Mortgage Rates – The Reason behind the Rise

Interest Rate RiseThere are some big concerns among people looking to become homeowners, and not the least is the current trend of rising mortgage rates. They may appear scary on the surface, but it doesn’t signify the coming apocalypse by any means. If we take a closer look at the reasons behind this recent trend, it all makes perfect sense.

It all started with a speech. Chairmen Ben Bernanke of the Federal Reserve told Congress in May that the Fed could begin to reduce its buying of mortgage-backed bonds. Up until now the Fed has been buying $85 billion a month in US and mortgage bonds, which has resulted in lower rates and stronger housing and stock markets.

However, according to Bernanke, this monthly purchasing has been in relation to the US economy. Since the economy has been improving, and the unemployment rate decreasing, Bernanke declared that the Fed has laid out plans to begin tapering down the amount of bonds it purchases. Eventually, if the unemployment rate continues to lower, it may cease buying altogether. But if the economy falters, the Fed will continue its support on the market.

This led to buyers becoming nervous about the prospect of higher rates and not wanting to be the last with only the low rates. The result: almost everyone immediately ceased buying mortgage-backed bonds for themselves. Some have even sold their shares. Rates inevitably have to rise now to attract new buyers, and thus the present volatility of rising mortgage rates.

This is not an easy game to play by any means. No one can know for sure exactly when rates will change and whether they’ll go up or down. The Fed is making these decisions to bolster the economy; it will continue its support as strong as ever if the economy weakens again. Perhaps even stronger. But if the current mortgage rate looks appealing to you, I suggest you take it; you never know what it might look like tomorrow.

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Renovation Home Loans

Renovation loans

Renovation lending and financing

One specific type of loan I can assist you with is a  203k, Homepath, or Homestyle –

renovation home loan with FHA or conventional lending. These are of great assistance if you plan on making changes to your current house or new purchase. For example, someone may decide they want to redo the outside of their house to make it look fresher with an updated curb appeal, or refurbish the roof to stop a leak. If you don’t have the money for it, here’s how the renovation loan process works:

The homeowner schedules a meeting with a contractor to discuss the one or many projects they may have in mind to get an idea of costs.  Then the first concrete step in the process is an inspection of the property and a feasibility study with a 203k Consultant*. Lots of goals and projects can easily be covered by the renovation loan as long as they are permanently affixed to the property and aren’t luxury items.  Sorry, no chocolate fountains!  You can landscape, eliminate hazardous materials, and enhance accessibility for the disabled, just some of the eligible renovations. Contact me for more specifics.

After the inspection and the bids are complete the 203k Consultant will complete a work write up.  From this work write up and the bids, the appraisal can be ordered.  The Appraiser will assess the value of the house based upon these new renovations.

Make sure to inform your home insurance agent of the changes, it is very important that you bring your insurance agent up to date on these projects and how they increase the value of your house. In the event of a total loss, if you have not compensated for the increased value of your home, insurance won’t cover the extra loss of these renovations.

Once the loan is closed (which takes about 45 days), the Contractor needs to get started right away with their renovations. They are required to have them completed within 6 months of the funding. Everything will be wrapped into one loan payment for you!

*Depending on the dollar amount of the projects and repair costs, the 203k consultant fee can range anywhere from a couple hundred to a thousand dollars.

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Required Home Loan Documents

Applying for a mortgage loan for a home is mostly a universal process.

Most loan officers require the same mortgage loan documentsdocuments when potential clients come to them to set up a mortgage loan.

When applying for a loan, I will ask you to provide the following documents:

1)    Proof of identification. The best options are either a driver’s license or a passport.

2)    The last two month’s statements for your checking and savings accounts.

3)     One month of your current stock and retirement statements.

4)    The most recent two years of employer issued W-2 forms, including the employer or company’s contact information.

5)    The most recent two years of your federal tax returns, including all schedules and addendum’s.

6)    The most recent thirty days of consecutive pay stubs, two if bi-monthly, and three if bi-weekly.

The overall purpose of these documents is simply to help me determine what you qualify for and the best loan scenario for you, by learning about your current monetary situation.  Checking and Savings statements show me the amount of money that is immediately available to you and your experience with a budget. It’s also important for me to know where all transfers and deposits are coming from.  W-2 forms and employer/company contact information is an indication of your personal salary and how much money you can put towards payments. The background of stock and retirement statements goes along with the bank account statements to provide a more complete picture of your financial assets.

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First Time Homebuyer Programs

Even though the rate of loan payments is steady, the reliability of your income is always a factor. Maybe your pay will be docked, or you have to work less hours. But if you’re a first-time homeowner, there are some credits I am certified to offer that can help lessen such concerns. One example is the Mortgage Credit Certificate, or MCC. The MCC is a tax credit approved by the IRS which reduces the homeowners’ annual income tax for as long as they continue the same loan and occupy their home. As long as first-time homeowners follow these simple requirements, the credit remains in effect. The MCC tax credit allows you to claim 20% of your annual mortgage interest rate. Depending on the type of loan, the credit amount is either added to your income or subtracted from your monthly house payments. Either way, this means more buying and spending power for the homeowner.

Another great option is the OR Bond. This is another name for Oregon Housing and Community Services’ Residential Loan Program. Homebuyers that go this route can choose between a cash advantage option and a rate advantage option for their loans. The cash advantage provides buyers with a monetary amount equal to 3% of the total amount of the loan, helping to lower the level of money needed to secure the loan. The rate advantage will get the lowest possible fixed rate to increase purchasing power on a home. Like the tax credit, the OR Bond offers you different options to save money and be a more confident buyer and spender.

The MCC Tax Credit and the OR Bond are definitely big perks for the first-time homebuyer. Not every loan officer can offer them to you, however. I am one who is certified to offer both the MCC credit and the OR Bond to first-time homeowners. These credits and bonds effectively increase your income and make your loan payments a breeze.

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Homeowners Insurance – Exciting eh?


Homeowners Insurance

Your home is the greatest investment of your life. To keep that investment optimized and to save the most money for you, it’s important to know the workings of homeowner’s insurance. If someone is in a rush to move into a house as quickly as possible, one of their biggest mistakes is that they tend to over-insure. The ideal situation is for you to ensure the greatest protection for your house in exchange for the least amount of dollars. If you take the time to sit down with an insurance agent and work out all the terms, you’ll have a plan that covers everything for a lower amount.

Insurance packages vary from source to source, but they do have some things in common.  Any renovations or changes to the property around the house are not covered by the insurance. Doing a thorough assessment of the house and roof and spotting potential problems is extremely important. Water and mold problems are a very real concern in wet, rainy Oregon. Roof leaks and basement flooding can be very costly. Another potential problem is earthquake damage. We live in the middle of a volcanic range, and seismic activity is not unheard of. Earthquake endorsement and reinforced foundation on homes is strongly recommended.

Let’s say that in the event of a complete loss, the land and the location will still be there. Often times, when people are purchasing a home, a lot of what they are paying for is the lot and the location of the property.

For instance, a home in the Mississippi area which sells for $400,000, the land may be worth $200,000 based on the location and the structures on the property may only be appraised at $200,000. In looking at the estimated replacement cost of the home, we wouldn’t be looking at a $400,000 rebuild. Homeowners insurance should be looking at a rebuild cost of somewhere in the $200,000 range, or somewhere near what the appraised value of the home is. However, let’s say this home had a beautifully landscaped yard. In the event of damage to the yard, your homeowners policy would cover outdoor trees, shrubs, and other plants for damage caused by fire, lightning, explosion, riot, civil commotion, aircraft, vehicles (not owned or operated by a resident of the property), vandalism, malicious mischief, or theft. The limit for this coverage is usually around 5% of the dwelling replacement cost. In this example, if the replacement cost of the home were $200,000, your homeowners insurance would cover up to $5000 for plants, trees, and shrubs.  Detached structures such as fences and retaining walls, sheds, storage units, gazebos, etc., would also be covered under a homeowners policy as well. All would need to be specified within the policy, but they are things that can be added.

When undergoing renovations and enhancements in your house, it is extremely important to keep your insurance agency up to date with the increased value of your home. An upgrade on the kitchen or the roof can make the overall value much higher. If you don’t reset the value with your insurance officer, then insurance will not cover these upgrades in the event of a total loss.

To save more money, it is also advisable to bundle insurances together. Take your home and auto insurance, for example. Combining home and auto insurance into the same package can shave hundreds of dollars off of your premiums. A good driver’s record can save you additional money as well.

To make a not so shameless plug!  My friend and Insurance Agent Joe Poitras has provided me a lot of value and savings by bundling my home and auto’s.  Ask him for a quote:  503-200-5545

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Mortgages bring you tax savings!

Tax SavingsWhen you hit the professional working world, one constant every year is calculating the amount of your income tax. And on top of saying goodbye to a part of your annual salary, you have secured a mortgage loan for a home. At first glance, adding the amount of property taxes and interest rates may seem like a lot on your plate. But these amounts do not in any way affect your income tax. In fact they work in your favor. When you draw up your total income to determine the amount to pay in taxes, you get to deduct several financial components of your mortgage and new home from your total income and thus from your income tax.

Let’s say you have your total income and the percentage that will go to taxes all figured out. Then let’s say you have a mortgage loan with a fixed interest rate of 4 percent. What this means is that you can subtract the monetary equivalent of that interest rate on your loan from your total income come tax time. Something else you can subtract is the mortgage insurance. One more thing that can also be written off your total income is the property tax you pay for a house, a plot of land, or for total real estate; a combination of house and land.

You can add together the total value for all these components – mortgage insurance, interest rate, and property tax – and subtract them from your total income. Now you are left with a new, smaller amount that is subject to the regular income tax. Individually, these savings may not look like too much, but bundle them all together and they will in turn save you a bundle. Owning a house and real estate is one of the best investments you can make, and it guarantees you annual tax deductions that save you money.

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How the IRS can help you with your down payment

IRSDownPaymentSay you’ve decided on a house you want to buy, and you understand the general process of obtaining a mortgage loan. But maybe you’re still concerned about problems you might face with money. And there’s one question that worries you more than anything else: making a down payment for the loan itself. Maybe the down payment amount is more than you can afford.

After you’ve made a deal on a house with a realtor and secured a loan, the down payment is the final stamp on the transaction. There’s no need to live in fear of down payments as high as 10 or even 20 percent. The amount is often much lower than that. For example, one of the benefits of an FHA loan – a loan backed by the Federal Housing Administration – is a down payment amount of just 3.5 percent. This is a loan system that has been in place since 1934, helping potential homeowners with low incomes during the Great Depression. This is a program that is tailored to tight budgets and difficult times, and is still very popular. There’s even more flexibility with your credit score, so there’s no worries about having a spotless resume. You can get a loan with as low as a 580 FICO.

Even with an easy down payment amount like 3.5 percent, maybe you’re short on funds at the moment and don’t know where the money will come from. Here’s one idea that maybe you hadn’t thought of: tax refunds. That little amount of money the IRS hands back to you every year after you pay your taxes. There are several courses you can take with these refunds. You can put the money back into your bank account, put it towards your taxes for next year, or you could decide that it’s the perfect bundle to make a low down payment with no special effort or savings. Easy.

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The importance of your credit score for a home loan

How your credit score affects a home loan.

credit-score-pie-chart_webIt usually isn’t enough to have knowledge of the mortgage loan process to qualify for a loan. Before you can get started, you need to have a good credit score and history. Your credit score is a number awarded to you based on an analysis of your credit files. The higher the FICO number, the better your credit worthiness. A good score is pretty important when applying for a loan. Banks and other companies that lend you money want to make sure that you are trustworthy and have good experience managing your finances. Think of your credit score and history as your resume, proving that you are responsible and have good experience with money. If it’s a good resume, you’ll get the good job, and you’ll get the good loan.

There are several different factors that can affect your credit score. One of the simplest is whether or not you make your payments on time. Lenders don’t like to see late payments in your history especially within the last 12 months. The fewer credit accounts that you have open, the better. However, it’s not always a good idea to close accounts when you’re looking to secure a loan; closing a credit account may give the impression that your debt ratio has increased. Be sure that you know what your credit limit is on all of the cards you have, so that you don’t max them out. It is advisable that you keep all of your credit balances below 30 percent of their limits to keep a healthy credit score. This may sound like a handful, but as long as you maintain a close eye on a concentrated amount of credit accounts and make your payments on time, that’s all you really need.

If you bring a good credit score and history to the business table, you can walk away with a great loan and a low interest rate. However, there is a loan program for a low score of 580 or better and you can buy your interest rate down as well.

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Affordable Home Loans


With the economy still going through troubled times, making a choice about what type of residence you want can be tricky. Maybe you have your eye on a beautiful house, but you’re worried about the price of a mortgage or the interest rate. If you’re worried that all you can afford is rent for an apartment, those worries are unfounded when it comes to mortgage loans. Especially in this market with extremely low interest rates and affordable home prices.
Next to no one can afford to buy houses outright, so the general process is for lending institutions to loan you money for the purchase, known as a mortgage loan. But this does not mean that every mortgage loan is the same. Far from it. Loans can vary in required down payment, size, length, and in interest rates. And payments for loans can be even more set and consistent than paying rent for an apartment. For example, Fixed Rate Mortgages mean that the interest rate is guaranteed to never change, so the monthly amount of a principal and interest rate mortgage payment will always remain the same. When paying rent for an apartment, there is always the fear of your landlord unexpectedly raising the rent. That is something you don’t have to worry about with a fixed mortgage. With a guaranteed consistent amount, it is very easy for you to form a budget and keep track of the money required to make payments. There’s no need to be stressed and rush to pay off your loan but you can also make extra principal payments to lower your balance quicker.
Paying rent for an apartment and making a mortgage payment are essentially the same thing; setting aside a certain amount of money to make a routine payment. There’s no need to give up your ideal residence just because you’re worried about steep prices. With a simple budget, a mortgage loan can be the rent you need for your dream residence.

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Home Affordable Program

The Federal Housing Finance Agency recently announced changes to the Home Affordable Refinance Program (HARP) that will allow more borrowers to refinance and take advantage of historically low mortgage rates.
These changes to HARP (often referred to as HARP 2.0) are set to rollout this spring. Fannie Mae and Freddie Mac are currently updating their automated loan underwriting software. This is due to be completed in March 2012.
Some enhancements to HARP include:

Removing the 125% loan-to-value (LTV) ceiling on fixed-rate mortgages backed by Fannie Mae and Freddie Mac when the automated underwriting software is updated eliminates the need for a new property appraisal. Depending on occupancy type, Prospect’s current LTV ceiling is between 105% and 125% with any HARP 2.0 LTV limitations forthcoming.
Eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages.
Extending the end date for HARP until on or before December 31, 2013.
HARP borrowers must meet the following criteria:

The mortgage must have been owned or guaranteed by Fannie Mae or Freddie Mac on or before May 31, 2009.
The mortgage cannot have been refinanced under HARP previously unless it’s a Fannie Mae loan that was refinanced under HARP from March 2009 to May 2009.
The current LTV ratio must be greater than 80%.
Borrowers must be current on their mortgage payments with no late payment in the previous 12 months to 24 months, depending on the LTV.
Owner-occupied, secondary residences and investment properties may be considered for HARP refinancing. There are many HARP refinancing scenarios available. This might be a great opportunity for your customers to lower the cost of their monthly mortgage. If you would like more information, please contact me today!

There are many people in America wondering if they will be able get the value out of their home, post recession.  With the recently announced Home Affordable Refinance Program or HARP 2.0, Fannie Mae and Freddie Mac have released updates in regards to a refinance program that will help you with this conundrum!  While you may not be able to get your equity back right away, you will be able to take advantage of the historically low interest rates that everyone has been raving about. Even if you are under water!!  The Government has raised the ceiling on the Loan To Value for which you would qualify!  To find out more read the HARP 2.0 Blog!

Click here to apply online:  Mortgage Application


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