With good preparation, most things are easier. That works in mortgages too! Today, I want to give you some ideas that can make your mortgage experience less painful.
1.Gather your documents. Today, many people will have to produce 2 years’ complete tax returns, including W2′s, 1099′s, K1′s, and all the schedules, as well as a month’s worth of pay stubs.
2.Be prepared to explain them. Deductions in your returns and your pay stubs may impact the income your lender will use to qualify you which, in turn, has a big impact on the loan you will get.
3.Have a breakdown of base pay versus overtime for both your pay stubs and 2 years’ W2′s. Lenders treat overtime (and bonus income) differently than your base pay. Be prepared to explain any changes over the last few years because your loan officer will ask you about it.
1.Start accumulating your bank statements. Lenders look back 3 months from when you sign your contract of sale.
2.You will have to explain any and all large deposits (which are defined as deposits greater than your regular pay check) because lenders want to make sure you haven’t taken out any new loans that aren’t on your credit report.
3.Avoid any significant cash deposits. However, if you did have a cash deposit, understand that the lender will have you source it (a bill of sale and DMV receipt for that motorcycle, for example).
4.If you will be receiving a gift, consult your loan officer on how to document it (from the donor’s ability to how you deposit it).
One of the more frequent topics discussed between loan officers and borrowers center around discount points.
“What are points?” “Should I pay points?” “What about NO points?” And so on…
So today, I decided to give you some information and some things to consider:
- First, a definition- Discount Points are pre-paid interest that allows a borrower to lower their interest rate on monies borrowed. Because points are prepaid interest and mortgage interest is tax deductible, points are tax deductible in full in the year you pay them when you use the proceeds of the loan to purchase a home. (Consult your accountant for rules concerning points on refinances.)
- As an example, paying a point (one point is equal to one percent of the loan amount) may lower the rate on your 30 year mortgage .25%. To give some practical numbers to it:
- On $100,000 loan, one point would be $1000.00.
- The difference in your monthly payment from a 4% rate to a 3.75% rate on a 30 year fixed rate loan would be $14 ($478 vs $464).
- Are you better off spending $1000 today to save $14 a month? It will take you nearly 6 years to make your money back. For most, it’s easier to find $14 a month than to save $1000. On the other hand, if you expect to have this loan for 30 years, your $1000 expense will wind up saving you over $5000.
- Next, talk to your loan officer about ACTUAL prices. The old guideline of 1 point for .25% in rate doesn’t hold true every day or at every price point or at different times of the month or year. Mortgages are bundled together and sold in packages called MBSs (Mortgage Backed Securities). These MBSs often are bought and sold before there are loans to fill them up. A given company may have projected (and committed to deliver) a certain volume of loans at a particular rate. To attract these loans as their deadlines approach, they may offer a “deal”. There are times when a lender can make more money selling a 3.75% Note than a 3.875% Note because of other commitments. Ask your LO the different costs (in points) you would have with different rates. Then, calculate the time needed to recoup the monies.
To continue reading this article by Dean Hartman visiti the KCM Blog by clicking here.
Mortgage applications in Florida are up 189 percent in one year – with the Sunshine State becoming one of the hottest home lending markets in the nation, according to the Mortgage Bankers Association.
Only Arizona and Nevada enjoyed a higher rate of increased home loan applications, according to the association’s state-by-state analysis.
One of the driving forces has been homeowners trying to refinance their homes. In May 2011 only 48 percent of Florida loan applicants were trying to refinance; last month, 74 percent of applicants wanted to refinance, the association found.
“Refinance volume increased as borrowers were able to lock in at mortgage rates below 4 percent,” said Michael Fratantoni, the association’s vice president of research and economics.
The 30-year fixed rate loan has remained below 4 percent since December, with the exception of one week, according to Freddie Mac, the secondary lender.
Mortgage interest rates increased this week for both 15- and 30-year fixed rate loans, but they still remained near historic lows, Freddie Mac reported Thursday.
The average 30-year fixed rate rose to 3.71 percent, up from last week’s 3.67 percent. Last year at this time, the average rate was at 4.5 percent, according to Freddie Mac.
Interest rates on 15-year, fixed-rate mortgages also moved up this week, from last week’s 2.94 percent to currently 2.98 percent, Freddie Mac said. Last year at this time the average rate was 3.67 percent.
The low interest rates have created a home lending boomlet, with mortgage applications jumping 18 percent last week nationwide on a seasonally adjusted based, according to the Mortgage Bankers Association. That was the biggest jump in three years, since May 2009, the association said.
The historic low rates are helping first-time buyers afford homes.
In Boynton Beach, Jen Harrison, 28, said she was able to get a 3.75 percent, 30-year fixed rate loan on her first home, a two-bedroom town house. Even with homeowner’s association fees, she said she will be paying less than $1,000 a month for her new home.
“That’s cheaper than rent,” she said, estimating she’s saving about a $400 a month.
The lower interest rates – plus South Florida’s current low home prices – are helping the region rebound from one of its worst economic downturns in decades, said William B. Stronge, an economics professor emeritus at Florida Atlantic University.
With lower monthly payments, owners have more money to spend elsewhere, he said.
The improved conditions also are helping the real estate sector recover from the devastating housing bust, he said.
In fact, more real estate professionals in Florida are becoming upbeat about business improving, said Timothy S. Becker, director of the Kelley A. Bergstrom Center for Real Estate Studies at the University of Florida.
More builders, for example, are now looking to start or expand new projects, said Becker, whose center is part of the Warrington College of Business Administration.
“It’s slowly coming back,” he said. Copyright © 2012 the Sun Sentinel
SHELTER | Live Better.
Should you lock in the interest rate on your mortgage? A couple of things to consider:
1. While I am confident that the Debt Ceiling Debate will be settled (whether it’s for six months or a year), my greater concern is the growing belief that the ratings agencies are looking at downgrading our government’s bonds from our AAA status. By lowering the credit rating of the bonds being presented to the market, the confidence of those who buy our bonds will be shaken. In order to overcome the risk of lower rated bonds, we will need to offer greater rates of returns on our bonds. THAT will result in a rise in mortgage rates because mortgages are what make up the bonds. This will affect virtually every conforming loan limit home buyer, whether they have conventional or government (FHA/VA) financing.
2. The lowering of the maximum loan amounts that can be sold to FannieMae, FreddieMac and GinnieMae (in high cost areas from $729,250 to $625,500 for single family homes) will create more “Jumbo Loans”. Jumbo loans have historically been .25% to .375% higher than conforming loans; however, industry insiders are hinting at a much bigger spread (.75% or more). Granted, this will not impact most home buyers, but it is worth noting.
Now, it is possible that neither item becomes effective. Let’s keep our fingers crossed. Yet, what is the benefit of NOT locking. Maybe rates could go down an eighth or a quarter of a percent. Is that worth the risk of a rate increase that would be quick and dramatick of a half of a percent or more?
The safe bet is to LOCK to protect yourself……my mother always said, “better safe than sorry”.