1. Don’t stop making your mortgage, rent, auto or any other payment!!  If you have a late payment, even on a silly $10 a month credit card it could mean the difference between “yes” and “no”.
2. Don’t buy or lease an auto!!  Lenders look carefully at your monthly debt obligations.  A large payment such as a car lease or purchase can greatly impact those rations and prevent you from qualifying for a home loan.
3. Don’t move assets from one bank account to another!!  These transfers show up as new deposits and complicate the application process, as you must then disclose and document the source of funds for each new account. It’s a paperwork nightmare.  Wait until after close of escrow to consolidate accounts.
4. Don’t change jobs if you can help it!!  A new job may involve a probation period, which must be satisfied before income for the new job can be considered for qualifying purposes.  If you job is part-time or temporary, please let your mortgage broker know as it affects your approval.
5. Don’t run a credit report on yourself or have anyone pull your credit!!  This will show as an inquiry on your lender’s credit report and could lower your credit score 7-10 points per credit inquiry!
6. Don’t buy new furniture or major appliances for your new home!!  If new purchases increase the amount of debt your are responsible for on a monthly basis, there is the possibility this may disqualify you from getting the loan.
7. Don’t attempt to consolidate bills before speaking with your lender!!  Moving around credit balances can destroy your credit score!  Ask your lender first before you change any balances around.
8. Don’t pack or ship information needed for the loan application!!  Important paperwork such as W-2 forms, divorce decrees and tax returns should not be sent with the movers along with your other household goods.  Duplicate copies take weeks to obtain and could stall the closing date on your transaction.

There has been a lot of hub-bub recently about the revisions to HARP.  This is a guest post that I thought answered a lot of the questions you might have!

by Ted Spradlin, Mortgage Advisor, MLO #214130

tspradlin@alpinemc.com                 www.alpinemc.com

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Yesterday’s New York Times had an article about the most recent expansion of the Treasury’s Home Affordable Refinance Program, known as HARP, which allows underwater homeowners with Fannie Mae and Freddie Mac backed loans to refinance their mortgage and take advantage of today’s low interest rates.

The revised program lifts the Loan To Value limit on fixed-rate loans which was 125% to unlimited, reduces some refinance fees, allows refinances of loans that experienced minor delinquency, and extends the eligibility date.

So far, HARP has helped 838,441 homeowners nationwide. Treasury anticipates this program will help an additional 900,000 homeowners in the coming year.

To better understand the program and who may be eligible, I created several Questions and Answers:

Q:  How does a person find out if Fannie or Freddie owns their mortgage?

A:  Go to the Fannie and Freddie loan lookup websites

Q:  If Fannie owns my loan, will it go back to Fannie?

A:  Yes, the loans go “Fannie to Fannie” and “Freddie to Freddie.”

Q:  Who benefits most from HARP?

A:  Homeowners with solid income, credit, employment, and mortgage payment history, who lost equity during this housing downturn. People who are in professions where they need to maintain their credit rating to keep their jobs will benefit the most.  For Example, police officers, financial professionals, attorneys, military officers, civil servants, etc.

Q:  What if my loan was originated in April 2010?  Can I still qualify for the HARP refinance?

A:  As of now, HARP is limited to mortgages delivered to Fannie and Freddie prior to June 1, 2009. When the expanded guidelines take effect in March 2012, you may qualify.

Q:  If I’m over 80% LTV, will I have mortgage insurance on my new loan?

A:  That depends on if you had mortgage insurance on your existing loan.  If you don’t currently have MI, you won’t have it on your new loan.  If you do have MI, you will have it on your new loan, and most likely with the same MI company as you had before.

Q:  Will my loan servicer change?

A:  Maybe, maybe not.  It all depends on where the loan and its servicing rights are sold or assigned in the secondary markets.

Q:  Can I refinance my underwater rental property?  

A:  Yes.

Q:  Can I refinance my underwater vacation home?

A:  Yes.

Q:  What is the maximum loan limit?

A:  $417,000.

Q:  What if I have a second mortgage?  

A:  Seconds may re-subordinate their position and allow you to refinance your first mortgage.

Q:  When does the unlimited LTV program take effect?

A:  The earliest this program will be online looks to be March 2012.  Remember, Fannie and Freddie’s software programmers have to re-write all the software code for the new guidelines.  Most mortgage originators use the automated underwriting engines of Fannie and Freddie rather than manually underwrite loans.

Q:  Do people really qualify for these loans?  

A:  Yes.  So far 838,441 people have refinanced with HARP so far.  HARP 1.0 and HARP 2.0 are aimed at the homeowner who bought at the peak of 2004-2007, who put 10-20% down at the time of purchase.  They have stable jobs, income, “strong to quite strong” credit, and have a desire to stay in their home.

Q:   Do you have an example of a HARP loan?

A:   Yes, here’s a loan I’m closing right now.  The loan balance is $300,000 and the home appraised at $280,000.  It’s a 108% LTV, Freddie to Freddie refinance.

Q:  Does this program help the people who lost their job and fell 180 days delinquent on their mortgages?

A:  No.  That would most likely be the HAMP modification.

Q:  What if I have a permanent HAMP modification, can I apply for HARP?  

A:  Yes, you can apply for HARP.

Q:  Do I have to pay closing costs out of pocket?

A:  No, you can roll your closing costs into the new loan; however, you are limited to the lesser of $5,000 or 4% of the loan amount.

Q:  Can I get cash out to pay off debt?

A:  No.  This program is for rate and term refinances with a maximum of $250 back at closing.

Q:  What if I’m delinquent on my property taxes?

A:   Taxes take priority over voluntary liens like mortgages and will need to be brought current.  Depending on your credit scores, debt to income and loan to value ratios, you may be able to roll your taxes into your new loan.

\”For the Love of Money\” – O\’Jays

It takes money to buy a home: “yours” or “theirs”.  If you’re not going to pay cash for a home, you need to find out exactly what you can borrow and what it will cost before you start looking at homes.  This is an important step so that you are relaxed about the $$$ part of the process, so that we are looking at the correct price point for your new home and that when you are ready to make an offer you have a letter of pre-approval to present to the seller of that property.  As you compare and interview lenders, be sure to not only look at interest rates but the Annual Percentage Rate (APR) as well!

The mortgage process is not as clear cut a path as it was a few years ago.  It is certainly more complex, takes longer and requires that you are credit worthy by a whole new set of standards of late. If you have less than stellar credit, a trusted mortgage professional can advise you how to improve your individual situation.

You are entitled to a free credit report from each of the three major credit bureaus each year.  Go to www.AnnualCreditReport.com  to get a copy of each from TransUnion, Experian and Equifax.  Read the reports to determine if they’re accurate.  Surprisingly, about 90% of all reports have errors.  You can try to correct them directly with the credit bureau, but a trusted mortgage professional can help you with this process too.  They have tools that are not available to individuals.  Some errors may not be serious but others will keep a person from qualifying.

Housing affordability is at a near record height due to the incredibly low interest rates and low home prices. Some areas are experiencing absorption of the inventories which could impact price. If you’re going to use “their” money to buy a home, the first step is to talk to a trusted mortgage professional. Call me for the name of a trusted mortgage professional.

There’s a time for spontaneity, there’s a time for flexibility and there’s definitely a time for resilience!  But, there’s always room for future planning, especially when it comes to finances and real estate.  Thinking ahead can make you $$$$!  Thinking about your retirement when you are young, can make you an early retiree.  Thinking about the type of loan you secure for real estate can make your property more salable in certain markets (such as those with higher interest rates).  Just sayin……….

I am actually referring to FHA (Federal Housing Administration)  or VA (Veteran’s Administration) loans!  FHA & VA do not lend money, rather they both guarantee the loans.  I remember in the mid-80′s when I began my illustrious career and the mere mention of an underlying FHA or VA loan made a real estate agent swoon!  WHY???  Because FHA/VA loans are assumable at the interest rate of the existing loan (current rates, at that time, topped at 13%…OUCH!).  So, if the new buyer can come up with the difference between the existing underlying FHA loan and the current sales price (and can meet the qualifying standards), they can assume at the existing interest rate.

I know, I know!  It’s been a long time since interest rates were an issue.  But, when (not if) our economy makes a change, interest rates must go up.  They’ve been artificially low for some time.  But, to have attractive financing that could be assumed would add to the future sale-ability!

Consider getting a FHA or VA loan to purchase your home. The present advantages are that these loans are priced competitively and a little easier to qualify for than conventional loans. The future advantage is that FHA and VA loans are assumable at the original note rate for qualifying buyers.

There’s more to sell than the home itself when you have an assumable loan. The mortgage payment could lower the cost of housing significantly.  A buyer may easily be willing to pay more for the home due to the attractive financing, especially if it helps their equity grow faster.

Competing with Cash
I have recently had Portland metro real estate listings that have received cash offers AND I’ve been representing buyers in multiple offer situations up against cash offers. It’s just not fair (unless you are the buyer with cash)!   29% of all sales in the US made in June and July 2011 were cash. How does a buyer who needs a mortgage compete with a cash buyer?  And, why the “uptick” in cash offers.  A sideline note:  have you looked at the stock & bond market numbers lately?  Many people are “parking” their money in real estate instead of the stock market.

Perhaps you’ve been looking for a home for months after thinking about it for years. You’ve found the home you want and meets your family’s needs. You write a contract but before it’s even presented to the seller, another offer comes in. With all the homes on the market, you’d think you wouldn’t have to deal with multiple offers but you’d be surprised how many times it does happen.  A sideline note: why does this happen???  Because this particular property is priced competitively and is in “show” condition.  There’s no secret…just location, price, condition!

If it’s a short sale or bank-owned (foreclosure), competing against a cash offer can be a bear!!  In a short-sale, the bank wants that property “off the books” and the short-sale numbers and situation have to be less expensive than the looming foreclosure.  If the bank has just repossessed a property (at some expense) and they want a sure bet on a substantive offer that lessens their losses.

There are some strategies that can (at least) compete with the advantage of an all-cash buyer.
1)  Get pre-approved and submit the letter from the lender with the offer
2)  Move fast to minimize competing with other offers
3)  Make an over sales price offer. Money talks….
4)  Use an escalation clause (you will pay “x” amount of money over any verifiable offer up to “x” amt)
5)  Submit larger than normal earnest money to show your sincerity
6)  Be as flexible as possible about closing and possession
7)  Avoid unnecessary contingencies in the contract
 Write a letter emotionalizing why you want the home

It’s a “dog-eat-dog” world out there right now.  Can anyone explain what “dog-eat-dog” means????

How interest rates affect a monthly mortgage payment

A simple one-percent increase in interest rates can have a dramatic effect on the payment. Making a loan application and locking in the rate are key strategies to keeping your payments as low as possible.

If you think you might be ready to make a new home or investment property purchase, call me (503-709-0802) or write (jj@janeesejackson.com ) and I’ll help you make an appointment with a mortgage professional. We will form a team to find that new residence or investment!!

July 2011 Portland Metro Real Estate Update!!

Despite the fact that summer refuses to join us this year, our Portland real estate market marches on.  Nationwide, 2011 thus far is the worst year for home sales in history!  However, locally it doesn’t necessarily feel that way.  Closed sales were definitely down in June 2011 compared with June 2010, but pending sales jumped compared with last year.  And inventory is the lowest it’s been since July 2007!  At the current rate of sales, the Portland Metro area has only 6 months of inventory!!  Builders broke ground on more new homes than expected last month and U.S. housing starts reached a 6-month high according to Reuters News. Which indicates some optimism on the part of home builders. Of course, our lack of inventory is two-fold, I believe.  In part, we are seeing reduced homes on the market due to pricing getting to the point where buyers are willing to venture into the market and absorb the existing inventory.  Low numbers are also a result of less homes being willing and able to go on market due to lack of equity!  Are we at the bottom in the Portland marketplace?  Some areas are definitely still dropping, some appear to have stabilized somewhat.

SELLERS:  What does this mean for sellers?  I have never been a big proponent of “losing” money on real estate.  However, if life changes demand the sale of a home where equity is non-existent, keep in mind that you may lose money on your sale but you will gain on your purchase.  Homeowners are still having trouble accepting just how much the values of their properties may have fallen, says a new report from the Zillow real-estate site. Current sellers who bought their homes in 2007 or later, an analysis of the site’s home listings shows, are overpricing their properties by an average of 14 percent. Sellers who bought their houses before the bubble, and those who bought during the big run-up in home values, also are overpricing their homes, but not by as much. Those who bought before 2002 are pricing their homes roughly 12 percent over market value, while those who bought from 2002-06 price them about 9 percent over market value.  Keep in mind these are national statistics and real estate varies neighborhood by neighborhood!  But, it’s not just sellers.  As a Realtor, I find pricing correctly and low appraisals to be my biggest current challenges!

BUYERS:  What does this mean for buyers?  Mortgage rates continue at record lows and opportunities definitely exist!  There are definitely tougher lending guidelines but more loan products are being slowly introduced (or re-introduced) into the mortgage marketplace.  FHA gives many buyers options like a low 3.5% down payment and the option for seller-paid closing costs. You can even set up your Bridal Registry with a bank and use the funds for a down payment.  VA financing still offers 100% financing to qualified veterans.  Don’t labor under mortgage misunderstandings, it’s free to find out if and for what you might qualify.  If interested, you might as well inquire…last I heard the worst they could do is say “NO” (they can’t shoot you, you know).

INVESTORS:  What does this mean for investors?  The local rental market continues to be hot, hot, hot (even tho’ our weather is not, not, not)!!  I’m in the midst of another duplex remodel and already both sides are rented, tho’ only one side is ready!  Financing for investment properties can be a challenge, especially for the self-employed (like myself).  A lot of patience and perseverance is required!!  A home or investment property is a “leveraged investment”! Leverage is the ability to control a larger asset with a smaller amount of cash through the use of borrowed funds. Paying cash is not always “King” when figuring your yield on an investment.  Leverage is not a dirty word, it’s a be-U-tiful thing!

Benefits of VA (Veterans Administration) Financing!

• 100% Loan-to-Value (LTV).  In other words, the lender (because the loan is guaranteed by the VA) will lend 100% of the value of the home.
• No monthly mortgage insurance (MI) premium.  Normally, a conventional or FHA mortgage will insist on MI if the buyer puts down less than 20% of the price of the home.
• No income limits.
• The VA funding fee can be rolled into the loan, paid by cash OR paid by the seller.
• Up to 4% of the loan amount can be seller-paid concessions (such as closing costs and pre-paids taxes).
• There are jumbo loan programs.  For the Portland area, you can secure a mortgage with conventional financing up to loan amount of $417,000, for higher figures it is considered a jumbo mortgage.

VA mortgages provide a variety of different benefits for the veteran buyer such as no down payment, broad qualifying ratios and the VA is more tolerant for credit challenges than conventional standards.  Thinking ahead to when the home is sold, a VA loan is assumable by the buyer at the existing rate upon qualification.  This could be a very important selling feature that may even have monetary value  as interest rates rise.

June 2011 Portland Metro Real Estate Update!

So, do you want to hear the “good news” or the “bad news” first???  Despite the recent bout of less-than-stellar economic news, the momentum in real estate sales in the Portland Metro area continues.  Short-sales and foreclosures continue to put pressure on pricing and there is no denying that those prices are determining market value!  As always, every neighborhood is affected differently.  But, I am still seeing well-priced investment properties and aggressively priced homes/condos in good condition sell quickly and even experience multiple offer situations!  Pricing correctly is still the challenge.  No one wants to leave $$$ on the table, but over-pricing will stall the sales process.  Year over year, closed sales were down, but inventory hit the lowest level since October 2009!  However, year-over-year, the average sales price fell 7.3%, but we are now down to 6.8 months of inventory!! I believe this market is fueled by a “crisis of confidence”  for the consumer and the lending institutions.

BUYERS: What does this mean for buyers?  Mortgage rates have leveled off at 2011 lows to date!  Low mortgage interest rates definitely benefit the first-time buyer, investors and repeat buyers (if they can sell their home).  If something is priced right, “priced-to-sell” or under-market, you may be forced to quickly view the property and make your very best offer!  That could even mean an over-sales-price offer.  I have this theory that “winning” in real estate is getting what you want (within reason, of course).  I always tell everyone (that will listen) that I have paid full price or OVER asking price (due to multiple offers) on every piece of real estate I’ve ever purchased!  When you know what you want and why you want it (and you know you can afford it), you don’t quibble over minutia!  Just one gal’s theory…..

SELLERS: What does this mean for sellers?  Buyers are in the market and they want to buy.  Cosmetically and structurally challenged properties have a narrower market, especially in some areas.  But, you still have to be careful not to over-do renovations for marketing, as you may or may not recoup the money.  So, it’s a fine line.  Pricing is tough!  Real Estate Brokers are experiencing issues with appraisals NOT coming in at value on properties under contract and/or demanding more $$$ down or higher interest rates on investment properties.  This makes competitive pricing not only necessary to attract buyers, but indispensable when it comes to getting the mortgage approved!  Perhaps offering incentives such as seller paid closing costs (very typical in the first-time buyer market) or interest rate buy-downs could entice a buyer to make a move?

INVESTORS: What does this mean for investors?  Again, decent properties that offer cash-flow (or the potential for getting the rents up to market), location and appeal are being “snapped up” by investors with the means to get financing.  Again, mortgage requirements for investors are getting more and more stringent, especially if you own more than four total properties.  Perseverance is key, be ready to make a larger down-payment and/or higher interest rate and steady yourself for rejection with the resiliency to keep trying!  I love that you use a smaller amount of your money + a larger sum of someone else’s money to purchase an investment and, then, the tenant pays the borrowed amount.  Remember “leverage” is not a dirty word!

A home or investment property is a “leveraged investment”! Leverage is the ability to control a larger asset with a smaller amount of cash through the use of borrowed funds. When the investment has positive leverage, the yield will increase as the loan-to-value increases. In other words, the more you can borrow (as long as you can afford the payments or the income from the property makes or exceeds the payments), the higher your yield. The power of leverage is using “other people’s money” (responsibly) to better your financial position. You use less of your money to obtain a more valuable property. Webster defines leverage as “a means to an end”.