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Beware of Loan Modification Scams

March 15th, 2011

Creative financing is often part of a house purchase or refinance. When the process is legal and with a trusted mortgage professional, it can be a great opportunity for both the buyer and the seller to close the deal - or for the current homeowner to remain in their home. Unfortunately, the word trusted is often forgotten when someone begins to feel desperate.

This story, coming out of New York State, is one that exemplifies why you should work with someone you know or who was referred by a friend, relative or previous customer.

According to National Mortgage News, a lawsuit has been filed against Save My Home, a group of companies that targeted low-to-middle-income homeowners who were struggling with their mortgage debt and were afraid of foreclosure.

The lawsuit charges that these "loan specialists" would find homeowners on the Internet, through cold calling or print ads. They promised to lower the monthly mortgage payments and asked for payment to renegotiate the debt for the homeowner. Other times, they told the homeowners to stop sending in their mortgage payments and that it was best to cease all communication with the loan holder. When they stopped sending in their payments, they fell further behind, increased their debt, accumulated lender fees and missed payment penalties.

Throughout this entire process, these targeted homeowners had no knowledge that there were HUD-approved housing counselors available to assist them with loan modification services. They were scammed because they believed what they were being told, they didn't investigate and were feeling desperate. 

We urge you to learn from this scenario - it's just one more example of "if something sounds too good to be true..." Call a trusted mortgage broker to verify what you are being told.


Short Refi Programs Face Discontinuation

March 8th, 2011

We're hearing - if not great, at least improving - news in the housing industry. Even so, there are still many people struggling to keep their houses and hoping for programs to help them do just that. Last week, the House Financial Services Committee voted down two programs that could have provided assistance.

The Federal Housing Administration's Short Refi Program: designed to help those who are upside down (sometimes called under water) which helps homeowners obtain a new FHA-insured loan.

The Department of Housing and Urban Development's Emergency Homeowner Loan Program: designed to provide mortgage assistance to unemployed borrowers through loans up to $50,000 with 0% interest.

Both of these bills propose ending the programs and it is anticipated that they will reach the House floor soon.

Rep. Judy Biggert (R-Ill.), who co-sponsored both bills, explains why she feels they should be eliminated. "A government program that spends more to save a single borrower than it costs to buy a home is no help at all – it’s just a waste of taxpayer money. We need to stop funding programs that don’t work with money we don’t have."

On the other hand, Rep. Maxine Waters (D-Calif.), who worked with HUD to develop both programs, counters Rep. Biggert with this response. "I am very disappointed in my colleagues on the opposite side of the aisle, who in their mania to achieve fiscal austerity at all costs, moved to cut two nascent programs designed to really help struggling homeowners," Waters said.

It will be interesting to see what happens with these two programs. Whether they are closed down or remain as assistance programs, these are not the only two options. If you're struggling with your current mortgage, contact your trusted mortgage broker.

Grandview Lending has a staff of professionals ready to assist and help guide you to make the best decision that is right for your particular financial situation.


Understanding Cash-out Refinancing

March 1st, 2011

You might have chosen to remain in your home rather than move. But that decision comes with the decision to access some cash to remodel. The equity in your home could serve as a vehicle to do just that, and a cash-out refinance might be the answer. 

The Top 4 "thumbs-up" of cash-out refinancing

  • When using these funds to pay off credit cards or other high interest debts, you'll improve your cash flow by merging all the debt into one payment. Though the payment is larger, it will most likely be less than the total of all the other bills. 
  • With fewer bills carrying balances due, you will most likely improve your credit score. 
  • You will realize the tax benefits of the deductible home mortgage interest.
  • You can use it for whatever you wish. There is a growing trend where people are using some of the money as "emergency funds" so they have it readily available.

The Top 4 "thumbs-down" of cash-out refinance

  • This is a new mortgage, so you will have to pay fees ranging from hundreds to thousands of dollars in closing costs.
  • If you borrow to the full value of your home, there is risk of being upside down if you want to sell within a few years.
  • You might extend the length of time you'll be making your mortgage payments, possibly going back to the full 30-year loan.
  • You might find yourself in worse shape. If you have difficulty managing money, you might find yourself returning to the credit card habit. Then you'll have a higher house payment, plus new debit on the credit cards you just paid off. This will place you in a more difficult place than you were prior to the refinance.

When you're ready to tap into the equity of your home, consult with a professional, dependable mortgage broker. He or she will be able to help you decide, depending on your specific financial situation and goals, which type of loan will best serve your needs.


What is a Subprime Mortgage?

February 22nd, 2011

Anyone who listens to the news, reads a newspaper or surfs the internet has heard the term subprime mortgage. This past year has been riddled with stories about mortgage fraud, delinquencies and foreclosures. All of these are good reasons why it's best to work with a reputable mortgage broker. This ensures you receive the proper guidance and education necessary to make a proper decision when buying your home.

With all the talk about subprime mortgages, I thought it would  be helpful to explain what is often called a "bad credit" mortgage. This type of mortgage is offered to potential buyers who have a high debt-to-income ratio, cannot verify their income or have a poor credit history.

Subprime mortgages:

  • involve higher risk, so require a larger down payment
  • have higher interest rates (from 1% - 5% higher) due to that risk  
  • frequently have a higher loan-to-value ratio
  • commonly include a prepayment penalty
  • often include a balloon payment

If you have a credit score of less than 620, a  subprime mortgage might be the answer for you if you're having difficulties qualifying for a conventional loan. If you currently own a home, you can use a subprime loan to clean up your credit. Once that has been accomplished, you can then refinance for a lower rate on the balance that remains on your mortgage. 

If you believe you qualify for a subprime mortgage, whether for a purchase or refinance, we'll be happy to work with you to determine the best alternative for you and your specific financial situation.


Will the Wealthy See a Cut in Their Mortgage Deduction?

February 15th, 2011

There are a number of news articles and blogs - along with many interesting comments - regarding yesterday's release of President Obama's 2012 budget.  One item of interest is the home mortgage deduction.

Interest on a home mortgage is currently deductible on an income tax return, filed jointly, if the loan is less than $1 million ($500,000 for individuals). The reason for the loan - whether for a home purchase or remodel - doesn't matter. If you have a mortgage loan, you receive the deduction.

Included in this new budget, homeowners that make over $250,000 and file a joint return ($200,000 for individual returns) would see their interest deductions decreased.

Will this discourage people from buying a house? Will this discourage retirees from purchasing a vacation home? Will this affect the housing market right when it's starting to improve? Will this help the national deficit? There are a lot of questions to be answered.


What do you think?


Understanding the Closing Process

February 8th, 2011

As the housing market sees a slight improvement, and many sources are stating the general public is feeling better about the economy, it seems natural that we'll see an increased interest in house hunting. With that comes more houses on the market, more houses purchased and more mortgages written.

So let's say you found your dream home, and today is closing day. What is going to happen?

In a nutshell, Closing is the final step in the loan process, when ownership becomes yours. The title is transferred from the seller to you, the buyer. You'll sign the loan documents and will receive ownership of one more thing besides your house - you now own the mortgage!

Three terms to help you prepare - Closing Statement, Closing Costs and Closing Process.


Closing Statement

This is a detailed statement listing all of the charges you will pay, plus the loan funds you will receive.  


Closing Costs

These costs are all the fees paid by you, the borrower, at closing. They include origination fees and loan processing fees. 


Closing Process

You'll feel like you're signing your life away with all the papers that require your signature. You will:

Sign documents. These will be the agreement between you, the buyer, and the lender (terms and conditions of the mortgage) and the agreement between you and the seller (transferring ownership).

Pay closing costs and (possibly) escrow items. 

Be sure to review all closing documents before signing them. If you have any questions, do not hesitate to ask. This is a major financial commitment and you must understand each step of the process and each document you sign.


At this point - congratulations! - the house is yours!


Home Sales on the Rise - LOVE it!

February 1st, 2011

February is the month we will hear the word "love" quite often as people think of Valentine's Day. People love their wife, husband, parents, children and pets. This over-used word also states that we love specific foods, warm weather, a certain jacket, a favorite restaurant, a walk on the beach ...

So I'm going to use the word for one more topic - home sales. The Census Bureau recently stated that 2010 had the lowest home sales in almost half a century, to the tune of only 321,000. That was a drop of over 14% from 2009, and the 5th consecutive year of decreasing sales.

So, what's to love? December saw a rise in sales. And according to National Mortgage News, new home supplies dropped from 8.4 months in November to 6.9 months in December. Additional good news: across the nation, mortgage brokers are now seeing an increase in purchase applications.

This, along with other economic indicators, shows that we are slowly pulling out of the recession. It appears that we are going to be able to love 2011. This means you might be able to start looking for the house you would love to have. And while looking, planning and preparing, it's probably time to give your current house that tender, loving care to get it ready for market.

And when you're ready, Grandview Lending would love to take care of your mortgage needs!


What Is A Home Appraisal?

January 25th, 2011

When you are applying for a home loan, whether to purchase a new home or to refinance your current home, you will need an appraisal. The best person to help guide you through this process is your mortgage broker. 

An appraisal is, in essence, an opinion of the value of your home, determined by a licensed individual. The appraiser is normally chosen by the lender. Included in the report is the neighborhood, comparisons of other similar homes, what they are selling for, and the condition of your home. This completed assessment will normally cost between $300 and $500.

Preparing for an appraisal is the same as preparing to sell or show your home.  Maintenance inside and out is essential. Inform him or her of new windows, flooring, a newly finished basement and any other remodeling recently completed.

When the numbers come in

If the appraisal comes in lower than you expect, it can affect or even prevent getting the loan. If you're buying, you can offer more down or the seller can lower the price - either way could allow the transaction to be finalized. If you're refinancing, you could dispute the appraisal. You will need to do a comp analysis to see where the differences are, and what might make your home more valuable. Verify that the appraiser is familiar with your town or neighborhood, specifically. You can also request a different appraiser for the second opinion.

Always remember that you want your house to show well so your appraisal will be as high as possible. And also remember that an appraisal is an opinion which can be changed, if you can provide the proper information to support your request. 


Bi-weekly Mortgages Help Save Interest

January 18th, 2011

Most likely you've received your Mortgage Interest Statement, Form 1098, in the mail. This form shows the amount of interest you paid last year on your mortgage. Most people look at this statement with a sigh, seeing how much is going to interest rather than the balance of the loan.

If you're looking for a way to reduce the amount of interest, and pay your mortgage off sooner, you might want to consider a Bi-weekly Mortgage. This is a fixed rate mortgage that is scheduled for payment every two weeks instead of the normal once-per-month schedule. 

The bi-weekly payment is half of the monthly payment, so most months you pay the same amount as you would with a monthly payment. However, paying every two weeks means you make 26 payments - or two extra payments - at half the amount, instead of just 12 per year. 

You will reduce the interest amount paid, which results in a larger savings in interest payments. Also, the additional payments allow for a faster repayment of the loan amount, thus building up equity faster.

If you're considering a new mortgage, check with a professional mortgage broker. We, and I'm confident others, will welcome the opportunity to apply your numbers and show you the results of a regular, 30-year fixed mortgage and a bi-weekly mortgage. Then, with the knowledge in hand, you can make the decision that is best for you and your financial situation, as well as your long-term goals.


Common Mistakes Mortgage Shoppers Make

January 18th, 2011

QuoteBuying a home, and getting a mortgage, is probably the biggest financial decision you’ll ever make. Shopping for a mortgage isn’t like shopping for car insurance or buying something at the mall. It’s a totally different experience. Therefore, it’s best if you learn from other mortgage shoppers’ common mistakes so you can avoid making them yourself.


Calling and getting a quick rate quote. Unfortunately, if you do this, you’ll just be wasting your time. You need to find a lender who asks questions, so he really understands your particular financial situation. This way the lender can find a mortgage solution that’s right for you.

Comparing apples to oranges. You may think you can call a few lenders over a couple days and get some quotes. The process just doesn’t work this way. The rates and costs are always fluctuating, so the quote you may get is only good for that day until you lock the rates in. So you can’t truly compare quotes unless you get them all on the same day within an hour or two of each other.

Getting an estimate without providing all the facts about your financial situation. All the lenders you talk to need to have all of the same information ( your credit score, down payment amount, loan size, type of property, etc.) in order to analyze your situation and give you an accurate quote.

Working with a lender you don’t trust. You may encounter lenders who promise the “best deal.” Unfortunately, if it seems too good to be true, then it probably is. You should always work with a reputable mortgage broker. Ask family members, friends or co-workers for recommendations of lenders they’ve worked with. Also check out the lender’s client testimonials.

Everyone wants the best deal, because no one likes to overpay. Therefore, by following these tips, you’ll avoid making costly mistakes when looking for the right mortgage for your financial situation.

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