Austin, Texas REALTOR® Frank Wade says mortgage rates are an element of simple supply and demand.

“The more there is, the cheaper they are

Since the U.S. Government, through the Federal Reserve Board of Governors, or the Fed, is injecting as much money as possible into the market, money is plentiful to lend out, if you happen to be a bank. Since money is plentiful, there is literally more money available than people who want a mortgage. This keeps mortgage rates low.

End of unemployment will end the cheap rates

In order for the Fed to keep inflation from taking over, they have to keep close tabs on other market factors. It is unheard of for someone without a job to buy a house. As the unemployment rate drops, more people will be willing to purchase a house. With more buyers wanting the limited number of mortgages, the price associated with mortgages, the interest rate, will rise. In order to hold off inflation, the Fed will take money out of the market place. This too will force mortgage rates to rise. How high will rates go? It was only 20 years ago that interest rates were over 14 percent.

Watch unemployment

Unemployment will be the key for many other indicators in the market. Where mortgage rates go, so do credit card rates. Where mortgage rates go, so will savings account rates. So even though the cheap mortgage rates may be coming to an end, it is also the beginning of a boon for those of us who are capable of saving their money.”

Click here to read more of Frank Wade’s blog.

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Getting a mortgage in 2010 is a little more complicated than it has been in the past due to the challenging economy and increased government regulation of the mortgage industry.

In fact, Michigan REALTOR® Michael Price compares the process to a giant hurricane that has swept through the housing and mortgage markets, leaving chunks of debris and danger in its wake. He offers advice to home buyers about how to successfully obtain a mortgage now.

“Here are a few of the challenges that we will tackle together as we navigate the danger zone known as the 2010 mortgage process!

New Good Faith Estimate
The US Government has created a new version of the disclosure form known as the Good Faith Estimate (GFE). The old GFE itemized all your closing costs and illustrated your ‘cash-to-close’ – the amount of cash you would need to bring to the closing if you are buying a home, or the net proceeds you would receive at the closing from a cash-out refinance. The new GFE lumps in your closing costs under certain categories instead of itemizing them, and does not illustrate your cash-to-close. Also, if the seller is paying closing costs or points on your behalf, this is not reflected on the new GFE. In other words, it will look as though you are paying these fees even though the seller is paying them.

New Appraisal Guidelines
Most mortgage loans these days are either insured by the Federal Housing Administration (FHA) or sold to Fannie Mae or Freddie Mac. This means that mortgage banks and brokers need to follow the rules set by Fannie, Freddie, and the FHA. In 2009, Fannie and Freddie adopted new rules surrounding the home appraisal process. In 2010, the FHA followed suit and implemented many of the same guidelines. What this means for you is that the appraisal process is going to be more stringent and inflexible, costly, and time consuming than it has been in the past.

In fact, many appraisals are now conducted by appraisers who may not live in your community, resulting in value estimates that may not agree with your own opinion of what your home may be worth. Also, many appraisals now go through multiple layers of screening and are handled by Appraisal Management Companies, resulting in higher costs and fees.

Finally, loan originators are prohibited in most cases from ordering appraisals or communicating with appraisers. Even so, it is important to keep in mind that an appraisal is simply somebody’s opinion of what your home would sell for in today’s market. You and I are entitled to disagree with the appraiser and have a different opinion, but the lending guidelines that we need to follow require us to use the appraiser’s opinion when calculating your loan amount and strategy.”

Click here to read more of Michael Price’s blog.

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If you’ve watched the news lately,you’ve probably heard about the government’s Making Home Affordable Plans.  But do you know what they are?  If you are a struggling homeowner, do you know if you may qualify? 

REALTOR® Erin Harbuck advises you find out all the facts because education is power!

“There are two main components to the Making Home Affordable Plans: Refinance and Loan Modification. 

Refinance:  This option is for homeowners who are current on their mortgage, but have been unable to refinance, by conventional means, due to a decrease in their home’s value, for instance.  Many homeowners who purchased a home 5-7 years ago may have gotten a great interest rate at the time.  That rate, however, is possibly 2-3% higher than today’s rate.  Do you realize that on a $200,000 mortgage, a decrease of even 2% on your interest rate will reduce your mortgage payment by over $250 per month?

Are you eligible for a Home Affordable Refinance?

• Are you the owner of a one to four unit home?
• Are you current on your mortgage payments?
• Do you have a loan owned or guaranteed by Fannie Mae or Freddie Mac?                      

If you can answer “yes” to all three of the above questions, you may qualify for a refinance.  Talk to your mortgage company to find out your next step.

Loan Modification:  This option is for homeowners who are struggling to make their payments, perhaps due to an increase in their interest rate or decrease in their income.

Are you eligible for a Home Affordable Loan Modification?

• Did you obtain your mortgage prior to January 1, 2009?
• Is your home your primary residence?
• Do you owe less than $729,751 on your mortgage?
• Is your payment on your first mortgage (including principal, interest, taxes, insurance and homeowners association dues, if applicable) more than 31% of your gross income?

If you answered “yes” to the above questions, you may qualify for a Home Affordable Modification.  The goal of a modification is to reduce your mortgage payments to 31% of your gross income by either reducing your interest rate, extending your mortgage term or even forgiving a portion of the principal balance (although the last option is up to your mortgage company’s guidelines and generally, is not offered if the modification can be accomplished by other means). 

For more information on the Making Home Affordable program, visit:  www.makinghomeaffordable.gov“

Click here to read more of Erin Harbuck’s blog.

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Applying for your first home loan involves lots of paperwork and having it all together before you apply is a must.

Northern Virginia REALTOR® Dave King shares the items needed to speed your application through the process.

“Here is a document checklist for a loan application. Your lender should provide the exact list of documents needed but to ensure a smooth loan application, it pays to get your documentation in order before you apply.

1.       W-2 forms for each person on the loan. You will also want to provide contact information to the person within your company who can verify your income.

2.       Copy of the fully executed sales contract. To include contact information of both the buyer and seller’s agent

3.       Copy of one month’s worth of pay stubs. If you are self employed, you’ll need to show profit and loss statements for the current year.

4.       Copy of the last 2 bank statements for every bank account, including retirement accounts. Lenders may require up to 6 months of history if you are using gift money for the down payment.

5.      Copy of complete federal tax forms for the last 2 or 3 years. Primarily required of self employed individuals or those who are claiming rental income. State returns are not needed

6.       If a gift is involved, such as funds from family members, the lender will need proof the gift giver has the funds and a gift letter affidavit indicating the funds are a gift and does not have to be repaid. Also needed is a copy of the check, the deposit receipt and a bank statement to verify the transaction.

7.       List of your addresses in the last two years.

8.       Proof of identity. Picture ID and a copy of your social security card.

See, that wasn’t so bad was it?”

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Winchester, Virginia REALTOR® Beth Paisley explains the advantages of these returning flexible loans for first-time and move-up buyers.

“The advantage of an 80/10/10 mortgage is to avoid the expense of mortgage insurance for buyers wanting a 90 percent loan.  A buyer can obtain an 80 percent first mortgage and a 10 percent second mortgage with a 10 percent down payment.

The reason they were temporarily not available was the lack of investors who were willing to loan the second mortgage.  The decline in property values in the past few years have wiped out the equity of many homeowners and even the security of the 2nd lien holder.  Now that values have stabilized in most markets, and are even on the rise in some, investors are willing to consider the 80/10/10 again. However, the interest rate on the second loan will be higher than the first because there is more risk to the investor.

There are different ways to pay for mortgage insurance but a common method is a monthly factor which is added to the interest.  Helping buyers make better decisions is a valuable service real estate professionals can provide; having the right tools and information can make the decisions easier to understand.”

Click here to read more of Beth Paisley’s blog.

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Tucson REALTOR® Joe Machado shares some encouraging statistics.

“If you wish to buy a home but consider yourself incapable of getting credit, you may be living in the past in terms of assessing your financial situation. Lenders have become more flexible in underwriting mortgage loans.

A recent survey of mortgage lenders revealed some interesting trends. Ninety-six percent of those surveyed had cut their standard down payment requirements for moderate-income buyers, and 93 percent said they are more lenient regarding debt-to-income-ratios.

Ninety-four percent of those surveyed said they now have more flexible approaches to credit histories, and look at rent and utility payments more than credit cards.

Seventy-nine percent of lenders say they have relaxed employment criteria. They now look more at your capacity to generate a stable flow of income rather than requiring a long history at one job.

There are more lenders today, and they are in fierce competition with each other. The home loan industry has created entire markets that cater to those with less-than-perfect credit.”

Click here to read more of Joe Machado’s blog.

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Boise, Idaho REALTOR® Keith Vermilyea shares tips from CredAbility, a national nonprofit credit counseling and education agency, that has tips for people to help them increase the chances that their application is reviewed as quickly as possible.

“Here are CredAbility’s recommendations for homeowners seeking a loan modification:

Speak With a Nonprofit Housing Counselor to Understand Investor Rules for Your Loan. Every homeowner’s mortgage loan is different, so don’t rely on information you may have heard from your neighbor or your sister-in-law, even if they received a loan modification. For example, if your 30-year, fixed interest rate loan is owned by one investor, and your neighbor’s is owned by another investor, the rules governing a loan modification may be quite different. A certified counselor at a nonprofit credit counseling agency can help you find the investor who owns your mortgage and determine your options.

Submit All Documents That Prove Your Current Income. Income verification is critical, but homeowners sometimes don’t provide their mortgage company with recent documents. If you lost a job in June, don’t provide pay stubs from March. In addition to recent pay stubs and other traditional income sources, homeowners should also provide a document called a ‘contribution letter.’ This letter explains the source of any household income that is not easily verified. For example, a servicer will want to know the total household income of a married couple, even if only one person’s name is on the loan. The letter could also include income verifying that you have a roommate that pays rent.

Submit Current Bank Statements. Recent bank statements allow your mortgage company to verify your income and expenses. This information enables the mortgage company to see your monthly expenses for food, utilities and other expenses and determine whether you will have enough money to make your mortgage payment.”

Click here to read more of Keith Vermilyea’s blog.

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North Carolina REALTOR® Sherrell Smith says when it comes to your home, there are certainly things that you can do to ease the uncertainty.

“First, look at your full financial picture, along with the all of your available options. NOW.  The sooner you take an objective look at the situation and your options, the sooner the remedy can begin. However painful it may be, it is crucial that you open the mail and answer the calls.  Keep abreast of what is happening, know where you stand, and find out what assistance is available.

I cannot stress enough to stay in contact with your lender and get assistance as early as possible! Although it is human nature to avoid asking for help, in the end you are wasting valuable time and may be limiting your options for assistance. Remember, foreclosure doesn’t happen overnight.

Also, be very truthful to yourself and your lender when completing documentation.  Our emotions may say keep the house at all costs, but reality may indicate that now is the time to pursue other options – such as a loan modification or a short sale. 

Knowing all of your options will help you make the best decision possible. I’ve met with customers who chose a loan modification only to continue to struggle to meet their obligations. They wished they would have known their other options or had acted sooner.  Conversely, there are some homebuyers who chose a short sale only to find that their perceptions of market values based on national home values were inaccurate and would have made a different choice if given the chance for a “do-over.”

Our respective financial situations and personal goals dictate the path we should take.  Take some time out and determine your fundamental goals whether they are peace of mind, financial or emotional investment in our home, or something else. Let that guide you in your choice, but act now.

Click here to read more of Sherrell Smith’s blog.

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“With private mortgage insurance considerably tougher to get last year than at any point in decades, many borrowers flocked to loans insured by the Federal Housing Administration.

They had little choice. Lenders typically will not offer mortgages to borrowers with down payments below 20 percent, unless the borrowers get insurance to indemnify the lender in the event of a default. And the federal government was the only entity willing to back many of these borrowers during the housing market slump.

Now private mortgage insurance, or P.M.I., could be making a comeback. Some mortgage insurance companies have been easing underwriting standards — sometimes eliminating geographic restrictions and offering insurance to some borrowers with down payments of as little as 5 percent.”

Click here to read more from Nate Harimoto and Shane Haas’ blog.

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Kansas REALTOR® Brett Pickett wants buyers to know that their Realtor is there for them and offers some helpful tips.

“Below are some simple ways to calm your nerves and ease your fears regarding the process:

Pay Everything on Time! Even though this sounds pretty obvious, many borrowers will get so wrapped up in their every day lives that they will forget to pay a bill. A recent late pay on your credit report could increase the interest rate quoted for the home loan or worse, jeopardize your chances of getting the loan altogether. To avoid late pays, send yourself online reminders via your bank or internet calendar, write it down in your Day Planner, or post a sticky note on the bathroom mirror. Whatever way you choose to be organized, pay those bills.

Don’t Pay Ahead. It’s not necessary to have all your debts paid in full when you are ready to start the loan process. In some ways, having some debt with a good payment history can be stronger. There are some underwriting systems that will allow higher debt to income ratios, depending on the status of everything else in your file. Your mortgage planner can guide you here.

Save, Save, Save. However, should there be a debt that the underwriter wants to have paid off, having cash on hand will allow you to do that comfortably without jeopardizing yourself financially in other areas. In addition, just having the savings in general can be a positive factor in the loan approval process.

Do NOT Obtain New Debt! I know this one also sounds like a no-brainer, but there are people out there that believe once they have been pre-approved that they can start buying things for their new home…furniture, appliances, paint, etc. DON’T DO IT!! Additional debt can easily ruin a pre-approval. Wait until you close on your home.

And remember – as your Realtor, we are here to help. Buying or selling a home can be an OVERWHELMING experience for anyone, whether it’s your first time or your fifth. If you have a question, we’ll have the answer.”

Click here to read more of Brett Pickett’s blog.

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