Mortgage product fundamentals – part 1

Once again, Coldwell Banker Mortgage Advisor Steve Nimmer NMLS # 186680 ph. # 912-604-3834 comes through with a great article to share.

Useful information you need to make an educated decision. And if you live in the Savannnah, GA MSA and are ready to buy give me a call 912-352-1222.

Conventional Loans

Conventional loans are the most traditional type of financing for a home purchase or refinance. Conventional loans are underwritten by government-backed enterprises, including Fannie Mae and Freddie Mac, and have their own set of guidelines (see Eligibility below).1

 
Benefits

Individuals with good credit, a steady income and who can afford the down payment on a conventional loan can take advantage of a number of benefits:

• competitive interest rates, typically lower than FHA, VA and jumbo loans,
• faster mortgage processing in most cases,
• avoiding private mortgage insurance if the borrower puts 20% down,
• building equity faster.

Eligibility

Borrowers must meet several criteria for conventional loans including demonstrating stable employment and having a maximum debt-to-income ratio of less than 33/45 (a borrower's mortgage payment cannot exceed 33% of their gross monthly income and total debt/obligations cannot exceed 45% of their gross monthly income). They also need good to excellent credit, specifically, FICO scores of 620 or above. Larger down payments are also required for conventional loans between 5%-20% of the home's sale price for the down payment plus additional cash/savings for closing costs.2


Mortgage Types
Fixed Rate Mortgages: A fixed rate mortgage is an option for conservative borrowers, those who want to lock in near historically low rates and homeowners who plan to stay in the home for a long time. With a fixed rate mortgage, interest rates remain static, and the borrowers' principal and interest payment will remain the same for the term of the loan.³ Fixed rate loan terms are generally amortized over 30, 20, or 15 years.

 Adjustable Rate Mortgages: Conventional adjustable rate mortgages (ARMs) can be beneficial for borrowers who don't plan to live in the home for a long period of time, or when mortgage interest rates are high or increasing. ARMs begin with lower initial interest rates and monthly payments; however, after an initial fixed period, the interest rate will adjust. (Most ARM rates are tied to the performance of one of three major financial indexes.)³ This type of mortgage is often considered by borrowers ARMs typically offer initial fixed-interest periods of 3, 5, 7, or 10 years.

 Sources:
1.Conventional Loan vs. FHA Loan by Karina Carrillo Hernandez
2.Conventional Home Loans Explained by Daniel Duffield
3.Adjustable-rate Mortgages by Realtor.com


A. Joseph Marshall
Coldwell Banker Commercial
Commercial Real Estate Advisor
Savannah, Ga

Is Your Loan Modification Application Stuck?

RISMEDIA, Wednesday, August 31, 2011— If you’re on the verge of losing your home, or you know someone who is, then you also know about the long, bureaucratic process involved in applying for a loan modification from a lender. The most common approach is to apply under the new Home Affordability Mortgage Program (HAMP), but lenders also accept modifications from mortgage holders because lenders really don’t want to take the house—they just want their money.

In many cases, however, the approval process takes longer than many homeowners can afford. But one expert believes it doesn’t have to be that way, and that there are solutions for homeowners whose applications seem stuck in the mud.

“Applying for a loan modification can be an extremely stressful process,” says Stephfan Nurse, CEO of Consumer Education—the makers of Mortgage Reduction software designed to help people through the modification process.

“Even if you send in your documents and your lender tells you everything is okay, you may still have a great amount of anxiety because you have no idea what the lender is doing with your file. You may not know what the next step is and how long it takes to move through each step in the process. Your lender may tell you what the next step is, but you may not understand why it will take so long. There are reasons, however, why the process can get stuck, and there are ways to move that process along, if you understand what goes on behind the scenes.”

Nurse’s tips for making the process smoother include:

• Account Numbers – It often happens that when you fax your paperwork to your lender, the lender either says they lost your paperwork or they just didn’t receive it all. This isn’t because they are incompetent. It’s because they receive thousands of faxes each day, and they use an image scanning technology to capture them all and place them in the appropriate file. In that system, a cover sheet that has your account number on it will get placed correctly, but the following sheets that lack your account number can be easily misplaced. The solution is to put your account number on every page of your paperwork, so they have a better chance of placing all your paperwork in your file.

• Complete the Paperwork – When your file gets assigned to a document manager, typically about 30 days after you first applied for the modification, the document manager’s job is to check to make sure all your required documents are ready to be submitted to the negotiator/specialist for review. If you have an incomplete file, even if you’re missing just one single required document, the document manager will note your account as having an incomplete file and move on to the next file to review. At this point, a generic letter is automatically mailed to your home requesting the additional information your file lacks. This letter can take up to two weeks to get to you, and then another two to four weeks before they look at your updated information. The key is to never send an incomplete package to your lender. It can lead to a delay or even a flat out denial.

• Follow Up – Finally, follow up every week with your lender to make sure all the documents they have are up to date. Don’t worry about being a pest. After all, it’s your house on the line if things get stuck in neutral. If you do this consistently, you will avoid getting caught in the delay cycle.

“The process is like any other, and it can be rife with mistakes and bureaucratic snafus,” Nurse adds. “But if you take the steps to reduce the opportunities for error, your application can move through the process much faster and you’ll have a much better chance at being approved.”

For more information, visit www.consumereducationonline.com.

A. Joseph Marshall
Commercial Real Estate Agent
Savannah, Ga.

Money for Small Businesses

(Originally published November 2010).

A new $30 billion small business fund, created in September as part of the Small Business Jobs and Credit Act of 2010, will provide caplital to community banks, along with incentives for small-business lending.

The government estimates that the $0 billion could leverage up to $300 billion in new loans. The bill also permanently increases the maximum loan amount (from $2 million to $5 million) for two Small Business Administration loan programs- SBA 7a and SBA 504- and introduces noteworthy tax breaks for the self-employed, including one for 2010 health insurance costs.

From the December/November 2010 REALTOR magazine p. 11.

FHA 203(k) Loans for Foreclosures or Properties in Disrepair

As we are all aware, there are plenty of foreclosures out there and more coming on the market. While each property has unique challenges and opportunities, it is not true that you need to pay all cash for one.

If the property in question is in need of substantial repair you can apply for a FHA 203(k) loan. Upon acceptance, qualified buyers can purchase the house as-is and finance the purchase, repairs, and improvements with a single mortgage loan. The loan amount is based on the value of the home after the construction is finished and the loan down payment is only 3.5%

Lenders, like Bank of America's Buy and Renovate home financing program, are even providing extra help by lining up contractors and project management services before the loan is entered into. The service provider, like Lowe's Home

Improvement, works with the customer and the lender through the entire repair process. If you have questions about a foreclosure you're interested in, give me a call- 912-352-1222.

Special thanks to Jim Ragan with Bank of America Home Loans for the 203(k) information. RealEstate Vol. 28, #12, 2010.