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Posted by DarinZ on August 15th, 2008 in Mortgage Info

Many people have high debt to income ratios and can still qualify for a mortgage loan. There are many options available out there for people who have a high debt to income ratio, also referred to as DTI. One solution to a high debt to income ratio is to work with a lender that allows for a high debt to income ratio. Typical good credit lenders allow for debt ratios around 40%, although many times an automated underwriting system may qualify borrowers with a much higher DTI too. Typical below average credit score lenders will allow a maximum debt to income ratio of 50%. Then there are even a few other lenders who will allow debt to income ratios up to 55%, and sometimes even 60% on rare occasions. Consult a mortgage broker today to find the right lender for your individual situation.

There are also no ratio loans that some lenders can provide.

There are also programs available for high credit score borrowers called No Doc loans. This is when a lender does not require income information from the borrower and will base the loan on the creditworthiness of the borrower.

If you are doing a mortgage refinance it may be possible to consolidate some of your other debts, such as credit cards, car loans, etc. into your new mortgage. By eliminating your other monthly debt payments, leaving you with just your new mortgage payment, you might find that this significantly lowers your debt to income ratio.

Even if you make more than enough money to comfortably pay for the mortgage you may find that you have to look at some of these other types of loans because the lender will not accept all of your income. Some examples would be a 2nd job, commission income, or bonuses that you have been receiving less than 2 years. Lenders may also not include rental income you receive if you rent out rooms in your home and do not have a signed lease, or proof of 12 months payments received.

If you fall into one of these categories you may need to look at a loan that allows a high debt to income ratio, even though your actual income may be more than sufficient to qualify.

Having a high debt to income ratio no longer means you are forced to accept the high rates and unfavorable terms of many subprime loans. If you have sufficient compensating factors, such as a perfect mortgage payment history and high credit scores, you may be able to qualify for a loan only slightly more expensive than someone with a low debt to income ratio. Be sure to ask your loan officer to submit your loan to various Automatic Underwriting programs prior to accepting a high rate subprime loan.

On higher debt-to-income ratio borrowers, a lender will sometimes require a certain amount of disposable income before approving this high debt ratio loan. Disposable income is calculated by taking the gross monthly income minus the monthly liabilities. If the borrower has a large amount of disposable income, say $3000 a month, then the lender is more likely to approve the loan.

Paying off high payment credit card and car loan accounts as part of a debt consolidation or cash out refinance is a great way to qualify for a lower rate mortgage.

Paying off debts will lower your dti ratio. There is a top and bottom dti ratio.
The top ratio is your housing expenses only. The bottom dti ratio is all your expenses. If you have any questions about any of this please feel free to give me a call!

-Darin Zabel

  530.753.5657

  Dzabel@mortgageitdown.com

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Posted by DarinZ on August 15th, 2008 in Mortgage Info

Here’s an interesting article I just came across on Bankrate.com:

The housing rescue bill, soon to become law, is full of goodies and not-so-goodies for homeowners and those who aspire to be homeowners. Here are some highlights.

First-time homeowner tax credit
The law will extend a tax credit of up to $7,500 to first-time homebuyers. A first-time homebuyer is defined as someone who hasn’t owned a home in three years.

The tax credit is for 10 percent of the purchase price, up to $7,500, but phases out for higher-income homeowners. Homeowners are eligible for the tax credit if they bought after April 8 of this year and before July 1, 2009.

This is a tax credit, not a deduction. It reduces the homeowners’ tax bill by up to $7,500 for the tax year in which the purchase was made. If you buy a house this year, you get the tax credit for the 2008 tax year — the one with a filing deadline of April 15, 2009. If you buy a house next year by the end of June, you get the tax credit for the 2009 tax year. It’s a one-time credit; you don’t get to keep taking it year after year.

There is a catch, and that is that the money has to be repaid over 15 years, starting two years after you buy the house. That makes the tax credit an interest-free loan. If you take the full $7,500 tax credit, your income tax bill will increase by $500 a year for 15 years. If you sell the house before then, you’ll have to pay Uncle Sam the remaining balance.

Complex issues, such as divorce, death, sale of the house at a loss and conversion of the house into a vacation home are accounted for in the law.

Forgiveness to allow refinancing into FHA
A lot of people have fallen behind on their mortgage payments after the rates went up on their adjustable-rate mortgages, or ARMs. And they can’t refinance into fixed-rate loans because their homes have lost value, and they owe more than their houses are worth.

Soon to be a law, the housing rescue bill seeks to help these people get out of trouble. It encourages lenders to forgive some of their debt so they can refinance at lower amounts into mortgages insured by the Federal Housing Administration, or FHA.

It works like this: The lender has to forgive all the debt above 90 percent of the home’s current appraised value. If that leaves you scratching your head, here is a hypothetical example, using round numbers:

Sometime before Jan. 1 this year, you bought a house for $125,000 and got an ARM for $110,000 after making a $15,000 down payment. But the house lost value. Now it’s worth $100,000, based on an appraisal. Meanwhile, the ARM’s rate went up and you can’t afford the full payment every month.

Under this law, the lender would forgive everything you owe above $90,000. Let’s say that you owe $105,000 of that original $110,000 loan. The lender would forgive $15,000, and let you pay off the loan for $90,000. The lender would not be allowed to seek any of that $15,000 later.

That allows you to find another lender who would underwrite a $90,000 mortgage to be insured by the FHA. That loan amount would include the upfront FHA insurance premium of roughly $2,700.

Again, there is a catch. If you take refuge in this program, you’ll have to share your home-price appreciation with the FHA. If you sell the house (or refinance the loan) less than a year after refinancing into the FHA loan, the FHA gets all of the house price appreciation. The FHA’s cut decreases over the next five years — but never goes below 50 percent.

What does this mean to the borrower? Take the example above. You refinanced when the house was appraised at $100,000. A little over two years later, you sell the house for $120,000. You split that $20,000 difference with the FHA. In this case, because it’s between two and three years later, the FHA gets 80 percent. The FHA would get $16,000 and you would get $4,000.

The equity-sharing arrangement goes like this: If you refinance or sell less than a year after getting the FHA loan, the government gets 100 percent of the home price appreciation. If it’s more than a year but less than two years, the FHA gets 90 percent. The FHA’s cut then decreases by 10 percent until the five-year mark. Anytime after that, the FHA gets half of the appreciation, no matter how long you have the loan or own the house.

This arrangement will encourage homeowners to keep their FHA-insured mortgages for at least five years, but to refinance before home prices zoom upward again.

Working with home equity debt
The government has been trying all year to encourage lenders to forgive debt so homeowners can refinance their loans for lesser amounts and remain in their houses. Lenders have been reluctant to forgive the debt. The FHA-refinance plan is another way of encouraging debt forgiveness.

Among the sticking points: Many homeowners have home equity lines of credit or home equity loans. In most cases, these lenders will lose that entire loan balance under the FHA-refinance plan. The new law is low on specifics, but it gives the FHA permission to give second lienholders a cut of the home price appreciation proceeds that the FHA collects.

Down payment assistance soon to be a thing of the past
The housing rescue bill, soon to be a law, bans down payment assistance programs such as the ones offered by Nehemiah and AmeriDream. The ban goes into effect Oct. 1.

Down payment assistance programs took advantage of a loophole in the way the FHA treats down payments. To get an FHA-insured mortgage, the homeowner has to make a down payment of at least 3 percent. Homeowners don’t have to save even that much; the 3 percent can come as a gift from family members or nonprofit organizations.

Regulations don’t allow the home seller to provide the down payment money. That’s where down payment assistance programs come in. They are nonprofits. That allows the seller to give the 3 percent down payment money to Nehemiah or AmeriDream, and then Nehemiah or AmeriDream can turn around and “give” the down payment to the homebuyer as a “donation.”

Fannie Mae and Freddie Mac don’t allow sellers to indirectly give down payments to buyers. But the FHA has allowed this type of transaction for years. The FHA has long complained that down payment assistance programs artificially inflate house prices, and that loans using down payment assistance are more likely to default. But prominent congressional democrats have protected the down payment assistance programs on the grounds that they allow many minority families to become first-time homebuyers.

House democrats wanted to keep the loophole open, and Senate leaders wanted to close it. With this law, the Senate won.

Property tax deductions for all homeowners
Under current law, you can deduct your property taxes from federal income tax — but only if you itemize deductions on Schedule A. That leaves out people who don’t have enough deductions to warrant filling out Schedule A. They have to take the standard deduction — and that means they can’t deduct their property taxes.

The housing rescue bill, soon to be law, changes that. For homeowners who pay property taxes, it increases the standard deduction by $500 for single filers and $1,000 for couples filing jointly. This will be a boon to people, such as retirees, who own their houses outright, and therefore don’t pay any mortgage interest, so they can’t itemize.

You can’t increase the standard deduction by more than the property-tax bill. So if you’re married filing jointly and you pay $800 in property taxes, you get an $800 deduction, not a $1,000 deduction.

Loan limits extended permanently
There are maximum amounts for loans that the FHA will insure, and that Fannie Mae and Freddie Mac will guarantee. Those limits were raised temporarily this year. The new law raises limits permanently.

For FHA-insured mortgages, the new limit will be 115 percent of the median home price in that area, up to $625,500. That provision will affect loan limits in higher-cost areas. In lower-cost areas, the current FHA limits won’t decrease.

For conforming mortgages — those eligible to be bought by Fannie Mae and Freddie Mac — the conforming limit will remain at least $417,000 for a single-family home. It can be higher than that. Starting next year, the new limit is either $417,000 or 115 percent of the area’s median home price, whichever is higher — up to $625,500. After that, the limits go up or down according to a price index.

More regulations on reverse mortgages
A reverse mortgage is an advance against home equity. It’s for homeowners age 62 or older, and the reverse mortgage doesn’t have to be repaid until the borrowers die or move out.

Because reverse mortgages are for elderly borrowers, there is concern that dishonest lenders and brokers take advantage of borrowers. Borrowers are required to get counseling first, to learn the pros and cons of reverse mortgages. The law will result in strengthened qualifications for counselors.

The law bars insurance salesmen from originating reverse mortgages and prohibits originators from requiring homeowners to buy annuities or insurance products. (There’s one big exception: The FHA insures reverse mortgages, and borrowers will buy that coverage.)

Finally, the law limits origination fees on reverse mortgages. They can’t exceed 2 percent of a reverse mortgage of up to $200,000. For a reverse mortgage amount above that, the limit is $4,000, plus 1 percent of the loan amount above $200,000. Origination fees can’t exceed $6,000 in any case. In future years, this upper limit is indexed to inflation.

Manufactured housing
FHA-insured loans for manufactured houses are limited to a maximum of $48,000 — a limit that has been in effect since 1992. That limit finally will be increased to about $70,000 and will be indexed to inflation. These are the limits for loans in which the borrower is buying only the manufactured home and not the land under it.

According to the Manufactured Housing Institute, the raised limit will make a big difference to thousands of families. Under the $48,000 limit, a lot of families can afford only single-section homes. The increased limit will allow more people to buy double-section homes — what are colloquially known as double-wides.

The law directs Fannie Mae and Freddie Mac to come up with new products and flexible underwriting standards for manufactured houses.

Veterans
Service members returning from active duty abroad will be given breaks, effective as soon as the president signs the bill into law.

Some protections apply to service members whose military obligations affect their ability to repay debts — primarily, reservists and members of the National Guard who are called to active duty. They have to leave their jobs and, in many cases, take pay cuts.

For these service members, there are protections having to do with foreclosures and interest rates. If a service member had a mortgage before entering active duty, a lender can’t start foreclosure proceedings until nine months after the service member returns from active duty. Formerly, the protection period was 90 days.

Also, when someone with a mortgage is called up to active duty, the interest rates on all previously existing debt are capped at 6 percent. That goes for mortgages — and for home loans, that 6 percent cap extends until one year after the service member returns from active duty.

The Defense Department will be required to provide foreclosure-prevention counseling upon request to service members who are returning from active duty abroad.

Miscellaneous
Other provisions of the law:

• It will establish an Office of Housing Counseling, which coordinate all federal housing counseling functions, as well as produce booklets that will be given to people applying for mortgages.
• It will require licensing and registration of all mortgage brokers. Several states have begun to license mortgage brokers and share the information through the Conference of State Bank Supervisors; this law extends that initiative nationally.
• It won’t ask questions about tornadoes. An earlier version of the bill would have commissioned a study into how to “mitigate the risks to manufactured housing residents and communities resulting from tornados.” The inquiry into this head-scratcher will have to wait for another bill; it was deleted in the final version that passed into law.

Darin Zabel

530.753.5657

Dzabel@mortgageitdown.com

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Posted by DarinZ on August 15th, 2008 in Buying A Home, Mortgage Info

The advantages of the CalPERS Loan are protection, opportunity, comfort & security. A person can use a CalPERS home loan benefit and rest easy when obtaining a home loan.

• 100 percent Financing
  For conventional fixed rate CalPERS financing, purchase a home with a 95 percent CalPERS mortgage loan and up to a 5 percent Personal Retirement Account Secured Loan (PRASL). For CalPERS government financing, purchase a home with a 95 percent or greater loan-to-value (LTV) (up to maximum FHA LTV limits**) and secure all or a portion of the difference with a PRASL. Only CalPERS offers this excellent benefit. 
• FREE 60-Day Rate Protection
  Lock in the interest rate and eliminate concerns about interest rate increases. During the 60-day rate lock, CalPERS is taking the interest rate risk. Other loan programs charge extra for a 60-day rate lock, or the borrower takes the interest rate risk by floating until loan approval. 
• Two FREE CalPERS Float Downs
  Receive the lowest CalPERS interest rate on three applicable dates: date of application*; date of loan approval; and date loan documents are drawn. Most other loan programs don’t offer float downs or charge extra for this benefit. 
• Controlled Closing Fees
  CalPERS has set maximums on some of the fees involved with a home loan, making the CalPERS loan very affordable. Most other loan programs have higher closing fees. 
• Closing Cost Assistance
  With CalPERS FHA/ARM financing, the borrower may buy up the ARM margin from 2.00 percent to 2.75 percent and directly offset a portion of his closing costs. The borrower’s own funds, a gift from a relative, and seller contributions** may also be used to pay for closing costs. CalPERS ensures that the borrower won’t be overcharged on his loan closing fees. 
• Conventional and Government Fixed/ARM Financing Available Purchases and Refinances
  (including streamlined refinances) 
• Competitive Interest Rates
  Set daily.

-Darin Zabel

(530) 753-5657

Dzabel@mortgageitdown.com

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Posted by DarinZ on August 15th, 2008 in Buying A Home, Mortgage Info

Fannie Mae and Freddie Mac are the biggest supplier of mortgage funds in the US.

Fannie Mae is also referred to, as FNMA. FNMA stands for Federal National Mortgage Association Freddie Mac is also referred to, as FHLMC. FHLMC stands for Federal Home Loan Mortgage Corporation. Freddie Mac and Fannie Mae both buy mortgages on the secondary market. This allows lenders to keep originating new mortgage loans constantly because Freddie and Fannie keep buying the mortgages from them, or from the primary market. An example of this is: You buy a home and obtain a mortgage from Bank A, Bank A is considered the primary lender, or the primary market, Bank A then sells your mortgage to Fannie or Freddie on the secondary market and this allows Bank A to have those funds available once again to give another homeowner a mortgage.

Fannie Mae and Freddie Mac computerized and simplified the loan underwriting process with the introduction of two automated underwriting systems. Freddie Mac’s Loan Prospector and Fannie Mae’s Desktop Underwriter revolutionized the mortgage industry by reducing the loan risk assessment process down to minutes rather than weeks.

A large number of conforming loans are bought and serviced by Fannie Mae and Freddie Mac.

Though Fannie and Freddie loans may offer the best rates, they are the most stringent around. If you have a unique situation it may be better to consider other options. Your loan officer can best describe these alternatives.

Fannie Mae is a privately-owned corporation authorized to make loans and loan guarantees. Fannie Mae is not backed or funded by the U.S. government, nor do the securities it issues benefit from any explicit government guarantee or protection.

Fannie Mae and Freddie Mac both offer programs to those with less than perfect credit as well. There is generally a pricing adjustment for such “just missed” loans.

Fannie Mae (FNM/NYSE) and Freddie Mac (FRE/NYSE), two of the nation’s largest sources of financing for residential mortgages, announced today the joint availability of 83 non-executable Spanish translations of the Fannie Mae/Freddie Mac Uniform Instruments to help lenders and others in the residential mortgage industry better serve Spanish-language dominant consumers in becoming homeowners. The translations are meant to complement the English-language documents a mortgage borrower would sign.

Conventional lending programs must follow the guidlines set by Fannie Mae and Freddie Mac. Lenders will conform their conventional products to meet these guidlines in order to be able to sell the loan to Fannie Mae or Freddie Mac. Conventional financing usually offers the best interest rate, however most lenders will offer alternative financing options that do not follow the strict guidlines of Fannie Mae and Freddie Mac. Contact your mortgage broker to see what financing option will best fit your needs and situation.

Darin Zabel

(530) 753-5657

Dzabel@mortgageitdown.com

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Posted by DarinZ on August 15th, 2008 in Mortgage Info, Real Estate News

When the Chairman of the Federal Reserve lowers “rates,” he lowers the “Federal Funds” rate. It’s the interest rate at which large banks lend funds to one another and is a “short-term” rate. Mortgage interest rates are long-term, up to 30 years. Longer-term interest rates are sensitive to expectations about inflation. When short-term rates fall, like the ones the Federal Reserve controls, borrowing and spending usually increase, which can actually cause inflation. Longer-term rates, like mortgage interest rates, can rise when concerns about inflation increase.

Markets are often ahead of the Federal Reserve. Mortgage interest rates are determined every day in active public markets. If those markets believe the economy is slowing, interest rates may fall as markets anticipate that the Federal Reserve might lower short-term rates. This happened in the last half of 2000 when mortgage rates began steadily dropping, even though the Federal Reserve left their short-term rates unchanged. The opposite can happen as well. Mortgage rates can rise well ahead of the Federal Reserve increasing short-term interest rates.

It’s almost impossible to accurately predict the future of something as complex as the U.S. economy. However, it is important that we, as mortgage consumers, understand some of these market dynamics. Sometimes, a lack of understanding can cost us a lot of money.

It is important to note that Adjustable Rate Mortgages (ARMs) and Fixed Rate Mortgages are affected differently by an increase made by the FED or Federal Reserve. The FED makes adjustments to the short term rates which in turn affects things like the bond market, a key determining factor in the 30 year fixed rate. The 30 year rates work in the opposite direction to the 10 year note. If the price of the 10-yr note falls, the rates rise.

Adjustble rates are comprised of two things an Index, and a Margin. The margin is set by the banks so when the FED adjusts the rates, banks in turn make adjustments. The Index is a regularly published rate that is independent of the lender and generally used as a market indicator. Examples of and Index would be: PRIME, LIBOR, MTA, COSI, etc.

Because Adjustable Rate Mortgages and Fixed Rate Mortgages are affected differently it is very important to find a mortgage professional who understands the market conditions and the relation between the bond markets and interest rates. Your mortgage broker can help you make the decision on when to lock a rate which can save you thousands of dollars over the life time of your loan. He can also help you choose the right program!

Bond prices and bond yields have a direct effect on long term interest rates. Bond prices and bond yields always move in opposite directions (if one pays more for a bond, the yield decrease, and vise versa). Bond prices, hence their yields, are affected by many economic indicators. Some of the monthly economic indicators the bond market pays close attention to are Non-Farm Payrolls, Unemployment Rate, and Gross Domestic Products, Consumer Price Index, Producer Price Index, and Retail Sales. As a rule of thumb, when these economic indicators forcast a strong or inflationary economy, bond prices fall and bond yields increases, interest rate will go up. If a weak economy or low inflation is expected, bond prices rise, bond yields falls and rate will fall.

One aspect of the economy that can cause interest rates to rise is inflation. One of the reasons interest rates were so high back in the 1980’s was that the market felt that inflation was out of control. Investors demand high rates of return when there is inflation because they are investing or loaning with today’s dollars and being repaid with tommorrow’s money. If the market senses inflationary trends, interest rates will usually rise.

When the Stock Market is in a Bull trend (Up Trend) it is indicative of monies flowing into the market. Historically, The stronger the up trend in stocks, the weaker the real estate market will be during the same period. Weak real estate markets (lack of demand) will result in declining prices in home values, which usually correlate to a rise in mortgage interest rates.

Many domestic and international investors, particularly those investing in the country’s stock and currency markets, will respond to a hike in interest rates by moving money out of the country. This is due to a belief that the increased cost of borrowing will weaken balance sheets and devalue equities, thereby creating a ripple effect which weaken’s the country’s currency.

This is why it is important to “shop” for your mortgage with lenders on the very same day. Key factors can see mortgage rates changed several times in a given week, sometimes in the same day. The lender that you get a rate from on Monday may not be able to give you the same rate on Wednesday.

This is why you must rate lock if you like the rate available to you.

Darin Zabel

(530) 753-5657

Dzabel@mortgageitdown.com

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Posted by DarinZ on August 15th, 2008 in Mortgage Info

“My adjustable rate mortgage is adjusting up way too much!”
That’s a complaint Loan Officers are hearing a lot lately. You’re not alone. Different estimates are that between 500 billion and 1 trillion dollars of adjustable rate mortgages (ARMs) are set to adjust by the end of next year.

Some good news - your ARM, as opposed to a fixed rate mortgage, has almost definitely saved you thousands of dollars in interest over the last few years. Congratulations!

If your mortgage rate is adjusting too much then it may be time to look into refinancing your mortgage loan. You can explore the options of refinancing your mortgage into a fixed rate mortgage to stop the loan from ever adjusting over the life of the loan or you can even look into refinancing your mortgage loan into another adjustable rate mortgage. Refinancing your mortgage into another adjustable rate mortgage will provide you with the lowest rate for your situation again and a rate that is fixed for a short term. Either option can provide you with the financing you need and get you away from the home loan that is currently adjusting by leaps and bounds.

For some people, interest rates are going up 3-4% once their adjustable rate mortgage adjusts. This is resulting in a payment increase of anywhere between $100 and $500 a month, possibly more depending on the size of your loan. A good, experienced loan officer can help you sort through your options.

Adjustable Rate Mortgages which are approaching the end of their fixed rate period will continue to adjust upwards so long as market interest rates continue on their upward trend. Many borrowers with adjustable rate mortgages who don’t like the idea of their payments going up are seeking the security of refinancing into a fixed rate mortgage. Don’t wait until you miss a payment to refinance your adjustable rate ARM mortgage. Lock in a low fixed rate today.

Stop the “PAYMENT SHOCK” Blues and look into a Fixed rate until the trend of Adjustable Rates has settled.

Another feature of the adjustable rate loan should be noted: commonly, adjustable rate loans are assumable by a creditworthy buyer. In other words, having an assumable loan might make it easier for you to sell your home in the future; if the buyer wants to take on your existing assumable loan.

The new FHASecure program was created especially to help borrowers whose adjustable rate mortgage payment has gone up and they have fallen behind in payments. If you can establish that the reason for your late payments was the rate increase on your mortgage and you had made the previous 6 months payments on time, an FHA mortgage could be the answer to your problem.

In the current interest rate environment, 30-year fixed rates are just as low as short term ARM rates, and much lower than rates of hybrid mortgages. Hybrid mortgages with a fixed rate period of 2 or 3 years in the beginning then subsequently followed by a 27 or 28 years with adjustable rates often have low rates during the fixed period. However, when the fixed period ends and the adjustable rate period starts, homeowners are in for a much higher rate and bigger monthly payment. Refinance out of such hybrid mortgage before the adjustable rate kicks in is prudent.

If you mortgage is adjusting up too much, consider a fixed rate mortgage refinance before you eat into your savings or miss a mortgage payment.

Remember that your not alone. Many homeowners are facing the same dilema. As your rate rises so does your payment. As your payment rises so does the stress. When purchasing a home it’s important to take these changes into account. If your already in the home then it’s time to look at some financing options. If you have any questions give me a call!

Darin Zabel

530.753.5657

www.lucentloans.com

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Posted by DarinZ on August 15th, 2008 in Mortgage Info, Selling Your Home

The current downturn in California real estate began in late 2006 after over five
years of a super heated market. During that five-year period, low interest rates
and easily obtained financing resulted in constant appreciation of values in most
metro areas of California. Presently, in mid 2008, we seem to have come full
circle. Average home values continue to fall month after month leaving many
Californians with homes currently valued for less than they paid for them. For
those who bought properties during the peak years of the surging market and
financed them with “no down” or high loan to value financing, the picture is not
good. For these homeowners, the position they find themselves in is one of
being “upside down” in their home – meaning that the debt against the property
amounts to more than the present market value.
The other component to the equation that has brought on the current crisis in
mortgages and home ownership is the preponderance of adjustable rate
financing. Tens of thousands of loans were written in California that contained
adjustable rate and payment features. Most of the borrowers were qualified on
the lower pre adjustment payments and find that their payments become
unaffordable upon the adjustment. Many of these loans were taken out with the
plan that the borrower would simply refinance into a more stable or affordable
loan before the payments adjust. A monkey wrench was thrown into these plans
when plummeting real estate values made it impossible for the homeowners to
refinance.
Up until just recently there were very few options available for these distressed,
“upside down” homeowners who wished to avoid the humiliation and credit
damage of foreclosure. The primary option that distressed homeowners tried
was the “short sale.” This is when the home is listed for sale at the current
market value and once a buyer is found the lender is asked to accept a short pay
on their note. These short sale transactions have become very popular in this
declining market and have allowed many homeowners to rid themselves of their
distressed properties. The only problem is that the homeowners must leave the
home and find another place to live.
More recently, two other options have emerged. The loan modification is one. In
this option the distressed homeowners simply ask the lender to change or modify
their note to more affordable terms. This method had seen some success but is
perceived in many cases by the lender as a “lose, lose” way to go. They feel this
way because they have taken a loss on their note but still have to have the risk of
having what they perceive to be a “problem” borrower on their books. As such,
lenders are generally reluctant to give too much to the borrower in a loan
modification.
The third and most recent option that has become available to the distressed
homeowner is that of the “short refi.” In this method, the borrowers are approved
for a refinance based on the current value of the home, regardless of the amount
presently owed. The current lender then has an opportunity to completely rid
itself of the problem loan by granting a short payoff. This is very similar to what a
lender does in a short sale; only this time the borrower is coming to the lender
with an approval for a new loan rather than a buyer for the property. The results
for the lender are the same in both instances – they take a one-time loss on the
loan but avoid the even greater losses that they would incur if they had to go to
foreclosure.
Who is a good candidate for a short refi? Simply those homeowners that owe
more on their homes than the current market value and want to continue living in
and retaining ownership of their homes by refinancing into a more affordable
loan. It works whether there is just one or more than one mortgage loan
recorded against the property.
Homeowners do have to realize that like in a short sale transaction, it is
ultimately up to the lender to decide whether they will grant the short pay off or
not. At the time of this writing, we are seeing lenders granting the short pay off
requests about 75% of the time. As the real estate markets in California continue
to deteriorate and foreclosures continue to rise, lenders will become increasingly
motivated to entertain alternative solutions (such as a short refi) to avoid
foreclosure.
At Equistar Funding, we are experts in the short refi. We know precisely
how to approach your lender to maximize the probability that the short payoff will
be granted. The homeowner only needs to co-operate fully and readily provide
all the documentation required by the lender. The amount of documentation will
vary from one lender to another. Incredibly, we charge no up front fees for this
service. We get paid from the refinance of your home. There numerous
companies that are now emerging who are charging up front fees of anywhere
from $250 to $2500 to handle a short refi. We handle our compensation the way
it should be – we don’t get paid unless your short refi is successful.
Thank you for taking the time to read this report. Please feel free to contact me
if have any questions regarding the material presented here or would like to
explore whether a short refi might be a solution to your situation.

Darin Zabel
204 F Street, Suite B5
Davis, CA 95616
530.753.5657
www.lucentloans.com

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Posted by DarinZ on August 15th, 2008 in Uncategorized

Be sure to ask for copies of the Good Faith Estimate before you agree to a deal. Granted this document is only an estimate, it should be very close to an accurate assessment of all fees and charges. If a broker tells you that they cannot provide information on a particular charge, begin to ask questions until you are satisfied. Most good brokers will provide a Good Faith Estimate (GFE) during the loan process, and come the day of closing you will find that you have to pay less than estimated.

Your mortgage professional will help you to choose the right type of refinancing for you. Be prepared to provide them with your reasoning for the refinance, as it will help them to better assess your situation. Are you looking only for a better rate or do you need cash out or debt consolidation?

Be sure to answer all of your mortgage brokers questions as accurately as possible. This will help your mortgage broker in determining which loan program may best fit your needs.

Before contacting your preferred mortgage professional, you may want to gather these documents before hand:

Most recent paystubs totalling 30 days
Most recent bank statements for checkings, savings, IRA, 401(k), etc. totalling 3 months
Last 2 years of W2’s if salaried or wage earner. Last 2 years tax returns if self-employed
Any other documents to show income from social security, alimony, rental income, etc.
Homeowners insurance declaration page
Most recent mortgage statement(s)

Everything you will encounter in your mortgage experience you can find on the internet, if you are reading this, you have access to learn more than you can handle in regard to this transaction…Gather info, research that info, get more info from second source, research that info, repeat that process until you feel that you can make a well informed decision, if you don’t think after that that you can make a good decision for yourself, seek legal advise…Just involving a lawyer will minimize the games and tactics that may otherwise be used…You’ll never be good at anything you don’t do often, but you can be as informed as possible…Just knowing where to find the answers and explanations can be money saving!…You don’t always get what you pay for, well you do, but it’s not always worth what you paid for it so when you take advise from the person that stands to make the most, be wary and research before making a decision…

In order to have a better refinance transaction, keep all copies of your original application disclosures. At closing you are allowed a 3 day period to rescind your loan if you do not feel comfortable with ANYTHING about the loan. Tell your mortgage professional upfront you will review your disclosures against the closing docs at closing.

Taking the time to fully document your income is one of the best ways to prepare for any mortgage application, in particular a jumbo loan application.

Whatever you do, be honest about your income, your job history and your credit history. Don’t even fudge a little bit. These things are verified during the process and just a little bit of misinformation can result in your approval being invalid because your loan officer relied on it when recommending a loan program. This can cause substantial delays even if the information is not something that would cause your loan to be denied. To talk about improving your mortgage refi experience give me a call at (530) 753-5657 or go to www.lucentloans.com.

Darin Zabel

Equistar Funding Corporation, Inc.

Senior Loan Consultant

204 F Street, Suite B5

Davis, CA 95616

Email: DZabel@MortgageitDown.com

Phone: (530) 753-5657

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Posted by DarinZ on August 15th, 2008 in Mortgage Info

There has been quite a bit of news coverage regarding Adjustable Rate Mortgages adjusting upward. There are many ways to refinance an ARM Loan to a Fixed Rate Loan. The next few paragraphs will examine the benefits and strategies of refinancing an arm loan to a fixed rate loan.

Fixed Rate loans are available even to borrowers with bad credit

The FHA Secure Loan Program can be of benefit to clients who have fallen behind on their mortgage due to an increase in the rate. Their are many parameters one must qualify for in order to obtain financing through this program. Contact an experienced mortgage proferssional to see if you qualify for the FHA Secure loan program to refinance your adjustable rate loan to a fixed rate.

FHA loans are great and are a very safe way to go when deciding on what type of mortgage financing to get.

Their is still many different conventional loan options available today, along with FHA.

An experienced mortgage broker can help you to decide what type of financing would be best for you and your family.

Another hurdle in today’s lending environment is called declining markets. If you live in an area that has been identified as a declining market you can expect a reduction of as much as 10% in some cases of the maximum allowed loan to value of your home.

Consumers who have opted to obtain an adjustable rate mortgage are now feeling the crunch of their rates adjusting. This is one of the top causes for the high numbers of foreclosures in so many areas. However, there is hope for those of you who have an adjustable rate mortgage, also known as an ARM loan. Contact a mortgage professional today and find out how you can convert that ARM loan into a fixed rate mortgage loan before you are left with a high rate loan that you can no longer afford.

Darin Zabel

530.753.5657

www.lucentloans.com

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Posted by DarinZ on August 15th, 2008 in Buying A Home, Mortgage Info

The best Fixed Rate refinance is not always going to be the quote with the lowest rate. When refinancing an adjustable rate mortgage, or ARM loan, to lock in a low fixed rate, a variety of other factors are significantly more important than rate alone.

When comparing potential sources of financing, remember that many lending institutions considered household names employ rather unscrupulous “bait and switch” tactics with alarming regularity. By quoting you the best rate, they hope to lock you into a process both financially and emotionally with the hope that by the time they give you the real rate, often at the closing table, you will be too exhausted and afraid to explore your options. Comparing Good Faith Estimate documents is also next to impossible because lenders with something to hide know you will do this. There are a variety of methods by which the costs of an unrealistically low rate can be concealed on a Good Faith Estimate, and it is after all only an estimate, and can be changed with no enforceable penalty at any time.

Choose a firm which you feel represents your interests, whose good faith is more than just a piece of paper, and you will be assured to find the best fixed rate with the best features and terms for your family’s financial situation.

Obtaining the best fixed rate, for example on a 15 year fixed rate mortgage, should not compromise your ability to consistently make the higher payments required of the loan. Mortgage companies can qualify you for payments which are much higher than you can truly afford, and do not account for any unexpected disruption of your income due to a break in employment, illness, or family emergency. While minimizing interest expenses is important, obtaining payment flexibility may be significantly more important to you, and may help you prevent an unforeseen future event from ruining your credit, bankrupting you, or even losing your home to foreclosure.

When looking to get the best fixed rate, always remember that everyone lends from the same pool of money. One mortgage lender may offer the best fixed rate but the costs may not be favorable. Another mortgage lender may offer a higher rate but the costs may be significantly lower.

There are other factors affecting your payment besides the interest rate. For example if your loan requires that you carry Personal Mortgage Insurance (PMI), these payments would be added to your monthly payment amount until this mortgage would no longer be necessary. This is normally when you acquire 20% equity in the home.

When choosing a Fixed Rate loan, take into consideration how long you plan on being in the home. If you plan to stay there without intention to refinance for a couple of years, take a loan with a pre-payment penalty. Mortgages which carry a pre-payment penalty usually carry a lower interest rate. Since you won’t be selling or refinancing inside of the penalty anyway, it is a benefit to you for a lower rate.

A fixed rate mortgage (FRM) is a mortgage loan where the interest rate on the note remains the same through the term of the loan, as opposed to loans where the interest rate may adjust or “float.”

Fixed rate mortgages are available in terms from 10 to 40 years. By choosing a program with a shorter repayment term you will receive a lower interest rate. Even with a lower interest rate your payment will be higher with a shorter term mortgage. Take everything into consideration when choosing interest rate and mortgage programs.

In a normal economic environment, Fixed Rate Mortgages (FRM) have interest rates that are 1% to 2% higher than that of Adjustable Rate Mortgages (ARM). However, when a slow or declining economy is expected and the interest yield curve is inverted, Fixed Rate Mortgages may have interest rates about the same as those offered by Adjustable Rate Mortgages.

Borrowers can get the best fixed rate by working with a mortgage professional they trust. Getting the best fixed rate will depend on a borrowers credit, type of loan and LTV.

The best fixed rate mortgage (FRM) can often be found by using a mortgage broker. The mortgage broker has access to numerous lenders wholesale interest rate pricing.

Ask your Mortgage Broker to quote you fixed rates from 10-40 yr amortization schedules to determine which is best for your needs.

To get the best fixed rate, do yourself a favor and review your credit report for any errors. Good credit is required to obtain the best fixed rate.

-Darin Zabel

(530) 753-5657

 (530)753-5657

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