Category Archives: Mortgage/Lending

New Mortgage Program for Helping Out Family Members

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Finally there is a mortgage program available that are designed for when someone is buying a home for another family member.   Previously, if someone wanted to buy a home to have their elderly parents live nearby, unless it could be classified a second or vacation home, the borrower would need to use non-owner occupied financing (much more expensive in rate and cost than owner occupied or second home financing).   

In addition to helping out the folks, this new program, the Family Opportunity Mortgage, works for parents buying a home for their college student and parents who would like to help their disabled adult child buy a home. 

Here’s the skinny:

Assisting a College Bound Student

  • The child must be enrolled in college.
  • The property must be located close to the college the student is enrolled.
  • Property must be a reasonable distance from the parents home.   
  • Property cannot be rented and the child must occupy the property for a minimum of one year.
  • Parents cannot own another second/vacation home in the same location as the student’s home.
  • Parents qualify for the loan, the child does not.   If the child is old enough, they can be on the mortgage with the parents, however it’s not qualified required.

Assisting an Elderly Parent

  • Elderly parent must have insufficient income to qualify for a mortgage or be unable to work.
  • The individuals qualify for the loan.   The parents can be on the mortgage although it is not required.
  • There are no distance requirements between the elderly parent and the individuals (their child).

Assisting a Disabled Adult Child

  • Disabled adult child must have insufficient income to qualify for a mortgage or be unable to work.
  • The parents qualify for the loan.   The parents can be on the mortgage although it is not required.
  • There are no distance requirements between the elderly parent and the individuals (their child)
  • Disabled adult child occupies the property as their primary residence.
  • Parents may all ready own their own primary residence.

It’s about time!  🙂  

Ba-Ba-Ba-Benny and the Fed

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Aw come on and sing along with me (Benny and the Jets).   Ben just surprised many by dropping both the Fed Funds and the Discount Rate by 0.50%.    It’s too soon to tell how this may impact mortgage interest rates…however it (the Fed Funds rate) directly drops the rate home equity loans are based on to 7.75% (Prime Rate).    You can see by the chart below that waiting on rate reductions from the FOMC to impact long term mortgage interest rates may not be the move for you to make.

[photopress:SeptAlertChart.jpg,full,centered]

Chart compliments of Loan Tool Box

The Fed based this reduction due to ” the tightening of credit conditions has the potential to intensify the housing correction”.   To read the entire press release, click here.

FHASecure: A Helping Hand for Those Who Did Not Refinance in Time

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Update January 9, 2009:  This program is no longer available effective December 31, 2008.

[photopress:piggydrown.jpg,thumb,alignright]This afternoon I received our Mortgagee Letter from HUD with the nitty gritty on FHASecure.   Since our company is a HUD Approved Mortgagee lender (we’ve been providing FHA financing since our inception back in 1976); we are also approved to help distressed home owners who have adjusting ARMs via a FHASecure refi.

FHASecure is “a temporary program designed to provide refinancing opportunities to homeowners

Quick reminder to lock in your mortgage

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On the first Friday of every month, the Jobs Report comes out.   Tomorrow is the big day.    As I’ve written about this topic before, this economic indicator tends to have a huge impact on mortgage interest rates.  

It is the consumers choice to float or lock a mortgage interest rate.   My preference is generally always to lock.   Especially during these historic times in the mortgage industry.   Locking in a mortgage interest rate not only secures that rate for your loan, it may also preserve that mortgage program.     With some lenders pulling back on certain programs, a few of them are honoring the loans that are locked and underwritten.  

Please do not assume that your mortgage rate is locked.   Make sure you have a written lock confirmation (a Good Faith Estimate is not a lock confirmation).   If you have a mortgage in process, you may want to contact your Mortgage Professional to confirm it is locked and what their read is on the current situation.  

It pays to be extra cautious right now.  

What is your Mortgage Exit Strategy?

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Unless you have a long term fixed rate mortgage, you should develop an exit strategy.   An exit strategy is a well thought plan on how you’re [photopress:airplaneexit.jpg,thumb,alignright]going to leave your current mortgage.  Every time you board an airplane, the Stewardess reviews the “exit strategy”.   They’re not planning on an actual emergency landing, they are simply preparing you for a worse case scenario and informing you where the exits are and what you need to do in that event.  

You should have a plan if your current mortgage is:

Having a plan (being prepared) does not mean waiting until you receive a notice from your mortgage company that your mortgage payment is hiking because your fixed period on your ARM is over.   You need an exit strategy because once fixed period is over and your mortgage adjusts, odds are that your new mortgage payment will not be desirable or affordable.  

You need to start developing your plan well in advance.    Here’s what I recommend:

  1. Find the Note for your mortgage (deed of trust) and determine what your new rate may be using the worse case scenario.   If you have an ARM, you can figure this out by adding the first cap to your interest rate.   For example, if you currently have a 5/1 ARM with a note rate of 5% and the first adjustment rate cap is 5% (5/2/5 is a common cap structure), your new rate could be 10%.   If the first adjustment cap is 2% (2/2/6 is another possibility); your new rate could be 7%.   If your ARM has an interest only feature and will also be converting to amortized payments (some have longer interest only terms beyond the fixed rate period), you’re in for a double whammo if you’re keeping the mortgage.
  2. Determine what your worse case payment may be.  Your new payment will be amortized over the remaining term of the mortgage.   Use an amortization schedule to see what your mortgage balance will be at 60 months (using the 5/1 ARM scenario) and figure your payment based on the maximum possible rate amortized for 300 months.   This new payment does not include taxes and insurance.  In fact, anyone with an adjustable rate mortgage, regardless how long the remaining fixed term is, should contact their LO to determine what their “worse case payment

LPMI, PMI and 80/20 Mortgages…Oh My!

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Note:  I should have titled this post:  “LPMI, PMI and Piggy Back Mortgages…Oh My”.  I just realized my error thanks to Bill’s comment.   My bad…my apologies!  And there’s no way for me to 80/20 in the title. 

LPMI (Lender Paid Mortgage Insurance) is one of my favorite mortgage products to use for clients with less than [photopress:wiz.jpg,thumb,alignright]20% down.   Here are some of the benefits of an LPMI mortgage:

  • Loan amounts up to the conforming loan limit (currently $417,000 for a single family dwelling).
  • Mortgage interest tax deductible for adjusted gross incomes over $100k (unlike PMI).
  • Convenience of one mortgage payment vs. two mortgage payments on a property.
  • Often provides lower payments a lower total mortgage payment than the “piggy back

Bribery to Work with the Builder’s Preferred Lender

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When ever I’m working with a home buyer who may be considering new construction, I know I might lose them to the builder’s in house lender.   Often times the builder will offer an enticing credit to the buyer’s closing costs only if they obtain their financing from the builder’s preferred lender.

How can having a Loan Originator (in this case, they are a retail sales mortgage person, or what ever Jillayne refers to them as  🙂  since they wait to be fed from the builder, often sitting at the construction site) who’s livelihood is supported by the Seller (i.e. the Builder) be in the Buyer’s best interest?    Who is looking out for whom?  How do you know the Loan Originator will not disclose the Buyer’s private information to the Builder if pressed?

Enough of my questions…here are some of my recent dealings with the Builder credit when working with the preferred lender.

UPDATE 12/12/2018: Unfortunately, it looks like part of the this original post is missing.

Two offers to refi in one day…just how lucky can a gal be?

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In our mail today, we received two very attractive offers to refinance our current mortgage.   Wow, how [photopress:MPj03876060000_1_.jpg,thumb,alignright]exciting!  Here are the details:

Offer One–This is your “Final Notice”

Reducing our current mortgage rate to 1.75% for 5 years.   A Senior Rate Reduction Consultant is waiting to assist you.   The APR on this offer is 6.308%.

This offer will expire on May 14, 2007.  Here’s my favorite part:  No other notices will be issued and no representatives will call you.    (Darn…the clock is ticking!)

Offer Two…Takes the Cake! (It’s even printed on pink paper)

“Your Mortgage Master loan in the amount of $375,000 can be restructured to a (you better sit down for this one) a 10 year payment at only $79.  This is not a typographacial error.   Your payment rate is only 1/4% and is fixed for 10 years….

Call us today and have no house payments until June 2008“.

Of course I had to call them!  The gentleman was very friendly (much nicer than the chaps I dealt with trying to help Jillayne uncover the Vacation Mortgage).    First you must meet their guidelines.   “Slick” tells me that one of their biggest “catches” to get around is loan to value…lucky for me,  we meet the 70% or less LTV requirement.   You also must have credit scores of 680 or better and not plan on moving for 3 years or you’ll have the opportunity to pay a prepayment penalty.

Me:  What is the rate based on?

Slick:  0.25% interest only

Me:  I mean, what is the base rate?  How much is the deferred interest?

Slick:  Wow, you seem to know a lot!  6.750%

Me: At what point does the mortgage recast?

Slick: 150% (yep…that’s what he said….150%).   I can’t believe it either!

This means that every month you make the 0.25% interest only payment of $79; the difference between that and the fully amortized payment is tacked on to the back of your loan.   This difference is $2,322.17.

This would be allowed to continue until my original mortgage balance of $375,000 reaches $562,500!   I estimate this would take 80 months (or just shy of 7 years).  Although the rate is fixed for 10 years, the loan will recast into a fully amortized mortgage when it reaches the 150% cap.

If we assume that my house is worth $550,000 today and has a mortgage balance of $375,000.   In 7 years, we know that if I did this refinance with Slick, my mortgage balance would be $562,500.   We really have no guarantees on what my $550,000 home will be worth in 7 years.    Not to mention what would happen to my credit scores having a mortgage balance that was increasing over the original loan balance.

Last but not least…we’ve finally uncovered the “vacation mortgage” mystery!  With this program, they also offer to give you 12 months off of your mortgage payment as a “credit”.  It’s very easy for this type of lender to do.   At $79 a month, 12 months of mortgage payments would be $948.   It’s simply priced into the loan by rebate, margins or the prepayment penalty.  

Pretty slick….huh?