Venessa provided this FHA loan scenario to illustrate how waiting to purchase will hit your pocketbook in just a short 6 weeks from now. You will notice three upcoming changes that will affect your out-of-pocket expenses:
The UFMI rate is increasing from 1.75% to 2.25% (Up Front Mortgage Insurance is an insurance premium collected by FHA at the time the loan is initially made. It is in contrast to private mortgage insurance (PMI), which is collected by the lender each month when a buyer’s down payment is less than 20% of the purchase price.)
The allowable Seller Contribution will decrease from 6% to 3%. For example, a seller can only contribute up to 3% toward the buyer’s settlement charges (formerly called “closing costs”).
The Homebuyer Tax Credit expires on April 30. Buyers must be under contract, having a signed purchase agreement in hand by April 30th, but you have until June 30th to close the financing. If a first-time homebuyer misses this April 30th deadline then you will miss out on $8,000.
Now take a look at this chart. In the case of $193,000 loan, there is a potential difference of $14,965 by purchasing after April 2010.
The lending industry has undergone big changes this past year, resulting in different paperwork, requirements to qualify for loans, and more complexity. Bella Casa firmly and absolutely encourages all buyers to ONLY seek financing from LOCAL mortgage lenders. You need to be able to sit face-to-face with your lender so they can educate you about the process and your loan, and also so that you can hold your lender accountable.
We realize that these figures can be confusing, so we highly recommend that you call a local lender to discuss your specific situation.
This is the first post in a series about the FHA (Federal Housing Administration). In short, the FHA is an agency of the federal government that helps borrowers get amounts they qualify for, and assists lenders by reducing their risk in issuing loans. The FHA is the largest insurer of residential mortgages in the world, insuring tens of millions of properties since 1934 when it was created.
An FHA refinance mortgage or FHA loan allows for the refinance or purchase of a home with a low down payment. These loans are great for the first-time homebuyer.
The Fed has told us repeatedly that their massive purchasing program of Mortgage Backed Securities is just about over – and this translates to home loan rates rising in the near future.
As you can see in the chart below, the amounts of Mortgage Backed Securities the Fed is purchasing are slowly dwindling, as the program is set to wrap up by March 31st, and are clearly trying to ration out the remaining portion. Last week, the Fed purchased $11 Billion in Mortgage Backed Securities, which leaves them with $66 Billion to spend out of their original $1.25 Trillion allotment. So about 95% of the total has already been spent and has purchased about 3 out of every 4 home loans during the past year. When such a large buyer leaves the market, it is very likely that prices will worsen.
This is very important because as the Fed has less money to last through the remaining months of the program, their ability to keep home loan rates low via their purchasing power will wane.
And to those who can take advantage of currently low home loan rates, DO NOT WAIT, as the clock on these historically low rates is ticking.
We begin 2010 with some major changes to the Good Faith Estimate and how it is used. You’ve most likely heard about the new law that went into effect January 1, 2010 stating that mortgage advisors must now honor all lending fees they quote in their Good Faith Estimate. They must also stand behind the estimates they quote for other third party fees including title and escrow and government charges – absorbing the difference themselves if it is more than 10%.
This change has served to make the concept of a Good Faith Estimate a misnomer. It is, essentially, a binding commitment.
[dropcap character=”W” color=”yellow”] We love good, professional loan people – they are heros! To make sure that you’re working with competent and trust-worthy professionals, we encourage you to personally know your mortgage broker or loan originator.We want you to have his or her phone number, email address, and office address. We want you to be in constant communication, and to have the ability to go into the your broker’s physical office any time you want face to face, cry your eyes out, or express your anger (civilly of course) in their presence. There needs to be accountability. Someone who does not do their work well and provide excellent customer service needs to see and hear what their laziness, greed, and incompetence does to real people![space10]
Your mortgage broker is the only one who has access to the lender.
It is critical to compare your options before deciding on a lender from whom to borrow money. This is where a good mortgage broker can help. When you go to a lender to borrow money, you will almost always be asked about your credit rating. A good CMB Barrie could be able to advise you on how to improve your credit rating, which is particularly important for those with poor credit.They must keep the pressure on during the process and preempt problems with the lender. They must have all the documents properly prepared, and they must understand you and your situation so they can represent your interests well to the lender. They must handle objections, assist in correcting a bad appraisal, and must expeditiously satisfy conditions before closing. A good mortgage broker should be deep in the industry and have broad connections. They have worked hard to become a valuable resource to the lenders and build a reliable professional reputation. They can rescue a troubled loan, they can call in a favor if needed, and they can sometimes get the benefit of the doubt. A first-rate mortgage broker is valuable and indispensable.[space10]
Search locally and ask for referrals from Realtors and other industry professionals.
Our reputations depend on you receiving quality service and making your experience rewarding. We cannot afford to refer to unqualified and irresponsible vendors. If you follow our advice, we also have positive influence with the mortgage broker and can better assist you. At Bella Casa Real Estate Group we have chosen not to have Affiliated Business Relationships with mortgage brokers. This means we do not have a financial interest in using anyone. We have no conflict of interest in referring the best to you. We get nothing in return for our referrals. All we ask is that our clients be treated as well as we treat them.[space10]
[button size=”large” link=”https://thebellacasagroup.com/real-estate-referrals/” target=”_blank” color=”yellow” ]We urge you to refer to our list of Mortgage Brokers when selecting your broker.[/button][space5]
Take the time to meet with several of the brokers or loan officers before you make your final decision. Get a feel for whom you’ll be working with as well as the rates and mortgage products they offer.
Published on: Jan 2, 2010
[dropcap character=”N” color=”gray”]No one can ruin your life better than a bad mortgage broker and the lender behind them! I cannot tell you how many times we have had grown adults in our real estate office literally crying because the moving truck is coming and the transaction is not complete; the stress is unbearable for everyone. I have rarely seen the kind of anger that wells up when the transaction is in trouble, or is falling apart at the last minute, and the buyer has spent a lot of money, sacrificed a great deal of time, and made unalterable plans which include many people and time off work. The closing days of a transaction are intense. Everything needs to work in concert. If something goes wrong, most likely it is because of the failure of a mortgage broker, bank closing officer, or the lender. You will be miserable and you will want to take it out on somebody, anybody who is near you. As Realtors® this is our most fearful time.
The lender is usually a huge, bureaucratic institution.
The people are nameless and faceless, and you are no more than a speck of dust in their universe! If your loan gets lost in the bowels of the organization, then there will be 100 new loans to replace yours, and you will never be missed. The processors may punch a clock and could not care less if your deadline is tomorrow; at 5:pm today, even with the simplest task yet to do, they are going to punch the clock and go home! If overworked, they may work at their own pace, oblivious to what this does to your life and your home purchase. Underwriters may delay their conclusions to the very end of your transaction and then require numerous conditions to be fulfilled before funding your loan, thus causing you to close late.
What if, in addition to this ‘no-service’ lender, you also have a nameless, faceless, ‘no service’ mortgage broker? Trust me; it is almost hopeless, and you are helpless, and life is going to get more complicated and painful. Don’t do it!
It’s not a pretty picture, but this scenario can be replicated for almost any industry. Have you tried to get good customer service from any large institution (cell phone, computer, utility, credit card, big box store…)? This is just reality, and it is the challenge that must be overcome for you to have a life and be happy!
Who to Avoid Like the Plague:
[pullquote align=”left”]It is our professional recommendation that you do not select your mortgage lender online unless they have a local office! [/pullquote]
The Internet is a priceless resource for information. It is instant and provides a level of access very few have had in the past. But it is also a dangerous place. You often do not know whom you are dealing with or what kind of company. Sometimes things work; too often they do not.
Avoid Lending Tree, Quicken Loans, and a host of other online options. They may offer a simple process and a lot of products, but like any big company, they sacrifice excellent customer service and accountability to be one of the big boys. Do you want to gamble with your most valuable asset?[space5]
Finally, you love your family and friends, but they may not be the best source for your business decisions.
A good mortgage broker should be deep in the industry and have broad connections. They have worked hard to become a valuable resource to the lenders and build a reliable professional reputation. They can rescue a troubled loan, they can call in a favor if needed, and they can sometimes get the benefit of the doubt. Is your family connection, friend, neighbor, or other personal referral such a person? If so, this is a benefit. If not, you will pay handsomely for your generosity. Do not let emotion cloud your judgment in making a wise decision.
Search locally and ask for referrals from Realtors® and other industry professionals.
At Bella Casa Real Estate Group we have chosen not to have Affiliated Business Relationships with mortgage brokers. This means we do not have a financial interest in using anyone. We have no conflict of interest in referring the best to you. We get nothing in return for our referrals. All we ask is that our clients be treated as well as we treat them. We urge you to refer to our list of Mortgage Brokers when selecting your broker. Take the time to meet with several of the brokers or loan officers before you make your final decision. Get a feel for whom you’ll be working with as well as the rates and mortgage products they offer.
Randy McCreith, Principle Broker
Bella Casa Real Estate Group
[dropcap character=”L” color=”yellow”]Lenders are the companies that give you the money to purchase a property; they actually fund the mortgage for you at closing. In reality, they will ‘own’ (hold legal interest in) more of the property than you do. Whether the lender is a bank, financial investment brokerage or institution, or a small local company, they all represent groups of investors who pool their money to make a return from the interest you pay on the loan. Often once your mortgage is closed, it is sold on the secondary market and may become part of investment funds sold on Wall Street. Most people’s retirement funds are invested, to one degree or another, in mortgage vehicles, or mortgage-backed securities (MBS). Traditionally, mortgages represent a safe, reliable, and lucrative investment for investors.
Banks historically have been the most common source for loans. There are local and national banks, each with their own advantages and challenges. However, the lending industry has changed dramatically in the past couple of decades. Now even credit unions offer mortgages. Most commonly, there are many mortgage brokerages (such as K5 Mortgage, to name one example), and the Internet has become a prominent source to find these companies and for virtual mortgage brokers to work through. Moreover, these companies could be doing better business than banks in the lending sector, since they may be only dealing with lending. In addition, they might also have a loyal customer base, thanks to mortgage broker CRM software systems. In the future, these organizations could be leading in this business sector if they take advantage of such tailored CRM software.
A mortgage broker can broker loan products from a wide array of sources. In fact, they usually have access to anything on the market. Often the number of loan products is in the hundreds. Banks and credit unions have Loan Officers to work with you, and they often have their own portfolio of products available for numerous applications. Sometimes loan officers can broker market products just like mortgage brokers. To clarify, mortgage brokers and loan officers serve the same basic function.
You will work with a loan originator of some kind who will choose the best applicable product for your specific need. The loan originator is more than a salesperson. They are the face of the lender, the only face you will see, voice you will hear, or phone number, address, and email address you will have. They are your guide and advocate through the whole process. You will never know the underwriter and the many other people involved in your loan acquisition. The loan originator must get to know you, your situation, your goals, and all the challenges that apply to getting you the desired effect. They must also be expert in the paperwork, managing the process, and they must be competent problem-solvers.
It is imperative that you work with a local and well-recommended mortgage broker! Find out why, and learn how to find a safe mortgage broker in Part 2. Stay tuned.