This is to ensure that you have not taken out, or even shopped for additional loans – a new car, furniture, and new credit card, etc. If the new credit screening finds that you have, the loan will be put on hold pending further investigation. If the loans are large enough to affect the debt-to-income ratio this could put an end to the loan as it could mean monthly payments that are too high to support your budget.

Part of Fannie Mae’s loan quality initiative, lenders will be required to get two credit reports, social security numbers and verification of the borrower’s occupancy of property.

When buying a home in Los Angeles resist the urge to continue spending after you have applied for a mortgage, because you spending pattern is going to be closely investigated after the second credit screening. You may need new furniture for that home, but you might want to wait until after the closing lest you lose your loan.

Search Los Angeles homes for sale

The mortgage rate itself never changes, but the price associated with the rate you choose, does.

You may have heard the term “Yield Spread Premium”, also known as a rebate. This video should help you understand.

Opt Out of Credit Report Marketing

Are you tired of receiving unsolicited offers of credit and insurance?  Do you know how they receive your information?

The major credit report companies are providing this information.  The Fair Credit Reporting Act (FCRA) permits this, but it also permits you to opt out of receiving these mailings.

To opt out go to OptOutPrescreen.com

The guidelines are part of  the new government Home Affordable Foreclosure Alternative Program (HAFA).  The purpose is to enable borrowers who are eligible for loan modification programs but are unsuccessful in their attempts, to work out a plan with their

lenders to execute a short sale or deed in lieu of foreclosure (where the homeowner relinquishes their rights to the property and passes ownership back to the bank).

The HAFA program applies to a large volume of risky loans not owned by Fannie Mae and Freddie Mac (these agencies will be issuing their own guidelines) as follows:

• The property must be the owner’s principal residence.
• The mortgage loan is a first lien mortgage originated on on before January, 1, 2009.
• The mortgge is delinquent or default is resonably foreseeable.
• The current unpaid principal balance is equal to or less than $729,750.
• The borrower’s total monthly mortgage payment exceeds 31% of the borrower’s gross income.

The HAFA guidelines are voluntary, but many of the major banks, smaller lenders, and servicers are expected to participate in order to clean up the mess and to avoid an influx of short sales.

These guidelines should help as there is an incentive for lenders to participate.  They receive $1,000 to cover costs, and subordinate lien holders receive up to $3,000 in order to release their lien.  Also borrowers receive $1,500 towards moving costs.

Standardized forms, procedures, and timelines will be provided and the borrower will receive pre-approved short sale terms prior to listing the property.  This will attract more serious buyers who are loathe to invest time and money in the short sale process with no guarantee of ever getting the property. The HAFA guidelines also prevent lenders from coming after the borrower for the balance of the debt.

Even though it will take months for lenders to put procedures in place to comply with the guidelines, and it will not solve all the problems, it will alleviate some of the pain.  Bsnk of America has had a short sale fall-out rate as high as 70% as compared with REO transactions with a 10-15% fall out rate.

Wouldn’t we all like to see the short sale process being planned and well-orchestrated as opposed to the free-for-all we have seen in the past.

The fees at closing cannot differ more than 10% of what was quoted, and if it is more, the lender is liable for the difference.  This was put in place to keep lenders honest.  Previously, cost estimates would be massaged in order to lure a borrower away from the competition, and when it came time to pay up at closing the actual fees could be substantially more.

Some lenders are getting around this requirement by issuing work sheets, and loan scenario forms which are not legally binding.  They can effectively do this if an application is incomplete, either because the lender did not ask for the information or the borrower did not fill it in correctly, either innocently or on purpose, thus per HUD’s definition, this is not an application.

Lenders are loathe to issue a hard and fast estimate as they cannot be 100% sure of actual closing costs.  They feel the worksheet gives a good idea of the final costs.  However,  if you would like a clear picture of those final fees, insist on a GFE.  It is a binding document and you will have no surprises come closing time.

Broadview Mortgage has an exciting new  loan for healthcare workers making home-buying affordable.

This loan is available to almost anyone in the medical field – medical office receptionists, ambulance drivers, doctors, nurses, physicians aids, physical therapists, etc.

Here are some of the program’s highlights:

• Fixed origination fee…the maximum origination charged is only 1%
• Fixed lender fees…the maximum lender fee is $350.00. This includes our underwriting and processing fee!
• The rates are based on the CalSTRS daily rate and there can be no lender manipulation just like the CalSTRS program.  What you see is what you get.
• One time free float down during escrow.  This means if you are locked at 5.5% but the rate goes to 5.25%, you get the lower rate for free with just a phone call to Broadview’s lock department.
• Low down payment….only 3. 5%….just like FHA.
• Minimum FICO score is 620.
• This is a 30-year fixed mortgage.
• No first-time homebuyer requirement.

Underwriting turnaround times from time of submission in 48 hours and most of the files are closed within 30 days.

If you have any questions, please don’t hesitate to contact me.

Good Faith Estimate

Buyers should educate themselves on the revised Good Faith Estimate (GFE) due to come into effect in January.

The revised GFE is another failed attempt to protect consumers,  The problem is, consumers cannot be protected with forms because those who wish to deceive will always find a way.  Consumer education is the only real consumer protection.

The new GFE requires lenders to guarantee their fees but it allows lenders to estimate fees for Title, Settlement, Prepaid Interest and Impounds.  Once again, it appears the rules are made by people with absolutely no understanding of real world lending.

Based on my experience, consumers are less interested in the individual fees than the grand total.   So, guess which fees will continue to be understated.

So, how can consumers be protected?  The answer is only with a little education.

Rule #1 All rate shopping should be on the same day and within a couple of hours

Rule #2 is really simple but, for some reason most people don’t get it.

ANY RATE QUOTE IS WORTHLESS WITHOUT ALL 3 OF ITS PARTS:

The parts are:

1. RATE… for equal comparison request a 30 day lock price.
2. POINTS…
3. FEES!!!

It bares repeating, RATE… POINTS… FEES.

Lets put it to music:
1, 2, 3  umm papa Rateta da…Points tra la, Fees tra la
Like love and marriage, you can’t have one without the otherrrrr.

Ok, So I am not a song writer but it makes the point

Providing credit where credit is due; the revised GFE points out that total lender charges are a function of the interest rate.  The relationship of points fees and rate is an important piece of information.

Note: Forget about APR because it is the most gamed number in lending and with Rate, Points and Fees it is not needed to compare rates from various lenders.  APR is only as dependable as the lender.

Rule #3

Unless a closing date is known… PREPAID INTEREST MUST ALWAYS BE ESTIMATED AT LEAST 15 DAYS!!

Rule #4 requires a little help from Buyer’s Agents.

1. Impound amounts vary by the month and locale so every real estate agent should provide their buyers with a local impound schedule.
2. Title and settlement costs vary by locale and every real estate agent should have average fees for title and settlement to provide their buyers.
3. Agents should make their buyers aware of any special state or local fees or taxes.

Note: Most title companies have schedules for impounds, title and settlement fees.

Education is the consumers best protection.  Below are listed some educational articles on lending.

CalPERS

Special features of the CalPERS home loan are:

3.5% down
Co-signers allowed
Fixed interest rates with maximum fixed costs
$350 lender fees allowed
No early payoff penalties
No income limits
You do not have to be a first-time buyer
You can use 100% gift funds for downpayment
Closing costs assistance available
Special down payment assistance benefit

CalSTRS

Special features of this loan are:

Only 3% down
No mortgage insurance
This is an 80%/17%  for which you only make payments on the 80% for the first 5
30- year fixed-rate mortgage
No early pay-off penalties
Low controlled rates and fees
Lenders fees limited
No income limits
You do not have to be a first-time buyer

For more information on the CalSTRS program go to Calstrs.com.

How is your Credit? Tougher lending laws are now are now leading Fannie Mae to require a minimum of 620 credit score as a qualification for some loans.  This includes FHA and VA loans.  However, in order to get the best rate, a credit score of 720 is required and verifiable income.

In the past a mortgage broker was able to shop around for the best rates, but the new procedures and the Home Valuation Code of Conduct (HVCC) have made this difficult.  Lenders will no longer take a broker-commissioned appraisal, so the Buyer will have to pay for a new appraisal for each lender.  This costs time and money.  However, for those needed that extra help, then a broker is the best bet.

Despite all this, now is a good time to buy. Interest rates are low, prices are favorable and there is a possibility of an extension of the federal tax credit.

If your credit does not qualify make sure you take steps to raise it.  Pay your bills on time and pay off your debt.  Also, never close an old credit card and use as small a portion of your available credit that you can.

Lastly a 30-year fixed is the best mortgage to take.  You never have to think about it again.

Now is a good time to buy!

How much will it cost to refinance?

This is based on a current rate of $729,750 financed at 5.50% with a new rate of 5.00%.

That cost, including the loan origination fee will be $6,791.

What will my monthly savings be?

Monthly savings with the lower interest rate will be $225.98.

How much will I save over 10 years?

Your savings should be $27,118 over 10 years.

The return on investment in this example is 14.85%.  However, this does not take into consideration investment of the monies saved or increase in the home equity due to lower interest rate over 10 years resulting in a lower loan balance.

So, if you are considering whether to refinance, it would be advisable to consult with a mortgage broker to see if it makes sense.

Rick will advise you at no charge.  What do you have to lose!

For example, in late August a borrower putting $80,000 on a $400,000 purchase, with a good credit score, around 720, would have qualified for a 4.875 rate on a 30-year fixed mortgage. The same rate was offered to borrowers only putting 5% down. And those who put down 25% got an even higher rate, 5.375%.  Why?

Fannie Mae and Freddie Mac (the government-controlled bodies that establish the underwriting rules for most of the country’s loans) consider those who put down 20-25% as high-risk because they are not required to carry private mortgage insurance (PMI). With a higher down payment, the interest rates go down, as the borrower is less likely to walk from the house.

Loans covered by PMI basically removes the risk of foreclosure on the lenders.

Putting down less gives those who might otherwise feel stretched a cushion for emergencies and when they have reached the 20% equity mark the PMI will no longer be required.

The monthly payments will be more for the person who puts down less will be more than the person with a higher down payment.  Example:  25% down on a $400,000 house will require payments of $1,6870 a month. 15% down means payments of $1,906 – $1,799 in principle and interest and $107 in PMI.  The PMI is tax deductible, so depending on the borrower’s financial status, the net mortgage cost could be less.

Opting for the lower down payment, thinking that the PMI payments will eventually end is a risky prospect. With the market the way it is, some lenders are not releasing borrowers from carrying the insurance.  So, it is probably better to put down more and build on the equity.

In either case, a nest egg of nine months mortgage payments is recommended.

So you have a mortgage and you are interested in refinancing your home through FHA Refinancing, but there is one problem, you don’t have a FHA mortgage. It may seem like your chance has been lost, but it has not. The program FHA Secure allows those with non-FHA mortgages, current or delinquent to refinance through FHA. FHASecure makes it so the lender will not immediately disqualify you because you are delinquent on your loan, instead the lender would offer a second mortgage to make up the difference in value of your property and what you owe.

If your goal is to get lower payments, prevent foreclosure, and protect your investment without an FHA mortgage keep in mind that through FHA Secure:

• You are not automatically disqualified based on delinquency on your current loan.
• You must have a dependable income and be able to make mortgage payments.
• If you are in default, you must show delinquency of default is the result of increased interest rates and higher mortgage payments.

This program is available for single-family or multi-family homes. Starting on July 14, 2008, FHA Secure will be in affect. This second chance refinancing does not indicate relaxed requirements for credit however. Those applying for this FHASecure program are under the same requirements as those applying for an FHA loan. Borrowers should:

• Have steady income from a dependable source.
• Show a reliable payment history.
• Have debt-to-income ration below 41%.
• Have a credit score appropriate for any home loan.

FHA Secure can improve conditions of life for many by helping to reduce the number of mortgage defaults and bring more stability to local housing markets. Visit the FHA’s website for more info on FHA loans.