Archive for October, 2009

Should You Refinance?

by Justin Miller on October 21, 2009 in Refinance with No comments

The answer is that it all depends on your situation.  I know everyone has heard the saying that you should refinance when rates are 1% lower.  That isn’t always true, sometimes it is more and sometimes it is less.  The way to figure it out is by dividing the costs of the loan by the amount of monthly savings to see how long it will take to recover your money.  If you plan on staying in the home and/or keeping the loan for at least that long then it makes sense. 

If you have an ARM (adjustable rate mortgage) then you need to decide how long you are going to stay in the home and/or keep the loan.  If you are unsure then you may want to think heavily about refinancing since rates are at historic lows.  There is no sense on risking it.  Look how many people are in trouble right now because they took out an ARM.  The article below has some good advice for you too.

http://money.cnn.com/2009/10/20/real_estate/refinance_adjustable_mortgage.moneymag/index.htm?section=money_realestate

More Drama With FHA & Some Stats

by Justin Miller on October 20, 2009 in FHA Loans, General News with No comments

Apparently FHA is currently underequipped to handle their exploding market share and did poorly on an internal audit.  This isn’t a surprise to me. 

The Wall Street Journal reported that.  “The review found that the FHA didn’t coordinate well between its various field offices to collect negative information on lenders that were seeking FHA-approval and that it failed to collect required fees, documents and certifications from lender applicants. For example, a review of 22 approved lender applications found that just one application had all the required supporting materials, while the remaining files were incomplete and lacked from one to five required documents.”

This is a pretty big statistic and of course they can’t handle it.  “Some 59% of new home buyers are using government-backed loans from the FHA and other agencies, according to a survey of home builders by John Burns Real Estate Consulting, an Irvine, Calif.-based consultancy. The FHA accounts for nearly half of all mortgages, while loans from the Department of Agriculture and the Department of Veterans’ Affairs account for another 10% of all loans for new homes.”

I am also amazed at how many people I hear that are buying homes with cash.  I wondered what the percentage was and now I know.  “South Florida also has the highest share of all-cash new home purchases, at 22%, largely the result of investor purchases of condos and other attached homes. Southern California and the U.S. Northwest had the highest share of purchases with jumbo loans, at 15% and 13%, respectively.”

http://blogs.wsj.com/developments/2009/10/20/fha-backs-more-than-half-of-new-home-loans/

First-Time Home Buyer Tax Credit Fraud

by Justin Miller on October 20, 2009 in General News with No comments

This should come as no surprise.  Anytime there is free money out there people will always try to get their hands on it.  Some may have been misled by the Accountant or just don’t care and want to try to take advantage of it.  If you want to find the correct information as to whether or not you qualify for the first-time home buyer’s tax credit, go to www.irs.gov.  There is a big difference between a government website than some article or Blog you read.  That goes for anyone’s Blog including mine.   

The Wall Street Journal reported that “The Internal Revenue Service is examining more than 100,000 suspicious claims for the first-time home-buyer tax break, another sign of potential trouble for the soon-to-expire program.  The IRS said it was investigating 167 “criminal schemes” involving the credit, according to the subcommittee. IRS officials on Monday declined to describe the suspected schemes or provide additional details.”

Hopefully this doesn’t have a negative effect on whether or not they will extend the tax credit.  If they are to extend it I think that the best option is the one that Kiplinger’s Letter had which meant you just had to have an offer accepted before the end of November.  You wouldn’t have to close by then. 

http://online.wsj.com/article/SB125599683058895389.html#mod=todays_us_page_one

The Best Mortgage Servicers Are….

by Justin Miller on October 19, 2009 in General News with No comments

J.D. Power & Associates has released the 2009 Home Mortgage Servicer Satisfaction Study.  BB&T and Regions were the best.  To view all of the ratings, click here http://www.jdpower.com/Finance/ratings/home-mortgage-service-satisfaction-ratings 

It shouldn’t surprise you that IndyMac, American Home Mortgage, and Aurora (Lehman Brothers) were the worst. 

http://www.jdpower.com/finance/articles/2009-Home-Mortgage-Servicer-Satisfaction-Study 

More On Buying A Condo

by Justin Miller on October 18, 2009 in Conventional Loans, FHA Loans, Mortgage Education 101 with No comments

Here is another great article that talks about buying a condo.  If you read my post the other day on this you will see that they touch on the same points that I do.

I won’t go into a lot of detail on this again because the article and my previous post take care of most of it but pay close attention to the reserves, delinquencies, and overall financial position the condominium project is in.  There are a lot of condos down here in South Florida that you should not be buying in even if there is a special program that will allow you to finance it.

http://online.wsj.com/public/b/article/SB10001424052748704322004574475640874117808.html

What We Have Learned From The Housing Crisis

by Justin Miller on October 18, 2009 in Guideline Changes, Mortgage Education 101 with No comments

I guess you could say a little.  Fannie Mae is about to release their new guidelines on December 12th, 2009 that will impose a maximum debt to income ratio of 45% and up to 50% with compensating factors.  That’s right you have been allowed to go higher than that.  It is scary.

This should have been implemented a year ago but I guess better late than never.  Where I am going with this is that people can and still do spend more than they should on a home.  You really shouldn’t be above 36% on your debt to income ratio but there are instances of why some would and should be able to go higher.  One example would be for someone who is self-employed and writes everything off. 

I think the article below said it best.  “”We wouldn’t be saddled with all this debt if we were a financially literate nation,” said Lori Gay, president of nonprofit lender Neighborhood Housing Services of Los Angeles. “But we’re not. We’re a financially illiterate people.”

People hear in the media that now is the time to buy, it’s more affordable than ever, the $8,000 tax credit, etc. that everyone feels that they can buy.  I am blown away by some people who want to buy but can’t come close to qualifying and others who do buy, putting only 3.5% down, the closing costs being paid by the seller, and they have no money left over after closing.  What happens if your dryer breaks, roof problems, a hurricane hits and you have to come up with your deductible, etc.  I could go on for days. 

There is absolutely nothing wrong with renting and not everyone should or needs to own a home.  Make sure you are dealing with a professional mortgage consult who will guide you in the right direction. 

http://www.cnbc.com/id/33345675 

Are Smaller Community Banks Better For Your Mortgage?

by Justin Miller on October 18, 2009 in Mortgage Education 101 with No comments

The article below from CNBC thinks that is the case.  There is some truth behind this logic.  I work for a small community bank, Great Florida Bank, and you would think I would be the first person to agree with this and/or use this as a sales pitch.  Well, I am not going to do that.  I personally like smaller community banks but that’s just me. 

In this current environment with low interest rates I have been seeing most offering very similar rates.  If someone is advertising or quoting a much lower rate than everyone else you better be careful.  There are probably additional fees involved or they are just doing this to lure you in.  If it seems too good to be true it probably is. 

Although you don’t want to pay .5% higher on an interest rate than what Freddie Mac is reporting for average interest rates, it isn’t the most important thing in my opinion.  How good is the interest rate if you don’t close on time and the rate lock expires or if it doesn’t close at all.  I have said this numerous times and will continue to say it, you have to deal with an expert no matter how perfect your credit, income, down payment, etc. are. 

No matter what you are buying (a service or product) you can always find someone cheaper but in the end you WILL get what you pay for.  Just keep that in mind.  Lastly, make sure you are dealing with someone locally because the rules and guidelines are different in every state, city, etc.  That is even more true with South Florida because we were hit so hard with foreclosures. 

http://www.cnbc.com/id/32893203/ 

Important Info To Know When Buying A Condominium

by Justin Miller on October 16, 2009 in Conventional Loans, FHA Loans, Mortgage Education 101 with No comments

This information is very important for you to understand.  I hear a lot of people wanting to know whether a condo is FHA approved or not, put 25% down on a primary residence, or do the Fannie Mae HomePath loan so that they don’t have to worry about what is wrong with the condo project.  It is not just about being able to get financing on a condo.  It is about whether this is something a borrower should be buying.  What I mean by that is if you have a condo that can get approved for financing because the bank does not need to get info on the condo project, that doesn’t mean they should buy it.  If the delinquencies are high, they don’t have reserves, and many other items, the buyer is most likely going to get hit with assessments down the road, it affects the marketability of the condo, and the value of the condo.

A lot of people will not look out for the buyer’s best interest and that is why it is so important to know this and/or use someone who will take care of this for you.  Some of this will change on November 2nd, 2009 when FHA starts to review these condo projects again (some haven’t been reviewed for years) update their list, and/or you have to get a full approval. 

http://www.marketwatch.com/story/dont-let-condominium-reserve-funds-run-low-2009-10-15?siteid=rss&rss=1

Walking Away From A Mortgage

by Justin Miller on October 14, 2009 in Bailout, Foreclosure, Loan Modification with No comments

I am sure many people will get angry about this article and have been upset with people who can pay their mortgage but walk away.  As the article states, they are using it the way it is designed to be used.  Unfortunately the systems are built where you can do this.  I don’t know how much you know about credit repair but my general understanding is that the burden of proof is on the 3 credit bureaus, Experian, Trans Union, and Equifax.  So what these credit repair companies do are bombard the bureaus with letters, one after another, until one of the letters doesn’t get a response within 30 days and then they have to remove that account from the credit report.

How do they not catch on to all of this?  It amazes me how the system is built to where you can pretty much just “scam” it.  Borrowers are strategically defaulting on their mortgages because they are so far upside down that the benefits not paying on something that is no longer a good investment outweigh the costs of their credit score going down.

“Self-assigned guardians of financial ethics see the willingness of borrowers to abandon their mortgage debts as a sign of the “erosion of social and moral standards.” The aim of these critics is to shame debtors into sticking with their mortgages. That’s something debtors should take with a grain of salt. There are many good reasons to keep paying your mortgage and avoid the black mark of foreclosure, but the immorality of sticking the bank with a loss isn’t one of them.”

http://www.msnbc.msn.com/id/33295860/ns/business-the_big_money/ 

FHA Defends 3.5% Down Payment

by Justin Miller on October 13, 2009 in FHA Loans with No comments

The head of FHA said that raising the down payment for FHA loans would hurt an already fragile housing recovery.  I agree to a certain extent but they do need to tighten FHA guidelines.  I know that this will hurt the business in the short term but in the long run it will prevent this from happening again.  I say this because I don’t want for anyone to have to go through this housing crisis ever again even though I know we will.  There have been a lot of good people who have lost their homes and business due to irresponsible lending. 

But Mr. Stevens warned against “jumping to conclusions” and making credit standards tighter just as some signs show that housing is beginning to stabilize in certain housing markets. “When I see members of Congress move a bill out that says raise it to 5%…I get very concerned,” he said. “It isn’t the down payment on its own that causes a default.”

He does make a good point but you have to tighten something if we continue to have defaults.  My thought is if it is because some of these borrowers are losing their jobs they should sign up for the Rainy Day Foundation which is a 1 time cost of $500 and they will pay up to $1800 of your mortgage payment for 6 months if you lose your job within the first 2 years of buying.  You cannot be self-employed. 

http://blogs.wsj.com/developments/2009/10/13/fha-head-rejects-calls-for-higher-down-payments/ 

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