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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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High Foreclosures Dismay Ben Bernanke

January 11th, 2011

There are a lot of people wanting to sell their houses today. Drive through most neighborhoods and you'll see a plethora of choices.

Many have been on the market for over a year, and are still up for sale. Some have stopped even trying, realizing it's a lost cause right now.

Some of the reasons people can't sell are: 

  • they have lost equity in their house, keeping them from making enough to move up
  • they owe more than the house is currently worth
  • there aren't enough buyers who can afford to purchase
  • the prospective buyers can't sell their house

An article in National Mortgage News reports that Federal Reserve Board Chairman Ben Bernanke used the word "dismayed" when discussing the declining home values and high foreclosure rates that continue to occur. When addressing the Senate Banking Committee, he made some key points:

  • the Treasury Department has been very innovative in devising loan modification and other programs to address foreclosures. "There have been sincere government efforts to address the problem but they run into lots of bureaucratic and other difficulties".
  • unemployment is 10% (this past Friday, it dropped to 9.4%.)    
  • there are a high number of vacancies which reduces the value of the neighboring homes

These factors, according to Bernanke, is "affecting household wealth, consumer spending and confidence." He is asking for principal reduction programs to "create incentives for homeowners to stay in their homes."

This might stop the flight of people who can afford their mortgage, but choose to walk away from them because they are upside down so severely they don't see a way out. If they can receive a principal reduction, they will be in a better position to sell and move up. Unfortunately, Senator Jeff Merkley, D-Oregon, noted that there hasn't been much action taken on such a program.

If you are feeling overwhelmed with your mortgage, are wanting to refinance to take advantage of the current low interest rates, or have questions about what's the best option for you, contact a trusted mortgage broker for assistance.

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Ways to Avoid Foreclosure

January 11th, 2011

ForeclosureWhen homeowners buy a home, the last thing they’re thinking about is losing their home to foreclosure. But in the past few years, millions of Americans have lost their homes or are in the process of foreclosure. There are several reasons why homeowners may stop making timely mortgage payments, including loss of employment, divorce, sudden illness or medical emergencies, or inability to pay an adjustable mortgage rate that increases.

If you’re having difficulties paying your mortgage, by following these steps, you may be able to keep your home and/or protect your credit rating.

  1. Negotiate with your lender. Depending upon your particular situation, your lender may:
    • Wait to take legal action and agree to a repayment plan based upon your financial situation, called forbearance. You’ll be required to provide information to your lender to show you can meet the requirements of the new payment plan.
    • Waive the payments, called debt forgiveness. (This rarely happens.)
    • Agree to a repayment plan that spreads out your missed payments over a longer term.
    • Allow you to refinance your mortgage, or change your loan terms, or extend the amortization period, called mortgage modification.
    • Allow you apply for another interest-free loan to pay the missed payments, called a partial claim. This is only available on certain government loans and if you met the loan criteria.
  2. Get government help. Contact a HUD-approved housing counseling agency for information on services and programs offered by Government agencies. If your home was bought with a Veterans Administration (VA) guaranteed loan, contact your nearest VA office for information.
  3. Sell your home by yourself or through a real estate agent to pay off your mortgage loan to avoid foreclosure. You will need to discuss this with your lender to see if you qualify for this option. Consider selling your home as a short sale if the home is worth less than the amount you owe. You or your agent will need to talk with your lender to see if they’ll agree to a short sale. While a short sale does affect your credit rating, it won’t be as bad as a foreclosure.
  4. Deed your home back to your lender, which will cancel the foreclosure. However, deeds-in-lieu of foreclosure will affect your credit the same as a foreclosure.

Above all else, beware of scams. If it sounds too good to be true, it probably is.

If you are feeling overwhelmed with your mortgage or you have questions about what's the best option for you, contact a trusted mortgage broker for assistance.

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No Crystal Ball for the Mortgage Industry

January 4th, 2011

Tradition has it, in any industry, that early January is full of predictions. The same is true with the housing and mortgage industry. I've been reading many blog posts and newsletters, and though I'm not one to predict, I wanted to share what others believe lies ahead for us in 2011.

So, what is going to happen to the real estate market? I've read that some think home prices will rise in 2011. Kerry Kurry of Housing Wire expects home prices to rise in 40% of the major metro markets. Others, according Bob Willis with Bloomberg, believe we're in for a long recovery due to foreclosures and excess inventory. He reports that too many of both of these categories will keep the housing prices down.

So what about mortgage rates? Though this is my world, I still won't make a prediction! I'll defer to the NY Times article that quoted HSH Associates, an independent publisher of mortgage and consumer loan information. Their take on mortgage rates is summed up this way: "With this year’s historically low rates, there is a good chance that we have peaked, give or take a few basis points.” And now, of course, you're expecting me to tell you mortgage rates will go down. Writing for Financial Edge, Michele Lerner presents a mixed bag of predictions, but does state that a drop in mortgage rates for jumbo loans is highly likely. 

So, what's really going to happen? Obviously, even the experts are in disagreement. Predictions are, in actuality, best guesses. Current mortgage rates are historically low. Home prices are, as well. (Ask anyone who placed their house on the market in 2010). Because of these two scenarios, right now is a great time to buy. Other than that? I'll keep you posted on changing trends during the year.

The one thing I can predict - actually, guarantee - is that Grandview Lending is dedicated to help you secure the right mortgage for your individual situation. Of that, I am completely confident!

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As the Year Closes, Fraud is Still a Trending Topic

December 28th, 2010

I have been hoping all year that I would have a better closing article for 2010. But, unfortunately, fraud is still high on the list of topics in the mortgage industry. 

CoreLogic estimates the 2010 fraud loss will be $11 billion! What seems like good news, is it is down from the 2009 number of $14 billion. Unfortunately, just looking at the numbers can be deceiving. CoreLogic said that the probable fraud rate increased by 20% due to volume increases.

What I find as a sad statement is that some are saying fraud is a crime of necessity where it used to be a crime of opportunity. Necessity? Fraud? The tough business environment is blamed for this; I, personally, don't see any excuse or good argument for anyone to commit fraud - in the mortgage industry or any other industry for that matter.

One huge area that is suspect is the information being entered into the automated underwriting system doesn't match the data in the loan file. It is yet to be determined if the discrepancies are carelessness or delibarate omissions of specific data. Two additional suspects are percentage rate calculation and proper appraisals. 

The good news is that problems will be detected earlier - before the loan is issued - rather than after the fact. Quality control is becoming more stringent as processes are put in place. And there are plans for the mortgage industry to share information, which will enable the fraudsters to be caught much earlier.

As always, it is best to work with someone you know, trust and feel comfortable with - a leader in the mortgage industry. When you choose a professional mortgage broker, you can be assured that you won't be taken advantage of. Grandview Lending is here to work WITH you for all of your mortgage needs.

Happy New Year; we wish a successful, abundant 2011 for all!

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Writing With a Specific Purpose

December 21st, 2010

It has been just a little more than a year ago when I started this blog. When I decided to jump into blogging, I knew I had to have a focus and purpose. What I chose was to use this medium as a way to reach out and create communication to provide some insight into the sometimes confusing and often seemingly complex mortgage industry. This past year I shared the ups and downs (unfortunately more downs than ups), in an attempt to keep you up to date on what's happening with interest rates, the housing market and some general information I thought would be of interest. I also covered some of the key mortgage terms and discussed - very recently -  some unique, creative types of loans available.

But the purpose of this specific post is to wish each of you a very Merry Christmas. As we all spend time with family and friends - exchanging gifts, sharing meals and enjoying each others' company, let's all take a moment to appreciate what we have. No matter our situation, we don't have to look far to find someone who is less fortunate and possibly even suffering, cold or hungry.  I hope you'll join me in being ever so thankful for all with which we are blessed. 

Merry Christmas!

Mike Farrell

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Rent to Own Could Be the Answer for Buyers and Sellers

December 14th, 2010

Reports are out that the economy is improving, and some have even stated that the recession is officially over. Most also agree that it's going to be a long recovery in the real estate market. Therefore, I have shared with you alternatives to traditional mortgages. During the past few weeks you've learned about Seller Carry Back, Land Contracts and Short Sales.

Another option that might help you purchase or sell a home during the economic recovery is Rent to Own (or Lease to Own). If you've purchased your new house, but can't sell the "old" one, you might want to consider this alternative. Paying two mortgage payments can be difficult at best. Another scenario that could encourage a Rent to Own transaction is when you have a serious prospect who just can't come up with the required down payment.

Quite simply, the renter pays an established amount each month to live in the house (just like renting). The difference is, a portion of each monthly payment is applied toward a down payment and the rest is income for the seller. At the end of a pre-determined period, the renter has the option to purchase the house. The money paid as part of the rent is applied to the down payment.

This benefits the buyer/renter by being able to purchase the home they want, while being given the time to accumulate the down payment. The term of the agreement also gives a trial period in the house before buying. This allows for the opportunity to "try it out" to see if there are any major expenses that will be required.

Conversely, during this agreement period, the buyer is responsible for all repairs and maintenance as though they had already purchased the house. On the financial side, a normal contract requires the buyer to pay an option fee at the beginning of the agreement, plus a penalty fee if late on the rent payment(s).

This Rent to Own option can lessen the risk to the owner, a great benefit. When compared to "just renting it," the buyer normally takes much better care of the house because it is, in essence, his. If the renter does break the contract, the seller retains the option fee and the rent he has received as income.

Two major chances the seller takes are 1) if the buyer backs out, the selling or renting process begins all over again and 2) a buyer with the ability to purchase cannot buy the house because of the current agreement with the renter/buyer. 

Though all transactions have an element of risk, these options can be the answer for a number of buyers and sellers. As I always suggest, discuss all options with a professional mortgage broker before making a decision. You might just find you have more than one alternative.

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Seller Carry Back Is Financing Provided By Owner

December 7th, 2010

The two previous posts discussed what some might call "creative financing". In these tough economic times, people are finding unique (or little known) ways to enable the sale or purchase of a home. These non-traditional transactions help 1) buyers who might not normally qualify, 2) sellers who are having difficulty selling and 3) stimulate the local real estate market. No matter what your financial situation is, a licensed, professional mortgage broker is a valuable resource who can help you determine the best type of loan for your situation.

Basically, and simply put, seller carry back financing is owner-provided financing. This can be a win/win for both the buyer and the seller. The increasing interest of this type of financing is due to the difficulty some are having when applying for a traditional loan.

The seller offers to “carry back” the loan to enable the buyer to purchase the house directly from the seller. Both sign a promissory note that states the buyer will pay a designated amount, plus interest, on a scheduled monthly basis. The only difference between this and a traditional loan is that the seller receives the payments instead of a bank.

Just like a traditional loan, title is transferred and the buyer takes possession of the property. If the buyer does not continue making payments, the seller can legally foreclose and take back the property. At that point, he or she can sell it, this time with a traditional mortgage, or seller carry back again.

Some seller-financed transactions might be disallowed due to the SAFE Act, which was passed in 2008. This applies even when originating all loans - even seller carry-backs on your own home. An exception is when the homeowner sells to immediate family members. Sellers may also carry back, only every three years, on their own house to a non family member.

I participated in the small think tank group that helped develop and write the state test that was implemented two years ago to meet the requirements of the SAFE Act. Briefly, it serves as protection for the buyers, requiring that anyone originating a loan be licensed by the state. Who better to assist you, than a mortgage broker who knows this law from the ground up?

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Land Contracts - Who Owns the House?

November 30th, 2010

In my last post, I explained a short sale and how it can benefit buyers and sellers. Many people have poor credit scores due to the current economy. Let's say you were off work for quite a while and fell behind on your bills. You're now back to work, and meeting all of your monthly obligations. Things are looking up for you! However, your credit score will take a while to reflect this.

Unfortunately, you might be in a situation where you're being told you don't qualify for a mortgage. First, before you do anything else, check with Grandview Lending. We have a variety of mortgage options and one might be a good fit.

An alternative for those who cannot qualify is a land contract. You would make scheduled monthly payments to the seller who holds the title (has ownership) to the property. And he will do so as long as you have a balance remaining. As soon as the house is paid off, the seller will give you the deed.

You can choose to pay off the balance sooner than the contract requires by paying more each month or by a lump sum. Some have a scheduled date for the buyer to take ownership through a traditional mortgage. This is beneficial to give you a few years to build your credit back up to where it needs to be.

One major advantage when buying a house on land contract is that you don't have to make a large down payment. There are disadvantages as well, and the biggest one is that the seller often charges more because you're not required to make a large down payment, and he knows that you don't have many other options.  

I'm familiar with one couple who sold their house on land contract and required no money down and the buyer basically just took over the payments. At the end of five years, as stated in the contract, the buyer then purchased the house via a traditional mortgage for a predetermined price. The sellers had moved out of town, couldn't sell their house and didn't want to continue to make two house payments. The buyer had filed for bankruptcy a few years prior, so was unable to purchase through a traditional mortgage. This was a win/win, as both parties benefited. 

Before you make any purchase or any agreement, discuss all of your options with a qualified, experienced mortgage professional.

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Facing Foreclosure? Consider a Short Sale

November 23rd, 2010

As a mortgage professional, I am always reading articles that discuss real estate and mortgages. A recent article on CNNMoney.com discussed how banks are more efficient and are expediting short sale approvals due to the distressed properties throughout the United States.

A short sale allows homeowners to sell their houses for an amount that is less than what they owe on it. According to Redfin, a real estate web site, it used to be very difficult to sell a house using this method, and often the application was "lost" for months on someone's desk. But the market is different today. Lenders lose, on average, 30% on a short sale. But comparing that to the normal 50% loss on a foreclosure, it's clear why lenders are taking a positive stand on short sales today.

It is projected that short sales might accelerate an end to the foreclosure crisis because it will help people get out from under an upside down situation and replace that homeowner with one more capable of handling the payments.

One big advantage a short sale provides is that you will receive less of a hit on your credit scores. A foreclosure can negatively affect your FICO scores by approximately 200 points, while a short sale results in an average decrease of 100 points.

As with any situation when it comes to buying or selling a home, consult with a professional mortgage broker to ensure you're receiving proper guidance. Grandview Lending will walk you through a variety of scenarios to determine the best approach according to your situation.

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