New “High Balance” loan limit rules go into effect on October 1st

Anyone known of someone in need of financing a mortgage loan above the $417,000 conforming loan size? Many unfortunately have been sitting on the fence, not acting on the current increased temporary conforming loan limits, better known as “High Balance” loans, this affects the maximum loan sizes for FHA and Conventional loans.  The maximum loan size will be reduced as of October 1^st (all existing loans must close by 9/30).  For those who had “jumbo financing” (loans above $417,000) with above market interest rates, the ability to obtain a “High Balance” loan can mean the difference between a homeowner saving hundreds of dollars on their mortgage payment every month. There is a huge need for this type of loan that affects many areas in the Northeast.

Since the beginning of the housing market fallout in late 2007, consumer loans above the standard $417,000 maximum loan size have had quite a challenge obtaining financing. The market for any jumbo loans essentially dried up or was so restrictive that no one could obtain financing. This phenomenon contributed to the further plunge in housing prices and more foreclosures for people in all markets. When Congress passed temporary high balance limits in 2008 for certain high priced counties…….which include several highly populated areas in Maryland, to have a maximum conforming loan size loan up to $729,750. The change provided much needed relief for prospective and current homeowners in designated high cost areas around the country.  The mortgage market was certainly helped, certainly not saved, by the ability to provide financing options to those applicable borrowers. Unfortunately, today many politicians and political pundits are calling for government to “get out of the housing sector,” the Government has heeded the call and allowed for this change to go into effect.  With many high priced markets still facing a glut of excess inventory, these changes are expected to add to the difficulties in housing and an already fragile economy.

For a typical purchase or refinance, most banks are requiring high balance loans to be submitted by August 20^th in order for them to get processed and closed by the end of September. Those missing the deadline will be faced with the new high balance loan limits. In Howard County alone the limit is being reduced $65,500 to $494,500. Don’t be one to sit and delay, those missing out may not qualify or be forced to bring a lot of extra money to qualify for a loan.  Many may think Congress will eventually step in and extend the limits. In today’s divided Congress and fears of further “tax payer liability”, I personally wouldn’t be one to count on it. To find out how the changes affect you and your plans, email us to receive more information.

Paying off your loan early makes sense in today’s housing market

The most recent stock market meltdown saw the investment earnings of many Americans decline rapidly since the 2008/2009 stock market crash. Since that time, Americans have also been inundated with a mortgage meltdown, a real estate implosion, and the loss of millions of jobs...many expected never to return. The last three years have changed our buying habits, how we look at debt, and especially how we view retirement. The depression-era belief was that you bought your home and paid it off – owning your home free and clear by the time you retire. Many today (usually financial advisors or investment people) preach the idea of using other people’s money….”the bank” in the form of a mortgage…… in an effort to make greater returns in the stock markets.  Sounds great, right? Except when economists and financial people refer to the last decade in the stock market as the “lost decade” where the markets returned nothing? Or in the last half of 2008 and into 2009 when the markets on average lost 50% of its market value?  Unfortunately, there are just no guaranteed investments anymore…..except when you look to pay your home mortgage loan early.  Taking such an option is a 1^st step to planning for retirement.

Today, homeowners can get near record low mortgage rates. Even if they refinanced a few years ago, the market is quite favorable to reduce the mortgage term to a 10, 15, 20, or even 25 year term. Such an option can save thousands of dollars in compounded interest payments over the life of the loan. When a homeowner pays any additional money per month to principle through a refinance of an old loan to a lower interest rate will save simple interest. However, the compounding effects allow a homeowner to pay their loans early, often saving tens, if not hundreds of thousands of dollars in mortgage payments.

What happens if you are not eligible for refinancing or cannot afford the new payments? Simply paying extra automatically through a direct payment allows homeowners to pay as little as $25 extra per month. Such an extra payment would save over 2 years of mortgage payments on a $150,000 loan over a 30 year term. Others still may want to take paying off their homes earlier through a bi-weekly payment program. Such options allow homeowners to pay their mortgage automatically ever two weeks or 26 times per year, the equivalent of a 13^th mortgage payment every year. Using the same example above, a homeowner would save over 3.5 years. Such an option works quite well….but comes with a catch, since transactions are usually orchestrated with the help of a 3^rd party company, most banks charge an upfront fee ranging anywhere from $295-$595 plus a per transaction fee from every payment. This often can make such an option not worthwhile.

Is refinancing worth the time and effort? Or should I just opt to pay a little more per month?  Determining what is best for each individual is a personal decision that does not fit everyone the same. However eliminating the mortgage payment, usually a family’s largest expense is a key step toward successfully retiring with additional cash flow.  Best of all….as long as the mortgage payments are made consistently and on-time, there is no risk of unstable markets, stock market declines or housing crashes.  Regardless of the decision you decide to pursue, make sure to speak with a qualified, licensed, and experienced mortgage consultant to best analyze your options.

Home Improvements Can Help Today’s Home Sales

Today’s housing market has left many homeowners with few, if any, options available to sell their property. They are suffering from the glut of inventory in their local community caused by foreclosures or they may have purchased their existing home at the height of the market which has now caused their home to be worth much less than they paid for it.  As a result, their ability to sell their home at a competitive price is an unobtainable goal.  Even for those who have equity in their homes, the price declines of the last few years have taken away a good piece of their equity to upgrade and move to the next home.  In these cases, most are required to live in their homes longer and make better use of the space they currently have.  The answer for many----home improvement projects.  Home improvement projects may range from as small as small saving closet organizers to the addition of a bedroom and bathroom, but their benefits are equally important.  Many prospective home buyers are always looking for curb appeal and many big ticket items such as the roof, HVAC, kitchen and bathroom repairs. Many items can be done cost effectively, may be financeable through a home loan or contractor financing, and will help pay for themselves when the home gets on the market, and best of all…..you get to enjoy living with the improvements.

Home projects can vary widely per contractor and region of the country. Some of the most common ones such as roof and windows vary greatly in price. These items unfortunately may be expensive and usually require a contractor. While many are fortunate enough to be capable of completing home improvements projects, but most are not. For those who are in need of qualified plumbers, electricians, or just general contractors, there are many online companies that will set you up with skilled, prescreened, licensed contractors. For those whose large projects are not affordable,  there are many low cost projects such as adding a new coat of paint or getting rid of clutter will markedly improve the ability to sell your home….and still enjoy the improvements while you live in the house!  Now, when improving the homes appearance, first impressions are obviously vital. Therefore no better way they improving the curb appeal. Large scale projects such as patios, walk ways, and high end trees and shrubberies will always be the first thing most people think of.  Fortunately, there are a lot of simpler items such as flowers, wreathes, trimming of overgrown plants, and patching missing grass spots on your lawn that is much more affordable  to make the front yard special.

How do I pay for this all? There are many ways to finance such projects when warranted and the value from the improvement makes such steps worthwhile. When doing home improvement projects, taking out equity from ones home is the most common step and today’s low rates usually make this option the most attractive.  This can be done by refinancing the existing home balance and the costs of improvements into one loan or by taking out a new loan against the home’s value. When this isn’t possible, the home improvements stores or outside contractors often offer low or zero-percent financing options.

Home improvements truly can be a favorable option to sprucing up a home’s appearance. Whether it is simple staging to make a home look more appealing or a full out remodel, all projects will add value to your home.  Confused on what to do first? Realtors generally will provide the best insight on which projects provided the best bang for your budget.  It’s always important to make sure to go into any project knowing it is the right one for your own unique situation.

Credit Repair Companies Overpromise and yet undeliver so frequently

Who among us can say they have found the credit repair company advertisements appealing? Their marketing makes many credit issues seem like they are simple to fix. They are the experts and we “need to call them now for a no obligation analysis.” While preying on desperate families attempting to save their home from foreclosure or “fix” poor credit, many often turn to these credit repair companies.  Often these people assume they have no other choice than to pay exorbitant upfront fees.  And of course, once you make those payments – never will you hear again from those “friendly customer service agents standing by”. More importantly, how can you even confirm these companies have completed the job as promised and resolved the credit issues effectively and accurately? In economic times where the unemployment rate is 9.1% and many more are struggling to keep up with their bills, credit repair companies have been booming and are quite profitable by preying on unsuspecting individuals.  

Credit is a unique and ever evolving industry. The credit standards needed to qualify in today’s credit market is pretty clear, however correcting past derogatory credit lines is not. Pay your bills on time, don’t overuse credit, be careful not apply for too much credit….these are the standard rules that over time will provide a solid credit score. When problems occur and legitimate credit inaccuracies are discovered, the individual whose credit is affected can contact the credit bureaus themselves to fix these issues. Legitimate credit repair companies don’t accomplish anything to individual with credit issues can’t do themselves- and for free! Those who take the time and have the resolve can have the major credit bureaus (Experian, TransUnion, and Equifax) monitor and send emails when individuals apply for credit in their name.  However, improving scores once errors are corrected actually takes time and people should always have the right expectations when undertaking such a task. Too often, these credit repair companies promise is to “erase,” for a fee….often up to $2000 for a derogatory credit item within 48 hours. These types of activity are clearly fraud.  Such schemes have lead in part to individuals qualifying to buy homes under false pretenses, only to have the home lost in foreclosure soon thereafter. This affects the greater economy as a whole due to home price declines, reduced credit standards.

One company offers a free ID repair service when consumers find their identity has been stolen.  The company is AllClear, which is Austin-based monitoring service by Debix, a data security company used by corporations and many government agencies in the US. The service, launched in April 2011 monitors identities through Internet surveillance of thousands of databases, including networks most often hacked by identity thieves. It also reports data breach attacks from companies instantly to its members.  Children are also some of the most prevalent groups of identity fraud victims today as many are truly unaware of an issue for years until they become adults. Figures say around 10% of all children will be victims, according to Bo Holland, chief executive of AllClear.  Fortunately, there are services offering its ChildScan product free to families.  One of these services will scan the child's Social Security number and report on what it finds. You can find this offer here. The free monitoring service can be found here. Other (free) services to help you organize and set up repair your credit from the Federal Trade Commission here.  Understanding the importance of credit, its limitations, and how to most effectively use it is a vital fact of life for the American consumer. No matter how dire the circumstance one finds them in it is never the answer to take costly and often illegal short cuts toward improving one’s credit. Start today with another free option by getting your free, federally mandated yearly credit report. This will be the first step for those looking at getting on top of their credit and correcting any misinformation.  Informed, yet tough financial choices may be difficult to take today, but are vital to long term financial stability and happiness.

Veterans have better options in buying a home

In today’s uncertain real estate economy, many are finding obtaining loan financing to be quite challenging. Loan program guidelines have been reduced and many eligible buyers are sitting on the sidelines because they have no down payment.  Fortunately, with so many military bases located in the Greater Baltimore area and two active wars, many of these individuals are eligible for special Veteran’s Administration or VA Financing. What is so important about VA financing? For starters, eligible applicants are able to qualify with 100% financing (meaning the tremendous down payment hurdle is avoided), no monthly mortgage insurance for having less than 20% equity in their homes, and as good (if not better) rates than some of the comparable Conventional or FHA Loans that others receive. So, who exactly is eligible for such a program?  Well, veterans or their spouses who served on active duty and were discharged under honorable conditions, during World War II and later periods are eligible for VA loan benefits. There’s a lot more to it of course, read here for more on who is eligible.

What’s the down side to such a great program? There’s not much. All eligible people much pay a one-time funding fee which ranges from 0-3.35% of the purchase price of the home depending on the level of eligibility, if the usage is first-time or subsequent usage, and the amount of the down payment used (better terms are also available with more money down!).  In addition, expect to have additional paperwork which includes the standard certificate of eligibility or form DD-214. All applicants still go through the application and qualification process which includes qualifying on the standard income/credit/assets requirements. However, once those hurdles have been obtained, veterans truly do get a valued benefit. Another example is VA Homes where the Veteran’s Administration acquires VA-guaranteed or VA-backed properties, these properties are listed for to all parties.  In addition, third party fees associated with obtaining a loan are very much limited. Origination fees are capped at 1% of the loan size (while the option to pay reasonable discount fees to buy down the rate still remains). Best of all – when rates drop, these loans are eligible to be refinanced through IRRL or Interest Rate Reduction Loan to obtain a new lower rate with little cost involved, very little documentation, and often without an appraisal.

During the days of the housing boom of the last decade, new innovative programs often caused the VA financing options to be overlooked. In today’s market, the VA financing option is a must for those who are eligible. It really can mean the difference of qualifying for a first home, upgrading to a larger residence, or simply reducing your mortgage payment. For more information to see how VA financing may work for you, contact us directly.

Good news for a struggling home finance loan market

Homeowners sitting on the fence about buying a new home or thinking they missed the last rate drop, think again. Mortgage interest rates have dropped for a fourth consecutive week last week. The national average 30 year rate at 4.67% is down 9 basis points from the week before. The numbers are quite favorable and continue to be a bright spot in an otherwise lackluster economic recovery. As consumers are hit with rising gas and food prices leading into the summer season, such news can often make or break homeowners already squeezed with higher payments or those trying to qualify to purchase a new home. Just a quarter percentage drop on a 30 year mortgage can increase purchasing power by approximately $15,000 (based on a 20% down payment). In Maryland, where the average home price is above the national average, people may save thousands per year. Such rate drops can be a vital key to helping stabilize the housing industry that some feel may be facing a double dip housing recession.

There are many homeowners who believe they have more than enough time to take advantage of such market conditions. They think rates will eventually drop down to the all time lows they missed from the last “rate drop cycle”.  Many add that rates just “continue to drop” due to conditions that may be relevant, are hardly the main issues effecting rate movements. In fact, institutional trading by mutual fund bond trades, pension fund investments, foreign governments, and especially Federal Reserve Board Asset Purchase Programs better known as “Quantitative Easing” or QE II, are the largest factors to cause interest rate shifts. People assume Congress will eventually artificially “prop-up” the housing market with more stimulus programs meant to push rates further down. Such assumptions are unlikely because Congress is divided among party lines and voters are more concerned about rising debts than they were a few years ago. The lending industry today is also more prone to reduce programs rather than add them to the options available. In addition, the housing market is faced with slowing sales and falling home prices. Because of these issues, additional opportunities may never be possible. Furthermore, those deemed to be in high priced county areas are about to lose have their expanded loan limits reduced as of September 30^th.  This means that people who have loan balances above the standard limit $417,000 limit and up to $729,750 will have difficulties obtaining loans.

Predicting rates and making assumptions can be quite risky and often times foolish. There are far too many factors that the average consumer….or even real estate/mortgage professional cannot accurately understand.  Those truly looking to take advantage of the important benefits of lower rates must be prepared to take advantage of the opportunity when presented. Timing the interest rate market is a lot like timing the purchase of a stock, it will fail miserable in the vast amount of cases. For most it can be the difference between keeping your home and making it more affordable or having a once in a life time opportunity to upgrade to a better home that more closely meets their needs.  If you think you may benefit from checking into your options, email us today!

Housing market decline means value for some; continued pain for others

The impact of the housing market has impacted people differently. Those who need to sell their homes or are currently underwater have faced never-ending challenges while others are experiencing the bargain of a lifetime. The two issues are created in part due to the country’s biggest banks and lenders owning over 872,000 homes, a number that is almost twice the amount in 2007. The index of home prices is at its’ lowest point since 2002. In addition, a million more homes may fall to foreclosure over the next two years. What was long expected is now confirmed; while many areas of the economy are improving, the housing market is in a double-dip housing recession. Where do we go from here, is there any end in sight? While many lenders are starting to take a loss in an effort to side-step the foreclosure process, the back log of homes remains on the market and is expected to only worsen. Unfortunately, the lenders are often overwhelmed and the system is unable to handle the volume. In reality, the issue comes back to simple economic measures of “supply and demand” and in most markets the lack of demand has helped contribute to the overwhelming supply.

Economic stimulus, low interest rates, and those available “cash buyers” or investors have helped make it more affordable to buy a home than any time in the last decade. In certain markets there are substantial value properties for those in the position to jump into the housing market. For those able to have a job or who are downsizing in retirement have great advantages and live comfortably (financially) in many markets, especially outside of the Northeast. Unfortunately, consumer sentiment is so weak that there simply aren’t enough interested buyers willing to take the plunge to real estate. They believe it is much simpler and more cost-effective to rent. A third of consumer wealth is from home ownership and when prices decline, you have less tolerance for risk. When fewer buyers are willing to buy a home coupled with reduced home prices caused by foreclosures and short sales, the resulting occurrence is the “spiraling effect” downward of home prices.

What is the answer to this major problem? Many certainly have tried their ideas but the problem is growing by the year. Local, State and Federal agencies have tried many stop-gap programs, but the problem is just too large and too costly to repair. Fighting among political party lines has created a stalemate to discover new solutions. Furthermore, budget issues and reduced tax revenues have all but guaranteed there will be no real solution. The banks, in many cases, have proven to be as ineffective and inefficient as government at solving the problem.

What does the future hold in housing? No one really knows. But one thing is for sure – someone will always find a way to make money while others suffer. Regardless of home values that are available, the housing collapse should be a concern for all Americans.   

Home Owners Gain Value with Vacation Homes in Maryland

With all the talk of a souring economy, poor housing market and unemployment at 9%, there are still some value home purchases for those looking at a 2^nd home. This is especially the case in the resort communities of Deep Creek Lake and Ocean City which offer year round attractions. The economic downturn has kept many from pursuing vacation properties and reduced state budgets have caused already struggling businesses to “fend for themselves” for coveted tourist dollars. In addition, proposed doubling of the bay bridge toll has left many worried interested homebuyers and other tourists will be hurt further, thus pushing down prices further. When you also factor in gas prices that while currently declining, are likely to average over $4/gallon this summer, it only makes such vacation spots more appealing.

Many assume buying a 2^nd home would be cost prohibitive, especially when it comes to the down payment. People assume the mandatory 20% would be required and they ask themselves “where would that possibly come from”. In actuality, qualified vacation home buyers may be able to qualify with as little as 10% down payment and the seller of the home help with the closing costs. Available rates are still near record lows for 2011. Other issues that generally pop up – its “just not in my price range” just doesn’t hold water anymore. There are many vacation owners looking for a quick cash infusion by getting rid of their homes. Unfortunately declining prices and falling demand often makes this prohibitive.

Investing the purchase of a 2^nd home is something many Marylanders should look at. Maryland and other local vacation hot spots are family friendly, offer fishing and other outdoor activities, and are now more affordable then ever. Purchasing a vacation with young children provides for years of trips as well as ties to the community during the summer or wintertime. Over time equity will be built providing for better long –term financial security. Prices are even more affordable the further out from the vacation locale. Once you determined investing in a vacation home is right move for you make sure to get a qualified realtor who is aware of the local market.  A simple real estate website search can also find properties geared toward your own home requirements. 

Purchasing a vacation home is not for everyone, but it something everyone should always consider.

Good news for a struggling home finance loan market

Homeowners sitting on the fence about buying a new home or thinking they missed the last rate drop, think again. Mortgage interest rates have dropped for a fourth consecutive week last week. The national average 30 year rate at 4.67% is down 9 basis points from the week before. The numbers are quite favorable and continue to be a bright spot in an otherwise lackluster economic recovery. As consumers are hit with rising gas and food prices leading into the summer season, such news can often make or break homeowners already squeezed with higher payments or those trying to qualify to purchase a new home. Just a quarter percentage drop on a 30 year mortgage can increase purchasing power by approximately $15,000 (based on a 20% down payment). In Maryland, where the average home price is above the national average, people may save thousands per year. Such rate drops can be a vital key to helping stabilize the housing industry that some feel may be facing a double dip housing recession.

There are many homeowners who believe they have more than enough time to take advantage of such market conditions. They think rates will eventually drop down to the all time lows they missed from the last “rate drop cycle”.  Many add that rates just “continue to drop” due to conditions that may be relevant, are hardly the main issues effecting rate movements. In fact, institutional trading by mutual fund bond trades, pension fund investments, foreign governments, and especially Federal Reserve Board Asset Purchase Programs better known as “Quantitative Easing” or QE II, are the largest factors to cause interest rate shifts. People assume Congress will eventually artificially “prop-up” the housing market with more stimulus programs meant to push rates further down. Such assumptions are unlikely because Congress is divided among party lines and voters are more concerned about rising debts than they were a few years ago. The lending industry today is also more prone to reduce programs rather than add them to the options available. In addition, the housing market is faced with slowing sales and falling home prices. Because of these issues, additional opportunities may never be possible. Furthermore, those deemed to be in high priced county areas are about to lose have their expanded loan limits reduced as of September 30^th.  This means that people who have loan balances above the standard limit $417,000 limit and up to $729,750 will have difficulties obtaining loans.

Predicting rates and making assumptions can be quite risky and often times foolish. There are far too many factors that the average consumer….or even real estate/mortgage professional cannot accurately understand.  Those truly looking to take advantage of the important benefits of lower rates must be prepared to take advantage of the opportunity when presented. Timing the interest rate market is a lot like timing the purchase of a stock, it will fail miserable in the vast amount of cases. For most it can be the difference between keeping your home and making it more affordable or having a once in a life time opportunity to upgrade to a better home that more closely meets their needs.  If you think you may benefit from checking into your options, email us today!

Incentive Programs Key to Housing Backlog

Many prospective home buyers are unaware of some pivotal programs designed to help make the purchase of a home more affordable. These include assistance with down payments, special financing and even tax breaks on your purchase.

One key demographic that is helped with such incentives are police officers, emergency workers, and especially teachers. These programs are especially important to helping encourage homeownership within one of the most underserved areas of the population.  Furthermore, they help alleviate the glut of vacant homes crippling many communities throughout the country. 

One of these programs is the Teacher Next Door Program allowing qualified teachers the opportunity to purchase a HUD-owned property at 50% of the asking price. Its goal is to have teachers buy homes and commit to living in them for at least 3 full years. Another similar program opens up the same possibilities for police officers.  Teachers, firefighters and emergency medical technicians can help revitalize their communities through HUD's Good Neighbor Next Door Sales Program.

Several real estate companies offer fee rebates for using their agencies. On a local level, counties officers offer applicable employees access to various incentives.  The Howard County Maryland Public School system has the Employee Incentive Program allowing mortgage and real estate incentives, which include closing cost credits and lower rates.

In a time when many Americans are suffering from poor economic conditions and unemployment levels still stubbornly high at over 8%, people often rush to place blame. The target of the blame (often justified) is political figures ranging from the President on the national level all the way down toward local City Council members. When people suffer it is a natural inclination to look at those who are believed responsible for their troubles. Since the start of the downturn in 2008 the root cause of the problems has included members of Wall Street, Banks, Mortgage brokers, the Federal Reserve Board, among many others.

When economic conditions have deteriorated to the level where public services need to be cut, taxes raised or a combination of both – public sentiment turns against the biggest expenditure of all, public sector employees. A common belief is that is immune to the cancelled pensions, layoffs, furloughs, and pay cuts that a large group of private sector employees face. As a result, sentiment turns against public sector employees and the unions that represent them. In actuality, many jurisdictions – many public employees, such as NYC public school teachers face the same fate as those in the private sector.

There is no doubting the system in place for the public sector needs some kind of overhaul. However, teachers, police officers, emergency workers and fire department personnel are all some of the most underappreciated groups in our current economy, and remain the back bone of most communities. Special housing programs allow an opportunity for this key demographic to live closer to where they work and become a more entrenched fixture in the communities they represent.

These programs are also vital to the redevelopment of many areas, directly resulting in more jobs, safer communities, and the chance for a better education for the children of local residents. With the sale of vacant or foreclosed homes property values become more stable, in turn increasing property tax revenues to the state budget. An unoccupied home cannot be taxed, and plummeting house values reduces the revenue collected by the state for currently occupied homes.  

These improvements to the neighborhood also decrease crime and recreate the sense of community which has been lost in so many areas.  

These benefits are not just about entitlement spending. They are about societal issues whose benefits are far outweighed by minimal expense associates with the administering of such programs. 

It may be tougher to qualify, but people still get mortgage loans

There may be road blocks experienced when attempting to qualify for a home loan however it’s often not as difficult as assumed. Rates remain at or near record lows and programs still remain available for those with no equity OR who owe more than their home is worth. Those that allow home owners to reduce rates (even without an appraisal in some cases…) and either reduce payment and the mortgage length.  With the uncertainty of the stock market, taking advantage of the opportunity to reduce one’s loan term is paramount for many to eventually retire. Some lenders have recently introduced reduced credit score standards allowing some to qualify through FHA and VA with credit score as low as 600!

Unfortunately, the media often overshadows the positives of the market. As a result housing inventory often remains stubbornly high, people struggle more with their financial situation, and still many believe they have no options. Some may not know where to turn to get answers, are told negative and often misinformed information from friends or colleagues. As a result, they don’t even attempt to improve their situation when help is usually available. Some common complaints heard today is I don’t have enough money for a down payment to buy or I don’t have the equity needed to refinance my loan to reduce my payments. Still rates remain near record lows over the last year, yet many still have rates much higher than they need to have.

While lenders may take a closer look at the income, asset, & employment detail as well the appraisal more closely than ever before there’s the potential of great benefits to homeowners. Home prices in a lot of markets are more competitively priced than they have been in years. Such value buys are a tremendous way to gain rental income or take advantage of any future upturn in real estate. Current homeowners, potentially affected by layoffs and declining home prices, are able to reduce their rates and often the terms of their current loans. In an economy where gas is nearing $4/gallon and consumer staples have risen rapidly, such cash savings is paramount for many just to keep ends meet.  Even when it is not possible for financing, there is a national website set up for free housing counseling (or in Maryland). While the news is often negative these days, take advantage of what is positively available today, before these options run out. For more information on how these programs may benefit you, contact us now!

The importance of a home inspection

Obtaining a home inspection is a vital step in buying any new home. Whether it’s a first time home buyer or a seasoned home buyer/owner; whether it’s a residential property, vacation, or rental there cannot be an underestimation to the importance of a home inspection.The home inspection provides the buyer with an unbiased opinion on what they can expect with the condition of their home. While sellers generally prefer to sell their homes “as-is” or as close to that as possible, it also helps the seller in understanding the condition of the home they are attempting to sell. Regardless, homeowners that agree to purchase a home without the inspection can have thousands of dollars worth of repairs on their hands they weren’t anticipating. A move to such a home can be a financial nightmare that can exhaust any applicable savings. Those who face this issue can quite possibly end up traveling down a slippery slope of accumulating additional debt. This has the possibility of becoming overwhelming financial and can even result in foreclosure.

Oftentimes buyers will assume that waiving a home inspection may help them prevail when multiple offers are placed on a given home. They believe they will loose leverage in a seller’s marketplace and may “fall in love with the house”. These buyers often are so focused on the house at hand and not as concerned about the tremendous financial liability which they will become committed. In some cases they may be able to adequately assess costs associated. However, most people don’t fall into this category. Even if a prospective home appears to be well kept up to date, the average home owner will miss vital issues that only those qualified will find.

A qualified home inspector will be able to inspect areas of the home and foresee issues pertinent to the buyer proceeding with the purchase contract. Very key issues pertaining to major expense items such as the roof, windows, plumbing, electrical, heating/air conditioning, among others items allow the buyer the opportunity to opt out of the contract if the seller doesn’t repair these items or agree to reduce the purchase price. Depending on various state laws, the seller may be financially responsible to repair such items. However, smaller items will fall onto the hands of the buyer of the home but can often depend on market conditions and the overall deal. Generally everything is negotiable. However, not all home transactions are routine and buyers and sellers. Both sides make their decisions differently, whether they are financially or emotionally based. Regardless, not requesting a home inspection is never worth the risk. Homes rarely will provide any such incentive such as a discount for the condition. Informed home buyers are much more aware of their options and are willing to move onto the next home of interest. In addition, they provide an unbiased opinion the realtor cannot provide. Doing otherwise takes on tremendous risk financially, emotionally, and can wreak havoc on the lives of all those involved.

Protecting your largest investment

Millions of Americans home owners are at risk due to being underinsured or not insured for life insurance. When a home is purchased, it often takes two people working full time positions to be able to afford the mortgage in today’s economic climate. People often worry what would happen if they lost their job(s) or became disabled, however, very few realize the risk that death presents for their families. As a result they inadvertently leave the financial well being of their family in jeopardy because often the mortgage becomes unaffordable in the event a spouse dies. When the loss of a loved one occurs, the family home is often lost to foreclosure, the kids or uprooted from schools, or life savings are drained in an effort to hold on financially.

“I’m young; I don’t need to worry about life insurance yet!” “I can’t afford life insurance!” “But I have a pre existing condition, what kind of insurance could I possibly be eligible for?”. These are just a couple of the many excuses people provide for the rationale about life insurance and the reasons they don’t have enough, or none at all. Many, especially at a younger age, aren’t able to consider the possibility of dying. However, once the commitment of a home and family has started the need for life insurance rises exponentially. The responsibility to the family, and to take care of them, and to allow for a quality upbringing as well as the expenses of clothing, food, and medical care make it seem fiscally difficult to add yet one more expense (such as life insurance). However, when the mortgage becomes unaffordable, the bank will take the home thus destroying the stability and structure of the family along with creating serious problems. Still others assume it’s unaffordable or have medical conditions that make them uninsurable. They rely on the small employer sponsored plan that is often cut back or eliminated in cost cutting measures. People don’t often consider the very real possibility of being laid off and losing income on top of any life insurance provided by the employer. Even without these issues, many don’t consider life insurance rates have dropped and often can qualify for much more coverage, with a longer guaranteed term.

The truth is life insurance is affordable, necessary, and a small price to pay for the piece of mind it brings. For many, coverage will be less than the price spent in a week ordering take out.  While it may take small sacrifices from your budget, one has to ask themselves “what is more important than the financial wellbeing of my family?” Those will pre-existing medical conditions are also able to get insurance through some providers. For those who may be uninsurable, there are often plans available without medical underwriting. While it may cost more than someone with a stronger medical history, it is still a necessary step to take. But like everything else, the price increases the longer you wait. Email today to see just how easy and affordable proper coverage is!

Protecting your largest investment

Millions of Americans home owners are at risk due to being underinsured or not insured for life insurance. When a home is purchased, it often takes two people working full time positions to be able to afford the mortgage in today’s economic climate. People often worry what would happy if they lost their job or became disabled, however, very few realize the risk that death presents for their families. As a result they inadvertently leave the financial well being of their family in jeopardy when the mortgage becomes unaffordable due to the death of a spouse. When the loss of a loved one occurs, the family home is often lost to foreclosure, the kids or uprooted from schools, or life savings are drained in an effort just to hold on financially.

“I’m young; I don’t need to worry about life insurance yet!” “I can’t afford life insurance!” “But I have a pre existing condition, what kind of insurance could I possibly be eligible for?” These are just a few of the many excuses people provide for the rationale about life insurance and the reasons they don’t have enough, or even none at all. Many, especially at a younger age aren’t able to possibly consider the possibility of dying. Often family longevity comes in and is viewed as yet another reason why should needs can be put off for later in life. However, once the commitment of a home and family has started the level of need for life insurance rises exponentially. The responsibility to the family to take care of them and allow for a quality upbringing as well as the expenses of clothing, food, and medical care is a daunting enough task. However, when the mortgage becomes unaffordable, the bank will take the home thus destroying the stability and structure of the family which creates serious problems. Still others assume it’s unaffordable or have medical conditions that make them uninsurable. They rely on the small employer sponsored plan that is often cut back or eliminated in cost cutting measures. Never will the thought of actually loosing their job, and the life insurance due to a layoff. Even without those issues, many don’t consider that life insurance rates have dropped and often can qualify for much more coverage, with a longer guaranteed term.

The truth is life insurance is affordable, necessary, and a small price to pay for the piece of mind it brings. For many, coverage will be less than the price spent in a week ordering take out.  While it may take small sacrifices from your budget, one has to ask themselves “what is more important than the financial wellbeing of my family?” Those will pre-existing medical conditions are also able to get insurance through some providers. For those who may be uninsurable, there are often plans available without medical underwriting. While it may cost more than someone with a stronger medical history, it is still a necessary step to take. But like everything else, the price increases the longer you wait. Email today to see just how easy and affordable proper coverage is!

National Mortgage Licensing System Protects Consumers

Based on the state of the industry these last few years, it was completely necessary to remodel the licensing system. Prior to the recent changes, tracking the quality of lenders/brokers and originators was challenging. Those individuals/companies committing suspect or illegal business practices were tough to track leaving individuals vulnerable to deceptive loan officers.

While the system continues to evolve, it has experience a few setbacks along the way to improvement. While still a great success, understaffed states are lacking the preparations to change over. Poorly trained individuals end up with unanswered questions as to how to adhere to the law while some states even have conflicting or duplicate standards. Some of these issues are still being worked out. However, since the playing field has been leveled (so to speak) by having originators at big banks becoming NMLS registered it reassuring that any loan officer you work with should be registered regardless of minor kinks in the system.  These changes are probably the most important piece of pro-consumer legislation introduced to the residential lending industry. The barriers of entry into this field were too low previously and almost anyone could originate mortgage loans with little or no training or education. In the first half of the 2000’s, thousands were entering the industry yearly as a part time job with little ramifications for the quality or ethical standards of their work. 

Recently, The National Mortgage Licensing System, or NMLS, has begun requiring the licensing, certification and registration of loan officers in all 50 states. Individuals and companies looking to apply for, amend, renew, and/or surrender licenses managed by NMLS for the state(s) licensed by the loan officer or mortgage lender/broker are required to use this system. The NMLS initiative was begun by state mortgage regulators in 2004 in response to the increased volume and variety of residential mortgage originators, and the need to address these changes with modern tools and authorities. The proliferation of the mortgage business had added to the urgency of a standardized licensing system which required a system of criminal background checks, education, and testing of loan originators and the lenders/brokers where they are employed. The overall goal is to tract, monitor, and remove unscrupulous originators when necessary.

Today loan officers are held accountable and have to abide by these new regulations. Consumers can check the license status of the originator as well as the lender/broker at one simple website. On this website, consumers are able to easily find pertinent information about the loan officer, company affiliations, as well as any applicable investigative measures.

New Mandated Loan Options

The Federal Reserve Board amended the Truth in Lending Act, Regulation Z that is geared prohibiting three main areas of loan office compensation. The new rules which become effective April 1^st is the latest in a long line of regulations that have changed the face of residential mortgage lending over the past several years. The rules, affecting all loan originators, who for compensation, obtains an extension of consumer credit for another person outlaw certain practices. They include basing loan officer compensation on certain terms or conditions except loan amount, being compensated both by the lender and the client for the same transaction, and steering based on the loan officers ability to obtain greater compensation. As a result of these rules, clients are now able to negotiate a pre-determined compensation for acquiring the applicable mortgage loan or agree the lender can compensate the loan originator a preset percentage of the loan that does not vary based on rate.  When shopping for loans, you may hear these options commonly known as “Consumer-paid” option or “Lender-paid” option. The intention of the new rules is simply to have the loan officer’s interests to be better in line with that of their client’s. Unfortunately, certain originators or originator firms had made a practice of directing clients to overall higher cost loans solely for the benefit of extra compensation

While the spirit of the news rules is well intended, the resulting changes will unlikely have a meaningful benefit for the consumer. Several regulations including the Home Valuation Code of Conduct, Mortgage Disclosure Information Act, and the new Good Faith Estimate have been rolled out in the last two years, all with the same goal of helping improve real estate lending practices. In actuality, the new rules have burdened clients with increased paperwork, extra costs, fewer options, and unending regulations from numerous local, state and federal guidelines. Well, what’s so wrong with these new rules? Many consumers have limited home equity which preclude them from benefiting with lower rates by financing the “Consumer-paid” cost option.  Such an option generally would allow a consumer to obtain the lowest rate available. On the “Lender-paid” option, consumers will have less of an ability to renegotiate for lower rates with their originator. When banks compensate the originator a fixed percentage of the loan amount that cannot be allowed to decrease, the originator also is unable to lower their compensation under any circumstances.  While consumers are allowed to increase their interest rate in exchange for a fixed percentage of the loan amount as credit for their closing costs, the broker is not allowed to do the same. The practice of crediting the borrower money from originator compensation at closing to pay for an appraisal,  provide a special incentive, or help client’s  when they are short funds for closing is strictly forbidden.

As with any new policy, there are always unanticipated consequences that must be dealt with. Consumers, along with the originators who help them obtain their needed mortgages will have to adjust to yet another change in the housing industry. Perhaps the results will be more favorable that the current outcome. More than likely this new policy will result in yet another rule that will inundate an already overwhelmed consumer understand how this helps their bottom line.   

Another Option for Homebuyers: 203 (k) Renovation Lending

Prospective homebuyers today have a significant amount of inventory available to them for review. Many markets are flooded with potential foreclosure or short sale purchases that are much more affordable than ever before. However, these homes may often need a full or partial renovation before they are deemed to be in the livable condition required to obtain a standard FHA, VA or Conventional mortgage loan.  For those homebuyers, an FHA 203 (k) may be the right answer for you.

The Federal Housing Administration (FHA) administers the 203 (k) program as part of the Housing and Urban Development Agency (HUD). Buyers can utilize the program in one of three ways: purchase a property, that is resided in by the owner as an “owner occupied property”, as a refinance of existing balance of their current loan on the home they currently occupy while taking out funds to complete applicable repairs, or lastly to purchase a home on another site and move it onto a new foundation and rehabilitate it.

Unlike with standard loan programs, the 203 (k) Rehab loans allows one to qualify based on the future value of the home’s value AFTER the repairs are completed. This is especially vital in areas that a home is in dire need of repair and the other comparable homes support a higher appraised value. Such improvements on the right property can be a great investment for those looking to move to a new area, first-time homebuyers or those who have occupied a home for many years and need upgrades on their residence. For those who currently occupy the residence, most lenders will essentially allow you to “cash-out” the equity in a refinance for such improvements to 97.75% of the home’s equity whereas a typical loan program has limits in place to 80%.  Homeowners unable to reside in the home while work is completed may be eligible to refinance up to 6 payments into the loan while the work is being completed. The eligibility for this program is quite similar for that of a standard FHA loan – meaning a limited or sometimes no down payment needed at all.

The program is extremely beneficial to many in today’s market. However, like everything it has its limitations. Applicable repairs are closely regulated, monitored, and inspected by the bank appraiser for quality and completion of work. Furthermore, repairs are required to be completed by an applicable General Contractor and not by any handyman. Home buyers must own the property and intend to reside in the home after repairs are completed. They must also work with HUD approved 203 (k) Consultant who meets with borrowers to coordinate their wants and needs. The Consultant also evaluates the property to determine which repairs are needed for HUD and Code requirements.  The Consultant often acts as the liaison between the lender, client, appraiser and borrower and whose write up is used by the General Contractor to bid for the job. Rates for the program average about 35-50 basis points above a standard FHA 30 year loan rate, still making the program a must for many applicable homebuyers.   

HVCC Changes Residential Mortgages

HVCC Changes Residential Mortgages

The Home Valuation Code of Conduct (HVCC) adds an extra element of risk for the consumer when buying a new home or refinancing their existing mortgage. The code requires the random selection of appraisers by appraisal management companies set up individually by the chosen lender. Homeowners, who were often accustomed to using a “preferred” appraiser during much of the last decade, no longer have this option. First implemented for most loans as of May 1^st, 2009, HVCC has since expanded to include all FHA & conventional loans bought by Fannie Mae or Freddie Mac. The goal of the Code was to prohibit borrowers or mortgage originators from selecting appraisers which was believed to create a conflict of interest and thus reduce the quality of the appraisal. While the idea was noble in theory, it has substantial ramifications for the homeowner and the greater mortgage industry as a whole.

Homeowners have faced longer wait times, reduced quality of appraisals, as well as increased costs. Appraisal management companies (AMCs) have added an extra middle man to the process of loan origination. When banks sign up with relatively few management firms, it allows such companies to increase prices for the appraisal to pay for office staff and management while facing less competition. Such appraisal costs increases have been passed onto the homeowner and have been up to 33% higher than prior to HVCC. In addition local appraisers were forced to sign up to staff such companies, resulting in substantially reduced income due to reduced payouts by management companies to the appraiser. As a result of all of these changes, management companies will select appraisers far from the local market of the homeowner requiring the appraisal. Appraisers, trying to increase profits are taking on more jobs. Appraisal quality, speed of completion, and accuracy of appraised value have lagged. Homeowner’s have a difficult time disputing the inaccuracies in the reports, even after several rounds of quality control that are supposed to be part of the appraisal process. In addition, many have reported poor service with the AMC’s, delays with return calls, and a lot of added confusion from informal third party communication with the client. Most importantly, homeowners who spent up to $500 on an appraisal in an effort to obtain financing are often out luck when the completed appraisal makes them ineligible for a loan.  

HVCC was intended to provide a more accurate picture of the value of a home for the benefit of the homeowner and the investor who buys the loan. While it is true there were cases of aggressive mortgage lending creating undue pressure on the appraisal process, HVCC by itself has done little to curb such practices. The unethical and often illegal behavior of the few originators, homeowners, and realtors engaging in such activity created undue problems for those involved in the mortgage process. Those engaging in wrongdoing will only find new and innovative ways to stay ahead of any new regulations, including ways to get around HVCC itself. Reform in the mortgage industry is a necessary and vital need for its future. However HVCC has turned out to be another poorly planned and executed regulation by politicians who are often more focused on their political futures than the actual issue at hand.

Trigger Leads

As if refinancing wasn’t difficult enough, homeowner’s now have more to worry about when applying for a loan. There are lenders and brokers that are immediately notified as soon as anyone does a mortgage credit report that's needed when taking an application to refinance. Almost immediately after the application, borrowers are often bombarded by phone calls and mail from other lenders. Brokers and lenders have the ability to buy "Trigger Leads". A trigger lead is generated by Experian, Trans Union and Equifax when a residential mortgage credit report is pulled. They are selling the information within hours so that others can solicit you for your refinance business. The information sold does not include your Social Security Number. It does, however, include your scores and your basic mortgage profile. They also include your phone number. It’s called purchasing “trigger leads” and guess what? 

It’s perfectly legal!

What’s the problem with home owner’s having brokers and lenders contact them to compete for their refinance business? Well, for one – it’s one of the leading causes of identity theft in the United States. Fortunately, today there is an option to opt-out. The consumer credit reporting industry has provided a way to “opt out” and remove your name from these lists. You can contact them by phone a 1-888-567-8688 or online.

Some have reported calls or mail that claims to need additional information as they work on processing your loan file. This is not legitimate, always remember to verify with your loan officer prior to giving any information to somebody to "process" your loan. Be sure to opt out right away before you fall victim to these deceptive practices. You can choose a five year or lifetime option, and the lifetime option will require a signed form. Make sure to report those violations to your states attorney general- the fines are rather hefty. If you don’t opt out now, be on the lookout for suspicious phone calls or mailers from someone who has purchased your data offering terms that are too good to be true – there is always a catch. Don’t wait until your data is stolen – protect yourself from trigger leads today!

HOME AFFORDABLE REFINANCE PROGRAM

Today there is a government-backed stimulus program, called Home Affordable Refinance Program (HARP), part of the Making Home Affordable program that allows those with declining home values qualify for today’s low rates. This is not to be confused with the Home Affordable Modification Program (HAMP) that has recently gotten some negative press (there will be more information on during a future blog over the next few weeks). The need for this program is tremendous. Many home owners are finding out that refinancing at today’s record low rates may be unobtainable. Several years of double digit housing price declines have caused them to become ineligible because they lack equity in their homes. While this would not have necessarily been an issue three to five years ago when clients could qualify for loans that had the best rates with less than 20% equity, today it is impossible. Many of the mortgage insurance companies that would have insured the lender against loss due to low homeowner equity positions are now out of business. Furthermore, the second mortgage lenders who used to provide a subordinate loan to help ease the equity issue for homeowners have been hit with record losses resulting in the products becoming unavailable.
This program will often allow homeowners to refinance their Fannie Mae or Freddie Mac owned homes, even if the home is not owner-occupied. Many home owners’ facing declining values have been unable to qualify due to their home’s depreciating value. As a result, those individuals have been unable to take advantage of today’s record low rates. While there are still restrictions, the first step for home owner’s told they were ineligible to refinance must first research whether Fannie Mae or Freddie Mac government agency currently owns their mortgage. Many unfortunately assume the owner of the mortgage is the same as the servicer, that’s the reason you need to check for yourself!
Some highlights:

• You are not currently paying mortgage insurance (MI/PMI) as part of your existing 1^st mortgage loan payment. If you are in this situation and are lucky enough to be eligible for Freddie Mac’s program, you may be okay.
• If you have an existing second mortgage, your home equity lender will have to agree to subordinate to the new first mortgage terms.
• No additional cash may be received at closing for debt consolidation, home improvement, etc.

While the Making Home Affordable Programs are not going to meet everyone’s needs, they are a start. With no end in sight to the continued price decline in many markets plus the unpredictability of the appraisal process through the Home Valuation Code of Conduct (****The HVCC will be covered in detail in February!), this program is the only coarse of action for many looking to save money on their mortgage. This program is currently scheduled to end by mid-year 2011 so don’t wait. With a divided Congress, there an extension of this program is unlikely.

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Good News for Maryland Homeowners

Good news for Maryland homeowners looking for possible relief on their property tax bills. 

For some time now the Maryland State Department of Assessment and Taxation has no longer automatically credited homeowners the Homestead Credit as seen on previous tax bills. The homestead credit used to be a standard credit to all owner-occupied residents in Maryland, however, due to the housing market downturn and lost Maryland State reviews, this policy changed. The changes actually went into effect as of 2008, but most homeowners are still not aware they are able to reinstate this credit and save big money off their property tax bills for their existing homes.

The Homestead Credit limits the increase in taxable assessments each year to a fixed percentage. Every county and municipality in Maryland is required to limit taxable assessment increases to 10% or less each year. The homeowner pays no property tax on the market value increase which is above the limit.

The original goal of the Homestead Credit Legislation was to help homeowners deal with large assessment increases on their principal residence. This is a quite an important step to take at a time when homeowner’s are struggling to make ends meet. With high unemployment, declining home prices, and household expenses, even a few hundred dollars a year can mean the difference to local families

The Homestead Credit Legislation does set out certain rules to ensure no homeowner incorrectly receives the credit. This credit isn’t available on rented or multiple properties of a single owner, and a new amendment enacted in 2007 requires all homeowners to submit a one-time application to establish eligibility for the credit.

The application form is automatically mailed to new purchasers of residential property with their first assessment. Current homeowners were mailed a copy at the end of December as part of three different mailing groups over 2008-2010.  

Didn’t get a copy? I did you throw it out as “Junk Mail”?

Homeowners now have to apply in person, via mail, or online. I encourage all homeowner’s to fill out this one time Homestead Credit Application as soon as possible.

If you have been denied a Homestead Tax Credit and you believe that you are eligible, contact the Central Office for the Homestead Tax Credit Program. A final denial of a Homestead Tax Credit by the Central Office may be appealed within 30 days to the Property Tax Assessment Appeal Board in the jurisdiction where the property is located.

For questions about the Homestead Tax Credit in Maryland check out the Homestead Department’s website.