Michael Creed's Blog

Tips The Mortgage Pros Use When They Shop For Home Loans

Refinance loan shopping may not sound as fun as shopping for a car — until you see the thousands of dollars your research can potentially save you! Still, time is precious. Why not fast-track your refinance loan education by taking some tips from a pro?

Tip #1: Know what you want your refinance loan to accomplish

For example, do you want to…

• Lock in the lowest possible rate for the longest period of time?

• Lock in the lowest monthly payment for the next few years?

• Get the most cash out from available home equity?

• Minimize interest expense and maximize equity build-up?

• Consolidate high-rate, non-tax-deductible consumer debt?

• Add a home equity line of credit for unexpected expenses or opportunities?

These are just a few of the possible goals you may have. And for each one, a different loan may be best-suited to do the job.

Tip #2: Review your whole financial picture, not just a refinance loan

Most mortgage professionals understand the multiple uses of refinance loans, and step back to look at the whole picture before they jump at a pretty interest rate. For example:

• Do I have enough equity to pay off other debts and lower overall monthly payments?*

• Are there home repairs or renovations I can finance at low first mortgage rates?

• Is there a child who may need cash for college funds soon?

• Is there need for a business, investment property or vacation loan on the horizon?

Tapping your available equity when you refinance may be the most cost-effective solution to many of these scenarios—and more.

Tip #3: Work with a refinance loan expert who puts their expertise to work for you
 

Mortgage pros either handle their own refinance loans, or hand-pick the person who does. That’s because they know who holds the key to a good experience. It’s the loan consultant who basically quarterbacks the financing transaction. It may be a good idea to find one who will:

• Share what they know about interest rates, loan options, rate locks, hidden costs and the potential trade-offs between options.

• Run the numbers to help you make decisions that improve your bottom line.

• Treat your loan like it’s their own—and has the satisfied customers to prove it! Check out my proof by reading my customer testimonials!

*Refinancing or taking out a home equity loan or line of credit may increase the total number of monthly payments and the total amount paid when compared to your current situation. Loan consolidation may result in an LTV for which mortgage insurance would be required. Many of the ideas in today's posting came from http://www.countrywidecredithelp.com/archives/2007/06/01/refinance-loan-shopping-tips-the-mortgage-pros-use-when-they-shop-for-home-loans/

This week I thought I would share a little insider's information with you that I found interesting regarding fraud that is rife in my industry. 

Every Friday, I get an email from Miss Busta, the Chief Advisor of Things Both Relevant and Interesting in the Non-Conforming Loan Market for one of our wholesale lenders. 

Her weekly column is done in a question/answer format and I chose to share with you her light-hearted, yet very true, comments about the past subprime market because I think you will like to see her take on it.

Dear Miss Busta,
Sure, you might talk a good talk, but I know for a fact that subprime loans are fraudulent. Nice try.
-- Shining My Halo in Omaha

Hello Halo,

As with most things in life, you are right and you are wrong. You are left and you are right. You are bitter and you are sweet. (Except for you - you may be a skosh more bitter than the rest of us.) If you're willing to listen to another point of view, I'll make the effort to enlighten you. 

Any lender worth their salt won't fund a loan that smells fishy, looks bad or otherwise flies in the face of good common sense. "Subprime" is actually a misnomer; the term non-conforming is more accurate in that these loans don't conform to standard guidelines. When you're flapping your wings over fraudulent things, what you're probably referring to, dear angel, are specific products that were all the rage not that long ago. You know a few of them by name - NINA, SISA, SIVA - and no, I don't mean the Russian sisters. [for those readers that do not know what these acronyms mean, they are referring to loan programs that require No Income No Asset (NINA), Stated Income Stated Asset (SISA) or Stated Income Verified Asset (SIVA)] These four-letter loans were fodder for fraud -- created for borrowers who didn't want to show documentation and, as it turns out, ideal for those with weak moral character. (It's so hard to be good and so easy to be bad.)

Do you remember what we called these gems?  Alt-A - the category of loans falling between prime and subprime. The F.B.I., with whom I've had a long and fruitful association, reviewed millions of loans and published a Mortgage Fraud Report that you can find here: http://www.fbi.gov/publications/fraud/mortgage_fraud07.htm

Guess what they discovered? The fraud rate on Alt-A loans is 300% higher than subprime. And those are the facts. Even Fannie Mae's post-purchase loan reviews show that monkey business with Alt-A loans is higher overall.

You know that old saying about how to tighten a bolt? Crank it 'til the bolt breaks, then back off a notch. That's exactly what happened to just about every lender out there; the guidelines got way out of whack. Now, business is getting back to the basics and Alt-A has pulled a disappearing act. At Accredited, we make sure that each file is meticulously underwritten so that the loan and the borrower are perfectly matched. That way you, the borrower, and my company are all around and on friendly terms well into the future.

As my favorite uncle Edward R. Murrow used to say, "Anyone who isn't confused doesn't understand the situation." Consider yourself both Bustafied and unconfused.
 

To learn more about Miss Busta, visit her site at http://www.missbusta.com/

Find the Perfect Nest for You and Your Family

If you're thinking about buying a new (or new to you) home, my list of the "Top Items to Look for when House Hunting," along with the help of your Realtor^®, can help to get your search off on the right foot. While the number of rooms, condition of the kitchen, and size of the yard are all important, there are other things to consider before you make an offer.

1. Location (location, location)
   It's been said that the three most important things to think about when buying are home are location, location, location. You can live with almost any imperfection in a home if you love the neighborhood and your neighbors. You can change almost everything else. But, once bought, you cannot change your home's location. When you go house hunting, consider any potential home's proximity to your work, the charm of the neighborhood, how the home is situated on the lot, ease of access, noise from neighbors, traffic, or pets, and access to parks, shopping, schools, and public transportation.

2. Factors of Situation
   Look at the particular site of the home. If the home is on a hill, does it have a view, a walkout basement, or lots of stairs to climb? Do neighbors' windows look directly into the home? Is the yard suitable for kids, pets, gardening, or other uses? Is access to the property safe regarding driveway elevation, stairs up to (or down to) the front door?

3. Check Out the Neighborhood
   Be sure the neighborhood, and not just the house, meets your expectations. Drive around on week days and weekends, during the day and in the evening. Are homes in the neighborhood consistent in size and features? Do the neighbors keep the yards clean and tidy or are there old cars and trash laying everywhere? Is the neighborhood safe enough for people to walk, run, or bike and are there children playing in the yards?

4. Consider the Home's Curb Appeal
   Your home should reflect your lifestyle. Do you live a laid-back life? Then you might not want a formal Victorian or Tudor style home. Something more simple and contemporary might be in order. Look at the exterior features; a brick home is easier to maintain it is still easier - unless you live in an earthquake-prone area! Is the roof in good condition? Is the landscaping attractive and are the sidewalks leading to the home safe?

5. Size and Floor Plan
   You may be thinking about buying your dream home. But is your dream home impractical? Do you really need four bedrooms and four baths when you live alone? A large home can give you the extra space you've always wanted for a home office or crafts or art projects. But you'll pay higher heating bills and have higher taxes. It will take more furniture to furnish and money to decorate. Take the time to think logically about how the new home space will be used and whether it will fit your lifestyle now and in the future.

6. Bedrooms and Bathrooms
   Decide how many bedrooms and bathrooms you really need, and only look at homes that meet your criteria. It would be a shame to fall in love with a cozy, charming cottage that just isn't big enough. An extra bedroom is always a plus, as it can be used for a home office, craft studio, or guest room. If you think you'll be adding more room later, be sure to consult an architect who can advise you on space planning, lot usage and city regulations. If you think you may be needing more room later (i.e. kids), it may be a better idea to plan for that before buying that planning on a major remodel at a later date.

7. The Kitchen
   If the kitchen is the heart of your home, don't settle for a home with a kitchen that just won't work. You can always remodel, but it's very costly. Can you just replace cabinet faces and counter tops? Will an inexpensive makeover be sufficient? Don't worry about appliances, as they can usually be easily replaced.

8. Closets and Storage
   Older homes tend to have little closets and not a lot of storage space. If you have lots of sports equipment, craft supplies, out-of-season clothes, and holiday decorations, be sure you know where it will go in your new home. Newer homes tend to have big closets and lots of storage. You can always add storage space, but you might have to sacrifice living space in your rooms.

9. Windows and Lighting
   Do you love a bright, sunny room or do you love privacy? Look at a home with light and sunshine in mind. Look at the locations of electrical outlets and fixtures. Will they accommodate your lighting needs? Is there recessed lighting in the kitchen, cove lighting in the family room and a lovely chandelier in the dining room? If not, you can add them later, but it's nice to have it in place when you move in.

10. Finishing Touches
    Sometimes the simplest home looks spectacular because of the installation of moldings, hardware and a fireplace. If these elements are important to you, look for them while house hunting or be ready to add them after you move in.
     

If you keep these specific elements of a home in mind, your house hunting will be more successful, and you'll likely end up with the home of your dreams -- Best of luck to you!

Most homeowners wait until their houses have sold before having a yard sale, but this is usually a mistake. Unless you are a super-organized person who regularly donates unwanted items, throws broken things out and saves nothing you cannot use, it's a good idea to have a yard sale before you even think about putting your house up for sale.

Do a thorough cleaning of your home and you are sure to find piles of out-dated clothing, boxes of dishes you never use, old bedspreads, draperies, etc. If you sell all of this useless clutter now, your home will look neater, and therefore more attractive (read: "bigger") to potential buyers.

Joint Sales

Make it a joint sale with a neighbor. It's more fun to share the event with a friend, and when those eager buyers descend upon you, it's good to have all the assistance you can get. Also, by pooling your efforts with a neighbor, you'll double the size of the yard sale, which will probably draw far more buyers.

Advertise

Advertise in local newspapers and be sure to list some specific "goodies" to attract buyers.

Post Signs

Make a lot of large, readable signs with clear directions to your sale, and post them around town.

Charity

What doesn't sell should go to Goodwill, the Salvation Army or to your church bazaar, not back into your house. If charity won't take your leftovers, head for the nearest dump and make a deposit.

Pricing

Price your items realistically and expect to barter. Keep remembering that your goal is to get rid of your stuff; not make a ton of money.

Your mortgage is not a one-shot deal; below you will find tips to help you determine if you'll benefit from refinancing:

Sometimes we just want a do-over in life. And that’s true even when it comes to your home mortgage. Are you a few years into your 30-year commitment, and itching to change the interest rate, term or size of your loan? If you’re feeling this way, you’re not alone: this type of application (refinance), according to mortgage giant Freddie Mac, comprises nearly 50% of all mortgages applied for today! Here are some signs that you might want to refinance too:

You’re Feeling Anxious - Biting your fingernails over your ARM (adjustable rate mortgage)? Stop fretting about potential interest rate increases and switch to a fixed-rate loan.

You’re Feeling House Rich - You want a wad of cash – for home improvements, college tuition, a trip around the world -- and your house has appreciated significantly since you bought it. Rather than taking out a separate loan, you could trade in your old mortgage for a bigger one, and pocket the difference. Cashing out the equity in one's home, according to Freddie Mac, has become the most common scenario among borrowers that are refinancing their mortgages today.

You’re Feeling Poor - Again, your house has appreciated, but you have other existing debt that carries a higher interest rate than your mortgage. You can use the cash you get from refinancing to pay off that credit card.

You’re Feeling Settled - Even if you lower your interest rate and – by extension – your monthly payment, refinancing still might not make sense. That’s because there can be a lot of fees associated with refinancing – application and appraisal fees, to name a few – and they can easily run into the four-figure range. You want to be reasonably sure that you’ll be in your house long enough to recoup those costs through monthly savings. Do the math to see where you will stand. Click here for more of a discussion on the math.

You’re Feeling Squeezed - You need to lower your monthly payment and are willing to go with a longer-term loan, extending it from 15 to 30 years or even 30 to 40 years. This could work in reverse too: you have some extra money in the monthly budget and want to go from a 30-year to a 15-year mortgage. Doing so will likely get you a lower interest rate and pay off your home mortgage faster. If only we all had this problem!!!

You’re Feeling Responsible - Good for you! Through years of good financial behavior, you have put those earlier credit score dings behind you. If your credit score has improved significantly, you could refinance at a lower interest rate. Check your credit report, for free, once a year, at www.annualcreditreport.com.

You’re Feeling Cheated - Why should you be paying 7.5 % on your loan when your new neighbors just locked in at 6.5%? Visit our loan calculator to find out how much you could save by converting to a lower interest rate mortgage.
 

Do you need to read more before knowing if now is the right thing for you?  If so, read this article that I posted back in March more more tools to help you discern if now is the right time to act.  Or, if you would rather talk about it, please contact me for a free consult.  Remember, my calls always forward to my cell when I am not in the office so you are welcome to call me in the evenings or on the weekends if you would like to talk. 

Thanks for reading!