30 Mar 2018

Gift Money: Everything You Need to Know

Gift Money: Everything You Need to Know

We get this question more often than most… “ Can my family member help me with my closing costs or down payment?” The answer is yes, but if you are getting gift money to help finance your new home there are a few things you need to remember…

The “Donor” of the gift must be a family member, fiancé or domestic partner. They must prove they have the ability to provide you with the gift by providing a copy of their bank statement, a copy of the canceled gift check and/or a signed letter from their bank saying the funds are available.

The “Gift Letter” is a form we will provide. The donor will need to complete it with basic information and a signed statement that the funds are a gift with no expectation of repayment.

The “Transfer” must be documented carefully. Make a copy of the gift check and deposit slip or of confirmation of the wire transfer. Deposit the gift in the account you’re already using for verification of funds to close. DO NOT combine this deposit with any other incidental deposits. Provide either an online update or the next account statement to show that the deposit cleared into the account.

Some programs allow for the entire down payment to be in the form of a gift. Others may require that you have at least 5% of the purchase price from your own funds. As these rules can vary or change at any time, never hesitate to consult with us for the specifics as they relate to your transaction.

While the documentation requirements may seem excessive at times, please remember that the underwriters are simply following the rules to assure that your down payment is not borrowed and that any allowable gift funds are coming from acceptable sources.

And remember, if you have any questions about the mortgage process, just ask me!

26 Feb 2018

Can You Close a Home With No A/C Unit?

Can You Close a Home With No A/C Unit?

 

The answer is … no,  and this can be a major problem for you and your business. House has had the A/C unit/ pool pump/ water heater stolen or broken and the lender will not close the loan until the equipment is fixed.

Seller or buyer agrees to pay for the repair but will not do so until closing.

This is understandable because the seller does not want to waste money and the buyer does not want to improve a property that he doesn’t own yet.

We have a solution that will allow the property to close, loan to fund, and the repairs to be done within 10 days of funding. We require that you get 2 estimates from licensed contractors. We will stipulate that 1.5 times the amount of the highest bid be put into escrow at closing. Example: highest bid is a $1,000. We will require 1.5 times ($1,500) held in escrow.

Schedule the work to be done shortly after closing. Once work is completed we send out an appraiser for final inspection and then release the funds to the contractor. This program is for minor repairs like the A/C unit, water heater, pool pump etc. It is not to be used on a new roof, kitchen/bath remodel etc. It is not a renovation loan.

Hopefully this information helps you in with you’re A/C Closing questions.

28 Nov 2017

Confirming Loan Limits Have Been Raised for 2017!

Confirming Loan Limits Have Been Raised for 2017!

Good morning!

Hopefully you had a great Thanksgiving!

On 11/23/16, the Federal Housing Finance Agency increased the conforming loan limits for 2017.

The loan limit was increased from $417,000 to $424,100 for Lee and Charlotte County.

Collier County increased to $450,800 from $448,500.

Hopefully this information helps you and your clients

Have a great day!

15 Mar 2017

Tax Liens vs Back Taxes

Tax Liens vs Back Taxes

“I have a tax lien/back taxes. Can I get an FHA mortgage?”

I get this question often and wanted to share with you the difference between the two and how they are treated in regards to an FHA mortgage.

Tax Liens: IRS has been trying to collect their money for a long time. A lien now shows up on their credit. They need to have a payment plan in place. There must be at least 3 monthly payments made and those payments can’t be prepaid. Payment plans will need to be included into the Debt to Income Ratio. The tax lien will subordinate automatically to the FHA mortgage.

Back taxes: This is normally tied to a more current tax year. They will need an established payment plan from the IRS. There is no established time frame required for payments so we only need the payment plan from the IRS. Monthly payment must be included in the Debt to Income Ratio.

Hopefully this helps you in your business, or Home Search.

04 Nov 2015

Primary Residence, Second Home and Investment Property?

Primary Residence, Second Home and Investment Property?

What’s The Difference Between A Primary Residence, Second Home and Investment Property?

When applying for a mortgage, a borrower’s “Occupancy Type” is a major factor in the amount of down payment required, loan program available and mortgage interest rate.

Whether you are purchasing, doing a rate/term refinance or taking equity out of your property through a cash out refinance, occupancy type is always considered by the underwriter.

Three Types of Occupancy:

Owner Occupied / Primary Residence -

According to HUD, a principal residence is a property that will be occupied by the borrower for the majority of the calendar year.

At least one borrower must occupy the property and sign the security instrument and the mortgage note for the property to be considered owner-occupied.

Second Home -

To qualify as a second home, the property typically must be at least 50 miles from the primary residence, and it cannot appear that the real estate is being purchased for rental investment purposes.

Investment Property -

A property that is not occupied by the owner and is typically utilized for rental income purposes.

Down Payment Requirements:

Owner Occupied / Primary Residence -

Purchases for VA and USDA can go up to 100% financing, while FHA requires 3.5% of the purchase price as a down payment.  Conventional financing may require anywhere from 5% – 25% depending on the credit score, county, property type and loan amount.

Second Home -

Average 10% down for a purchase, and 25% equity for a refinance.

Investment Property -

Down payment requirements will range from 20-25% depending on the number of units.  When doing a cash-out refinance on an investment property with 2-4 units, the required loan to value will need to be 70% or lower to qualify.

…..

*It should be noted that on any high balance loan amount the above mentioned Loan-to-Value (LTV) requirements will change. Credit score requirements also apply.

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Related Articles – Mortgage Approval Process:

01 Nov 2015

Mortgage Glossary

Mortgage Glossary


























A

abstract of title
A historical summary provided by a title insurance company of all records affecting the title to a property.
acceleration clause
Allows a lender to declare the entire outstanding balance of a loan immediately due and payable should a borrower violate specific loan provisions or default on the loan.
adjustable rate mortgage (ARM)
A variable or flexible rate mortgage with an interest rate that varies according to the financial index it is based upon. To limit the borrower’s risk, the ARM may have a payment or rate cap. See also: cap.
amenities
Features of your home that fit your preferences and can increase the value of your property. Some examples include the number of bedrooms, bathrooms, or vicinity to public transportation.
amortization
The liquidation of a debt by regular, usually monthly, installments of principal and interest. An amortization schedule is a table showing the payment amount, interest, principal and unpaid balance for the entire term of the loan.
annual cap
See: cap.
annual percentage rate (A.P.R.)
The actual interest rate, taking into account points and other finance charges, for the projected life of a mortgage. Disclosure of APR is required by the Truth-in-Lending Law and allows borrowers to compare the actual costs of different mortgage loans.
appraisal
An estimate of a property’s value as of a given date, determined by a qualified professional appraiser. The value may be based on replacement cost, the sales of comparable properties or the property’s ability to produce income.
appreciation
A property’s increase in value due to inflation or economic factors.
A.P.R.
See: annual percentage rate.
ARM
See: adjustable rate mortgage.
assessment
Charges levied against a property for tax purposes or to pay for municipality or association improvements such as curbs, sewers, or grounds maintenance.
assignment
The transfer of a contract or a right to buy property at given rates and terms from a mortgagee to another person.
assumption
An agreement between a buyer and a seller, requiring lender approval, where the buyer takes over the payments for a mortgage and accepts the liability. Assuming a loan can be advantageous for a buyer because there are no closing costs and the loan’s interest rate may be lower than current market rates. Depending on what is in the mortgage or deed of trust, the lender may raise the interest rate, require the buyer to qualify for the mortgage, or not permit the buyer to assume the loan at all.

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B

balloon mortgage
Mortgage with a final lump sum payment that is greater than preceding payments and pays the loan in full.
biweekly mortgage
A loan requiring payments of principal and interest at two-week intervals. This type of loan amortizes much faster than monthly payment loans. The payment for a biweekly mortgage is half what a monthly payment would be.
bond
A certificate serving as security for payment of a debt. Bonds backed by mortgage loans are pooled together and sold in the secondary market.
bridge loan
A loan to “bridge” the gap between the termination of one mortgage and the beginning of another, such as when a borrower purchases a new home before receiving cash proceeds from the sale of a prior home. Also known as a swing loan.
broker
An intermediary between the borrower and the lender. The broker may represent several lending sources and charges a fee or commission for services.
buy-down
Where the buyer pays additional discount points or makes a substantial down payment in return for a below market interest rate; or the seller offers 3-2-1 interest payment plans or pays closing costs such as the origination fee. During times of high interest rates, buy-downs may induce buyers to purchase property they may not otherwise have purchased.

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C

cap
A limit in how much an adjustable rate mortgage’s monthly payment or interest rate can increase. A cap is meant to protect the borrower from large increases and may be a payment cap, an interest cap, a life-of-loan cap or an annual cap.
A payment cap is a limit on the monthly payment.
An interest cap is a limit on the amount of the interest rate.
A life-of-loan cap restricts the amount the interest rate can increase over the entire term of the loan.
An annual cap limits the amount the interest rate can increase over a twelve-month period.
certificate of reasonable value (CRV)
A Veteran’s Administration appraisal that establishes the maximum VA mortgage loan amount for a specified property.
certificate of title
Document rendering an opinion on the status of a property’s title based on public records.
closed-end mortgage
A mortgage principal amount that is fixed and cannot be increased during the life of the loan. See also: open-end mortgage.
closing costs
Costs payable by both seller and buyer at the time of settlement, when the purchase of a property is finalized. These costs can be up to ten percent of the mortgage amount and usually include but are not limited to the following:
cloud
A claim to the title of a property that, if valid, would prevent a purchaser from obtaining a clear title.
collateral
Something of value pledged as security for a loan. In mortgage lending, the property itself serves as collateral for a mortgage loan. .
commitment fee
A fee charged when an agreement is reached between a lender and a borrower for a loan at a specific rate and points and the lender guarantees to lock in that rate.
co-mortgagor
One who is individually and jointly obligated to repay a mortgage loan and shares ownership of the property with one or more borrowers. See also: co-signer.
condominium
An individually owned unit within a multi-unit building where others or the Condominium Owners Association share ownership of common areas such as the grounds, the parking facilities and the tennis courts.
conforming loan
A loan that conforms to Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC) guidelines. See also: non-conforming loan.
construction loan
A short-term loan financing improvements to real estate, such as the building of a new home. The lender advances funds to the borrower as needed while construction progresses. Upon completion of the construction, the borrower must obtain permanent financing or pay the construction loan in full.
consumer handbook on adjustable rate mortgages (C.H.A.R.M.)
A disclosure required by the federal government to be given to any borrower applying for an adjustable rate mortgage (ARM).
conventional loan
A mortgage loan that is not insured, guaranteed or funded by the Veterans Administration (VA), the Federal Housing Administration (FHA) or Rural Economic Community Development (RECD) (formerly Farmers Home Administration).
convertible mortgage
An adjustable rate mortgage (ARM) that allows a borrower to switch to a fixed-rate mortgage at a specified point in the loan term.
co-signer
One who is obligated to repay a mortgage loan should the borrower default but who does not share ownership in the property. See also: co-mortgagor.
covenants
Rules and restrictions governing the use of property.
CRV
See: certificate of reasonable value.
curtailments
The borrower’s privilege to make payments on a loan’s principal before they are due. Paying off a mortgage before it is due may incur a penalty if so specified in the mortgage’s prepayment clause.

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D

debt
Money owed to repay someone.
debt-to-income ratio
The ratio between a borrower’s monthly payment obligations divided by his or her net effective income (FHA or VA loans) or gross monthly income (conventional loans).
deed of trust
A document, used in many states in place of a mortgage, held by a trustee pending repayment of the loan. The advantage of a deed of trust is that the trustee does not have to go to court to proceed with foreclosure should the borrower default on the loan.
Department of Housing and Urban Development (HUD)
The U.S. government agency that administers FHA, GNMA and other housing programs.
discount points
Amounts paid to the lender based on the loan amount to buy the interest rate down. Each point is one percent of the loan amount; for example, two points on a $100,000 mortgage is $2,000.
down payment
The difference between the purchase price and mortgage amount. The down payment becomes the property equity. Typically it should be cash savings, but it can also be a gift that is not to be repaid or a borrowed amount secured by assets.
due-on-sale
A clause in a mortgage or deed of trust allowing a lender to require immediate payment of the balance of the loan if the property is sold (subject to the terms of the security instrument).
duplex
Dwelling divided into two units.

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E

earnest money
Deposit in the form of cash or a note, given to a seller by a buyer as good faith assurance that the buyer intends to go through with the purchase of a property.
easement
The right one party has in regard to the property of another, such as the right of a public utility company to lay lines.
Equal Credit Opportunity Act
A federal law prohibiting lenders and other creditors from discrimination based on race, color, sex, religion, national origin, age, marital status, receipt of public assistance or because an applicant has exercised his or her rights under the Consumer Credit Protection Act.
equity
The value of a property beyond any liens against it. Also referred to as owner’s interest.
escape clause
A provision allowing one party or more to cancel all or part of the contract if certain events fail to happen, such as the ability of the buyer to obtain financing within a specified period.
escrow
Money placed with a third party for safekeeping either for final closing on a property or for payment of taxes and insurance throughout the year.

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F

fair market value
The price a property can realistically sell for, based upon comparable selling prices of other properties in the same area.
Fannie Mae
Nickname for Federal National Mortgage Association (FNMA).
Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac)
A quasi-governmental, federally-sponsored organization that acts as a secondary market. investor to buy and sell mortgage loans. FHLMC sets many of the guidelines for conventional mortgage loans, as does FNMA.
Federal Housing Administration (FHA)
An agency within the Department of Housing and Urban Development that sets standards for underwriting and insures residential mortgage loans made by private lenders. One of FHA’s objectives is to ensure affordable mortgages to those with low or moderate income. FHA loans may be high loan-to-value, and they are limited by loan amount. FHA mortgage insurance requires a fee of 1.5 percent of the loan amount to be paid at closing, as well as an annual fee of 0.5 percent of the loan amount added to each monthly payment.
Federal National Mortgage Association (FNMA or Fannie Mae)
A private corporation that acts as a secondary market. investor to buy and sell mortgage loans. FNMA sets many of the guidelines for conventional mortgage loans, as does FHLMC. The major purpose of this organization is to make mortgage money more affordable and more available.
fee simple
The maximum form of ownership, with the right to occupy a property and sell it to a buyer at any time. Upon the death of the owner, the property goes to the owner’s designated heirs. Also known as fee absolute.
FHA
See: Federal Housing Administration.
fifteen-year mortgage
A loan with a term of 15 years. Although the monthly payment on a 15-year mortgage is higher than that of a 30-year mortgage, the amount of interest paid over the life of the loan is substantially less.
fixed-rate mortgage
A mortgage whose rate remains constant throughout the life of the mortgage.
flood insurance
The Federal Flood Disaster Protection Act of 1973 requires that federally-regulated lenders determine if real estate to be used to secure a loan is located in a Specially Flood Hazard Area (SFHA). If the property is located in a SFHA area, the borrower must obtain and maintain flood insurance on the property. Most insurance agents can assist in obtaining flood insurance.
FNMA
See: Federal National Mortgage Association
Freddie Mac
Nickname for Federal Home Loan Mortgage Corporation (FHLMC).

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G

gift
This includes amounts from a relative or a grant from the borrower’s employer, a municipality, non-profit religious organization, or non-profit community organization that does not have to be repaid.
Ginnie Mae
Nickname for Government National Mortgage Association (GNMA).
good faith estimate
Estimate on closing costs and monthly mortgage payments provided by the lender to the homebuyer within 3 days of applying for a loan.
Government National Mortgage Association (GNMA or Ginnie Mae)
A government organization that participates in the secondary market, securitizing pools of FHA, VA, and RHS loans.
graduated payment mortgage (GPM)
A fixed-interest loan with lower payments in the early years than the later years. The amount of the payment gradually increases over a period of time and then levels off at a payment sufficient to pay off the loan over the remaining amortization period.

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H

hazard insurance
A form of insurance that protects the insured property against physical damage such as fire and tornadoes. Mortgage lenders often require a borrower to maintain an amount of hazard insurance on the property that is equal at least to the amount of the mortgage loan.
home equity loan
A mortgage on the borrower’s principal residence, usually for the purpose of making home improvements or debt consolidation. .
home inspection
A thorough review of the physical aspects and condition of a home by a professional home inspector. This inspection should be completed prior to closing so that any repairs or changes can be completed before the home is sold.
homeowners insurance
A form of insurance that protects the insured property against loss from theft, liability and most common disasters.
Housing and Urban Development. (HUD)
The U.S. government agency that administers FHA, GNMA and other housing programs.
housing affordability index
Indicates what proportion of homebuyers can afford to buy an average-priced home in specified areas. The most well known housing affordability index is published by the National Association of Realtors.
housing expenses-to-income ratio
See: debt-to-income ratio.
HUD
See: Housing and Urban Development.

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I

income approach to value
A method used by real estate appraisers to predict a property’s anticipated future income. Income property includes shopping centers, hotels, motels, restaurants, apartment buildings, office space and so forth.
income-to-debt ratio
See: debt-to-income ratio.
index
A published interest rate compiled from other indicators such as U.S. Treasury bills or the monthly average interest rate on loans closed by savings and loan organizations. Mortgage lenders use the index figure to establish rates on adjustable rate mortgages (ARMs).
insurance
As a part of PITI, the amount of the monthly mortgage payment that does not include the principal, interest, and taxes. Also see: homeowners insurance.
interest
The amount of the entire mortgage loan which does not include the principal. Also, as a part of PITI, the amount of the monthly mortgage payment which does not include the principal, taxes, and insurance.
interest cap
See: cap.
interest rate
The simple interest rate, stated as a percentage, charged by a lender on the principal amount of borrowed money. See also: Annual Percentage Rate.

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J

joint tenancy
See: tenancy.
jumbo loan
A nonconforming loan that is larger than the limits set by the Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC) guidelines.

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K

key lot
Real estate deemed highly valuable because of its location.

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L

lien
A claim against a property for the payment of a debt. A mortgage is a lien; other types of liens a property might have include a tax lien for overdue taxes or a mechanics lien for unpaid debt to a subcontractor.
life-of-loan cap
See: cap.
liquidity
The capability of an asset to be readily converted into cash.
loan discount
See: points.
loan origination fee
See: origination fee.
loan-to-value ratio (LTV)
The relationship, expressed as a percentage, between the amount of the proposed loan and a property’s appraised value. For example, a $75,000 loan on a property appraised at $100,000 is a 75% loan-to-value.
lock-in:
The guarantee of a specific interest rate and/or points for a specific period of time. Some lenders will charge a fee for locking in an interest rate.

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M

maintenance costs
The cost of the upkeep of the house. These costs may be minor in cost and nature (replacing washers in the faucets) or major in cost and nature (new heating system or a new roof) and can apply to either the interior or exterior of the house.
margin
The amount a lender adds to the index of an adjustable rate mortgage to establish an adjusted interest rate. For example, a margin of 1.50 added to a 7 percent index establishes an adjusted interest rate of 8.50 percent.
market value
The price a property can realistically sell for, based upon comparable selling prices of other properties in the same area.
modification
A change in the terms of the mortgage note, such as a reduction in the interest rate or change in maturity date.
mortgage
A legal instrument in which property serves as security for the repayment of a loan. In some states, a deed of trust is used rather than a mortgage.
mortgage banker
A lender that originates, closes, services and sells mortgage loans to the secondary market.
mortgage broker
An intermediary between a borrower and a lender. A broker’s expertise is to help borrowers find financing that they might not otherwise find themselves.
mortgage insurance
Money paid to insure the lender against loss due to foreclosure or loan default. Mortgage insurance is required on conventional loans with less than a 20 percent down payment. FHA mortgage insurance requires a payment of 1.5 percent of the loan amount to be paid at closing, as well as an annual fee of 0.5 percent of the loan amount added to each monthly payment.
mortgage interest
Interest rate charge for borrowing the money for the mortgage. It is a used to calculate the interest payment on the mortgage each month.
mortgage term
The length of time that a mortgage is scheduled to exist. Example: a 30-year mortgage term is for 30 years.
mortgagee
The lender.
mortgagor
The borrower.

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N

negative amortization
A situation in which a borrower is paying less interest than what is actually being charged for a mortgage loan. The unpaid interest is added to the loan’s principal. The borrower may end up owing more than the original amount of the mortgage.
non-assumption clause
In a mortgage contract, a statement that prohibits a new buyer from assuming a mortgage loan without the approval of the lender.
non-conforming loan
A loan that does not conform to Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC) guidelines. Jumbo loans are nonconforming. See also: conforming loan.
note
A signed document that acknowledges a debt and shows the borrower is obligated to pay it.

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O

open-end mortgage
A mortgage allowing the borrower to receive advances of principal from the lender during the life of the loan. See also: closed-end mortgage.
origination fee
The amount charged by a lender to originate and close a mortgage loan. Origination fees are usually expressed in points.

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P

payment cap
See: cap.
P&I
Abbreviation for principal and interest.
PITI
Abbreviation for principal, interest, taxes and insurance.
points
Charges levied by the lender based on the loan amount. Each point equals one percent of the loan amount; for example, two points on a $100,000 mortgage is $2,000. Discount points are used to buy down the interest rate. Points can also include a loan origination fee, which is usually one point.
pre-qualification
Tentative establishment of a borrower’s qualification for a mortgage loan amount of a specific range, based on the borrower’s assets, debts, and income.
prime rate
The interest rate commercial banks charge their most creditworthy customers.
principal
The amount of the entire mortgage loan, not counting interest. Also, as a part of PITI, the amount of the monthly mortgage payment which does not include the interest, insurance, and taxes.
private mortgage insurance (PMI)
See: mortgage insurance.
property appraisal
See: appraisal.
property tax
The amount which the state and/or locality assesses as a tax on a piece of property.
prorate
To proportionally divide amounts owed by the buyer and the seller at closing.

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Q

qualification
As determined by a lender, the ability of the borrower to repay a mortgage loan based on the borrower’s credit history, employment history, assets, debts and income.

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R

rate cap
See: cap.
RESPA
Abbreviation for the Real Estate Settlement Procedures Act, which allows consumers to review settlement costs at application and once again prior to closing.
reverse annuity mortgage
A type of mortgage loan in which the lender makes periodic payments to the borrower. The borrower’s equity in the home is used as security for the loan.
RHCDS
Rural Housing and Community Service
right of first refusal
Purchasing a property under conditions and terms made by another buyer and accepted by the seller.
right of rescission
When a borrower’s principal dwelling is going to secure a loan, the borrower has three business days following signing of the loan documents to rescind or cancel the transaction. Any and all money paid by the borrower must be refunded upon rescission. The right to rescind does not apply to loans to purchase real estate or to refinance a loan under the same terms and conditions where no additional funds will be added to the existing loan.
rollover
At the end of the construction loan period, the borrower’s file is delivered to Bank One Mortgage Loan Servicing Dept. Prior to delivery, CLD contacts the borrower and obtains funds for the tax and insurance escrows, a final title policy and homeowner’s policy. This process is called a rollover.
Rural Housing and Community Development Service
A federal agency that administers mortgage loans for buyers in rural areas.

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S

second mortgage
A loan that is junior to a primary or first mortgage and often has a higher interest rate and a shorter term.
secondary market
A market comprising investors like GNMA, FHLMC and FNMA, which buy large numbers of mortgages from the primary lenders and sell them to other investors.
servicing
The responsibility of collecting monthly mortgage payments and properly crediting them to the principal, taxes and insurance, as well as keeping the borrower informed of any changes in the status of the loan.
settlement costs
See: closing costs.
survey
A physical measurement of property done by a registered professional showing the dimensions and location of any buildings as well as easements, rights of way, roads, etc.

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T

tax deed
A written document conveying title to property repossessed by the government due to default on tax payments.
tax savings
The amount of money that the homeowner is not required to pay the government in taxes because he or she owns a home.
taxes
As a part of PITI, the amount of the monthly mortgage payment which does not include the principal, interest, and insurance.
tenancy
joint tenancy – equal ownership of property by two or more parties, each with the right of survivorship.
tenancy by the entireties – ownership of property only between husband and wife in which neither can sell without the consent of the other and the property is owned by the survivor in the event of death of either party.
tenancy in common – equal ownership of property by two or more parties without the right of survivorship.
tenancy in severalty – ownership of property by one legal entity or a sole party.
tenancy at will – a license to use or occupy a property at the will of the owner.
title
A formal document establishing ownership of property.
title insurance
A policy issued by a title insurance company insuring the purchaser against any errors in the title search. The cost of title insurance may be paid for by the buyer, the seller or both.
trust deed
See: deed of trust.
Truth In Lending Act
The Truth In Lending Act requires lenders to disclose the Annual Percentage Rate and other associated costs to homebuyers within three working days of the loan application.

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U

underwriter
A professional who approves or denies a loan to a potential homebuyer based on the homebuyer’s credit history, employment history, assets, debts and other factors such as loan guidelines.
Uniform Settlement Statement
A standard document prescribed by the Real Estate Settlement Procedures Act containing information for closing which must be supplied to both buyer and seller.
utility costs
Periodic housing costs for water, electricity, natural gas, heating oil, etc.

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V

VA loan
See: Veterans Administration.
variable rate mortgage (VRM)
See: adjustable rate mortgage.
Veterans Administration (VA)
The federal agency responsible for the VA loan guarantee program as well as other services for eligible veterans. In general, qualified veterans can apply for home loans with no down payment and a funding fee of 1 percent of the loan amount.

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W

walk-through
An inspection of a property by the prospective buyer prior to closing on a mortgage.
warranty deed
A document protecting a homebuyer against any and all claims to the property.

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X

No Entries in “X”

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Y

yield
The rate of earnings from an investment.

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Z

zoning
The ability of local governments to specify the use of private property in order to control development within designated areas of land. For example, some areas of a neighborhood may be designated only for residential use and others for commercial use such as stores, gas stations, etc.

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12 Oct 2015

Do I Need To Sell My Home Before I Can Qualify?

Do I Need To Sell My Home Before I Can Qualify?

Although every situation is unique, it is not uncommon for homebuyers to qualify for a mortgage on a new home while still living in their primary residence.

Perhaps you are outgrowing your current house, or have been forced to relocate due to a job transfer?  Regardless of the motivation for keeping one property while purchasing another, let’s address this question with the mortgage approval in mind:

So, Do I Have To Sell?

Yes. No. Maybe. It depends.

Welcome to the wonderful world of mortgage lending. Only in this industry can one simple question elicit four answers…and all of them may be right.

If you are in a financial position where you qualify to afford both your current residence and the proposed payment on your new house, then the simple answer is No!

Qualifying based on your Debt-to-Income Ratio is one thing, but remember to budget for the additional expenses of maintaining multiple properties. Everything from mortgage payments, increased property taxes and hazard insurance to unexpected repairs should be factored into your final decision.

What If I Rent My Current Property?

This scenario presents the “maybe” and the “it depends” answers to the question.

If you’re not quite qualified to carry both mortgages, you may have to rent the other property in order to offset the mortgage payment.

In that scenario, the lender will typically only count 75% of the monthly rent you are proposing to receive.

So if you are going to receive $1000 a month in rent and your current payment is $1500, the lender is going to factor in an additional $750 of monthly liabilities in your overall Debt-to-Income Ratios.

Another detail that can present a huge hurdle is the reserve requirement and equity ratio most lenders have. In some cases, if you are going to rent out your current home, you will need to have at least 25% equity in order to offset your payment with the proposed rent you will receive.

Without that hefty amount of equity, you will have to qualify to afford BOTH mortgage payments. You will also need some significant cash in the bank.

Generally, lenders will require six months reserve on the old property, as well as six month reserves on the new property.

For example, if you have a $1500 payment on your old house and are buying a home with a $2000 monthly payment, you will need over $21,000 in the bank.

Keep in mind, this reserve requirement is incremental to your down payment on the new property.

What If I Can’t Qualify Based On Both Mortgage Payments?

This answer is pretty straightforward, and doesn’t require a financial calculator to figure out.

If you are in this situation, then you will have to sell your current home before buying a new one.

If you aren’t sure of the value of the home or how your local market is performing, give us a ring and we’ll happily refer you to a great real estate agent that is in tune with property values in your neighborhood.

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As you can tell, purchasing one home while living in another can be a very complicated transaction.  Please contact us at anytime so we can review your specific situation and suggest the proper action plan.

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18 Sep 2015

Do I Need To Make Mortgage Payments If My Lender Goes Bankrupt?

Do I Need To Make Mortgage Payments If My Lender Goes Bankrupt?

When mortgage lenders go out of business and are essentially taken over by the FDIC, homeowners are left wondering if they still need to make a monthly payment.

Great thought, and a very common question for many borrowers in the 2006-2010 timeframe.

The short answer is YES, you still have to continue making mortgage payments if your current lender files for bankruptcy or disappears over the weekend.

In order to give a more thorough answer to this popular topic, we’ll need to address the relationship between mortgage loans as liens and mortgage servicers who make money by handling payments.

To put this topic in perspective, 381 banks actually filed bankruptcy between 2006 and 2010 forcing them to cease their mortgage lending activities. And a common misconception borrowers have about their mortgage company is that their agreement should become obsolete once the lender files for bankruptcy or goes out of business.

Based on the way mortgage money is made, packaged and sold on the secondary market as a mortgage backed security, the promissory note (agreement) is actually spread between many investors who rely on a servicing company to collect and manage the monthly payments.

A mortgage is considered a secured asset, where the collateral is real estate.  And, the mortgage note has a separate value to investors and servicers based on the interest and servicing fees they have wrapped up in the monthly payments.

This is why many mortgage notes get sold to other servicers who pay for the rights to service your loan. So basically, even if a mortgage company is bankrupt, someone else is willing to take on the job of collecting payments.

Also, by signing a mortgage note, the borrower is committing to continue making the required payments, regardless of what happens to the mortgage company servicing your loan.

Bullets:

  • Your house is an asset
  • The mortgage note has a separate value to investors
  • Regardless what happens to your mortgage company, you need to make your payments

Also, it’s important to continue making your mortgage payments on time, regardless of which servicing company is sending a monthly statement.  Obviously, keep a good paper trail of those mortgage payments in case there is a mix-up between transitions.

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18 Sep 2015

Shopping For A Hazard Insurance Policy

Shopping For A Hazard Insurance Policy

When shopping for a hazard insurance policy, something called “bundling” can actually save you quite a bit of money that most people aren’t aware of.

Many of the big insurance companies price their insurance rates to attract a particular segment of the market. They usually price their hazard insurance policies to attract homeowners who need to insure not only their homes with hazard insurance, but also their cars with car insurance and lives with life insurance.

The big insurance companies want customers who will stay with them for years vs shopping around for a better deal every six months.  So, to give customers an incentive to stick with them, they offer discounts if you use the company for all three (hazard, auto, life) lines of insurance.

Companies offer “multiline discounts” to attract customers who will need more than one type of insurance. These companies offer a cheaper rate to insure both your house and car than if you insured each one separately at different companies.

The same goes if you add a second car or a life insurance policy – the discounts keep adding up.

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Frequently Asked Questions:

Q. How much can you actually save when you combine insurance policies with one company?

It varies by company, but with some of the large insurance companies, it will save you up to 40%.

Q. Why are the large companies sometime so far off when it comes to price on my hazard insurance?

Large companies often give significant discounts if you have your hazard, auto and life insurance with them – and they actually *want* to be higher in price if you only have one line. People with only one line of insurance switch more often according to the statistics.

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18 Sep 2015

Alternate Sources For Establishing Credit

Alternate Sources For Establishing Credit

While the basic Rule-of-Thumb for acceptable credit history is a minimum of four trade lines documented on a credit report, there are alternative methods of building a credit picture that an underwriter can use to make a decision for a loan approval.

For potential home buyers with little or no credit history, keeping records for 12 months of paying bills on time is essential for mortgage loan approval. In fact, loan officers will appreciate receiving proof that you have paid a variety of accounts regularly and on time. Even if you do not have a credit history, or your credit report isn’t as good as it could be, this may enable you to get a mortgage.

The industry term for this is “thin credit.”

Some loan types, namely FHA and USDA, will accept alternative credit sources in order to establish proof of financial responsibility.

Alternative credit is unreported to the bureaus, but will still be verified and can be instrumental in a home loan approval.

Those with thin credit don’t usually have bad credit, but have just not had an opportunity to build enough traditional credit, such as bank/store credit cards, auto loans, etc.

Alternative Sources for Building Credit:

  • Rental History – Canceled checks and letter from property management company
  • Medical Bills – 12 months of statements from medical billing company showing paid as agreed
  • Utilities – power, gas, water, cable, cell phone
  • Auto Insurance
  • Health / Life Insurance – as long as it’s not auto-deducted from pay check

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