200,000 jobs added gets us closer and closer. But employment is not the only variable affecting the Federal Reserve Board’s thinking. This month when China devalued their currency in a move they said would let market forces set the value, one of these variables was front and center. This variable is the value of the U.S. dollar. Why do we care about the value of the dollar?

In the past year, the value of the dollar has gotten considerably stronger than other foreign currencies. This is actually good news because our economy seems to be getting stronger while others languish. To a consumer a stronger dollar is good because it lowers the cost of goods bought overseas and even makes vacations cheaper. It is bad for U.S. companies that do business overseas because our exports become more expensive. So a stronger dollar is a double-edged sword for our economy and thus the Federal Reserve Board.

Overall, a strong dollar is good because it lowers the risk of inflation. And inflation is exactly what the Fed is looking to protect us from when they raise rates. With oil and gas prices going down and the dollar getting stronger, the risk of inflation is going down. Plus, the risk to our economy is rising and the recent drop in our stock market certainly reflects worries concerning this risk. The question is-will these factors convince the Fed to wait longer before they raise rates? At least for now, we have the best of all worlds — a recovering economy, low rates, low gas prices and cheaper vacations to Europe!

Market Update

Rates on home loans were stable in the past week, but trended down later in the week in response to the release of the minutes of the last meeting of the Fed. Freddie Mac announced that for the week ending August 20, 30-year fixed rates eased to 3.93% from 3.94% the week before. The average for 15-year loans decreased to 3.15%. Adjustables were also stable, with the average for one-year adjustables unchanged at 2.62% and five-year adjustables rising slightly to 2.94%.

A year ago, 30-year fixed rates were at 4.10%, close, but still higher than today’s levels. Attributed to Sean Becketti, chief economist, Freddie Mac — “There was little movement in the financial markets this week as the 30-year fixed rate remained steady, dropping only 1 basis point to 3.93 percent. Overall inflation grew an underwhelming 0.2 percent year-over-year in July, but core inflation remains steady at 1.8 percent keeping chances alive for a potential rate hike in September.

Housing markets have responded positively to low rates — the 30-year fixed rate has been below four percent for five consecutive weeks. One-unit housing starts in July 2015 jumped to 782,000 units, up 12.8 percent from June and up 19 percent from last year. Overall, the housing market remains on track for the best year since 2007.”

Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

19
AUG
2015

Never Ask What Is Your Rate

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Sounds like the most natural thing in the world. You need a home loan. Perhaps you are purchasing a home. Or perhaps you are refinancing your present mortgage. So you are shopping around. And shopping is important. However, 99% of the home loan “shoppers” start with this question, “what is your rate?”

After all, it makes sense that if you need a loan, obtaining the lowest rate will give you the best deal. Yet, we advise vehemently against starting with this question. Why? Well, let us give you some very important reasons which will help make your shopping experience more fruitful.

First, You are not likely to get an accurate answer to your question. We are not saying that the lender you speak with will be untruthful. However, the answer to the question is much more complex than you would imagine. There are several variables that will affect the rate on a mortgage and some of those variables are not likely to be known by the lender you are speaking to–not without further research.

Therefore, if you do not spend major time with that lender as opposed to “just shopping around,” the lender is likely to give you a very favorable rate quote that is not likely to be accurate. If the quote is not going to be accurate, why not quote the lowest rate possible?

What are these variables? Here are just a few:

  • Your credit score. The lower the score, the higher the rate;
  • The amount of your down-payment or equity in the home on a refinance;
  • What type of property is being financed;
  • The stability of your income;
  • Is the seller paying for part of the closing costs;
  • How large a cash reserve is available after the transaction is consummated;
  • Will the property be occupied as your primary residence;
  • How many debts do you have;
  • Is there a previous foreclosure, bankruptcy or other major credit issue.

Second. There are many other factors which are as important as the rate. For example, what fees are charged by that lender? The higher the fees, the higher the cost of the mortgage. On the other hand, some fees can lower the payment on a mortgage and be more advantageous for those who are going to use that mortgage for a longer period of time. So we are not saying that fees are necessarily a negative factor, but they must be considered in light of the rate quote.

Another consideration is the variety of programs that may be available from that lender. We understand that home buyers are likely to want a lower rate so that they have a lower payment. Yet, many homeowners are looking to become debt free more quickly, especially in uncertain economic times. A mortgage with a 20-year term may be more advantageous if your goal is to build equity. Rates for 15-year and 20-year mortgages are likely to differ from the rates on 30-year mortgages, making shopping more complex.

Finally, it is important to know who you are dealing with when shopping for home financing. It is important to know not only the mortgage company, but also the qualifications of the loan officer on the other side of the telephone line. You may be dealing with a major bank that you have dealt with many times before, yet the person handling your loan request could have little or no experience. Conversely, you may have not heard of the mortgage company you are dealing with, but the loan officer has decades of experience.

Why is experience, training and skill important? If a loan officer can’t put your loan request together in the right way, it is more likely that something could happen to create stress in the process, change your rate quote or even cause the loan not to go through altogether. This is why a personal referral can be the best way to find a mortgage company.

In light of this information, perhaps the questions you should ask should be..

“Do you have any references from satisfied customers?”

“What do you need me to do in order to obtain an accurate rate quote from your company?”

“What programs does your company have that might help me achieve my long-term financial goals?”

A rate quote may make you feel good, but it would be better if you had the right information to help you achieve your goals with regard to this very important transaction.

19
AUG
2015

Mortgages and the Self-Employed

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You are self-employed and are looking to purchase a home or refinance your mortgage. You have heard horror stories regarding reams of paperwork and underwriters who wanted two pints of blood in order to approve a loan application. As a matter of fact, you have held off purchasing a home for years because you thought verifying your income may be difficult or impossible.

In this article we will investigate one of the more complex areas of real estate finance. Hopefully we will help dispel some myths and make the process easier for everyone.

Who is self-employed (SE)? For underwriting purposes, someone is considered SE if they own 25% or more of the entity which provides their income. For example, if someone is a sole proprietor (such as a real estate agent)–they are SE. If someone owns at least 25% of a corporation (such as a restaurant) or partnership (such as a law firm), they are SE.

Why is self-employment important? SE is important from an underwriting standpoint because the income derived from SE varies (i.e. variable income). It also is more difficult to calculate than salaried income. This gives rise to two important underwriting concepts–

1. Two year average. The income of a SE applicant is derived by taking a minimum two-year average. For example, if one has earned $50,000 in 2010 and $70,000 in 2011–the average annual income used by an underwriter would be $60,000. Many loan programs will not consider applicants who have been SE less than two years.

2. Net, not gross income. The income used to qualify an applicant is the net income derived from the business. If one owns a restaurant which grosses $2 million annually, this is not relevant because the net of the business may be $30,000 annually. Generally, salary derived from the business can be used (it is still averaged) as long as the salary is supported by the cash flow of the business. In the case of a sole-proprietorship, it is the “net” of the Schedule C which is important.

But what about all those “phantom” write-offs? If you are telling the IRS that it is a business expense, then it is a business expense–though some “non-cash” items such as depreciation may be added to the income.

What should I bring to application? In addition to the “normal” documents, bring two years complete and signed federal tax returns and a profit and loss current through the previous quarter, unless you are applying in the 1st quarter of the year in which case the returns will suffice. If there is a corporation or partnership involved, bring these returns as well.

What about no-income programs? It is true that many who are SE have heard of programs that require no documentation of income. However, these programs are few and far between in the wake of the financial crisis and recession. If you find such a program, it is likely to require a much larger down payment and/or significantly higher rates and fees. You are also required by law to be accurate with regard to the question on the application which asks for your income, regardless of the documentation method.

19
AUG
2015

Lower My Debt Payments Now

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In the past few years there has been a strain on the budget of the average American. For some, equity in homes has fallen as overall debt payments have been rising. In the meantime, the price of gas, food and medical costs are increasing. It is no wonder that for many Americans credit scores are falling and default rates are going up on all types of financing from mortgages to credit cards.

There is a way out of this dilemma for the average American. The solution will require prudent fiscal management and planning, things that many of us are not used to implementing. The first step towards fiscal sanity and achieving the American dream of a comfortable retirement is to lower or eliminate all debt payments.

Lowering or eliminating your debt payments can also be a daunting task when you are drowning in debt. Your loans dictate that you will be paying for 30 years or more and that may as well be forever. You may be straining to make your minimum payments; but, if you adhere to certain financial principals, you can turn what seems an insurmountable task into one that will pave your way to success. What are these principals?

First, you must start now. A dollar of debt paid down today is worth many dollars of debt paid down ten years from now. It is the same concept as saving money. Thirty years from now, a dollar saved today will be worth many times more than a dollar saved 10 years from now. This concept does not mean that you have to put thousands of dollars toward your debts in the first month. Even small payments today will save you thousands later on.

Second, understand that all debt is not equal. What are the differences in debt? For one, mortgage debt is tax deductible and consumer debt is not. This does not mean that you should obtain as much mortgage debt as possible because it is free. If you borrow $1.00 and the government gives you back $0.25, you still owe $0.75. What it does mean is that if you have a significant amount of consumer debt and a significant amount of mortgage debt, it makes sense to concentrate on consumer debt elimination first.

You also want to concentrate on consumer debt elimination because consumer debt is typically easier to attack than mortgage debt and gains are easier to achieve. This is because consumer debt is paid out over a shorter period than mortgage debt.

Take a look at the following example:
$200,000 mortgage/$1,500 payment
$ 10,000 loan/$ 500 payment

In this situation you can achieve one-third of the reduction in payment of the mortgage loan (500 vs. 1,500) by paying off one-twentieth of the size of the loan (10,000 vs. 200,000). While paying off a $10,000 loan is not easy, it is much easier than paying off a $200,000 loan! When you add the effect of taxes, the benefits are multiplied. If you do have equity in your home you can use that equity to pay off consumer debts and this may put you in a position to eliminate mortgage debt in the future.

A careful analysis of your debts will show you the most efficient way to pay them off. Even consumer debts can be paid down in a way that will have you debt-free in a fraction of the time.

For example, if you have the following debts:

Type

Balance

Payments

Months Left

Car

$30,000

$700/mo

60

Card

$8,000

$200/mo

48

Loan

$4,000

$200/mo

20

If you pay the smallest loan off first, you can then apply the savings to the credit card. When the credit card is also paid off in approximately 30 months, you can then use the savings from both payoffs ($400 per month) to apply to the car. By the time you are finished, you can then apply the $1,100 per month savings to a mortgage, cutting down the term drastically. There are programs designed to automate this process so that you can achieve maximum efficiency.

If you would like more information about these alternatives, contact your loan officer or real estate agent. Of course, you also have to make wise decisions in the future regarding taking on more debt. The key towards retiring comfortably is reducing your debt and/or becoming debt free and not letting debt overload happen again!

Interested in purchasing a home with the minimum cash required? Contact us for more details regarding these alternatives.

16
AUG
2015

Lower Gas Prices May Help Sellers

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Gas Prices May Boost Sales

Falling gas prices can shorten the time it takes a house to sell and can increase the selling price, according to results from an ongoing longitudinal study by Florida Atlantic University and Longwood University faculty.

Using data from central Virginia and spanning over 10 years of gas price changes and housing transactions, researchers found statistical evidence to indicate that for every $1 per gallon decrease in gasoline price, average time to sell a property decreases by 25 days. In addition, for every $1 per gallon decrease in gasoline prices the average selling price rises by 2.4 percent, which amounts to roughly $4,000 per sold property in the study. The good news from the seller’s perspective does not end there. A $1 decrease is also shown to increase a seller’s chances of selling and closing by roughly 20 percent.

“In the event of a forced sale, these odds are very welcome news for a seller who might already own a second property and must close,” explained Ken Johnson, Ph.D., a real estate economist and an associate dean of graduate programs and professor in FAU’s College of Business.

Based on these findings, the immediate future looks bright for home sellers. Gas prices are down nearly $1 from where they were a year ago, and prices this summer are expected to be the lowest they’ve been since 2009 “due to stabilizing crude oil costs and as refineries complete seasonal maintenance,” according to the American Automobile Association (AAA).

Source: PR Newswire

16
AUG
2015

September Rate Increase?

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Fed Looking At September?

Just as we were enjoying another month of mixed economic news and the markets were “hoping” for a little reprieve from the Federal Reserve Board, one of the Fed Governors shocked the markets with this statement reported by the Wall Street Journal — “It will take a significant deterioration in the economic picture for me to be disinclined to move ahead,” Federal Reserve Bank of Atlanta President Dennis Lockhart said in an interview with the Journal. The Wall Street Journal article went on to report that Lockhart’s comments followed those of James Bullard, President of the St. Louis Fed — “we are in good shape” for a rate increase in September.

These comments by Fed officials shocked the markets somewhat because long-term rates had been falling in late July and early August. Upon release, rates reversed course. The good news is that more bad economic news overseas helped mitigate the increases rather quickly, but it just tells us how jumpy the markets are with regard to the threat of the Fed raising rates in September. As we have continuously pointed out, the greatest effect of the Fed raising rates is likely to be on shorter-term rates. These short-term rates also have risen in anticipation of the Fed making a move.

Meanwhile, there is plenty of time for intervening variables to change the equation. The recent devaluation of China’s currency may put pressure on the Fed because the strong U.S. Dollar continues to hurt our exports. There is one more jobs report to be released before the Fed meets in September, as well as a revision of the measure of economic growth for the second quarter. Many are expecting second quarter growth to be revised upwards. While we progress toward September, we expect the markets to hang on every word uttered by a Fed official. This could cause increased volatility in all markets.

Market Update

Rates on home loans were slightly higher in the past week, but they continued to be subject to sharp variations day-to-day. Freddie Mac announced that for the week ending August 13, 30-year fixed rates rose to 3.94% from 3.91%. The average for 15-year loans increased to 3.17%. Adjustables were mixed, with the average for one-year adjustables moving up to 2.62% and five-year adjustables falling to 2.93%.

A year ago, 30-year fixed rates were at 4.12%, close, but still higher than today’s levels. Attributed to Sean Becketti, chief economist, Freddie Mac — “The jobs report for July showed that the economy added 215,000 jobs, in line with expectations. Wage growth remains modest at 2.1 percent compared to the same time last year, and another solid if not stellar employment report leaves a potential Fed rate hike on the table for September.

However, this year’s theme of overseas economic turbulence continues with the focus shifting east to China. Over the past few days the Chinese Yuan has fallen sharply. In the midst of these mixed data rates inched up, increasing 3 basis points to 3.94 percent. Headed into the fall, we’ll likely see continued interest rate tension, with dollar appreciation weighing against possible Fed rate hikes leaving the rate outlook clouded.”

Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

12
AUG
2015

McLean Mortgage Corporation Welcomes July 2015 New Hires

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Join us in giving a warm welcome to our newest team members here at McLean Mortgage Corporation!

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Billy Saylor joins us in our Corporate office in Fairfax, VA as a Loan Officer.

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John Landry joins us in our Fair Lakes office in Fairfax, VA as a Loan Officer.

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Tony Scardelletti joins our Bethesda branch in Bethesda, MD as a Loan Officer.

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Jason Moses joins our Washington, DC office as a Loan Officer.

Rosemary Ellis joins our Washington, DC office as a Loan Officer.

Julia Scott joins our Greensboro, NC office as a Loan Officer Assistant.

Yessenia Agosto joins at Corporate in Fairfax, VA office as a Quality Assurance Specialist.

Leah Pipes joins in our Arlington branch in Fairfax, VA office as a Processor.

Audra Lavik joins at Corporate in Fairfax, VA office as a Processor.

Damon Lavik joins at Corporate in Fairfax, VA office as a Junior Underwriter.

We look forward to their contributions to our continued success!

 

McLean Mortgage Corporation is hiring.
If you are interested in joining our team, CLICK HERE for more information about careers available with McLean Mortgage Corporation.

09
AUG
2015

Home Price Increase Could Push Limits Up

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Could Conforming Limits Rise?

Jumbo mortgages for single-family residences exceed $417,000 in most parts of the country and $625,500 in high-price markets. But with home prices climbing back to prerecession peaks in some markets, baseline jumbo thresholds may be raised for the first time in a decade. The agency that sets these limits, the Federal Housing Finance Agency (FHFA), in May requested public input on its house price index. This index includes sale-price information on government-backed mortgages as well as real-estate sales compiled by research firm CoreLogic from hundreds of U.S. counties. Distressed sales are included but not appraisal values from refinances.

The deadline for input was July 27, and the FHFA will decide this fall whether to change the baseline limit starting Jan. 1. In the early 1970s, the baseline limit for conventional loans was just $33,000. That was the maximum amount a homeowner could borrow to qualify for a “conforming” loan —one financed through Fannie Mae or Freddie Mac guidelines. The $33,000 limit rose steadily over the years to keep up with home prices. The Housing and Economic Recovery Act of 2008 established the current formula, which is based on median home-sale prices reported in a monthly FHFA survey.

However, there is some wiggle room in high-cost areas, where conforming loans can exceed the baseline by up to 150%. To keep up with rapidly rising home prices, FHFA in January raised its conforming-loan cap in 46 counties nationwide—the largest number since 2012. Typically, it’s easier to qualify for a conforming loan than a jumbo loan. Fannie Mae and Freddie Mac allow down payments as low as 3% and may require fewer cash reserves.

Source: The Wall Street Journal

09
AUG
2015

Enough Jobs To Raise Rates?

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The Fed and the Jobs Report

The Federal Reserve’s Open Market Committee met at the end of July. While they did not give a date to raise interest rates, they sounded optimistic that things were improving — “The labor market continued to improve, with solid job gains and declining unemployment,” the Fed statement said. And they are getting the markets ready with statements such as these: “The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market.”

Thus the importance of last Friday’s employment data. There are only two reporting months for jobs between now and the next meeting of the Fed. Friday was one of these dates. What did it show? A solid gain of 215,000 jobs and a steady unemployment rate of 5.3%. Meanwhile, the labor participation rate remains stuck at a 62.6%, the lowest since the 1970′s, and wages grew 0.2% last month, consistent with the growth of the past year.

This data definitely tells us that, while we are creating jobs, we still have a long way to go with regard to wage growth and job market participation. The report brings the Fed closer to raising rates, but does not make an increase in rates in September a certainty. We must emphasize again that the Fed raising short-term interest rates does not necessarily mean that rates will skyrocket tomorrow. On the other hand, it will tell us that our era of record low rates is likely over and those who are looking for a better time to make a major purchase such as a car or a home had better get moving.

The Market Update

Rates on home loans were lower in the past week, but they were subject to sharp variations day-to-day in a week of important economic releases leading up to the jobs report. Freddie Mac announced that for the week ending August 6, 30-year fixed rates fell to 3.91% from 3.98%. The average for 15-year loans decreased to 3.13%. Adjustables were mixed, with the average for one-year adjustables moving up to 2.54% and five-year adjustables unchanged at 2.95%.

A year ago, 30-year fixed rates were at 4.14%, close, but still higher than today’s levels. Attributed to Sean Becketti, chief economist, Freddie Mac — “All eyes are on the upcoming July employment report, as the Fed has made it clear developments in the labor market will affect the timing of any potential rate hike. Early signals indicated that Friday’s employment report would not look so good. The employment cost index rose 0.2 percent in the second quarter, the lowest quarterly increase in its 33-year history and ADP’s Private Employment Report missed expectations for private jobs in July.

Uncertainty about the economy helped drive down Treasury yields early in the week, and thus 30-year fixed rates fell 7 basis points to 3.91 percent, the lowest level since June 4th.”

Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

05
AUG
2015

Existing-Home Sales Rise in June as Home Prices Surpass July 2006 Peak

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The rise in buyer demand, combined with a limited number of homes for sale, pushed the national median sales price above its 2006 peak and to a record high, according to the National Association of Realtors®. The median existing-home price for all housing types reached $236,400 in June – 6.5 percent above year ago levels and surpassing the peak median sales price set in July 2006 at $230,400.

Along with a boost in home prices last month, existing-home sales also reached the highest pace in more than eight years. Lawrence Yun, NAR’s chief economist, calls this year’s spring buying season the strongest since the downturn.”Buyers have come back in force, leading to the strongest past two months in sales since early 2007,” Yun says. “This wave of demand is being fueled by a year-plus of steady job growth and an improving economy that’s giving more households the financial wherewithal and incentive to buy.” Yun says that June’s sales also likely got a boost by the spring’s initial phase of rising interest rates. That “usually prods some prospective buyers to buy now rather than wait until later when borrowing costs could be higher,” Yun says.

Total sales of completed single-family, townhome, condo, and co-op transactions ticked up 3.2 percent last month to a seasonally adjusted annual rate of 5.49 million and are nearly 10 percent above year ago levels. Sales also are the highest pace since February 2007.

Source: National Association of Realtors®

31
JUL
2015

New Study Shows Millions Could Benefit

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Millions Could Benefit

About 6.5 million borrowers could likely qualify for and benefit from a traditional refinancing or the HARP program, according to a new report released from the Black Knight Financial Services Inc. About 3 million borrowers alone could save at least $200 a month via traditional refinances. About 500,000 borrowers stand to save $500 or more per month, the report shows.

“By looking at current interest rates on existing 30-year home loans and applying broad-based underwriting criteria, we found that approximately 6.1 million borrowers make good candidates for traditional refinancing,” says Ben Graboske, senior vice president of Black Knight’s data and analytics. “An additional 450,000 meet HARP-eligibility guidelines. All told, in the aggregate we’re looking at about $1.5 billion that American home owners could be saving every month through a traditional refinance. Add in the 450,000 HARP-eligible borrowers and that figure swells to about $1.66 billion in savings every month — almost $20 billion a year.”

But refinancing is very rate-sensitive. If rates rise just half a percentage point, 2.6 million borrowers fall out of that population where refinancing would be beneficial, Graboske notes.

Source: Black Knight Financial Services

Contact us if you think you would benefit from a refinance. We can help you find out whether a refinance would be cost-effective for you and whether you qualify for the HARP program.

31
JUL
2015

Important Week For The Markets

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A Lot Has Happened

This week is employment data week, which is a very important week for the markets. Since last month’s report a lot has happened. A lot of the focus has been on the international side with the default crisis in Greece, nuclear talks with Iran and the stock market fallback in China. These international events are very important, especially in light of the fact that the markets are anticipating an increase in rates from the Federal Reserve Board, possibly as soon as next month.

If the jobs report is strong, the speculation regarding a rate increase will grow. However, all these intervening variables are being watched by the Fed. We also had an avalanche of earnings reports last month and if the stock market is under pressure because of lower earnings, this is another economic issue the Fed needs to factor into a decision as higher rates can also make stocks less attractive. The preliminary number for economic growth in the second quarter came in at 2.3%, which is a solid but not spectacular number that will be factored into the Fed’s decision. This number will be revised before the Fed meets again in September.

Real estate seems to be the one area of the economy that appears to be weathering the international news and upward pressure on rates. Last month we saw another month of rising existing home sales, though new home sales were weaker. Even these numbers can be affected by rates as consumers rush to beat future rate increases. For now, the real estate sector is contributing positively to the economy which is why the Fed is watching the real estate markets very closely as well.

Market Update

Rates on home loans continued to decrease last week, with average 30-year rates moving below 4.00%. Freddie Mac announced that for the week ending July 30, 30-year fixed rates fell to 3.98% from 4.04% the previous week. The average for 15-year loans decreased to 3.17%. Adjustables were also lower, with the average for one-year adjustables moving to 2.52% and five-year adjustables falling to 2.95%.

A year ago, 30-year fixed rates were at 4.12%, close, but still higher than today’s levels. Attributed to Sean Becketti, chief economist, Freddie Mac — “Monday’s 8 percent decline in Chinese stock prices triggered similar — though smaller — sell-offs in global equity markets. The associated flight to quality drove U.S. Treasury yields down nearly 5 basis points. Accordingly, 30-year fixed-rate loans fell. The rate has bounced between 3.98 and 4.09 percent since the first full week of June, falling a bit when events overseas take a turn for the worse and rising when the clouds appear ready to part. With no clear direction coming from the Fed last week, we expect more of the same in coming weeks. Recent housing data exhibited the same good news/bad news pattern as overseas developments.

Coming into this week, existing home sales for June and the latest FHFA house price measures both suggested a stronger tone in the housing market. However this week brought weaker-than-expected news. New homes sales and pending home sales both weakened and the Case-Shiller house price indices, while positive, fell below the lower end of expectations.”

Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

30
JUL
2015

Why Home Sales are Finally Surging

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Home sales are on pace for their best year since 2007. First-time buyers are streaming back into the market. Prices are skyrocketing, aided by a stronger job market and tantalizingly low mortgage rates that are creating pressure for buyers to act fast. The resurgence is a sign that the U.S. economy — after muddling through a sluggish, six-year recovery — has re-discovered another source of growth.

Buyers are more confident about their own prospects. But many also appear ready to close sales quickly because of concerns of being potentially priced out of the market by rising mortgage rates and home values. “What we’ve seen is that demand is off the charts in 2015 — and that is really boosting sales,” said Nela Richardson, chief economist at the brokerage Redfin. “Last year, buyers were dipping their toes in their water. Now, they’re diving in.” The National Association of Realtors said that sales of existing homes climbed 3.2 percent in June to a seasonally adjusted annual rate of 5.9 million. June was the fourth consecutive month of the sales rate exceeding 5 million homes.

Median home prices climbed 6.5 percent over the past 12 months to $236,400, higher than the July 2006 peak. Employers have hired 3.1 million additional workers in the past year as the unemployment rate has slid to 5.5 percent from 6.3 percent. This influx of additional paychecks has led more Americans to feel financially secure after weathering the most severe downturn — sparked by a housing bust — since the 1930s. “Many buyers appear eager to finalize their purchases before rates and prices increase any further,” said Jonathan Smoke, chief economist at Realtor.com.

Source: The Associated Press

24
JUL
2015

Falling Gas Prices Expected

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Lower Gas Prices on the Way?

Even before the Iran deal was announced, market analysts were predicting that lower gas prices were on the horizon. Certainly, the optimism over the Iran deal has increased this speculation. In reality, the deal might help more Iranian oil get to western markets, yet we know that this agreement still has to go through the “political process.” That does not stop optimism, and CNN/Money recently published a story saying that we could see gas prices at $2.00 per gallon, especially after the summer driving season comes to an end.

Again, even without the deal being implemented, analysts were bullish on lower gas prices as world production was rising. The next question is–will that hurt or help our economy? On the plus side, lower gas prices should bolster consumer spending, while lowering the threat of inflation. This could help moderate future rate increases. On the negative side, our energy sector would be negatively affected and areas dependent upon those sectors would be hurting as well.

The overall effect would definitely be positive. We should remember that the energy sector affects all industries. There has even been a recent study that has indicated that falling gas prices can shorten the time it takes a house to sell and can increase the selling price. The study was published by Florida Atlantic University and Longwood University. We certainly understand that lower gas prices can affect demographics with more moving closer to cities when gas prices are higher. Will gas prices fall and by how much? That remains to be seen but the possibility is intriguing.

The Market Update

Rates on home loans fell back last week to the level of two weeks ago. Freddie Mac announced that for the week ending July 23, 30-year fixed rates fell to 4.04% from 4.09% the previous week. The average for 15-year loans decreased to 3.21%. Adjustables were higher, with the average for one-year adjustables moving to 2.54% and five-year adjustables rising to 2.97%.

A year ago, 30-year fixed rates were at 4.13%, close, but still higher than today’s levels. Attributed to Sean Becketti, Chief Economist, Freddie Mac — “U.S. Treasury yields dropped following announcements that many blue chip companies’ earnings failed to meet expectations. This drove the 30-year fixed rate loan down 5 basis points to 4.04 percent this week. Housing continues to be the bright spot in the economic recovery.

Existing home sales beat market expectations coming in at a seasonally adjusted annual rate of 5.49 million homes. This is up 9.6 percent from a year ago and the fastest pace since 2007. Also, housing starts jumped 9.8 percent responding to strong demand in the multifamily market.”

Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

24
JUL
2015

New Homes Offer Cost Savings

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New homes – those that are four years old or less – can be cheaper to maintain than older homes, according to data from the American Housing Survey. Twenty-six percent of home owners spend $100 or more a month on various routine maintenance expenses for their home. However, the study shows that 73 percent of new home owners spend less than $25 a month on routine maintenance costs.

Home owners of new homes tend to spend less on energy costs too. Home owners on average spend 81 cents per square foot per year on electricity. In comparison, home owners of new homes tend to spend 68 cents per square foot per year. Utilities tend to be less expensive too. All home owners spend, on average, 28 cents per square foot per year on water bills. But on new homes, home owners tend to average 22 cents. The studies suggest that owners of new homes also tend to pay less on insurance too: The median cost of all home owners for property insurance is 39 cents per square foot compared to 31 cents per square foot for new homes.

“These data highlight that a new home offers savings over the life of ownership due to reduced operating costs,” according to the National Association of Home Builders’ Eye on Housing blog. “These reduced expenditures represent one of the many reasons that the current system of appraisals needs updating to reflect the flow of benefits that comes from features in a new home.”

Source: National Association of Home Builders

24
JUL
2015

The Perfect Mortgage Application

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The media has it all wrong – securing mortgage approval and satisfying credit underwriting guidelines are not the difficulties plaguing mortgage consumers. It’s in meeting the rigorous documentation requirements that most people fall flat. The good news is, the fix is simple. Just scan, photocopy, fax, and deliver every aspect of your financial life. Then, shortly before closing, check everything again.

Mortgage consumers who enter the mortgage approval process ready to battle their chosen mortgage lender will come out with a nightmare story to tell. As the process, requirements, and guidelines are the same for everybody, your mindset is the game-changer. Accepting the redundant documentation necessary for lender approval will make everyone’s life easier.

When I was a kid, my father occasionally issued directives that I naturally thought were superfluous, and when asked why I needed to do whatever it was he wanted me to do, his answer was often: Because I said so.” This never seemed to address my query but always left me without a retort, and I would usually comply. This is exactly what consumers should do during the mortgage approval process. When your lender requests what seems to be over-documentation and you wonder why you need it, accept the simple edict – “because I said so.” You will find the mortgage approval process much less frustrating.

So, what’s the perfect loan? Well it’s one that (a) pays back the lender and (b) pays back the lender on time. Underwriting the perfect loan is not the goal that mortgage lenders aspire to today. The real goal is the perfect loan file.

Mortgage lenders have suffered staggering losses and gone out of business because of the dreaded loan repurchase. As mortgage delinquencies increased, FannieMae and FreddieMac began to audit mortgage loans they had purchased and discovered substandard and fraudulent underwriting practices that violated representations and warranties made, stating these were high quality loans. Fannie and Freddie began forcing the originating lenders of these “bad” loans to buy them back. So a small correspondent mortgage lender is forced to buy back a single mortgage loan in the amount of $250,000. This becomes a $250,000 loss to a small mortgage business for a single loan, because it will never be repaid.

It doesn’t take many of these bad loan buybacks to close the doors on many small mortgage operations. The lending houses suffered billions of dollars of losses repurchasing loans from Fannie and Freddie, and began to do the same thing for loans they had purchased from smaller originators.

The small and medium sized mortgage originators that survived created underwriting guidelines and procedures to eliminate the threat of future loan repurchase losses. The answer? The perfect loan file.

It’s no longer necessary to have excellent credit, a big down payment and stable employment with income sufficient to support your debt service to guarantee your loan approval. However, you must have a borrower profile that meets the credit underwriting guidelines for the loan you are requesting. And, more importantly, you have to be able to hard-copy-guideline-document your profile.

Every nook and cranny of your financial life has to be corroborated, double- and triple-checked, and reviewed again before closing. This way, if the originating lender has created a loan file that is exactly consistent with published underwriting guidelines and has documented while adhering to those guidelines, the chances are that your loan will not be subject to repurchase.

Borrowers also need to prepare for processing and underwriting. Processors and underwriters are the people trained and charged with gathering (processors), all of your required-for-approval financial documents, and then approving (underwriters), your loan. You can assume these people are well trained and very experienced, as they are tasked with assembling and approving a high-quality-these-people-will-pay-us-back loan file. But just how do they go about that?

The process begins with the filter – the loan originator (a.k.a loan officer, mortgage consultant, mortgage adviser, etc.) – tasked to match the qualifications of a particular mortgage deal to the appropriate underwriting guidelines. It is the filter’s job to determine if a loan scenario is approvable and to gather the documentation to support that determination. It is here, at the beginning of the approval process, where the deal is made or broken. The rest of the approval process is just papering the file.

The filter determines whether the information provided by the borrower can be validated and documented. This is simple, since most mortgages are approved by automated underwriting engines such as Desktop Underwriter, and the automated approval generates a list of the documents needed to paper the loan file. An underwriter can, at this stage, request additional supporting documentation evidence at their discretion, as not all circumstances neatly fit into the prescribed underwriting box. If the filter creates a loan file with accurate information, then secures the documentation resulting from the automated underwriting findings, the loan will close uneventfully,

So, let’s begin with the pre-approval call. Mortgage pre-approval is typically accomplished with a telephone interview. A prospective borrower calls a mortgage rep (filter), and the questions begin. There will be lots of questions as this critical phase of the process is akin to the discovery period in a trial – you’ll need to disclose everything. Expect to answer queries on what you do for a living, how long you’ve been employed in your current field, and what your salary is. If there is a co-borrower, they will have to answer the same questions.

Every dollar in checking, savings, investments and retirement accounts, also known as assets to close, as well as gifts from relatives and non-profit grants, has to be accounted for. Essentially everything appearing on a borrower’s asset-radar-screen has to be documented and explained.

If you were previously a homeowner and sold your home in a short sale, or if you own a home now and plan to keep it as an investment or rental property, there are new and specific underwriting guidelines created just for you. In these cases, full disclosure of your credit and home ownership past can potentially eliminate unforeseen mortgage approval woes. For instance, FannieMae has a new underwriting guideline called Buy-and-Bail” for current homeowners’ planning on keeping their existing home as an investment/rental property. Properties not meeting the 30% equity test for “Buy-and-Bail” result in additional asset requirements to purchase a new home. Buyers with a short sale history may have to wait two to three years before they are eligible for mortgage financing again. Full vetting of your previous mortgage life will save you the dreaded we-have-a-problem call from your mortgage lender.

It all comes down to your proof. If the lender asks for a specific document, give them exactly what they are asking for, not what “should be OK,” – because it won’t be. This is where the approval process tends to go off the rails, when the lender asks for specific documentation and the borrower supplies something else. Here, too, is where both sides get frustrated. So if the lender asks for a bank statement and there are 5 pages for that bank statement, send them all 5 pages, and not just the summary. If you send them the summary page and they ask again, don’t complain that the lender keeps asking for the same thing when you never sent it in the first place. This may sound elementary, but the vast majority of mortgage approval process woes stem from scenarios just like this.

The reason the mortgage approval process is now so rigorous is simple. Avoiding defaults and loan buybacks has become the primary goal of mortgage lenders. Higher standards are reducing loan defaults, which should mean fewer foreclosures in the future. Government data shows that less than 2% of loans originated in 2009, that were resold to Freddie Mac and Fannie Mae went into default after 18 months, down from more than 22% default rates for 2007 loans.

So when your lender requests specific documents from you, give it them “just because they said so.”

You can thank my dad for that.

 

Source: Forbes, Mark Greene Contributor

 

22
JUL
2015

The Keys To Qualifying For a Mortgage

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The purchase of a home is the goal of the vast majority of Americans. That is why home ownership is often referred to as “The American Dream of Home Ownership.” Almost two-thirds of Americans have taken advantage of the tax benefits, government programs and the economic benefits of owning to become home owners. With lower home prices in many areas of the country and low mortgage rates, homes have become more affordable than they have been during the previous decade.

One area that keeps many Americans from reaching this goal is the difficulty of qualifying for a mortgage. The financial crisis of 2008 has caused lenders to scrutinize loan applications more tightly. The recently released qualified mortgage standards have also received significant publicity regarding credit standards lenders must follow today. The good news is that potential homeowners can take positive steps to make sure they have a better chance of qualifying for a mortgage.

There are several areas for you to focus upon that can help you get in position to qualify for a mortgage to purchase your first home or even move up if you are already a homeowner…

Your credit score. Today, a low score can be a cause of rejection or add to the cost of owning a home. It is important to start by finding out your score and, if it is low, coming up with a plan of action to raise your score. With the right plan, the good news is that anyone can raise their score. Did you know a low score can cost you hundreds of dollars per month even if you are a renter? If you don’t know your score or don’t know what your score means with regard to obtaining a mortgage, contact us and we will help you find out as well as help you set up a plan of action to raise your score.

There are many reasons for low scores, including late payments, outstanding judgments, tax liens and more. Sometimes the information contained on your report is riddled with inaccuracies and/or information that was reported is in non-compliance with laws meant to protect the consumer.

Your monthly debts. Many can’t purchase because they have too many debts. This problem also exacerbates the process in other ways as too many debts can help to lower your credit score and make paying a mortgage or even rent more difficult. It is important to come up with a plan to lower your debts. Paying down debts is actually a science and undertaking the task without advice can cost you thousands of dollars. Again, we can help determine how your debt load may be affecting your qualification for a mortgage as well as setting up a program to help you get your debts paid down.

This process starts by budgeting and minimizing excess spending. Certainly, if you are thinking about purchasing a home, you should hold off on major expenditures such as purchasing a new car or furniture. Concentrate instead on paying off existing debts.

Cash reserves. Most home purchases require a down payment as well as the payment of closing costs. There are many programs that may help you minimize your need for cash. For example, there are programs for active military and veterans and programs for those with low-to-moderate income.

Regardless of these programs, having cash reserves after you purchase the home is important for qualification standards and it is prudent to have reserves for emergencies at all times whether you are a homeowner or renter. Of course, the first step in building reserves is minimizing your debts. As you can see, all of these factors are related.

Income documentation. Many Americans do not keep good records, especially with regard to the money earned by those who are self-employed or have other sources of income that vary such as tips or commission. Keeping track is very important because mortgage programs today require detailed documentation of income. This means keeping copies of checks, receipts, tax returns and more.

For many who don’t qualify, this process may seem daunting. Yet, if you are truly committed to improving your financial situation, the rewards are well worth it. Contact us for an analysis of your situation and to determine how we can help you change factors affecting your qualification for the home of your dreams.

21
JUL
2015

Agency Finalizes Disclosure Delay

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The Consumer Financial Protection Bureau announced on July 21 a final decision which confirmed the date of October 3 as a delayed effective date of the Integrated Disclosure rule. When the delay was proposed originally, the CFPB indicated that “We made this decision to correct an administrative error that we just discovered in meeting the requirements under federal law, which would have delayed the effective date of the rule by two weeks,” said CFPB Director Richard Cordray. “We further believe that the additional time included in the proposed effective date would better accommodate the interests of the many consumers and providers whose families will be busy with the transition to the new school year at that time,” added Cordray.

The required loan documentation consists of two new forms: the Loan Estimate and the Closing Disclosure to ensure compliance. It was originally set to go into effect on August 1. These new forms consolidate the present forms and are meant to give consumers more time to review the total costs of their home loan. The Loan Estimate is due to consumers three days after they apply for a loan and the Closing Disclosure is due to the consumer three days before closing.

This announcement came after the news last month, when the CFPB announced that it would allow a good-faith enforcement grace period that both the industry and a bipartisan coalition in Congress had asked for. The enforcement grace period will be open-ended, David Stevens, chairman and CEO of the Mortgage Bankers Association, indicated, because Cordray wants to be flexible. “At the very least, it should run through the end of 2015,” Stevens said.

Source: HousingWire (Updated)

17
JUL
2015

Rents Still Rising

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Rents Continue to Soar

Rents have been soaring across the country, even outpacing home values, according to a recent Zillow report. And it’s not just a big city problem. “Places that were more traditionally affordable are growing more quickly,” said Skylar Olsen, senior economist at Zillow. The reason? A shortage of available rentals. “Vacancy rates are at very low levels, which continues to push rents higher,” said Andrew Jakabovics, senior director, Policy Development & Research at Enterprise Community Partners.

There’s a lot of pressure on the rental market: Millennials are renting longer, housing inventory is tight and Baby Boomers are downsizing. There’s also been a shift in people wanting to live in more urban areas, where renting is more common. But there just aren’t enough “For Rent” signs to keep up with the demand. Rental construction slowed in the aftermath of the housing crisis as confidence shrank. “We weren’t building enough so when the economy recovered, vacancy rates got very tight,” said Hans Nordby, a managing director with real estate research firm CoStar Group. “If you don’t build apartments, it pushes rents up.”

Adding more supply will eventually ease some price pressure, she said. “It just takes time to creep down the distribution. People living in the older units now that aren’t as luxurious migrate over to the new luxury units, and that opens up more units.” But it takes about two years for rental buildings to become available in many markets, Nordby said, so the relief won’t be immediate.

Source: CNN/Money

16
JUL
2015

Why Build a Custom Home

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Why Build a Custom Home

When shopping for a home, there are many alternatives to choose from with regard to the location, style and price of your new residence. These choices include purchasing single family homes, town homes and condominiums. The options also include purchasing a resale or a new home and even when choosing a new home there are alternatives such as purchasing in a subdivision from a tract builder or purchasing a custom home which better fits your lifestyle and needs.

What are the advantages of building a custom home?

Choice.
While purchasing new home gives a home buyer more choices as opposed to a resale, a custom home typically gives a home buyer the ultimate array of choices. These choices include the design and layout of the home as well as special features that fit the lifestyle and needs of the prospective home owners. For example, if one is expecting that parents will someday share the home, it can be designed to fit a multi-generational lifestyle. If energy efficiency is important, then the home can be designed to minimize the use of energy.

Location.
Your only choice of locations with a tract builder is within subdivisions which are still being built out. With a custom home, you can purchase a lot in a location which is more convenient to work, your children’s school or closer to friends or relatives. You could choose to live out in the country on a larger lot or closer to shopping and other services.

Type of lot.
With a tract home you have a choice of only the lots that are available within the subdivision, and if you select one with upgraded features, you will pay a premium. When building a custom home, you not only can choose the location of the lot, but also the type of lot — including the size and configuration.

Contractors.
Subdivisions may give you one or just a few choices of builders that offer a limited array of models. With a custom home, you can choose any contractor and work with them to build your dream home.

Of course, custom homes include some of the same advantages as new homes versus resales.
A new home…

  • Allows the owner to choose their own color scheme, appliances, flooring and more.
  • Is more energy efficient than a resale because environmental standards and technological advancements keep evolving.
  • Will have fewer maintenance costs moving forward as opposed to an older home.
  • Will have more standard safety features and may be less costly to insure because of these features.

The advantages of a custom home also extend into the financing arena. With a tract home, the home owner obtains the financing after the home is built. That means the builder is incurring the costs of the lot acquisition, development and construction. These costs are added into the price of the house. With a custom home, the home buyer has the choice to obtain their own construction loan. This can lower the cost basis of the home while typically making fees and interest paid directly by the homeowner tax deductible.*

In short, the advantages of building and financing a custom home are wide ranging. These include the ultimate range of choices, lower maintenance costs, energy efficiency and may even enhance your tax deductions.*

*You are advised to seek the advice of a tax professional to determine if the costs of financing qualify to be deductible in your situation.

14
JUL
2015

McLean Mortgage Corporation Production Rises in Second Quarter Named Top 50 Best Companies To Work For in the Industry

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McLean Mortgage Corporation announced today that the company closed $435 million in mortgage production during the second quarter of this year and achieved an additional national award. This production level was up 20% from the $365 million closed in the second quarter of 2014. It also represented a $44 million increase from the first quarter of this year.

The production for the first half of the year was up 44% year-to-year. Purchase volume for the first half was at 60%. The Mortgage Bankers Association has projected purchase volume would average 50% nationally in the first six months of the year.

The company is also proud to announce that Mortgage Executive Magazine has named McLean Mortgage a “Top 50 Best Company To Work For” for the second year in a row. In releasing the results, Nathan Burch, President of McLean Mortgage Corporation indicated, “We are most proud of our continued ranking as a best company to work for in the industry.”

“We have grown consistently over the past seven years and the fact that our penetration into the purchase market continues to be above average tells us that we are doing the right thing regarding building a high-quality culture that attracts high caliber loan officers with strong ties to the real estate community. As of June 30, 25% of our sales force is on-track to close $30 million in volume this year,” Burch added.

About McLean Mortgage Corporation.

McLean Mortgage Corporation has been named the A Best Company to Work For by Mortgage Executive Magazine and a Top Mortgage Employer by National Mortgage Professional Magazine. In 2014 McLean was also named an Inc 500/5000 company for its growth record during the previous three years, as well as the 6th leading lender in the Washington, DC area by Washington Business Journal. McLean Mortgage Corporation is a privately held full-service mortgage lender based in Fairfax, Virginia with branch offices in Virginia, Maryland, North Carolina and the District of Columbia. McLean Mortgage is dedicated to delivering first-in-class customer service to each client. The company is focused upon continuing their expansion footprint throughout the Mid-Atlantic Region and is interviewing branch managers and loan officers who share our ideals and goals.

Careers Website www.WhyMcLeanMortgage.com

13
JUL
2015

Purchasing Easier Than Consumers Believe

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Lenders Are Making it Easier

Sixty-five percent of recent survey respondents feel home ownership is a dream come true or an accomplishment to be proud of. But when it comes to achieving that dream, many consumers may sit on the sidelines because they’re overestimating what it takes to make it come true. Many consumers have misperceptions about the credit score, down payment, and income requirements needed to qualify for a home loan, according to a survey released by Ipsos Public Affairs of more than 2,000 U.S. adults.

A high percentage of home owners are still unaware of recent efforts by lenders and the government to enhance the availability of credit through lower down payment programs. Two-thirds of consumers surveyed believe they need a very good credit score to purchase a home, with 45 percent believing a “good credit score” is over 780 (many lenders consider scores over 660 to be “good”). Consumers also tend to overemphasize credit scores as a single factor that determines whether they’ll be able to buy a home.

But a credit score is not the sole criteria. Many lenders will consider a loan applicant’s entire financial picture, including income, assets, debt-to-income ratio, credit history, credit scores, and the amount of the loan compared to the value of the property. Also, the survey found that consumers tend to overestimate the down payment funds needed to qualify for a home loan. Thirty-six percent of respondents said they believe a 20 percent down payment is always required, the survey showed. However, down payment options are available as low as 3 percent or 3.5 percent for some loan programs.

Source: BusinessWire Note: Even zero down for VA and Rural Housing!

02
JUL
2015

Buying a Home is Easier Than Many Realize

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Yes You Can

A lot of people are operating under the mistaken impression that getting a home loan has become impossibly strict, and that people with good credit scores are being denied loans. They mistakenly think you have to have 20 percent down, or that you have to have absolutely perfect credit, or that having student loans means you won’t qualify. That’s just not the case.

The fact is that it has definitely gotten easier to qualify for a loan than it was right after the financial meltdown in 2008; standards are now relaxed back to where they were in the 1990s. You can’t get a loan just because you say you’re a nice person who makes a lot of money. But you most definitely do not have to have a 20 percent down payment saved. With FHA financing you only need 3.5 percent. Fannie Mae and Freddie Mac both offer 3 percent down loans but with some requirements, while the VA has zero percent down. When you apply for a loan, you’re going to have to jump through a fair number of required hoops by providing pay stubs, tax returns and bank statements. What can you do as a borrower to make the process smoother? Provide whatever documentation they’re asking for, as soon as they ask for it.

The mortgage industry isn’t setting people up for failure. They’re in the business of making loans. They want to make loans. It’s important to remember that if you’re going to get to the finish line you just have to cooperate fully. As a borrower, you are an active participant in the process. If you do your part as best as you can, you’ll have the smoothest transaction possible. And it’s useful to familiarize yourself with the standards that loan processors follow. When a loan processor says they need two months of bank statements, if you don’t give them every single page of the statement, even the seemingly meaningless ones with boilerplate language on them, they can’t check off that they have received your bank statements.

Source: The Washington Post

29
JUN
2015

Dealing with the Home as Part of a Divorce

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Getting a divorce is typically a stressful and traumatizing time. Because of the financial implications, the experience can become even much more stressful. There are a multitude of financial issues to deal with during a divorce, from making sure each party can afford to live on their own to the division of marital assets.

In this article we will be dealing with just one important financial issue – the disposition of the couple’s home. Though this is not an isolated issue, it is a very significant concern and it will be connected to many other financial considerations that must be dealt with during a divorce. It is important to address these issues up-front and the majority of these concerns should be specified in the formal Settlement Agreement*. What follows is a discussion of some of the important factors which must be addressed with regard to a divorcing couple’s home.

What is the desired disposition of the home?

There are basically three things that can be done with a home after a divorce:

• The home could be sold and the proceeds split, assuming that there is positive equity in the home;
• One spouse could live in the home – either by gaining ownership or possibly a continuance of joint ownership;
• In a less likely scenario, the home could be leased.

Selling the home

The most straightforward scenario is to sell the home and divide the proceeds. For example, in this case the mortgage is paid off and there is no worry of future joint liability. Generally this process is cleaner than having one spouse buy out the other, however it should be noted that there are potential complications which can arise during the sale of a home and couples should be prepared to work on solving these issues when they arise during the sales process.

One very important consideration is the selection of a Realtor®. It is important to select a real estate agent that is used to dealing with divorce situations as the agent many times will work as an intermediary not only between the selling agent and the seller, but also between two spouses that are likely not to see eye-to-eye on every decision — from the sales price to improvements which must be made in order to make the home saleable.

Of course, if the sales price is below the amount of the mortgage, a condition known as negative equity, this makes the process much more complex because it is likely that the couple must bring money to settlement. There is also the possibility of accomplishing a short sale in which the bank accepts a lower mortgage payoff. As attractive as that scenario sounds, one must remember that a short sale will affect each spouse’s credit in the future, including their ability to purchase another home.

One spouse could be the purchaser

In another scenario, one spouse could purchase the home from the other. This could be accomplished by refinancing the current mortgage and removing the spouse from the loan and title to the property. If there is positive equity, a cash payment may be required from one spouse to the other. A “cash-out” refinance could provide the capital necessary by increasing the loan amount, or the assets may come from other marital assets.

Of course, the alternative of refinancing assumes that the spouse purchasing the home can afford and qualify for a new mortgage on their own – and the mortgage payment may rise if the loan amount is increased to generate cash during the refinance. Working with a mortgage and financial advisor, it is important to assess budgetary constraints as well as the limits to qualification. Speaking of qualifying, this brings up two issues:

• The purchasing spouse might be using child support and/or alimony as income to help qualify (for the new loan) and it is important that the Separation Agreement is finalized (signed by both parties) and a precise history of these payments can be tracked. Typically, the lender will need to verify that at least six payments have been received by the lender in order to utilize the income to qualify.
• In some situations, the purchasing spouse may not have enough credit in their name to qualify for a mortgage, even if the income is sufficient. Therefore, it is important that any divorcing spouse in this situation establish credit lines early in the separation/divorce process.

It should also be noted that the time line for closing on a refinance can range from 30 to 60 days. If there are qualification issues, this timeline could be extended significantly, for example, to allow for the tracking of child support and/or alimony payments. Therefore, the Separation Agreement might have to address the financial arrangements of a temporary living situation before the permanent solution is implemented.

Keeping the present mortgage

Perhaps the spouse remaining in the home can’t qualify for a new mortgage. In this case, the Separation Agreement must determine which party will be responsible for making the payments. The concern with this scenario is that the mortgage and ownership of the property officially must remain in both names. Thus, if the spouse is responsible for making the payments, but does not do so on a timely basis, this will adversely affect the credit of the other spouse. This is why it is important that all credit and bank accounts are clearly separated in a divorce. For example, if one spouse tries to purchase another home, they may find that debts run up by their ex-spouse may affect their own qualification.

Leasing a home

As indicated earlier, leasing the home is not a likely scenario. However, it may occur in a situation where the divorced couple leaves the area and the home is in a negative equity situation. Because refinancing is also not likely, joint ownership would continue and the spouses would have to become “joint” landlords, not a preferable situation in most divorce situations.

In summary, the disposition of a home during a divorce can be a very complex situation which requires careful consideration of the options and serious planning. Here is a synopsis of the important rules to follow…

• Make a quick and decisive decision regarding the disposition of a home after consulting with legal, financial, mortgage and real estate advisors.
• Integrate these decisions specifically within the legal Separation Agreement.
• If selling a home, employ a real estate agent experienced in working with divorcing couples.
• If selling or refinancing a home, make sure your mortgage advisor understands all of the ramifications of the disposition plan. This includes making sure that any plan to refinance the home or purchase a home includes requalification of the party(s).
• Do make sure that all assets and liabilities are separated so that the divorced spouses are less likely to be hampered as they purchase real estate or obtain credit in the future.
• If a spouse does not have sufficient credit in their name, steps must be taken to establish credit lines early in the separation/divorce process.
• Make sure all child support and alimony payments are tracked precisely and fastidious records are kept in case they are needed for qualification.

*A Separation Agreement may also be known as a Property Settlement Agreement (PSA), Divorce Agreement or Property Settlement in various jurisdictions.

26
JUN
2015

Important Purchase Preparation

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Knowing the Score Makes a Big Difference

A new survey finds that house hunters who know their credit scores feel significantly more prepared to buy a home. Yet, just half of recent buyers say they have checked their credit as soon as they considered purchasing a home, according to the survey, commissioned by Experian, of 250 recent and 250 future home buyers. “No one likes to go into a lender’s office, whether buying or refinancing, and not know the state of their credit; it makes them feel helpless,” says Becky Frost, senior manager of consumer education at Experian Consumer Services. “Our survey shows when people interact with their credit by tracking it and learning more about the factors that affect it, they feel more confident about their purchase power.”

Still, more than two in five future home buyers are concerned that they will not qualify for the best home loan rate and have even delayed purchasing to improve their credit, the survey found. Fifty-eight percent of buyers surveyed say they are working to improve their credit to qualify for a better home loan rate, but 35 percent of future buyers say they are not sure what steps to take to qualify for a larger loan. For those who are working to improve their credit, the top actions respondents said they’ve taken are paying off their debt, paying bills on time, keeping balances low on credit cards, protecting credit card information from fraud or identity theft, and not applying for or opening new credit accounts.

Source: Experian Home Buying and Credit: Survey Report 2015

18
JUN
2015

Agency Proposes Disclosure Delay

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New Disclosure Delay in Works

The Consumer Financial Protection Bureau announced on Wednesday a proposal to delay the effective date of the Integrated Disclosure rule until Oct. 1. “We made this decision to correct an administrative error that we just discovered in meeting the requirements under federal law, which would have delayed the effective date of the rule by two weeks,” said CFPB Director Richard Cordray. “We further believe that the additional time included in the proposed effective date would better accommodate the interests of the many consumers and providers whose families will be busy with the transition to the new school year at that time,” added Cordray.

The required loan documentation consists of two new forms: the Loan Estimate and the Closing Disclosure to ensure compliance. It was originally set to go into effect on Aug. 1. These new forms consolidate the present forms and are meant to give consumers more time to review the total costs of their home loan. The Loan Estimate is due to consumers three days after they apply for a loan and the Closing Disclosure is due to the consumer three days before closing.

The public will have an opportunity to comment on this proposal and a final decision is expected shortly thereafter. This announcement comes shortly after huge news earlier this month, when the CFPB announced that it would allow a good-faith enforcement grace period that both the industry and a bipartisan coalition in Congress had asked for. The enforcement grace period will be open-ended, David Stevens, chairman and CEO of the Mortgage Bankers Association, indicated, because Cordray wants to be flexible. “At the very least, it should run through the end of 2015,” Stevens said.

Source: HousingWire

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