August 22nd, 2008 by gerri
If you are having trouble paying your mortgage and trying to stop foreclosure, you probably know that things are very tough for many borrowers. At Lender Rate Match we have been monitoring thousands of loan programs over several years, and we’ve seen extraordinary changes in mortgage loan programs and what it takes to qualify.
If you have decent credit, equity in your home or a good sized down payment, and a job that pays you a steady W-2′d salaried (meaning taxes are withheld), then plenty of good loan programs still exist and we encourage you to compare mortgage rates.
But if you are someone who is self-employed, you owe more than your house is worth or your credit is bad (maybe you’ve missed payments), then your options are more limited.
In particular, it’s the homeowners who are “under water” - meaning they owe more than their house is worth - that are really in a tough bind.
The new housing legislation is supposed to help that with an FHA option that allows lenders to write off some of the balance of the loan now in exchange for a share of the appreciation of the home later.
But it’s a voluntary program, and that’s the big problem.
Many lenders simply are not working with borrowers on long-term solutions. They are only plugging the leaks temporarily, and they need someone with some authority to help right the ship. That person could - and in my opinion should - be a bankruptcy judge with the authority to direct a lender to restructure a bad loan to give the consumer the opportunity to pay off a loan based on the current value.
The New York Times agrees. In a recent editorial, they called for the same reform that many consumer advocacy groups have been pushing for:
…lawmakers should be ready to reform the bankruptcy law so that homeowners can have their mortgages modified under court protection. That is arguably the best way to prevent foreclosures, but it is also the policy most reviled by the mortgage industry
It’s a solution that costs taxpayers nothing, yet can save millions of homes from foreclosure and halt the downward spiral that vacant homes are causing, even for homeowners with no trouble making their payments.
Posted in Mortgage Problems, Credit Crunch | No Comments »
August 20th, 2008 by gerri
While the media and the market scrutinized every word of the Federal Reserve Board’s message last month, it seemed to overlook the most important signal - which was there loud and clear for anyone reading between the lines.
It went like this: “Refinance your adjustable-rate mortgage now, if you can.”
That’s the logical interpretation of the Fed’s current position…
I was interviewed on this topic for a story by Chuck Jaffe of Marketwatch and if you are in an ARM I hope you’ll take a minute to read it and heed the warning.
Posted in Uncategorized | No Comments »
July 3rd, 2008 by gerri
If you are going to buy or refinance your home, beware: Your appraisal may cost more than before, and take a lot longer. It’s not surprising that lenders are trying to make sure that appraisals more accurately reflect the value of the property today. After all, they’ve taken a big hit on loans where inflated appraisal values contributed to foreclosures.
But their “solution” to appraisal problems often just mean more headaches for borrowers — and higher costs as well. Randy Johnson a mortgage broker who has financed over $1 billion in properties shared the latest scoop in his post about Appraisal Hanky Panky on Creditbloggers.com.
Just one more thing to deal with when you’re trying to buy a home. Seems like they are making the “housing turnaround” an awfully wide turn.
Posted in Mortgage Problems | No Comments »
June 23rd, 2008 by gerri
A reader asks:
I am planning to live in a house for next 6-7 years which I just purchased. Is it advisable to pay accelerated mortgage ( biweekly or 13th payment) compare to monthly payments.
Would appreciate your suggestion. Thanks!
This is great question, and one I hear often: Should I prepay my mortgage?
There are a few things to consider:
1. First, I would not recommend you pay any fees to get a bi-weekly or accelerated mortgage. This is something you can easily do yourself for free. Just take your mortgage payment, divide by twelve, and send in the extra amount each month with your payment. There is an article on our site that talks about do it yourself mortgage prepayments.
2. It’s great you are in a position to pay extra on your mortgage. It’s a risk-free, tax-free way to build wealth in your home. However, I would first encourage you to make sure you have adequate savings reserves that are liquid (easy to get to). If you run into a financial crisis due to a layoff, disability, etc. it may be difficult at that time to tap the equity in your home quickly.
My colleague and the true expert Marc Eisenson wrote a book about prepaying your mortgage called The Banker’s Secret. He also wrote a chapter on pre-paying in the book I co-authored with him and Nancy Castleman entitled Invest In Yourself: Six Secrets to a Rich Life. I am going to send you an autographed copy for your library.
(Yes, that’s a hint for those of you who may be thinking about asking a question. Ask and you may receive!)
Posted in Uncategorized | No Comments »
June 18th, 2008 by gerri
Q: My two sons and ex-wife are in the market for a mortgage. My sons’ FICO scores are in the high 700’s but my ex-wife’s score is in the low 700’s (3-4 years ago, she declared bankruptcy). Can your software handle three FICO scores on a single inquiry ?
A: Great question!
First, let me explain how lenders view credit scores. You’ll typically have one “primary borrower” on an application. That person is usually the one who is makes the most income. It’s the middle score of that primary borrower that usually determines the rate and program for the loan. Any “co-borrower” will also be on the application, but their credit scores are often considered a “compensating factor” which means they can help, but don’t carry the same weight. A very small number of lenders will average credit scores of both borrowers.
Our system is set up like that of the lenders whose programs we search, allowing for two borrowers (one primary borrower and one co-borrower).
I don’t know what your son and ex-wife’s incomes are, but if your sons make enough money to support the loan, your wife doesn’t even have to be on the loan. She can still be on the title to the property without being included on the loan. If her income is essential to qualifying, however, then the good news is that her bankruptcy may be old enough that it doesn’t have a major impact on the loan. (Though as you point out, it would likely be best if one of your sons is the primary borrower because of their high credit scores.)
I would recommend they run their rate search using the information of the two borrowers with the highest documented income. If those two are your sons, then great. If your ex-wife is the primary wage earner, she should be listed first. After they compare mortgage rates using our mortgage search engine, a single loan officer will contact them to discuss their loan needs, and can help them decide if there is a better way to handle the application.
Posted in Mortgage Problems, Mortgage Searches, Qualifying | 2 Comments »
June 13th, 2008 by gerri
In 2000, before the housing market took off like a rocket here in Florida, my husband and I bought our first house together. It happened to be a foreclosed home that had been sitting empty for months. The price was a bargain — or so we thought!
My hubby happens to be pretty handy with a hammer and paintbrush but it still took him about six weeks of full-time repairs to get the house to the condition where we were ready to move in. (The glossy black wet bar and spiral staircase with orange carpet in the living room were just a few things that had to go!)
That was just the beginning. Since moving in we’ve replaced just about everything in the home including the central heating and a/c unit, roof, pool pump and more. And we’re still not completely finished.
I’m describing this because today HUD announced it is going to help “bring stability to home values and accelerate the sale of vacant properties” by waiving the normal 90-day waiting period required for FHA financing on vacant foreclosed properties.
“A glut of foreclosed and abandoned homes harms neighborhoods, frustrates homebuyers and delays a community’s recovery,” said Brian D. Montgomery, Assistant Secretary of Housing-Federal Housing Commissioner. “The action we take today will allow homebuyers to purchase these homes in much greater numbers and ease the excess supply of unsold homes in neighborhoods across the country.”
Here’s why I don’t buy this spin:
1. These vacant foreclosed properties must be purchased by owner-occupants who can qualify for FHA financing. But since many current homeowners cannot sell the homes they live in (which is one reason why so many have been foreclosed upon), the prospective borrowers by and large will have to be first-time homeowners. How many first-time homeowners who couldn’t buy over the past five years are now in a position to buy a foreclosed home with all the headaches of deferred maintenance and unforeseen problems? Experienced investors are usually in a much better position to deal with the reality of foreclosure sales, and this proposal isn’t aimed at them.
2. How does selling a home at a bargain basement foreclosure price help stabilize prices? Wouldn’t preventing more foreclosures do a better job at that? There are still plenty of would-be buyers waiting to see “how low they will go” before they will buy.
Sure, this may be a great time for some first-time homeowners to find affordable homes, but I hope HUD doesn’t believe its spin here. And I hope this isn’t touted as another way the government is “helping homeowners in this time of housing crisis.”
But I didn’t use FHA financing to buy my foreclosed home, so what do I know?
Posted in Credit Crunch, First-time Homebuyer | No Comments »
June 11th, 2008 by gerri
Have you shopped online for a home? If so, join the club. Some four out of five consumers are using websites to search for real estate these days.
Now that the barriers to MLS access (Multiple Listing Service) for online real estate firms may be ending, it’s going to be a great time for major innovations in real estate websites.
Bankrate recently provided a good round up of the best online real estate shopping sites which includes some of our favorites. There are some great places to find a home, or list yours.
(Of course, if you want a mortgage for a home you find online, we have the solution for you!)
Posted in First-time Homebuyer | No Comments »
June 10th, 2008 by gerri
It was no surprise to us when a study last week revealed that minorities and people without college degrees pay more in mortgage fees than do white applicants and those with a higher education.
According to the study, “..Those living in neighborhoods where all adults have a college education typically paid $1,100 less in fees than those where no residents had a college education.”
Think about this for a second. Online mortgage shopping — loan officers “competing” for your business — was supposed to make loans cheaper for borrowers, right? So how were so many people overcharged over the past several years? One reason has been the lack of transparency in the mortgage loan industry. Sure, a lender may tell you they have a great loan for you…but how do you know if they do or not?
The only way to effectively shop for a loan is to have access to the same information loan officers do. Then it’s no longer a matter of who can do the best job selling you on a loan, but who can actually deliver the loan.
That’s what we’ve been trying to do for the past year with our mortgage rate search engine: level the playing field between consumers and borrowers with information lenders use when finding loans for their clients.
And if we can save you $1100, we’re thrilled!
Posted in Mortgage Searches | 1 Comment »
June 9th, 2008 by gerri
Optimizing your credit score to get a better home loan is dubbed “Lipstick on a Pig” in a recent Forbes story by reporter Maura Desmond. She consulted my colleague, John Ulzheimer, a credit scoring expert with Credit.com (and former credit industry exec) who warns that credit score manipulation is the next subprime crisis. This quick credit rescoring service, offered through mortgage lenders and brokers, can identity problem areas in your credit reports and suggest fixes to boost your credit — such as paying down a maxxed out credit card, for example.
Is it fraud? Or it is fair play in a system that is heavily influenced by the numbers (that we don’t always understand in the first place)? What do you think? Would you be willing to play the system to increase your score if it meant saving thousands on your mortgage?
Posted in Qualifying | No Comments »
May 27th, 2008 by gerri
“Dani” asks:
My score is right around 620 and I’m looking to get my first home. My question is, should I wait until I improve my score to buy and risk rates going up, or buy a home while rates are lower now? Together my husband and I make about $56,000 a year and want to buy between $120,000 and $130,000. But we want a 30 yr fixed rate and don’t have a lot for a down payment. We’re also wondering if that is possible to get one loan with private insurance instead an 80/20 loan with our credit score?
1. You indicate your credit score is around 620. I want to make sure you have checked your three bureau credit scores through MyFICO.com. The middle of those three scores is the one most likely to be used to qualify you for a rate and program. If you are using credit scores from another source, they are not the same scores that mortgage lenders use and will not be as useful. And since scores can vary widely between the three credit agencies, you’ll need all three to make sure you have the correct number. Make sure your husband has checked his too. Typically the lender will use the score of the person with the higher income, which may be you or your husband. (Our system will search mortgage programs using all three scores, and take into account each lender’s criteria for evaluating those scores.)
2. The price range in which you wish to buy sounds reasonable for your income, but the fact that you have little saved and lower scores does worry me. If you get too strapped with the purchase, you’ll have nothing to fall back on when the normal expenses of homeownership crop up. You may want to look for a real bargain (depending on prices in your area), even if it’s not your dream home, to keep your expenses low. Don’t worry so much about where rates are headed as whether you are ready to buy a home or not. If you feel pressured or rushed, you are more likely to make a poor decision.
3. You may well qualify for a low-downpayment loan with Private Mortgage Insurance (PMI) but don’t rule out a piggyback loan (80% first, 10/15 or 20% second). Compare both. The only way to know for sure what your options are is to find out what loans are available to you. In addition to using our mortgage search engine to compare mortgage loans at LenderRateMatch, I would also recommend you talk with a lender who offers FHA loans. These government insured loans are offered by private lenders, and can be more lenient on credit factors as well as offering a low downpayment. They had fallen in popularity in the past few years, but there is a resurgence in them now that other options have dried up.
We wish you the best with your first home purchase!
Posted in First-time Homebuyer, Mortgage Searches, Qualifying | 1 Comment »
Posts
