My new house for Christmas!

Often I hear that it is getting close to the Holidays so I am going to wait until the new year. I understand what people are trying to say. There is a lot going on around this time and everything is rather stressful. For some the holidays are not so joyous. However, if everyone has that very same mentality then you will have less competition.

Each year my business activity increases in November and December. Just in time to claim that income for 2009. Ughh! I will never complain about it though and when I think about it I realize it is because I am working. I do not take the Holidays off. There are only three from November 1-December 31st. There is Veterans day, Thanksgiving day, and Christmas. All other days are work day and sure I take a half day here and there but overall there really just are not that many holidays. I find that because of the drop off my clients get fast efficient service and keys to celebrate Christmas and start the new year in style. If there are 100 people looking for the same home as you and 50 of them take a break for the holidays your chances just doubled to get an accepted contract.

Moral of the Story: It is a great time to get your new house for Christmas. The homes are there, the price is right and the rates are awesome. Time continues to pass whether or not we want it to. So why do we pause our lives and our futures, wants, hope and dreams for a few days that we are told to celebrate. Make the celebration more grand.

Consider having the holiday party in the new home before you replace the carpet and paint. No need to worry about making a mess!

Shopping should be done at the Mall. 5 reasons why shopping can cost you more money.

I love going to the mall. There are so many stores to choose from. I    get  the opportunity to check out all the stores looking for the greatest price. I am there for jeans and I do not have the need for the customer service team to assist me in trying them on. There is little value that staff at the retail stores can add other than an occasional explanation of the product. If I leave a store and then I decide to go back two hours later the price is still the same. Malls are great for a one stop shop and one size fits all type of product. My only question would be: Do you get your suits at the mall? If answer is yes then answer the follow up: Do you leave that day with the suit that you just bought?

Mortgages are an items that need to be tailored to your specific dimensions. They are not something that you can just pick a store and then check with another store and say the price tag was cheaper over here. Price Tags can be deceiving. In our industry they are called the “Good Faith Estimate.” Here are 5 reasons why shopping can cost you more money:

1. Rates are a moving target – In the mall you can go from store to store and then back to the original store and purchase the item that you found to be the most well priced. However, imagine if as soon as you left the store they had a price change for the worse. When you went back to buy the item that was initially $100 you found out it was $125. Had you committed ealrier in the day you would have paid $100. The flip side is you could come back and find the item to be $75 and feel like not only did you make the right choice but you got a deal. This is what is going on with rates. They change daily and in many cases multiple times a day. A Good Faith Estimate is exactly that an estimate. Some will give the the absolute best case scenario and others will price in the volatility of the market. The latter is done to prep you for the worse so that you avoid let down or shock late in the game.
2. Mortgages are Custom – There is not a one size fits all mortgage. They are custom tailored to meet the needs of the individual applying for the loan. When  you are looking at every store and comparing our GFE’s (small part of what we do) there will not be an extraordinary amount of work put into your file. Our job is to shop the best deal for you. This is what brokers do. See the definition of Broker brought to you here compliments of the free dictionary. In short we organize deals and negotiate contracts for a commission. The tailor is not going to begin cutting the suit before you buy it. You may get measured and fitted but the real action will not take place until you have committed. Common ways to show your committment are paying for the credit report and the appraisal for starters and providing all the documents to give you an accurate assessment.
3. Change in the Guidelines – While you are out looking at other stores to find the right deal for you other stores are changing what they offer. Imagine going back to the store and the item that you were looking to purchase says no longer in stock or discontinued. You may be able to find a used version online or from a store that you do not trust but you would have to weigh that risk on your own. Today’s climate has led to many changes in our guidelines. Many consumers missed the boat on Nehemiah. This was seller funded down payment assistance and it has been taken off the books. When you look so hard for the deal you may miss out on the opportunity of your life time. Don’t pick the fleck out the pepper!
4. Credit Scores – Each month just after the 3rd or so your active credit will report to the bureaus. If you have had new charges post to your debts or bought something new or inquired about a new car your score may suffer the consequences. If you were borderline 620 and your score drops below this mark your chances for an FHA have just taking you away from the Mall of options and sent you to one of two specialty stores. You know what that means right? Higher Prices. You are now going to pay more for your product through the specialty store and there is no guarantee that they will be able to stay in the market long. You have to protect your score and when you have it pulled by a Broker they have that score and can use it for up to 90 days before they would have to re-pull a new report.
5. Price is what you pay value is what you get – Often times as a consumer we are shopping for the best price. I can understand and respect this. I don’t want to pay more than I have to either. However, there are many more elements to the whole customer experience. You want to feel comfortable, informed, in the know, respected and Valued. Often times when you get a victory so to speak on the price you take a hit on the value. You will get the bare minimum but that is to be expected considering you paid the bare minimum. So I like to subscribe to the wise saying “Price is what you pay and value is what you get.” You cannot shop value in our market.

If you take nothing away from this at all please understand this: Shopping can cost you more than committing to the individual you feel most comfortable with. Shop for trust and information not for price. Ask someone to refer you to someone that you can be excited to work with. You will find by doing this you will get exactly what you are looking for. Malls are a moving target and are not a fair representation of our industry. We do not sell retail and therefore your rate and price may not be waiting for you when you come back. Leave the mall as something you do on the weekend with the family or friends. We are here to work with and for you not against. Businesses built by Referral receive nothing from charging you an unfair price for their product or service.

The Mall in Motion!

Risk Assessment Tools: DU and LP Automated Underwriting Definitions

In today’s market, the need for an automated underwriting approval prior to submitting an offer has become common practice. To be competitive the Listing agent or the bank that owns the property would like to know that you have been ran through our automated underwriting engines. Yes, they are computer programs that assess the risk of the file and determine the viability of the loan. It is only as good as the inputter and that is why in most cases brokers and loan officers are asking that you provide a backpack of information. In continuing our trend of Mortgage Definition Monday I have defined these terms below:

Hud has defined Automated Underwriting in their terms and glossary section as follows.

Automated Underwriting - loan processing completed through a computer-based system that evaluates past credit history to determine if a loan should be approved. This system removes the possibility of personal bias against the buyer.

Additionally, I will add that the computer is assessing the total credit risk of the buyer. The loan can still be declined even if it receives an automated approval for multiple reasons. Some of which may include but are not limited to: unacceptable collateral, unacceptable income documentation, drop in the borrowers credit, unacceptable asset documentation and wholesaler overlays that would override the automated approval for the specific wholesaler.

Automated Underwriting Systems has been defined well on Mortgage Professor’s website.

This definition is as follows:

Automated Underwriting Systems -A particular computerized system for doing automated underwriting.  Mortgage insurers and some large lenders have developed such systems, but the most widely used are Fannie Mae’s “Desktop Underwriter” and Freddie Mac’s “Loan Prospector”.

I will add that the systems are very accurate however again each of the approvals will be reevaluated manually by an underwriter to determine the completeness of the documentation. The underwriting systems are constantly being tweaked to include the newest guidelines however it would be appropriate to double check prior to issuing an approval letter. DU Refi Plus is one of the new programs that took a minute before it was available in the system. When this is the case you make get feedback that is not consistent.

I will continue to bring Mortgage Definitions to you each and every Monday. Until then have a great week.

God Bless,

Matt Freeman

Definitions taken from the HUD glossary and Mortgage Professor glossary. I have added to these definitons and included links to their sites for further verifications.

With or Without Harp here are 5 ways you might Refinance your Home!

Are you considering refinancing your home? You cannot listen to all the the talk of low Mortgage rates and not consider looking into it. Maybe you have some equity and would not mind taking out a little cash right now. The problem is the devil that is on your shoulders. Yes, there are naysayers out there that say that it cannot be done or that you would be crazy to cash out of your home right now. I know I get it. Jealousy is a disease of the worst kind. The bottom line is that if you are considering refinancing there are a few different options that you have.The following is a list of opportunities that may be available to you:

1. Streamline FHA – This is a simple and effective way to lower your rate on your FHA mortgage. If you currently have a rate that exceeds 5.875% then you may want to talk to your professional. There are limited costs such as title insurance, processing and few miscellaneous. You will receive a refund from the upfront MIP that you paid or financed initially and that can be applied to your costs. In most cases that I have done or seen the borrower brings their monthly payment to the close of escrow or less.
2. VA IRRL or VA Cash-out Refinance - The VA IRRL is similar to and FHA streamline. The goal is to minimize the cost of the refinance so the Veteran can lower the rate on their note. A Cash Out VA loan is the same as a traditional cash out mortgage but for Veteran’s only and with certain restrictions.
3. DU Refi Plus - This program is part of the HARP (Home Affordability and Stability Plan) that was recently released. If your loan is owned by Fannie Mae you can refinance your first Mortgage to 105% of the homes value. If you have a second in place then that second can be subordinated to an unlimited CLTV. This will vary case by case and lender by lender and many of the wholesalers have their own overlays. Overlays are added guidelines to protect their investors. Essentially stricter underwriting.
4. Freddie Mac’s Relief Refinance Mortgage – This Program is the same as the DU Refi Plus but Freddie Mac requires that you return to the current servicer of the loan. What this means is that if you have a Freddie Mac owned loan and that loan is serviced by Countrywide you will have to refinance with Countrywide. In my post Breaking News Fannie Mae and Freddie Mac to the rescue? I have listed the sites where you can find out who owns your mortgage.
5. Traditional Refinance – If you are one of the few that have equity in your home you have the ability to capitalize on today’s low rates. The one concern is the appraisal on many of these loans because often times the lender will do an AVM or Desk Review of our appraisal. This is especially common when you are looking to take cash out of the property. Here are a few ways to refinance traditionally:

• Rate and Term Refinance – A rate and term refinance is simply as it states. It is when you refinance to lower the rate or the term of you mortgage. Many cases you can do both at the same time. I have several clients that are taking advantage of this opportunity right now. They are cutting the term of their mortgage from 25-30yrs to 15-20 yrs.
• Cash-Out Refinance – A cash out refinance occurs when you borrow equity from your home. The cash may be used to pay off debt, home improvements, vacation, investing or whatever else you choose to do with it. WARNING – The appraisal on a cash-out refinance will be scrutinized the higher the LTV. Also, there are costs that are associated with a cash-out refinance that you will not incur on a rate and term refinance. It is part of the risk based pricing that Fannie Mae and Freddie Mac have gone to.
• Government Cash Out or Rate and Term Refinance - This is the same as the traditional except that it is bound by Government Guidelines. For Example FHA has limited refinance transactions to 85% LTV.

As always this information is to help you gain a better understanding on what may be available to you. I strongly encourage you to consult you mortgage professional and find out your options today!

Thank you,

Matt Freeman

Grandma and Grandpa Learned me Good!

Death is an inevitable part of life. Everyone will experience losing a loved one at some point of their life. Losing a loved one is a very difficult thing to process. It can stop you in your tracks and send your mind into warp speed. As your mind is warping you think about what I should have done, need to do, regret doing, and all the ways that you failed to connect to the loved one you have lost. Then you step back for a moment and begin to remember all the good things that you did with the loved one. You begin to see all the things that they had taught you that you did not know were lessons at the time.

As many of you already know I recently lost my Grandmother. Evelyn Freeman was one of the greatest people that I have had the opportunity to be influenced by. She was a mother, daughter, wife, grandmother, great-grandmother, friend, confidant, disciplinarian and most of all a teacher. It is because of my Grandparents that I am so sharp with my math skills. We would sit down at the table and play 10,000 which has various forms. We play with seven dice and have for the last 30 years. The game requires addition, quick number recognition and some luck if you want to beat my grandfather. After we took each other’s money playing 10,000 my dad and grandpa would begin to snore and grandma and I would sit up and play Skip-bo. This was another game that required math skills and the ability to plan ahead, have a strategy, notice potential obstacles, and be crafty and alert. I lost a lot but my grandmother would give in and let me win a few to keep me going. Many times she would stop and say did you see this Mathew? You could have done this if you would have been patient.

Here are a few things that Grandma and Grandpa taught me:

Commitment – 68 years my grandmother and grandfather were together. They were committed to their relationship that may not have always been just peachy. Through the good and the bad they stuck by each other and worked through it. Grandpa was a farmer and crops were not always plentiful. There were many times that their home value tanked and others when it sky-rocketed. Grandma and Grandpa knew a few things.

1. They always needed a place to stay and so they saw their place as “home” first and an investment second(it’s worth 77 times what they paid for it years ago).
2. Slow and steady wins the race. They were never in a hurry to make significant upgrades that they could not pay for with cash. Their “home” provided everything they needed. Although many of their friends were building palaces that eventually crumbled they stuck together.
3. Maintaining the goal of paying off the mortgage so they had to answer to no-one when they could have pulled out lot’s of money to do what they loved, Gambling.

Price is what you pay value is what you get – Grandma and Grandpa paid the price of hideous wallpaper that still resides on the walls in exchange for the ability to live without financial fears. As the crop failed they knew that they had enough seed stocked away to get them through the times. The wallpaper can wait. They did not rush to buy the next big thing. They also always stuck with a fixed rate mortgage. One term and done. If they refinanced they made sure they they stayed on track to pay off. Never backwards.

A slow start is a good start – This was a saying during every dice game when grandpa was losing. What he was really saying was: Every strong household needs a solid foundation. There is no need to rush anything in life. Live in the moment and understand what the future may bring. Know your history and be prepared for it even if it requires you to stay in second gear a little longer. “Don’t be lightning McQueen and allow your tires to blow!” When you build a foundation that is solid you will always catch up to the others. Just think about the three little pigs:)

Exercise good Judgement – Going back to skip-bo grandma was trying to tell me not to get ahead of myself. Study the board and my opponent, my market, prepare and seize the opportunity when it presents itself. Today’s market is that opportunity. Low prices and low rates. A perfect storm if you will. The government will pay you to buy your first home. Let your opponent show their cards and then make your first move. Always have a counter and never be too desperate.

1. Exit Strategy – So much of the market mess was created by the lack of an exit strategy. We knew how to get in and capitalize if the market stayed the course. We did not plan a strategy to get out. Long term hold, investment that pencils out from the gate, ability to stay the course as things go awry, and the ability to avoid panic. A carefully crafted exit strategy can be the difference. Grandpa and Grandma stayed the course and were always in a position to sell if they needed to simply because they did not leverage their home for toys.

Risk only what you are willing to lose - As I said earlier my grandparents loved to gamble. They always seemed to win although I know that this was not always the case.  What I began to realize as I grew older is that they only gambled with what they were willing to lose. This gave them the ability to to play freely. They did not have to worry about the downside of a bet. Lose and go home to play again another day. They did not gamble what they could not afford to lose. Many of us gambled with the very thing that we could not afford to lose. We took major risks, we rushed, bought more of a home than we ever deserved to own and now we are hoping that others can bail us out. Believe me when I say I am not criticizing. This was a hard learned lesson. For those that read this and say I have done everything right. My home is upside down and now I have to bailout all the others that made the mistakes my grandparents would have said:

1. No-one else matters. Are you selling your home? If no then remember that our home is worth 77 times what we paid for it. Have you lived in your “home” for 45 years. Be patient and you will be rewarded for your patience.
2. A slow start is a good start – so you started backwards – you are now only left with forward – cherish it!
3. Owning a home is like marriage. It is a commitment that you must stick with. Don’t divorce your home at the first sign of adversity. Remember what you loved about it in the first place and focus on that. In the waning moments of my grandmother’s life she looked over at my grandfather and said, “I always had an eye for that man.” She remembered that her commitment was to the very end.
4. Remain childlike. Continue to question until they day that you are gone. My grandpa said to me the other day, “Mathew I am always learning something new. I know a lot about farming but the things that they can do now days. I just finished learning about a new almond tree that does not require pruning or bees. Bees are $145 a hive driving the profit down. We will see how they yield in comparison but they are the new thing.” Perspective for a moment, this is my 93 year old grandfather who can spit out the number of days before corn will produce good silage. 105 days if you were wondering.
5. Use or lose it! Freeman’s live long and it is mainly because they continue to challenge themselves to the end. We are a stubborn bunch who are strapped with curiosity. That game 10,000 not only taught me the sharp arithmetic skills that I have come to love but it kept my Grandparents learning and teaching.

If you are one of the many that lost your home to foreclosure or had to short-sale just know that this does not define you. How you bounce back will. I strongly suggest Dave Ramsey’s Total Money Makeover it will change the way that you look at money management forever. Three years and some guidance from one of the most sought after finance educators in the country and you will have positioned yourself to buy again. If you are one of those that has done everything well and were a victim of the market answer this: Do you open your 401K statements and look at the balance weekly? If you answered know then stop thinking about the house.

In conclusion, when I was reflecting back on the life of my Grandmother I began to realize that I am in such a hurry sometimes. Why the rush? My grandmother lived 89 happy years and one of the last things that I heard her say was I always had an eye for that man. Take care of him. She knew what was ultimately important. She also asked to go in her home. Not a convalescent or a hospital room. No, she wanted to go in the very home that she spent her life in. Home-ownership to my grandmother was a commitment. One that was not rushed, doctored up, neglected, but one that was honored. She was humbled by the fact that she was allowed the opportunity to own acreage in the heart of the valley. Prime agricultural Real Estate. She was not willing to risk that and move to bigger and better. She gambled only what she was willing to do without.

In loving memory of Evelyn Freeman. You will forever be missed but never forgotten. May your lessons continue to be passed on for generations to come.

Wow that was Easy! FHA Streamline Refinance designed specifically for the consumer.

 

 

 

 

 

 

 

 

 

 

Confused Homeowner

 

Dear Confused Homeowner,

 First of all you are not alone. The FHA Streamline is a terrific loan and it is rather simple. Contrary to the media reports on lending. The FHA Streamline is designed to be simple and low cost. Many times the cost to close is simply the amount of the mortgage payment you would have made. Instead of paying your mortgage to your servicer you make that payment to the Escrow Company at close. Wholesalers have reduced their fees on these transactions and the many escrow companies have compatible rate programs. As is the case with every loan program each wholesaler has their own overlays or qualifications if you will. It is common to see a 620 credit score minimum, some require employment and others do not, no income and no assets are many times the case. Consult your professional to speak directly about your situation.

How the loan is set up and how the loan amount is determined is based on how long you have had your current mortgage. Based on the time that you have had the loan you receive a refund on the last upfront mortgage insurance premium you financed or paid for. For example: If you have had the loan 6 months you will receive 70% of the amount you paid. If you financed $3500 in upfront mortgage insurance premium you will be refunded $2450 applied to the payoff or closing costs. You will then have a new upfront mortgage insurance premium of 1.5% of the new base loan amount. There are a few ways to calculate your new base loan amount based on how long you have been in the current mortgage as well.

Here is a grid of the Upfront Mortgage Insurance Refund:

 

Upfront Mortgage Insurance Premium Refund Percentages
	Month of Year
Year	1	2	3	4	5	6	7	8	9	10	11	12
1	80	78	76	74	72	70	68	66	64	62	60	58
2	56	54	52	50	48	46	44	42	40	38	36	34
3	32	30	28	26	24	22	20	18	16	14	12	10

 

 

The bottom line is if you have an FHA Insured Mortgage currently and your rate is 6% or higher than it would be to your benefit to give your Mortgage Professional a call.

Matt Freeman