The Importance of Good Credit
As your mortgage broker, I am committed to making sure you get the best interest rates available. I offer a program that teaches homeowners and buyers how to quickly and permanently increase their credit scores and lower the interest rates on their home loans, car payments, and credit cards.
An excellent credit score is particularly critical during a downturn in the market, which means refinancing may not be an option for borrowers with credit scores under 720. To this end, I now offer a credit coaching program that helps my clients increase their credit scores and qualify for stronger loan terms. Through this program, you can learn shocking secrets that are hurting your credit score.
For instance, did you know that:
- Paying your collections will probably hurt your credit score?
- Even if you pay your bills on time and in full, your score could still be low?
- Credit card companies use a dirty little trick to lower your credit score and keep competitors away from you?
- The difference between a 719 credit score and a 720 credit score could be an eighth of a percentage point?
To schedule a review of your credit profile, call Joe Elizondo at (323) 256-7833 or by email at neast-financial@sbcglobal.net.
Mortgage Applications & Current Interest Rates
Mortgage applications fell again last week as average 30-year rates held relatively flat at 5.00%. Refinancing activity was much higher back when rates were below 5.0%, which you would expect. Now, refinancing activity is at somewhat “normal levels.” Purchases, however, are sinking as well and hit their lowest level since May 2009. It seems natural though that purchase applications would sink seeing as the tax credit for first-time homebuyers is essentially over now with no time for potential buyers to get deals done before the deadline. Locally however, the $8,000 tax credit did not appear to help many buyers in the Northeast areas of Los Angeles. Even though property values are lower than in past years, an income of over $75,000 is usually required to purchase a home in this area. The latest update from Capitol Hill is that the Democrats have agreed on a tax credit proposal that would extend through next spring. The updated program would be a 10% tax credit (up to a maximum of $7,250), but would also include buyers who are not first-time homeowners and have higher incomes. Hopefully, this plan along with low interest rates would stimulate purchase activity again.
Currently the rate for the 30 year fixed is 4.875% with one point. At Northeast Financial, if you prefer not to pay a point you may be able to qualify for a “no points” loan at 5%.
To find out if you qualify I invite you to call Joe Elizondo of Northeast Financial at (323) 256-7833 or email Joe at neast-financial@sbcglobal.net
Understanding Fannie Mae
The Federal National Mortgage Association, abbreviated FMNA, and commonly called “Fannie Mae” was established in 1938 by the US Congress as a Government Sponsored Enterprise. In 1968, the government converted Fannie Mae into a private shareholder-owned corporation.
Fannie Mae is responsible for maintaining a secondary market in home mortgages, by buying and pooling conforming loans from original lenders.
Fannie Mae buys loans, either for cash or in exchange for mortgage-backed securities that carry Fannie Mae’s guarantee of timely payment of interest and principal.
By purchasing the mortgages, Fannie Mae provide banks and other financial institutions with fresh money to make new loans.
In order for Fannie Mae to provide its guarantee to mortgage-backed securities it issues, it sets the guidelines for the loans that it will accept for purchase, called “conforming” loans. Mortgages that don’t follow the guidelines are called “non-conforming”.
Need more information? Call Joe Elizondo of Northeast Financial at 323-256-7833 or email Joe at neast-financial @ sbcglobal.net.
Understanding how much time to allow for the closing process
Understanding how much time to allow for the final closing process will help reduce some of the stress and frustration that can accompany closing an escrow.
After the appraisal of the property has been made; after all the buyer’s financial documents have been reviewed, the loan processor or loan officer will advise all parties that final approval has been obtained, and that the lender is ready to “draw docs”. The “docs” being the note and deed of trust, and all the accompanying disclosures and addendums that the buyer must sign before the lender delivers the funds.
It can take up to 48 hours from the time the final approval is given until the documents are received by the escrow officer.
The escrow officer will contact the buyer for an appointment to sign the documents. Buyers are well advised to sign loan documents as soon as possible!
After the buyer signs the documents, the escrow officer will “package” them with other documents from the escrow file, such as an estimated closing statement, and return all the documents to the lender. The lender will most likely receive the documents back on the day after the buyer has signed them.
After the lender receives the signed documents back, it can take up to 72 hours for the lender to check the documents in and review them. After the lender reviews the documents to be sure they have been fully and correctly signed, the lender will issue the funds.
The funds are wired by the lender to the escrow company. Recording of the grant deed is scheduled for the next business page after the funds are received.
Remember, in California, an escrow is not “closed” until the day that the grant deed is recorded in the official records at the County Recorder’s office. The moment the grant deed is date-stamped by the county clerk is considered the moment that ownership of the property changes hands.
Need more information? Call Joe Elizondo of Northeast Financial at 323-256-7833 or email Joe at neast-financial @ sbcglobal.net.
First Time Buyer Tax Credit Expires November 30
Time is running out on the $8,000 First Time Buyer Tax Credit. You have to actually own a home by November 30th to qualify. So if you’re going to be buying you need to start looking now. Affordable properties are selling fast, and competing offers will probably increase as more buyers try to grab the tax credit before it expires.
If you are considering buying please do yourselves a favor and call Joe Elizondo of Northeast Financial at 323-256-7833 or email Joe at neast-financial @ sbcglobal.net. Joe will process your mortgage loan application and prepare your preapproval letter so you buy a home before that tax credit expires!
Calculate Your Debt Ratio
You will hear the term ‘Debt Ratio” several times when you apply for a mortgage loan. Lenders look at two types of Debt Ratio when qualifying you for a loan: Housing Debt Ratio and Total Debt Ratio
Debt Ratio is a simple formula that caculates what percentage of your monthly gross income goes towards housing payments and other debts.
For example, let’s say:
Your total gross monthly income is $4,000.00
Your new housing payment (including taxes, insurance and HOA fees) will be $1,500.00
Divide 1,500 by 4,000 (4000 / 1500)
You will get an answer of 0.375; Change this answer into a percentage by moving the decimal point two places to the right and it tells you your housing debt ratio is 37.5%
Need more information? Call Joe Elizondo of Northeast Financial at 323-256-7833 or email Joe at neast-financial @ sbcglobal.net.
Building permits and lender appraisals
Making additions, upgrading plumbing or electrical systems, remodeling your kitchen or bathroom? Some homeowners have chosen to avoid applying for permits when making improvements to their homes. When a homeowner decides to refinance or sell their home, they may find that lenders will not give value for the non-permitted upgrades.
In today’s lending environment the comments made by the appraiser in his report regarding the condition of the property could delay or keep the transaction from closing. If the appraiser notices a substantial difference in square footage between the public record and his measurement of the property, the underwriter will request that permits be provided. In the absence of permits, if the transaction were a refinance, it would probably not be able to close.
Need more information? Call Joe Elizondo of Northeast Financial at 323-256-7833 or email Joe at neast-financial @ sbcglobal.net.
What is an escrow account?
Escrow accounts are also sometimes called impound accounts. You can think of an escrow account as a simple savings account.
The escrow account is an automatic savings account set up by your mortgage lender, and used by the lender to pay your property taxes or insurance.
For example, your property taxes are $2,500.00 per year. Your lender will tack an additional $209.00 to your regularly monthly payment. Each month that $209.00 will be collected by your lender and set aside in the escrow account. When the property tax payment is due, your lender will make the payment, using the funds that have been saved in the escrow account.
Need more information? Call Joe Elizondo of Northeast Financial at 323-256-7833 or email Joe at neast-financial @ sbcglobal.net.
What is the difference between Amortization and Loan Term
Amortization is the process of paying off a debt by making periodic payments throughout the term of the loan.
Because your monthly mortgage payment is comprised of both Principal and Interest, although the payment amount may stay the same every month, each monthly payment is allocated differently between principal and interest.
At the beginning, each month you are paying mostly interest on the loan, with a small amount going towards payoff of the principal.
As time goes on, that small monthly amount allocated to principal, gradually reduces the principal; and as time goes on less of the payment is allocated to interest, and more is allocated to the principal.
The loan term can be different than the amount of time needed to amortize (full pay off) the loan. For example, that is “Amortized for 30 years, Due in 5 years”. That means the amount of the monthly payment would be the amount calculated for a 30 year amortization. At the end of five years, a balloon payment of the outstanding loan balance would be due.
Need more information? Call Joe Elizondo of Northeast Financial at 323-256-7833 or email Joe at neast-financial @ sbcglobal.net.
What Are Loan Points?
Points are a one-time, up-front fee charged by the lender to originate the loan. 1 point equals 1 percent of the loan amount.
If you need a loan of $300,000; one point will be $3,000.
Typically you can obtain a lower interest over the life of the loan by paying higher points up front; or you can obtain lower points up front by paying a higher interest rate over the life of the loan.
You will want to carefully consider which approach best suits your personal financial goals.
Need more information? Call Joe Elizondo of Northeast Financial at 323-256-7833 or email Joe at neast-financial @ sbcglobal.net.