Monday, December 22, 2008
First-Time Home Buyer Tax Credit Available Until July 1, 2009
The Housing and Economic Recovery Act was signed into law by President Bush on July 30, 2008. A key part of the legislation is the First-Time Homebuyer Tax Credit. Under the law, first-time homebuyers are eligible for a tax credit of 10% of the price of the home they purchasing up to $7,500. There are income limits of $75,000 for an individual and $150,000 for a family. Individuals earning up to $95,000 and families earning up to $170,000 are still eligible for a reduced credit. Keep an eye out for additional programs that become available to help stimulate the housing economy.
Mortgage Rates Hit Historic Lows!
As you may have read in the paper or seen on TV, the United States Treasury has taken a major step toward resolving the financial crisis by buying large quantities of mortgage backed securities (MBSs) from lending institutions. This creates a sense of demand for the MBSs and in turn drives up their value. Mortgage interest rates work in reverse of the value of MBSs. So – when MBSs are valuable, mortgage rates tend to fall. This is exactly what we are experiencing right now. As of 12/16/08, our 30 year fixed is at 4.875% and our 15 year fixed is at 4.75%. Historically, these are some of the lowest mortgage rates we’ve ever seen.
We have even heard talk recently of the Treasury creating a program that will provide incentive for banks to offer loans to consumers at 4.5%. As of now, this program is slated to be available only to those purchasing homes and not refinancing. The funds aren’t currently available and many people believe they won’t be until after President-Elect Obama takes office.
For those who recently purchased a home, you are eligible for a refinance after 90 days.
We have even heard talk recently of the Treasury creating a program that will provide incentive for banks to offer loans to consumers at 4.5%. As of now, this program is slated to be available only to those purchasing homes and not refinancing. The funds aren’t currently available and many people believe they won’t be until after President-Elect Obama takes office.
For those who recently purchased a home, you are eligible for a refinance after 90 days.
Monday, November 10, 2008
Fannie Mae/Freddie Mac Under Government Control
On September 7th, 2008 Treasury Secretary Henry Paulson and Federal Housing Finance Agency (FHFA) Director James Lockhart announced that the U.S. Treasury would take control of battered mortgage kingpins Fannie Mae (FNMA) and Freddie Mac (FHLMC). It is estimated that Fannie and Freddie back over $5 trillion in home mortgage loans which account for about half of the nation's outstanding mortgage debt. With the loss of a number of mortgage companies over the last few years, Fannie and Freddie have come to be relied upon as nearly the only source of funding for consumers wishing to purchase homes. Combined, the two have lost over $12 billion in the last year due to mortgage defaults. Prior to the announcement, stock prices of the two had fallen over 80% on the year.
Under the new plan, Fannie and Freddie will be supervised by FHFA. Treasury will offer support by purchasing mortgage backed securities from and lending money for additional home loans to the mortgage giants. In hopes of stabilizing them, Treasury and FHFA will assume some ownership of Fannie and Freddie by purchasing stock in them.
Many experts believe this will be a band-aid fix to get the companies through the rest of 2008 and into 2009. Thereafter, the fate of Fannie and Freddie will be in the hands of the new administration.
UPDATE: So far, this move has not reduced the cost of borrowing for consumers. Interest rates have actually inched up slightly since the announcement. Of course, there are many other factors in play so this program can't necessarily be at fault for the rise in interest rates. Hopefully the markets will begin to steady as we enter 2009.
Under the new plan, Fannie and Freddie will be supervised by FHFA. Treasury will offer support by purchasing mortgage backed securities from and lending money for additional home loans to the mortgage giants. In hopes of stabilizing them, Treasury and FHFA will assume some ownership of Fannie and Freddie by purchasing stock in them.
Many experts believe this will be a band-aid fix to get the companies through the rest of 2008 and into 2009. Thereafter, the fate of Fannie and Freddie will be in the hands of the new administration.
UPDATE: So far, this move has not reduced the cost of borrowing for consumers. Interest rates have actually inched up slightly since the announcement. Of course, there are many other factors in play so this program can't necessarily be at fault for the rise in interest rates. Hopefully the markets will begin to steady as we enter 2009.
Tuesday, August 26, 2008
Relief to Struggling Homeowners!
On August 6th 2008, President Bush signed into law a new bill that aims to bring relief to struggling homeowners across the nation. The measure attacks not only the current crisis but also has pieces that aim to avoid the same problems in the future. The bill includes measures to establish an affordable housing fund financed by Fannie Mae and Freddie Mac; tighter government regulation on Fannie and Freddie; neighborhood grants; loan-limit changes; a pre-foreclosure counseling fund; tax cuts; and an expansion of housing credit programs. So what are these various aspects all about?
Immediate Relief to Struggling Homeowners
This new bill will allow homeowners struggling with mortgage payments to refinance into more affordable government backed mortgages rather than lose their home to foreclosure. It is believed that these government-backed mortgages will have looser qualifying criteria than a typical conventional or FHA mortgage.
More Government Power – Tighter Regulation
The United States Treasury will be given the power to extend an unlimited line of credit to Fannie Mae and Freddie Mac (Government Sponsored Entities or GSEs), the largest mortgage purchasers in the secondary mortgage market who have run into liquidity issues of late. The two GSEs currently back or own half of the nation’s total outstanding mortgages. As a result of these liquidity issues, the GSEs have been unable to lend and homeowners have been restricted in the amount of mortgage credit available. The credit line was previously capped at $2.25 billion. The unlimited line of credit is expected to remain in place until at least the end of 2009. With government help comes tighter regulation, it appears that the Treasury Department will step in and act as somewhat of a regulator to Fannie and Freddie.
Neighborhood Grants
In an effort to avoid further deterioration of the communities hit hardest by foreclosure, the new legislation will provide $3.9 billion for neighborhoods to buy and repair properties that have already been foreclosed on.
Permanent Loan Limit Changes
The measure also calls for a permanent increase to the loan limits that Fannie Mae and Freddie Mac will purchase to $625,000. It will also allow FHA to back mortgages up to 15% higher than the median home prices in certain areas. These changes are expected to open up financing options for a larger pool of homeowners specifically in high cost areas of the country such as California and Florida.
Other Key Parts of the Bill
$180 million has been devoted to pre-foreclosure counseling to struggling homeowners. This is an important part of the bill as it aims to help educate homeowners and hopefully avoid many of these problems in the future. Also in the plan is an effort to stimulate the housing industry by expanding the low income housing credit and making credit of up to $7,500 available for first time homebuyer assistance.
How About Some Numbers?
The new housing relief bill aims to help approximately 400,000 homeowners – many of whom are upside down on their mortgage (owe more than their home is worth) – a result of loose lending guidelines and a declining real estate market. It has been estimated that up to $300 billion has been allocated to the Federal Housing Administration (FHA) to back these new refinanced mortgages. Of course, before being approved for a refinance, the borrower would need to show that they can afford the new loan and their lender must agree to take a loss on the existing mortgage.
It has yet to be determined if this new law will aid in recovery of our housing industry but it appears that this is certainly a step in the right direction. It is important that our law makers have not only taken measures to relieve the current crisis but have also put safeguards in place that will hopefully avoid this same collapse in the future.
Immediate Relief to Struggling Homeowners
This new bill will allow homeowners struggling with mortgage payments to refinance into more affordable government backed mortgages rather than lose their home to foreclosure. It is believed that these government-backed mortgages will have looser qualifying criteria than a typical conventional or FHA mortgage.
More Government Power – Tighter Regulation
The United States Treasury will be given the power to extend an unlimited line of credit to Fannie Mae and Freddie Mac (Government Sponsored Entities or GSEs), the largest mortgage purchasers in the secondary mortgage market who have run into liquidity issues of late. The two GSEs currently back or own half of the nation’s total outstanding mortgages. As a result of these liquidity issues, the GSEs have been unable to lend and homeowners have been restricted in the amount of mortgage credit available. The credit line was previously capped at $2.25 billion. The unlimited line of credit is expected to remain in place until at least the end of 2009. With government help comes tighter regulation, it appears that the Treasury Department will step in and act as somewhat of a regulator to Fannie and Freddie.
Neighborhood Grants
In an effort to avoid further deterioration of the communities hit hardest by foreclosure, the new legislation will provide $3.9 billion for neighborhoods to buy and repair properties that have already been foreclosed on.
Permanent Loan Limit Changes
The measure also calls for a permanent increase to the loan limits that Fannie Mae and Freddie Mac will purchase to $625,000. It will also allow FHA to back mortgages up to 15% higher than the median home prices in certain areas. These changes are expected to open up financing options for a larger pool of homeowners specifically in high cost areas of the country such as California and Florida.
Other Key Parts of the Bill
$180 million has been devoted to pre-foreclosure counseling to struggling homeowners. This is an important part of the bill as it aims to help educate homeowners and hopefully avoid many of these problems in the future. Also in the plan is an effort to stimulate the housing industry by expanding the low income housing credit and making credit of up to $7,500 available for first time homebuyer assistance.
How About Some Numbers?
The new housing relief bill aims to help approximately 400,000 homeowners – many of whom are upside down on their mortgage (owe more than their home is worth) – a result of loose lending guidelines and a declining real estate market. It has been estimated that up to $300 billion has been allocated to the Federal Housing Administration (FHA) to back these new refinanced mortgages. Of course, before being approved for a refinance, the borrower would need to show that they can afford the new loan and their lender must agree to take a loss on the existing mortgage.
It has yet to be determined if this new law will aid in recovery of our housing industry but it appears that this is certainly a step in the right direction. It is important that our law makers have not only taken measures to relieve the current crisis but have also put safeguards in place that will hopefully avoid this same collapse in the future.
Tuesday, June 10, 2008
How do you prove your income to an underwriter?
How is useable income calculated and what sort of documentation do underwriters typically require?
This answer can vary greatly depending on your employment status. Are you self-employed? Are you an employee of a company? Are you retired? Let’s look at the characteristics of each.
Self-Employed
If you are self-employed, there are several different tax structures that you might choose for your company. You might elect to be treated as a C-Corporation, or an S-Corporation, a Limited Liability Company (LLC), or a sole proprietorship. For the sake of simplicity, we will include independent contractors (those receiving a 1099) in the self-employed category. Your company organization and tax structure will ultimately determine how you verify your income to an underwriter. However, in general you will want to plan on producing signed business and personal tax returns with all supporting schedules for the most recent 2 years. For self-employed borrowers, an underwriter will use the adjusted gross income reflected on the tax returns to calculate the debt-to-income ratio.
Employees
If you are an employee of a company, plan on providing your W-2s for the 2 most recent years and paystubs to cover the most recent 30 days. An employee’s income is the amount listed on the W-2 as gross wages.
Retirees
Retirees living on a pension or social security benefits will likely be required to show proof that the benefits will last a lifetime (typically a letter from the awarding authority will suffice). They may also be asked to show a paystub to cover the most recent 30 days. Retirees use the total income reflected on their W-2 or reward letter. For social security benefits and benefits that are not taxed, underwriters will calculate income using 125% of the monthly income. In other words, if your benefit is $2,000/month, the income you will list on your loan application is $2,500 ($2000 x 1.25).
For additional documentation questions check out
the loan checklist at http://noblelenders.com/checklist.php
This answer can vary greatly depending on your employment status. Are you self-employed? Are you an employee of a company? Are you retired? Let’s look at the characteristics of each.
Self-Employed
If you are self-employed, there are several different tax structures that you might choose for your company. You might elect to be treated as a C-Corporation, or an S-Corporation, a Limited Liability Company (LLC), or a sole proprietorship. For the sake of simplicity, we will include independent contractors (those receiving a 1099) in the self-employed category. Your company organization and tax structure will ultimately determine how you verify your income to an underwriter. However, in general you will want to plan on producing signed business and personal tax returns with all supporting schedules for the most recent 2 years. For self-employed borrowers, an underwriter will use the adjusted gross income reflected on the tax returns to calculate the debt-to-income ratio.
Employees
If you are an employee of a company, plan on providing your W-2s for the 2 most recent years and paystubs to cover the most recent 30 days. An employee’s income is the amount listed on the W-2 as gross wages.
Retirees
Retirees living on a pension or social security benefits will likely be required to show proof that the benefits will last a lifetime (typically a letter from the awarding authority will suffice). They may also be asked to show a paystub to cover the most recent 30 days. Retirees use the total income reflected on their W-2 or reward letter. For social security benefits and benefits that are not taxed, underwriters will calculate income using 125% of the monthly income. In other words, if your benefit is $2,000/month, the income you will list on your loan application is $2,500 ($2000 x 1.25).
For additional documentation questions check out
the loan checklist at http://noblelenders.com/checklist.php
Thursday, May 29, 2008
All About Adjustable Rate Mortgages
What is an Adjustable Rate Mortgage?An Adjustable Rate Mortgage (ARM) is a mortgage in which the interest rate is adjusted periodically based on a pre-selected index.
Characteristics of an ARM
Index – An index is a published interest rate against which lenders measure the difference between the current interest rate on an adjustable rate mortgage and that earned by other investments (ex. 5 year U. S. Treasury yields, 6 month LIBOR, and the 11th District cost-of-funds index, or COFI). The index is then used to adjust the interest rate up or down.
Margin – The margin is the percentage a lender adds to the index to establish the adjusted interest rate.
Adjustment Date – The adjustment date is the date that the interest rate changes.
Adjustment Interval – The adjustment interval is the time between changes in the interest rate and monthly mortgage payment.
Interest Rate Caps – Interest rate caps are consumer safeguards that limit the amount of change to the interest rate. Caps assure the borrower that financing costs will not rise excessively if there is a sharp increase in interest rates.
Start Rate (also know as initial interest rate) – The start rate is the interest rate of the mortgage at the time of closing. This rate will change at the adjustment intervals based on the index, margin, caps, and floor rate.
Floor Rate – The floor rate is the minimum rate that the mortgage could ever achieve regardless of the caps. The floor protects the lender from a sharp decrease in rates.
For the following definitions we will use the adjustable rate mortgage example below:
5/1 ARM with caps of 5/2/5
This ARM will have a start rate that will be fixed for the first five years of the loan term (5/1 ARM with caps of 5/2/5). The 1 (5/1 ARM with caps of 5/2/5) means that it will adjust once per year (see adjustment interval definition above) after the initial fixed period.
Initial Interest Rate Cap (5/1 ARM with caps of 5/2/5) - The maximum percentage that an interest rate can change during the first adjustment. In the example above, the interest rate can increase or decrease a maximum of 5% in the first adjustment, subject to the floor rate (see floor rate definition above).
Periodic Interest Rate Caps (5/1 ARM with caps of 5/2/5) – The maximum percentage that an interest rate can change during each adjustment after the first. In the example above, the interest rate can increase or decrease a maximum of 2% for each adjustment after the first, subject to the floor rate.
Lifetime Interest Rate Caps (5/1 ARM with caps of 5/2/5) – The maximum percentage that an interest rate can change during the life of the loan. In the example above, the interest rate can increase or decrease a maximum of 5% throughout the entire life of the loan, subject to the floor rate.
When is an Adjustable Rate Mortgage a Good Idea?
An ARM is not for everybody. However, in certain cases choosing an ARM over a fixed rate mortgage can save the borrower thousands of dollars in interest charges. For borrowers who feel they will own their home for a relatively short period of time, an ARM can be a perfect solution. Many ARMs come with a fixed period of 3, 5, 7, or 10 years. If the borrower will be living in the home for less than any of these terms, they will not be subject to any rate adjustements. Therefore, by choosing an ARM, they will typically save on interest payments due to the fact that ARMs typically come with lower interest rates than FRMs. It might also make sense to choose an ARM when economic conditions indicate that interest rates will be decreasing in the future. This can be a risky strategy and it is best to discuss this with your loan officer prior to making a final decision.
Check out the resources on http://www.noblelenders.com/ to learn more about financing options.
Monday, May 12, 2008
Fannie Mae to the Rescue!
Fannie Mae has just announced another initiative to aid in recovery from the subprime mortgage crisis. This initiative will be fairly limited in scope but will address a group of homeowners that haven’t received much help to date. The new program aims to assist homeowners that are upside down on their homes, or in other words those that owe more on their mortgage than their home is currently worth. Without this recent announcement, some of these homeowners would be forced to bring money to the closing table in order to refinance their existing mortgage or sell their home given the current market conditions.
The Nuts and Bolts of the Program
There are clearly benefits in this program for both homeowners and Fannie Mae. Under it, homeowners will not be forgiven of any debt but will have the opportunity to refinance at a mortgage balance of up to 120% of the value of the home. This may result in relief to the homeowner by reducing interest rates, converting an adjustable rate mortgage (ARM) to a fixed rate mortgage (FRM), and/or extending the repayment term. Fannie Mae is banking on the idea that this will help homeowners avoid falling behind on their mortgage and buy them some time to allow home values to stabilize and begin appreciating again. The benefit for Fannie Mae is that by keeping these mortgages current, they can avoid or postpone writing down further losses associated with delinquent mortgages.
What does it take to qualify?
Again, this program will allow for loan-to-value ratios of up to 120%. The major stipulation is that the mortgage must be paid current and Fannie Mae must either own or insure the mortgage.
FHA Secure vs. New Fannie Program
So what is the difference between this program and FHA Secure? FHA Secure is an excellent program that allows homeowners that are current or delinquent on their ARM to refinance. If the borrower is delinquent, they must show proof that the delinquency was caused by an increase in mortgage payments caused by the reset of an ARM. The borrower may have an FHA or non - FHA mortgage and still be eligible for refinance. However, the current mortgage must be an ARM. With Fannie Mae’s new initiative, the borrower may have an ARM or FRM but they must be current and must have a Fannie Mae owned or insured mortgage. Both programs do require borrowers to meet traditional underwriting guidelines for income, assets, employment, etc.
To learn more about this program, click on the red drop down banner at the top right corner of the http://www.noblelenders.com homepage.
The Nuts and Bolts of the Program
There are clearly benefits in this program for both homeowners and Fannie Mae. Under it, homeowners will not be forgiven of any debt but will have the opportunity to refinance at a mortgage balance of up to 120% of the value of the home. This may result in relief to the homeowner by reducing interest rates, converting an adjustable rate mortgage (ARM) to a fixed rate mortgage (FRM), and/or extending the repayment term. Fannie Mae is banking on the idea that this will help homeowners avoid falling behind on their mortgage and buy them some time to allow home values to stabilize and begin appreciating again. The benefit for Fannie Mae is that by keeping these mortgages current, they can avoid or postpone writing down further losses associated with delinquent mortgages.
What does it take to qualify?
Again, this program will allow for loan-to-value ratios of up to 120%. The major stipulation is that the mortgage must be paid current and Fannie Mae must either own or insure the mortgage.
FHA Secure vs. New Fannie Program
So what is the difference between this program and FHA Secure? FHA Secure is an excellent program that allows homeowners that are current or delinquent on their ARM to refinance. If the borrower is delinquent, they must show proof that the delinquency was caused by an increase in mortgage payments caused by the reset of an ARM. The borrower may have an FHA or non - FHA mortgage and still be eligible for refinance. However, the current mortgage must be an ARM. With Fannie Mae’s new initiative, the borrower may have an ARM or FRM but they must be current and must have a Fannie Mae owned or insured mortgage. Both programs do require borrowers to meet traditional underwriting guidelines for income, assets, employment, etc.
To learn more about this program, click on the red drop down banner at the top right corner of the http://www.noblelenders.com homepage.
Thursday, May 8, 2008
Adjustable Rate Mortgages - LIBOR is on the Way Up!
The LIBOR has been rising in recent weeks begging the question: How does LIBOR affect the American homeowner?
LIBOR stands for the London Interbank Offered Rate and it is the interest rate at which British banks borrower funds from one another in the London wholesale money market. Many adjustable rate mortgages are based on LIBOR. An adjustable rate mortgage (ARM) is a mortgage in which the interest rate is adjusted periodically based on a pre-selected index. Probably the most common index is the 6 month or 12 month LIBOR. A popular ARM mortgage product is the 5/1 ARM. What this means is that the loan is fixed for a period of 5 years. After that time, the rate begins to adjust based on the current LIBOR index. When LIBOR is rising and your loan is in the adjustment period, your rate will go up regardless of whether or not mortgage interest rates are down.
So, why is LIBOR rising?
In recent months the Federal Reserve has embarked on an aggressive interest rate cutting campaign. This has caused the gap between LIBOR and the interest rates set by central banks to increase. Many believe this is a sign that banks are in poor financial health and are reluctant to lend money. This seems logical considering much of this mortgage crisis is due to a lack of liquidity in the secondary mortgage market.
What does this mean to homeowners?
If you currently have a fixed rate mortgage, it means nothing. However, if you have an adjustable rate mortgage that is scheduled to begin adjusting in the next 18 months, now may be a great time to take action. This might be an excellent time to consider a refinance. Of course, remember to explore all options before making a decision to refinance. Ask yourself questions like: How long will you be in this home? How long until you plan to retire? Do you have catching up to do on your retirement savings? Are you preparing to send children to college? Do you currently have equity in your home? Is there a pre-payment penalty on your existing mortgage?
With interest rates near historical lows, this could be a great time to refinance. Just make sure to ask questions and determine if it’s right for you.
Also, check out the refinance calculators at http://noblelenders.com/calculators.php for additional guidance.
LIBOR stands for the London Interbank Offered Rate and it is the interest rate at which British banks borrower funds from one another in the London wholesale money market. Many adjustable rate mortgages are based on LIBOR. An adjustable rate mortgage (ARM) is a mortgage in which the interest rate is adjusted periodically based on a pre-selected index. Probably the most common index is the 6 month or 12 month LIBOR. A popular ARM mortgage product is the 5/1 ARM. What this means is that the loan is fixed for a period of 5 years. After that time, the rate begins to adjust based on the current LIBOR index. When LIBOR is rising and your loan is in the adjustment period, your rate will go up regardless of whether or not mortgage interest rates are down.
So, why is LIBOR rising?
In recent months the Federal Reserve has embarked on an aggressive interest rate cutting campaign. This has caused the gap between LIBOR and the interest rates set by central banks to increase. Many believe this is a sign that banks are in poor financial health and are reluctant to lend money. This seems logical considering much of this mortgage crisis is due to a lack of liquidity in the secondary mortgage market.
What does this mean to homeowners?
If you currently have a fixed rate mortgage, it means nothing. However, if you have an adjustable rate mortgage that is scheduled to begin adjusting in the next 18 months, now may be a great time to take action. This might be an excellent time to consider a refinance. Of course, remember to explore all options before making a decision to refinance. Ask yourself questions like: How long will you be in this home? How long until you plan to retire? Do you have catching up to do on your retirement savings? Are you preparing to send children to college? Do you currently have equity in your home? Is there a pre-payment penalty on your existing mortgage?
With interest rates near historical lows, this could be a great time to refinance. Just make sure to ask questions and determine if it’s right for you.
Also, check out the refinance calculators at http://noblelenders.com/calculators.php for additional guidance.
Thursday, May 1, 2008
Relief could be on the way!
The Federal Deposit Insurance Corporation has proposed a new plan that could help a large number of borrowers in the United States that are dealing with declining property values. The plan is specifically aimed at homeowners whose mortgage balance is currently higher than their property value, thus putting them "upside down". Under the new plan, the United States Treasury Department would issue loans to borrowers that would allow them to pay off some principal and restructure their mortgages. This could work wonders for over 1 million homeowners. Many homeowners aren't currently able to refinance their adjustable rate mortgage because they don't have the equity to do so. In the very recent past, loans have been written based on very high loan-to-value ratios. Now that underwriting guidelines have tightened and property values have declined, many borrowers are unable to qualify to refinance out of their adjustable rate and into a fixed rate mortgage. This is probably the most logical proposal that I have seen during the current mortgage crisis. I sincerely hope this proposal gets the approval of our Congress.
For a definition of any terms in this blog that you may be unfamiliar with, click here http://www.noblelenders.com/glossary.php
For a definition of any terms in this blog that you may be unfamiliar with, click here http://www.noblelenders.com/glossary.php
Tuesday, April 22, 2008
Trigger Leads - Don't Fall Victim to Them!
There is a fairly new lead generation program in the mortgage industry that has created a large amount of controversy. They’re called trigger leads and the strategy used to obtain these leads has mortgage brokers and lenders at odds over the ethical dilemmas they cause. Many consumers are shocked when they find out who is selling their personal information to the brokers and lenders who choose to purchase these leads. Read on to find out how to avoid becoming a victim of these solicitations.
What are trigger leads?
The process begins when you make a rate inquiry, submit an application, or request a pre-approval letter with a mortgage broker or lender. In order to fulfill your request and provide as accurate an estimate as possible, the broker or lender will request a copy of your credit report from any or all of the three major credit bureaus (Transunion, Experian, Equifax). This request sets off a “trigger” to the credit bureaus that you are pursuing some sort of mortgage financing. All mortgage companies are required to state exactly why they are using credit reports (ex: mortgage loan approvals) when they register with the credit bureaus. This is how the bureaus know that you are in the market for some sort of mortgage. The next part of this story is what has many industry professionals up in arms. The credit bureaus are permitted by law to sell certain information pertaining to your application to other “hungry” mortgage companies. This information may include your name, address, FICO score, home value, mortgage amount, mortgage date, and amount of revolving debt you carry. The information is typically sold within 24 hours of credit request and may cost anywhere from $.40 to $6 per household. It is important to clarify that the mortgage broker or lender that you are currently working with is not the party that is sharing your information. Once your credit report has been requested, it is out of their hands. The three major credit bureaus are responsible for sharing your information with unwanted solicitors.
What legal issues are present?
As of the writing of this article, trigger leads are permitted by the FCRA (Fair Credit Reporting Act). The FCRA prohibits your social security number and date of birth from being released; only public information is permitted. Many mortgage brokers and lenders are adamantly opposed to triggers as they feel these the leads cause a consumer to be bombarded with unwanted solicitations for credit. Those who purchase these trigger leads are trying to solicit a client who in most cases does not wish to talk to them. As a consumer it is important to pay attention to the many scams out there involving trigger leads. Beware of mortgage companies calling you claiming that they are your actual lender in order to obtain social security numbers and other private information when in fact they are not your lender and have simply purchased a trigger lead.
What can you do to avoid falling victim to trigger leads?
Education is the key, many loan officers will discuss with their client at application how to avoid becoming a trigger lead. However, oftentimes it is too late. The credit bureaus need some time to process your request. You will want to plan on removing your name at least 30 days prior to making application with a lender. So, if you believe that you’ll be applying for a mortgage in the next 30-60 days, be sure to use one of the following methods to remove your name and personal information from eligibility of these leads.
Currently, there are three ways to remove your name:
By mail – you can visit www.optoutprescreen.com, print the application and mail it to the address listed on the form. This method will remove your name permanently from trigger leads.
On the web – visit www.optoutprescreen.com to register your information. This method will be active for 5 years. After 5 years, you will need to re-register or you may begin receiving unwanted solicitations again.
By phone – Call (888) 5-OPTOUT (888-567-8688) to register your information. This method will keep you off the list for 5 years. As with the online option, you will need to re-register after 5 years or you may begin receiving unwanted solicitations again.
All three methods will ask for your name and social security number. You may also want to consider other ways to put an end to trigger leads. Let your voice be heard! Call the consumer protection agencies and The Federal Trade Commission to voice your opinions and help put an end to this unethical practice.
Visit www.noblelenders.com to work with a mortgage broker that does not support the unethical practice of trigger leads.
What are trigger leads?
The process begins when you make a rate inquiry, submit an application, or request a pre-approval letter with a mortgage broker or lender. In order to fulfill your request and provide as accurate an estimate as possible, the broker or lender will request a copy of your credit report from any or all of the three major credit bureaus (Transunion, Experian, Equifax). This request sets off a “trigger” to the credit bureaus that you are pursuing some sort of mortgage financing. All mortgage companies are required to state exactly why they are using credit reports (ex: mortgage loan approvals) when they register with the credit bureaus. This is how the bureaus know that you are in the market for some sort of mortgage. The next part of this story is what has many industry professionals up in arms. The credit bureaus are permitted by law to sell certain information pertaining to your application to other “hungry” mortgage companies. This information may include your name, address, FICO score, home value, mortgage amount, mortgage date, and amount of revolving debt you carry. The information is typically sold within 24 hours of credit request and may cost anywhere from $.40 to $6 per household. It is important to clarify that the mortgage broker or lender that you are currently working with is not the party that is sharing your information. Once your credit report has been requested, it is out of their hands. The three major credit bureaus are responsible for sharing your information with unwanted solicitors.
What legal issues are present?
As of the writing of this article, trigger leads are permitted by the FCRA (Fair Credit Reporting Act). The FCRA prohibits your social security number and date of birth from being released; only public information is permitted. Many mortgage brokers and lenders are adamantly opposed to triggers as they feel these the leads cause a consumer to be bombarded with unwanted solicitations for credit. Those who purchase these trigger leads are trying to solicit a client who in most cases does not wish to talk to them. As a consumer it is important to pay attention to the many scams out there involving trigger leads. Beware of mortgage companies calling you claiming that they are your actual lender in order to obtain social security numbers and other private information when in fact they are not your lender and have simply purchased a trigger lead.
What can you do to avoid falling victim to trigger leads?
Education is the key, many loan officers will discuss with their client at application how to avoid becoming a trigger lead. However, oftentimes it is too late. The credit bureaus need some time to process your request. You will want to plan on removing your name at least 30 days prior to making application with a lender. So, if you believe that you’ll be applying for a mortgage in the next 30-60 days, be sure to use one of the following methods to remove your name and personal information from eligibility of these leads.
Currently, there are three ways to remove your name:
By mail – you can visit www.optoutprescreen.com, print the application and mail it to the address listed on the form. This method will remove your name permanently from trigger leads.
On the web – visit www.optoutprescreen.com to register your information. This method will be active for 5 years. After 5 years, you will need to re-register or you may begin receiving unwanted solicitations again.
By phone – Call (888) 5-OPTOUT (888-567-8688) to register your information. This method will keep you off the list for 5 years. As with the online option, you will need to re-register after 5 years or you may begin receiving unwanted solicitations again.
All three methods will ask for your name and social security number. You may also want to consider other ways to put an end to trigger leads. Let your voice be heard! Call the consumer protection agencies and The Federal Trade Commission to voice your opinions and help put an end to this unethical practice.
Visit www.noblelenders.com to work with a mortgage broker that does not support the unethical practice of trigger leads.
Monday, March 31, 2008
No Mortgage Payments Up to 6 Months?
Lately, there has been a lot of press about mortgage programs that offer no payments for up to 6 months. What are they?
With these mortgage programs, you can purchase a new home (1-unit primary residence) and have the builder/seller agree to pay up to 100% of the principal and interest portion of your monthly mortgage payment for up to the first six months of the loan term.
Eligible loan products include both fixed and adjustable-rate loans, extended repayment terms (ex. 40-year loans) and affordable lending options for first-time home buyers. Currently, most programs will allow for 3% of your purchase price to be used for your mortgage payments when you finance over 90% of the purchase price. In other words, if you purchase a $200,000 and take out a 95% loan ($190,000), the builder/seller can contribute up to $6,000 for your mortgage payments. Also, if you finance less than 90%, it is possible to receive up to a 6% contribution. The main thing to keep in mind is that principal and interest are included. Taxes, hazard insurance, and mortgage insurance (if applicable) are not included.
Eligible loan products include both fixed and adjustable-rate loans, extended repayment terms (ex. 40-year loans) and affordable lending options for first-time home buyers. Currently, most programs will allow for 3% of your purchase price to be used for your mortgage payments when you finance over 90% of the purchase price. In other words, if you purchase a $200,000 and take out a 95% loan ($190,000), the builder/seller can contribute up to $6,000 for your mortgage payments. Also, if you finance less than 90%, it is possible to receive up to a 6% contribution. The main thing to keep in mind is that principal and interest are included. Taxes, hazard insurance, and mortgage insurance (if applicable) are not included.
Given the current lending environment, mortgage programs are subject to change almost daily. If you are considering a strategy such as the one above, please visit www.noblelenders.com for product updates or call 636.594.5536 for a FREE consultation.
Tuesday, March 25, 2008
Interest-Only Mortgages Aren't Always A Bad Thing!
Interest-only mortgages are utilized by many homeowners and real estate investors as a means to safely increase their wealth. There is a time and place for everything and interest-only mortgages are no exception.What are interest-only mortgages?
In a mortgage, when principal payment is not required for a certain period of time, it is classified as interest-only. The only payment that is due every month is the interest that has accrued on the mortgage balance. The interest-only period varies but a popular one seems to be 10 years. In the case of a 30 year fixed rate mortgage with a 10 year interest-only period, you will pay interest for the first 10 years of the loan. For the remaining 20 years you will pay principal and interest.
Is it for me?
For a homeowner that is considering an interest-only mortgage I think there are a few questions that need to be addressed. Why are you choosing interest-only as opposed to a fully amortizing mortgage? If your answer is that you can't afford the fully amortizing payment, I think you are making a mistake. If your answer is that you want to invest your savings in a safe investment account, then let's talk.
My approach has always been to educate rather than sell. I want to know that a borrower is using the savings of an interest-only mortgage to improve their financial picture and not to live beyond their means. A popular strategy is to apply the savings of an interest-only loan to some sort of safe investment account. I am not a financial planner, but I would not recommend investing this money in the stock market or other risky investments. True, many investors have performed extremely well in the stock market, but I do not advise that the typical homeowner place their home equity in potentially risky investment vehicles. There are many advantages to this approach including greater liquidity and rate of return. There can also be disadvantages. Interest-only mortgages are not for everyone. Education is the homeowner's most powerful tool in choosing a mortgage strategy. To keep this posting relatively concise, I won't get into great detail on the advantages and disadvantages. To request your FREE detailed report on interest-only mortgages vs conventional 30 year mortgages, visit www.noblelenders.com, and click on the NOBLE TOOLS tab then DOCUMENTS. Select the report titled "Interest Only Mortgage vs Conventional 30 year."
Tuesday, March 18, 2008
What Are Seller Contributions?
For some time now, homebuyers have been using the power of seller paid contributions to structure a transaction to best fit their needs. There are many uses for seller paid contributions and each mortgage program has specific guidelines relating to the use of them.
What are they?
A seller contribution is when the seller contributes a portion of the sales price of a home to the buyer during a real estate transaction. The most popular use of seller contributions is to assist the buyer with paying closing costs. So why would any seller ever want to do this? There are a number of reasons why a seller would do this, but in general it is a way for a property seller to increase the pool of potential buyers of their property. Let's look at a particular example: Jim Seller is selling his house to Tom Purchaser. Tom Purchaser just recently graduated college and is short of funds right now. His closing costs for this purchase are $3,000. Jim Seller has determined that he wants to walk away from the sale of his home with $97,000 in his pocket. So, here is what you would do to accomplish seller paid closing costs: Jim and Tom would agree on a sales price of $100,000. Within the purchase agreement, Jim and Tom agree that Jim will contribute $3,000 to Tom's closing costs. So, we have a win-win situation. Jim will walk away with $97,000 ($100,000 sales price - $3,000 seller contribution = $97,000). Tom will purchase the home and won't have to come to the closing table with his $3,000 closing costs because Jim paid them for him.
What are the restrictions on mortgage products and the amount of contribution that is permitted?
Please keep in mind that mortgage programs change frequently and the following guidelines are subject to change at anytime. Please visit http://www.noblelenders.com/ often for program updates. As of today 3/18/08, you are able to receive a contribution of 3% on Fannie Mae and Freddie Mac (agency) products above 90% LTV (loan-to-value ratio). If your LTV is 90% or below (you are making at least a 10% down payment), you are eligible to receive up to 6% seller contributions. For FHA loans, 6% seller contributions are permitted. In most cases, the seller contributions can be applied toward non-recurring closing costs (appraisal fee, escrow fee, etc.), and pre-paid items (hazard insurance, taxes). Seller contributions MAY NOT be applied toward the actual down payment. All percentages are calculated based on the sales price of the property ($100,000 sales price * 6% = $6,000 seller contribution).
Seller contributions continue to gain in popularity as a means to structure a transaction to best fit one's needs. Check for future postings that discuss other popular ways to use seller contributions.
Wednesday, March 12, 2008
What is a No Cost Refinance?
As consumers, we are bombarded with advertisements about no closing cost refinances. We hear about them on the radio, see commercials for them on TV, maybe even receive mail about them. So what are they? How are these institutions able to offer them and still earn a living? The remainder of this post will dive into the ins and outs of a no cost refinance.
So what is a No Closing Cost Refinance?
Mortgage lenders and mortgage brokers are able to offer interest rates to consumers that are slightly higher than the cost of those funds to them (read par or market rate). In turn, they are able to use the difference (premium) that they receive to pay for closing costs and their own compensation. You see, no matter what lender or mortgage company you choose to work with, their are costs associated with closing a loan. A majority of these costs are paid to a third party such as an appraiser, title company, or surveyor.
When does it make sense to pursue a No Closing Cost Refi?
During markets like what we are seeing right now with interest rates at relatively low levels, no closing cost refis become extremely attractive as a means for homeowners to lower their interest rate and monthly mortgage payment. If a homeowner is able to lower their interest rate 2% and save $300/month on their mortgage payment AND pay no closing costs to acheive this, oftentimes it makes good financial sense.
Now, as long as we are talking about no closing costs, it is worthwhile to explain exactly what this means. When you close a loan, you have closing costs and prepaid items. Closing costs are fees that are paid to the parties involved in arranging your transaction. Closing costs are not required to be paid in a no closing cost refinance. Prepaid items are things such as prepaid interest (interest on the new loan because mortgage payments are made in arrears), hazard insurance (if you are within 3 months of renewal or if you choose an escrow account), or property taxes (if you close at the very end of the year and taxes are due or if you choose an escrow account). In a No Closing Cost Refinance, borrowers will be required to pay for pre-paid items as they will need to be paid whether the homeowner refinances or not. These items are typically included in the new loan amount.
To find out if you are a good candidate for a No Closing Cost Refinance visit http://www.noblelenders.com/ and click on the No Closing Cost Refinance section at the bottom of the home page. Also take a look at the mortgage calculators that are available under the Noble Tools drop down menu.
Tuesday, March 11, 2008
Alert: FHA Raises Loan Limits
3/6/08
Effective immediately, the United States Department of Housing and Urban Development will temporarily raise FHA loan limits to range from $271,050 to $729,750. It is expected that as many as 240,000 homeowners and homebuyers nationwide will benefit from this change. The change is temporary and is set to expire 12/31/08 unless the U.S. Congress approves bipartisan legislation to permanently increase the loan limits. For the complete press release click here http://portal.hud.gov/portal/page?_pageid=33,717234&_dad=portal&_scheme=portal
Who is FHA?
FHA is the Federal Housing Administration and is a part of the United States Department of Housing and Urban Development. FHA insures mortgages issued by FHA-approved lenders, thereby protecting the lenders against losses associated with borrower default. FHA provides incentive for lenders to make loans that might otherwise be deemed too risky.
What does this mean to the St. Louis, MO homeowner?
This will benefit a number of homeowners throughout the St. Louis area as well as the entire State of Missouri. St. Louis city and county along with most surrounding counties (St. Charles, Jefferson, Warren, Lincoln) will benefit from loan limits increased to $281,250 from $200,000. A majority of the other counties in Missouri will benefit from an increase to $271,050 from $200,000. So what does all this mean? This will open up the pool of homeowners that are able to qualify for FHA insured financing. With the fallout of subprime, many homeowners have been left with mortgages that they are unable to refinance because they don't currently qualify for the stricter guidelines associated with conventional financing. Many of these homeowners are in Adjustable Rate Mortgages (ARMs) and have already seen their payments increase significantly. This will also increase the number of people able to purchase homes in Missouri.
For a list of FHA loan limits for every county in the United States, click here https://entp.hud.gov/idapp/html/hicostlook.cfm. To filter your search results, go to the Limit Type drop down box and select FHA Forward.
For other helpful homebuying resources visit http://www.noblelenders.com/
Effective immediately, the United States Department of Housing and Urban Development will temporarily raise FHA loan limits to range from $271,050 to $729,750. It is expected that as many as 240,000 homeowners and homebuyers nationwide will benefit from this change. The change is temporary and is set to expire 12/31/08 unless the U.S. Congress approves bipartisan legislation to permanently increase the loan limits. For the complete press release click here http://portal.hud.gov/portal/page?_pageid=33,717234&_dad=portal&_scheme=portal
Who is FHA?
FHA is the Federal Housing Administration and is a part of the United States Department of Housing and Urban Development. FHA insures mortgages issued by FHA-approved lenders, thereby protecting the lenders against losses associated with borrower default. FHA provides incentive for lenders to make loans that might otherwise be deemed too risky.
What does this mean to the St. Louis, MO homeowner?
This will benefit a number of homeowners throughout the St. Louis area as well as the entire State of Missouri. St. Louis city and county along with most surrounding counties (St. Charles, Jefferson, Warren, Lincoln) will benefit from loan limits increased to $281,250 from $200,000. A majority of the other counties in Missouri will benefit from an increase to $271,050 from $200,000. So what does all this mean? This will open up the pool of homeowners that are able to qualify for FHA insured financing. With the fallout of subprime, many homeowners have been left with mortgages that they are unable to refinance because they don't currently qualify for the stricter guidelines associated with conventional financing. Many of these homeowners are in Adjustable Rate Mortgages (ARMs) and have already seen their payments increase significantly. This will also increase the number of people able to purchase homes in Missouri.
For a list of FHA loan limits for every county in the United States, click here https://entp.hud.gov/idapp/html/hicostlook.cfm. To filter your search results, go to the Limit Type drop down box and select FHA Forward.
For other helpful homebuying resources visit http://www.noblelenders.com/
Monday, March 10, 2008
Changes to Conforming Loan Limits
3/6/08
Fannie Mae and Freddie Mac have announced their latest effort to bring relief to American homeowners. As part of the Economic Stimulus Act of 2008 Fannie and Freddie will immediatley begin purchasing loans on the secondary market with a maximum principal obligation of 125% of the area's median home price. The maximum loan amount will increase from $417,000 to $729,500 in some areas. At this time, the change is only temporary and is set to expire 12/31/08. For a copy of the entire press release, please click here https://www.efanniemae.com/sf/mortgageproducts/index.jsp.
Who are Fannie Mae & Freddie Mac?
Fannie Mae and Freddie Mac are the largest purchasers of home mortgages in the secondary mortgage market. Their purpose is to assist mortgage bankers and other lenders by ensuring that they have enough funds to lend to home buyers at reasonable rates. During times of restricted liquidity such as what we have right now, Fannie and Freddie play a major role in keeping the dream of American homeownership possible.
What does this mean to the St. Louis, MO homeowner?
Well, nothing right now. Actually, the entire State of Missouri is deemed to be in an area that is not considered high-cost by the United States Department of Housing and Urban Development. Check back periodically as we will post any changes relevant to Missouri and the St. Louis area. For properties in other states that may be affected, click on the following link https://entp.hud.gov/idapp/html/hicostlook.cfm. To filter your search results, go to the Limit Type drop down box and select Fannie/Freddie.
Check back in a few days as we will be posting changes to the FHA Loan Limits that WILL affect those in St. Louis and other Missouri counties.
For other useful articles and reports, please visit http://www.noblelenders.com/
Friday, March 7, 2008
The Power of Pre-Approval
People ask me all the time: I'm in a lease for another 3 months, don't you think it is too early to apply for pre-approval? My answer is always the same: NO! I have many reasons for saying this. For the sake of time & simplicity, I will explain the three most important here.
The primary reason is that you need to find out if you qualify to purchase a home now. If not, you will have several months to work on what is needed to qualify. Reasons that you may not qualify right now could include: Lack of down payment, lack of job history, low credit scores, etc. Wouldn't you like to know if you need to do some work to qualify before you go out looking for homes? Or much worse, before you find the dream home? You'll save yourself and your Realtor quite a bit of time by applying for financing first!
Okay, so you've made up your mind. You're ready to pursue the American dream of homeownership and you've brought me to my second reason to apply for pre-approval prior to home shopping. Wouldn't you like to know exactly how much you can afford? Would you like to find out all of the expenses that are associated with owning a home? A good loan officer will provide you with this information at the time of pre-approval. This person will ensure that you are shopping in the price range that you are financially comfortable with. Remember, you'll want to put furniture in this home too! Nobody wants to feel "stretched" to make their mortgage payment every month. A thorough loan officer will explain the 5 components of a monthly house payment with you.
The five components of a house payment
1. Principal & Interest
2. Property Taxes
3. Hazard Insurance (theft, fire, etc.)
4. Private Mortgage Insurance (if you finance over 80% of the sales price of a home)
5. Condominium Maintenance Fees (if applicable)
When you add these five components together, you come up with your total monthly house payment. Now, wouldn't you like to know all of this before you find that dream home? I know I would. If more loan officers had explained this in years past, maybe we wouldn't have this current foreclosure crisis on our hands.
Okay, so let's briefly explain each component of the total monthly mortgage payment.
1. Principal & Interest is what you pay directly to your lender each month. The principal portion goes to reduce the balance on the loan, thereby creating "equity" in your property. The interest portion goes to your lender to compensate them for making the loan to you.
2. Property Taxes (aka Real Estate Taxes) are paid to your state and local governments and schools to fund worthwhile projects.
3. Hazard Insurance will be required by your lender and will protect you from fire, theft, etc. Most lenders will allow you to choose your own insurance agent for coverage.
4. Private Mortgage Insurance (aka PMI, MI) is only applicable when you finance over 80% of the sales price of a home. This is a fee that you pay to your lender so that they can obtain an insurance policy protecting them against loan default.
5. Condominium Maintenance Fees (aka HOA Fees, Homeowner's Association Fees) are only applicable if you purchase a condiminium or certain townhouses and co-ops. This is a fee that you pay each month to the association that manages your property. This will pay for things such as lawncare, security, and pool maintenance.
Last but not least, my third reason for obtaining pre-approval before you begin shopping for a home. Now, here's something your Realtor will thank you for. You've found the perfect home and your ready to make an offer. How do you structure that offer? Let's suppose you've met with your loan officer and he/she has determined that it will be best for you to request that the seller pay a portion of your closing costs. Maybe you have recently graduated college and you haven't been on your job long enough to have saved for closing costs. Well, here's the good part. It is possible to ask the seller to pay up to 6% of the sales price toward your closing costs. Let's say the dream home will cost you $150,000 and your closing costs will be $4,500. In this situation, the seller will be able to contribute enough to cover your closing costs ($4,500 / $150,000 = 3%, which is less than the maximum of 6%). You will only be required to come up with $500 to purchase this home. Here's how: You request 100% financing from your loan officer. When preparing your contract, your Realtor negotiates for the seller to pay $4,500 for closing costs. You put up a $500 deposit for earnest money and you have your dream home.
As I have outlined above, it is important to visit with your loan officer to discuss your home financing before beginning your home search. Summer in St. Louis is right around the corner!
For more information and to obtain other FREE reports and articles, visit http://www.noblelenders.com/.
The primary reason is that you need to find out if you qualify to purchase a home now. If not, you will have several months to work on what is needed to qualify. Reasons that you may not qualify right now could include: Lack of down payment, lack of job history, low credit scores, etc. Wouldn't you like to know if you need to do some work to qualify before you go out looking for homes? Or much worse, before you find the dream home? You'll save yourself and your Realtor quite a bit of time by applying for financing first!
Okay, so you've made up your mind. You're ready to pursue the American dream of homeownership and you've brought me to my second reason to apply for pre-approval prior to home shopping. Wouldn't you like to know exactly how much you can afford? Would you like to find out all of the expenses that are associated with owning a home? A good loan officer will provide you with this information at the time of pre-approval. This person will ensure that you are shopping in the price range that you are financially comfortable with. Remember, you'll want to put furniture in this home too! Nobody wants to feel "stretched" to make their mortgage payment every month. A thorough loan officer will explain the 5 components of a monthly house payment with you.
The five components of a house payment
1. Principal & Interest
2. Property Taxes
3. Hazard Insurance (theft, fire, etc.)
4. Private Mortgage Insurance (if you finance over 80% of the sales price of a home)
5. Condominium Maintenance Fees (if applicable)
When you add these five components together, you come up with your total monthly house payment. Now, wouldn't you like to know all of this before you find that dream home? I know I would. If more loan officers had explained this in years past, maybe we wouldn't have this current foreclosure crisis on our hands.
Okay, so let's briefly explain each component of the total monthly mortgage payment.
1. Principal & Interest is what you pay directly to your lender each month. The principal portion goes to reduce the balance on the loan, thereby creating "equity" in your property. The interest portion goes to your lender to compensate them for making the loan to you.
2. Property Taxes (aka Real Estate Taxes) are paid to your state and local governments and schools to fund worthwhile projects.
3. Hazard Insurance will be required by your lender and will protect you from fire, theft, etc. Most lenders will allow you to choose your own insurance agent for coverage.
4. Private Mortgage Insurance (aka PMI, MI) is only applicable when you finance over 80% of the sales price of a home. This is a fee that you pay to your lender so that they can obtain an insurance policy protecting them against loan default.
5. Condominium Maintenance Fees (aka HOA Fees, Homeowner's Association Fees) are only applicable if you purchase a condiminium or certain townhouses and co-ops. This is a fee that you pay each month to the association that manages your property. This will pay for things such as lawncare, security, and pool maintenance.
Last but not least, my third reason for obtaining pre-approval before you begin shopping for a home. Now, here's something your Realtor will thank you for. You've found the perfect home and your ready to make an offer. How do you structure that offer? Let's suppose you've met with your loan officer and he/she has determined that it will be best for you to request that the seller pay a portion of your closing costs. Maybe you have recently graduated college and you haven't been on your job long enough to have saved for closing costs. Well, here's the good part. It is possible to ask the seller to pay up to 6% of the sales price toward your closing costs. Let's say the dream home will cost you $150,000 and your closing costs will be $4,500. In this situation, the seller will be able to contribute enough to cover your closing costs ($4,500 / $150,000 = 3%, which is less than the maximum of 6%). You will only be required to come up with $500 to purchase this home. Here's how: You request 100% financing from your loan officer. When preparing your contract, your Realtor negotiates for the seller to pay $4,500 for closing costs. You put up a $500 deposit for earnest money and you have your dream home.
As I have outlined above, it is important to visit with your loan officer to discuss your home financing before beginning your home search. Summer in St. Louis is right around the corner!
For more information and to obtain other FREE reports and articles, visit http://www.noblelenders.com/.
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