A Guide for Consumer Choice in Your Next Mortgage
When looking to purchase or refinance your home mortgage, one may find it responsiblle to contact a mortgage company such as Winterwood Mortgage Group, LLC, for example, before considering a new home loan. Upon reaching someone for a pre-approval or new refinance, you may be told to hold off on any new debt and/or quitting your job. In fact, this is a normal policy here at Winterwood. Or, you may call up your bank and ask a few questions to which their responses may be similar - "You should keep your credit and income situation stable from this day forward until we close your loan, or else we may have problems."
So, in the interest of obtaining that new home loan, you begin to act as a responsible citizen - minding your P's and Q's - because only then will this transaction follow through. Like a team working together for one common goal, you agree with your Loan Officer that you will abide by his/her rules (whether your know it or not is in the paperwork). Moreover, the consequences of not could be catostrophic. Follow my lead here as I walk you through the Four Consequences of Not Listening to Your Mortgage Loan Originator. Grab your wine and cheese plate, this may escalte quickly.
I am a child of the 1990s. I went through elementary school in the mid to late '90s, then on to middle and high school in the early 2000s. As part of my Public School teachings, I learned what the acronym T.E.A.M. stood for - Together Everyone Achieves More - which holds true to this day.
Notice how this group of young people (I say young just based on their arms and hands and dress code) are preparing to take on their next challenge. They are all in with each other. That is EXACTLY how you should be as a party to a real estate transaction - ALL IN.
Work as a T.E.A.M. to achieve the final goal - to close on your new home loan. Whether you are refinancing (and working with the lender solely) or purchasing (then you have a much larger T.E.A.M. to work with), it should be your goal to win the race and complete the match. Let me start by breaking down the acronym one letter at a time. From there, you will get the consensus that failure is not an option if you work as a T.E.A.M.
T for TOGETHER:
For centuries, teams have existed in one way, shape, or form. Most of them have been on the battlefield. Then, sports were created. This Summer 2016, Rio Di Jinero, Brazil refreshed our minds on Olympic sports - first individual, then team. What do we mean by "Together" when it comes to a T.E.A.M.? The answer is simple - as a group of multiple unit entities, we unite "together" to act as one. The same holds true for mortgage transactions.
We are made up of five parties in purchase transactions - the Seller, The Seller's Agent, the Buyer, The Buyer's Agent, and the Mortgage Loan Originator. Each one works together to process the transaction. For instance, in an FHA transaction - Buyer utilizes a 3.5% down payment & Seller pays up to 6% concessions for Buyer to not have closing cost money to worry about at closing time - the Mortgage Loan Originator is working closely with all four parties to ensure the transaction is a success. First, the Buyer needs to have an inspection done on the property to find out what may be wrong with it, otherwise, it may not pass an FHA Appraiser's opinion of value right away. Once that inspection is done, the Buyer's Agent sends the information over to the Seller's Agent for review. The Seller's Agent then confirms with the Seller what will or will not need to be addressed to pass the FHA Appraisal the Mortgage Loan Originator has to order on the back end of the inspection report for the property in order to determine its value for the Investor. If there are issues with the terms of the repairs, the Buyer has every right to back out of the transaction. We never want to see that happen, but it could determine the entire transaction's health from the very beginning.
In another case of "togetherness" - the Seller is responsible for ensuring their property meets the guidelines for an investor to place a lien on the property in the form of a mortgage. The very first document that is signed other than the purchase agreement, itself, is the Sales Disclosure. This document - for a fee of $15 in Indiana - is then recorded after the Closing at the County Courthouse. It ensures there is nothing wrong with the property as well as informs on the current condition for tax purposes. Why is it important, you ask? Simple - lying on this form is grounds for real estate fraud, which can be a felony, which also comes with hefty fines. If the Sales Disclosure is not correct from the very beginning, we have attempted to dismantle the T.E.A.M. from the very beginning as well.
E for EVERYONE:
Everyone WILL Achieve More if they are working Together - that goes without saying. But what does "Everyone" need to do in order to make this happen? The answer may shock you - but I hope it comes as no surprise if you have been paying attention. "Everyone" should be forming bonds that do not break while the transaction is in motion. For instance, remember the Buyer's Inspection results from above? The Buyer will have formed a bond with the home at first glance, but upon further inspection, may have relinquished some of that bond. It is the Seller's responsibility to ensure that bond continues by coming up with a solution to the inherent problems they are facing post inspection. Through the work of the Agents on both sides of the transaction, this bond is put back in place with the home for the Buyer. Once that bond has been solidified, the Mortgage Loan Originator moves ahead in the transaction by ordering the appraisal and clearing further conditions of the loan. Together, Everyone is bonding. Not just the Buyer. Not just the Seller. Everyone -
From a Mortgage Loan Originator standpoint, it is my job to ensure the loan is completed on time. But, it is also the Buyer's job to ensure they have remained current with their debt payments, not changed any of their income status, delivered all documentation on time to me, as well as assisted in figuring out problems that may exist. In that process, I am forming bonds with the Buyer, but also with the Buyer's Agent. If my Buyer's Agent is well informed, he/she will be forming a successful bond with the Seller's Agent, who in turn bonds with the Seller. We all work together (Everyone) to ensure the parties are happy and excited about closing on the new home. After all, that is when the Buyer can start turning the new house into their new home. This makes the transaction enjoyable and memorable. Everyone wants a memorable transaction experience - as long as it is enjoyable and has zero problems! :)
A for ACHIEVE:
After we lay the foundation of togetherness as a T.E.A.M., we "Achieve" greatness as a T.E.A.M. by following the simple rules of Owning One's Actions I am about to outline below. Owning your T.E.A.M. actions means you are responsible for how it will function and what it will achieve in the end. The following is a list of what each T.E.A.M. member needs to remember while functioning inside a mortgage transaction:
- Mortgage Loan Originator -
- Should be communicating throughout the transaction - set the expectations upfront with both parties. Make them expect things in due time.
- Should be focusing on what is important for the Buyer - working with the Buyer's Agent to secure inspection times, results, etc. as well as ordering appraisals on time to make sure transactions close
- Should be considerate of the Seller's time - making sure when the transaction is ready, everyone knows about it ahead of time
- Should be listening to the Mortgage Loan Originator - making sure to follow every ounce of advice, including but not limited to -
- Keeping current job loan is approved with
- Not spending down payment money elsewhere
- Not incurring new debt outside of the new mortgage BEFORE closing
- Should be following the advice of the Buyer's Agent - making sure negotiations are clean as well as understanding some requests will be unrealistic
- Should never bad mouth, back talk, or otherwise get upset when the reason for the delay in closing your transaction is a direct result of a violation of one of the above rules. Not participating as a full T.E.A.M. member causes delays and frustrations that could have been avoided
- Should be listening to the Mortgage Loan Originator - making sure to follow every ounce of advice, including but not limited to -
- Buyer's Agent
- Should be patient - loans are not instantaneous, they are tedious. The worse the credit applicant, the harder the process will be
- Should be representative - meaning will take the bull by the horns on behalf of the Buyer and Mortgage Loan Originator to represent to the Seller's Agent and Seller their desires for a smooth transaction. The more cool, calm, and collected the Buyer's Agent is, the more relaxed the T.E.A.M. environment. This does not mean the Buyer's Agent can sit back and relax - they need to be pushing for the Mortgage Loan Originator like the Lead Blocker to ensure all parties are in the endzone celebrating a win in the end
- Should be patient - loans are not instantaneous. Buyers need time to work out their finances, but they need to understand their money will come to them in due time
- Should be willing to work the extra mile - unless a Buyer has unrealistic expectations for repair work, the Seller should be willing to make the transaction happy for the Buyer by completeing their list in the inspection report. I have found transactions with unhappy Sellers cause everyone to be unhappy - much like the old saying, "If Mom ain't happy, ain't nobody happy!" - well, the same goes for purchase transactions involving mortgages. It gets made worse by an unhappy Seller's Agent
- Seller's Agent
- Should realize their job is to ensure their Seller's receive the most money for their asset. After all, they have worked hard to build it. They need to sell it at a profitable margin because nine times out of ten, that Seller's Agent is also representing the Seller in a Buyer's capacity, too. It means more money can be used on a new purchase if the money received out of the prior sale was substantial enough. More money = bigger house = bigger commission check. I'm just saying. . . it's in everyone's best interest at that point
- Should be willing to be flexible - The most important aspect of a Seller's Agent job description is to sit back, negotiate the purchase price, fix the underlying property issues, and enjoy the ride to the closing table. The Seller's Agent need not worry about what's going on with the Buyer's loan - unless that loan has problems that just cannot be fixed. Trust me, no news is good news in this situation. When the loan is ready to close, you make every effort to close it as soon as possible. That is why you must be flexible, as the Clear to Close will come when you least expect it
M For MORE:
More. We all want it. Our society craves "more." But what does "more" do for you in a mortgage transaction? This answer may be more complicated than orignally thought, I mean, if you are achieving "more" by working together, what really are you "achieving?" I find that this answer aligns with the principal of "give and take." You get what you put into it, in other words. If we are to achieve "more" by working together, then we better be putting more into the team aspect of the transaction in the first place. Nobody likes working in teams where one guy does all of the work - unless you are the other part of the team benefiting from that one guy's work. Is it fair? No. Should it be allowed? Absolutely not. But does it exist? On a daily basis.
I find many of my team members during these transactions are leaning on me to throw my weight around instead of working with me to balance the weight distribution before the ship keels over. The "Achieve" section above highlights some of those problems I encounter with each party. Should you have one T.E.A.M. member talking to all parties involved and organizing all aspects of the transaction? I do not think so - because then you encounter conflicts of interest. Who's best interests are at stake when that occurs? It is certainly not the Buyer or the Seller - one of them is losing. That is why I condone single party representation. There is no room for negotiation. Do you want to achieve "more" by having your guy negotiate your wants to the same party, but then turn around and have the other party communicate their wants to the same party again? That's a circular conversation, not a negotiation. Chances are not good that transaction will end well. Consider receiving a diagnosis from your Doctor that you have a benign tumor on your brain. That Doctor then recommends surgery to remove it, but you know it is benign and does not necessarily need to be removed. You have no other Doctor to tell him your thoughts, so you tell him, yourself. Is there really negotiating power there? Or are you stuck with that Doctor's opinion? You need another expert's opinion in this case. That is what negotiation power boils down to.
We will achieve "more" by taking each responsibility as important as the other. One party to negotiate, one party to respond, one party to make the transaction follow through to the end. All parties agree on a closing date, one makes it happen on that date. We all are happy in the end.
Formally concluding this little ditty just does not exist as an option. Achieving More as a T.E.A.M. is an ongoing process because achieving success takes constant work. There are so many things that can, and will, go wrong inside a mortgage transaction - but, the T.E.A.M. actions together will prevent anything from becoming a real problem if it is handled as soon as even a hint of it raises its ugly head. The take away here is that you need to understand as either a Buyer or a Seller in a home loan transaction that you are a key component of how it will go. As I write this out, I have experiened the highs and lows of excellent and poor sportsmanship, respectively, in the last few months. My teams have had their ups and downs, but there is no greater feeling when they all cross the finish line in the end. Working Together so that Everyone will Achieve More is the only way to be effective in this business. Parties inside the T.E.A.M. greatly effect the third parties outside of the T.E.A.M. if the former is not functioning with the end goal in mind from the onset of the project.
I want you to achieve greatness as a Buyer and/or Seller. I want you to pick an Agent that will work for you, fight for you, and become your best friend even if you least expect it to happen. As your Mortgage Loan Originator, I want to send your loan through the best investor you qualify for, but I also want you to learn why you may or may not qualify for that "perfect" loan. Your dreams are out there. All you have to do is go get them. Listen to your Mortgage Loan Originator when he/she tells you what to fix with your credit. Listen when he/she says you are one underwrite from a Clear to Close and he/she does not have a timeline for when that will come out exactly. Listen when you are told to paint over window sills that have flaking paint - they will rot if not treated! But most importantly, do not think you are in this alone. It takes a Village to raise a barn - you need to learn that buying or selling a home is a marathon, not a sprint. That marathon is mixed in with a little baton passing as well. Each of us has our own job to carry that baton to the finish line.
Start the conversation below by sharing in your last home loan experience. What made the difference for you? Where did you see the most trouble? We want to know your thoughts. Share them with us - we promise not to laugh. Ok, ok. Maybe not if it's a real doozy. . . but hey, in over 20+ years of successfully lending money, we have heard them all!
Once you know about the reverse mortgage loan programs, you will be quite impressed. Right now you don't realize how much you don't know! First we have to make certain that you qualify. As long as you are 62 years old (and older) and have at least 50% equity in your home--that is a good start. If your home is totally paid for, you will be absolutely AMAZED at the growth in your line of credit that you can generate tax free. But let's back up just a little. In addition to age and equity, you must also be "credit worthy." Maybe you don't have great credit; sometimes an explanation is needed. You must prove that you can afford to remain in your home (pay your property taxes and insurance) as well as maintain your property.
Now if you are still with me and see that you DO qualify, let's move forward. Let's answer the WHY in this question! A reverse mortgage loan benefits many seniors. Like I said, most seniors just don't know enough about it. Like in a line of credit, you have access to your money at all times. If you do not use your line of credit, it keeps on growing tax free.
And here is the best part of it all--no more mortgage payments, assuming this is your primary residence. You can live in Florida during the winter, but your primary residence is the home with the reverse mortgage loan in place.
However, what if you still owe on your home? You simply want to get rid of your mortgage payments. You definitely plan to remain in your home for as long as you can. How can YOU benefit by having a reverse mortgage loan? Let's assume you owe $100,000 and the value of your home is a little more than $200,000. You can get a reverse mortgage loan just to eliminate future payments--if that is your goal.
I have a friend who has a home valued at more than $625,500. Since these are FHA insured loans, and FHA limits are $625,500--I showed her what she can earn by getting a reverse mortgage loan and allowing the line of credit that she can access ($321,000) grow. Her FHA insurance, closing costs, origination fees, etc. came out to be about $10,000. Her financial planner said "NO WAY. It costs too much." But then my friend showed him how much her line of credit grows the very first year (over $20,000). Since my friend is only 63 years old, if she is able to let that line of credit continue to grow (without removing any of the money), in just 15 years (she will be 78) it will grow to $497,000+ tax free. Her financial planner wanted a second look!
Another client has a Chapter 13 Bankruptcy. In August, he made his 13th payment to the Trustees and became eligible for a reverse mortgage loan. He is only 62 and plans to pull money out of his line of credit to modify his home so that his wife (she has had 3 strokes and is in a wheel chair) can get around the home more easily. His wife is 58 years old. She will be a "non-borrowing spouse" because she is too young to be on a reverse mortgage loan. If her husband dies first, she can remain in the home but cannot access any money from the line of credit. If she wants to remain in the home and access the line of credit, she would need to put another reverse mortgage loan on the home.
These are AWESOME LOANS. Learn all about them!
The next step is yours--register for our seminar by following the link below. I would love to see you there!
HOW does a reverse mortgage loan work? Where do I begin? Let’s say that you are curious as to how they work so you call your favorite mortgage company (which just happens to be Winterwood Mortgage Group) and ask if anyone there knows about reverse mortgage loans. AHA, yes. Winterwood Mortgage Group has a reverse mortgage loan department.
Let’s say you get me on the phone (reverse mortgage specialist) and ask me to explain exactly how these reverse mortgage loans work. I am most likely going to ask you some questions because there are so many scenarios on reverse mortgage loans—different families have different wants and needs. So I am going to ask you if you are 62 or over (you answer YES). Then I am going to ask you if you own at least half of your home! You tell me that you have NO MORTGAGE at all on your home.
So my next question to you is probably: What do you know about reverse mortgage loans—what event has brought you to me? Was it a commercial that peaked your interest? Was it a neighbor who got a reverse mortgage loan and told you they really are a good thing for senior citizens?
I only need 4 pieces of information from you at this point so that I can answer the rest of your questions. (1) Date of birth of the youngest homeowner. (2) Address along with the zip code. (3) What is the approximate value of your home? And (4) Do you have any liens against your home?
From there it takes me about 5 minutes to enter this information into a program that gives me the answers to nearly every question that you could ask! But I will tell you that it is easier to “show” you than it is to explain it on the phone—but it is your choice. So let’s say you are really seriously considering a reverse mortgage loan; we sit down and go over the numbers. From there, I refer you on to a HUD counselor (third party; reverse mortgage loans are FHA insured). I provide you with a list of HUD counselors and their phone numbers. Most people have their “counseling session” by phone. You call and set an appointment. The counselor has access to the material that I just reviewed with you. The HUD counselor then goes over it with you and discusses reverse mortgage loans as well as other programs that might fit your needs. Once that counselor feels that you understand what a reverse mortgage loan is all about, you are issued a “certificate of completion.” The counseling session costs around $125 that you pay “out of pocket.”
Once you have the certificate that shows you have completed the HUD counseling session, the next step is the application. An appraisal is then ordered. This is your second (and final) out-of-pocket expense. Appraisals cost between $475 and $495.
From there we proceed by selecting a lender (we are BROKERS meaning that we can work with any lender that we choose). You do not pay our fees—the lender does. We find the lender that best suits your needs.
In your case, where your home is already paid for, you tell us if you want any money at closing and if you want set up for monthly payments—or a line of credit that keeps growing at 6% plus per year TAX FREE on any amount that remains in the line of credit. You always have access to your money in the line of credit. You never have a mortgage payment; however, you must continue to pay your taxes and insurance and maintain your home as your primary residence. In your case, you are putting your equity to work for you!
Do you see why we have to ask questions? The person who has a mortgage balance—it is a completely different set up. That’s why it is so important that we talk and that you ask questions!
This is a great program for senior citizens (62+) who own their own homes (with approximately 50% to 100% equity). You continue to own your home.
Spread the word. Let seniors know what is available to them. Call and ask questions!
I know what you might be thinking right now - "I'm ready to purchase my new home, but I don't know where to start." The answers to your questions aren't really that difficult, so for the next few paragraphs of this post, I will help you answer the basic questions all new buyers have when purchasing their first home. Some may be no brainers. Some may be things you may never have thought of before. All will enhance your purchasing knowledge - that's a guarantee. So if you're ready, sit back, relax, pick up your favorite beverage, and let's talk purchasing!
So you think you're ready to buy a home, you have some questions about it, and have no place to start. . . that sounds like many (mostly young people) these days that I come across on a regular basis. Today's 1st Time Home Buyer was born in the digital era. As a result, they begin to search for the "perfect" place to begin life out on their own online. When they've found a place, they get stuck - unless they're already working with a Realtor or they have spoken with a mortgage representative first. Why does this happen? Because the 1st Time Home Buyer needs to consult with a financial representative prior to even searching for their first home - with or without a Realtor - to be successful and make the process as hassle-free as possible from the beginning.
Just recently, I was able to provide such services for a client who was just nineteen (19) years of age! What a motivated individual to be buying their first home at such a ripe young age! How was this successful, you ask? Easy - because all parties involved in the transaction understood the process of how following the right advice would help my client reach their ultimate goal - owning a home at the age of 19! Here's a brief analysis for how the three parties involved interracted to create the successful buying experience:
First - as a Realtor, it is important to know that lenders drive transactions when hard money is not involved in the purchase of a home. What does that mean? As a Realtor, you should be aware that not every transaction is the same. Not every person you bring to the lender will be qualified. Not every person you ask a lender to qualify will want to purchase at the top of his/her budget. And, when a Loan Officer asks the Realtor to provide certain information, it is not because they want to just have an excuse for another chat, but because the Lender/Investor in the new loan asks for it. The Loan Officer/Realtor relationship drives the transaction as much as the communcation between the Lender/Investor and the Loan Officer does. It always helps a 1st Time Buyer to choose a Realtor that will be able to work with the Loan Officer, instead of against by trying to explain financial information they have no business doing.
Second - as a Loan Officer, it is important to advise the 1st Time Buyer in a manner they are most comfortable - either in person, over the phone, online, or otherwise. If this sourds like a no brainer, it's because it is. When a client has questions about the loan process, great Loan Officers are quick to answer. The difference between a "Great Loan Officer" and a "Good" one is that a "Great" one anticipates these questions ahead of time. He/She explains everything upfront
Third - the actual Client needs to be proactive to make the transaction work. It is important to understand the following if you are lost with everything else: The Loan Officer and the Realtor can only push the transaction along so far. First Time Buyers are either one of two things - motivated or scared. Case in point - I also at the same time I was closing the nineteen year old's mortgage was working on a twenty-seven year old's file when out of the blue, that twenty-seven year old decided they no longer wanted to go through with the transaction. I suspect this was because the Realtor/Loan Officer relationshp was misunderstood by the 1st Time Buyer. The Realtor wanted a budget. The Loan Officer gave one. The 1st Time Buyer agreed to sign a purchase agreement near the top of that budget. After seeing the actual numbers for that transaction, the 1st Time Buyer became frightened and moved on elsewhere. Because this client was scared, the motivation to actually purchase was non existant. As a Loan Officer, it is my job to provide the numbers. As a Realtor, it is their job to bring the prospective buyer to the prospective new home. The Client needs to secure financing first, before the Realtor shows the Client properties they would be uncomfortable purchasing in order to avoid frightening the Client away from the transaction all together.
I know you have had a lot to read and take in. The Bottom Line to take home from this message is twofold - 1. Get your pre-approval before being shown possible homes 2. Trust your Loan Officer and Realtor to work together to help you purchase that new home. If you have any questions at all - AT ALL - do not hesitate to contact us by clicking here first. Or, you should follow the orange button below to talk to me directly. I will be more than happy to assist you with your new home purchase. In fact, I look forward to the opportunity to serve you in this capacity. So. . . have you learned anything? Click below to get started today!
Spring can be a great time of year to purhase a new home. It can also be the best time to do a little cleaning after a long winter. I bet you are considering the former while doing the latter, especially if your home may be too big! Let me introduce you to some interesting facts below about the whole process of buying while answering four of the most common misconceptions about when the "right time to buy" may be.
First, do you know a great Realtor or a Mortgage Loan Originator that you can utilize to make this process as smooth as possible? Secondly, have you done your homework online or by word of mouth as far as what to expect and when? Finally, do you have a plan for moving? Let me unpack these questions and more that I see everyday in my quest to find people homes in the Indiana market.
Should I wait for someone to tell me where to get qualified?
The easy answer is always - "No." Why do you want to wait? Are you questioning your decision over and over and over again? That does nothing for you NOW! Whenever you get the "urge" to move up, move down, move over, or move all around - you should first contact your local real estate agent for available properties in the area you wish to move to. After you contact your agent of choice, call a mortgage broker. It doesn't have to be a bank.
We have all seen those Lending Tree commericals where the little green guy sits around in his boxer shorts, pretending he is shopping for a mortgage on his computer. He tells his buddy that puts on a suit to go to the bank that this is what everyone should do because it's faster, easier, and banks compete for you. It ends in an awkward scene with both guys on the couch in their respective boxer shorts shopping for a mortgage online. Why do you think this commercial works? Because with the advent of the Internet, Joe Consumer becomes more knowledgeable almost instantaneously.
So why should I start looking right away you ask? The answer is pretty simple: the sooner you find out if you are qualified for a mortgage, the sooner you can move out of your current housing situation and into the home of your dreams.
How do I become qualified?
Do your homework ahead of time. Check out this case study I recently had with a client that knew what she wanted, came to me to get qualified, and subsequently had one of the best loan experiences she will possibly ever have because of it:
I recently had a client that was awesome - there, I said it. I will admittedly brag on her for being prepared and always ready for my phone call when needed. How did she do it, you ask? She did her research. Granted, she is a professional researcher by trade, so it was in her blood to do it, but she came to our company for a mortgage because she knew our name, lived in the area, and trusted us to get her the best available product. I was able to do all of that, and then some. I quoted her an initial rate when we started the application based upon current rates of the day, but then when we went to lock in her interest rate, she gained a half of a percentage point lower! Wow! I couldn't believe it, but because she had come to me for a full pre-approval, she was able to obtain her qualification for a mortgage while she searched for an available property and while interest rates were at their highest fluctuation in months. Almost instantaneously she found a property the very day her initial application returned from the lender approved! This made the rest of the transaction super easy. It was so easy, we closed her loan three weeks before the scheduled expiration of her purchase contract!
Why am I telling you all of this? If only one thing resinates with you from this article, get this: You need to act fast in today's real estate market! Properties are there to be bought and sold, but some are hard to find. If you act now, you will be rewarded.
I Have Second Thoughts About Selling, Why Should I?
There is no better time to sell your home like the present. Even if you have thoughts at all, go ahead and do it. Home prices are driven by individual market. Each market is different. When viewing the national news or reading nationally covered newspapers, keep in mind every market is different. Your local market may be outperforming the national average, or it may be way below. Either way, look for homes in other markets outside of yours like Chicago, Ney York, or Los Angeles to make a comparison. Then look at the Indianapolis market. You will see that the MidWest is super cheap and the more highly sought after markets are super expensive! Supply and Demand drive home prices. It's simple economics. Right now Demand is supplying us with better home prices because the inventory available has shrunk significantly post the 2008 meltdown. There are many contributing factors to home prices. Let me list a few and discuss them now.
Number 1: Total Amount of Living Area
This truly is the biggest contributing factor in determining your home's value. Do you have an open floor plan? Chances are greater your home will have more value if the living area is open to all of the common areas of your home. Do you have a finished vs. unfinished basement? Basements add additional value to a home, but main floor living space is still where an appraiser will estimate the greatest value for the home. He/she has to make adjustments if your house has a basement, but no other comparables in your area do.
Number 2: My Neigborhood Has Not Performed Well Lately
That may be true, but did you know an appraiser has an adjustment radious of twenty-five miles from the subject area? Rural areas tend to get this exception before more densely populated areas, however. If your neighborhood has not performed well in the market, it could be due to the fact homes around your neighborhood are not built to the same specifications, and that has caused lots of adjustments to value due to non-existing exact comparables. When it comes to selling your home, make sure you have the expertise of a Realtor or Licensed Appraiser that can pull the comparables in your neighborhood just to be safe. You never want to out price your market, nor do you want to under value your property.
Number 3: Desireability
Is your neighborhood in a desireable market? If it is, only move out of it if you are planning to move to a more desirable area. Once you have found yourself in the most desireable neighborhood, stay put! Only move if you have to! By all means, never move just to move unless you have the desire to start fresh, or circumstances force you to. That is why you need a qualified Realtor and not just trust your own instincts - it is their job to find the desireable areas for you and find a buyer for your current place.
Finalizing the Process
Ok, so you have finally sold your property after stewing over it for months on end. What now? The hope there is that you will have some other property already found and a lender working on finalizing the loan so you can purchase it. But, have you given the above advice some thought? Have you been preparring ahead of time for the day when you buy your next home all along? Good for you if you have!
Working alongside a mortgage loan officer in your neighborhood is a great way to ensure not only that you are approved to buy, but that you did your homework ahead of time. It is also a great way to flatter the Boy Scouts of America and "Always Be Prepared." Preparation is key in the real estate business. Doing things ahead of time, having a mortgage company working for you that is detail oriented, having a real estate agent that is knowledgable of the area you wish to live, and always being available for when these people have questions for you or need documents from you like my example above will guarantee your next success in purchasing your next home.
I will leave you with this challenge: when shopping for your next home, call a mortgage professional right away to determine your credibility for taking on a new expense this substantial. You will learn so much upfront that the process will become much easier than you think, or what you've heard it is.
You may be thinking it is too late for you to refinance your mortgage. Rates are getting higher, right? Indeed they are. But do you know the benefits of refinancing in general?
One fallacy I run into with potential borrowers is in direct correlation of how much money it will cost to close this new loan versus how much money it will save them later. If we get past this initial fallacy, these people will see that refinancing makes the best financial sense as long as you can recoup the costs in the timetable the rest of this article will focus on below.
I am going to reference an article from msn.com throughout this article that describes five tips for refinancing a mortgage. I believe some of the ideas of this article are true, however, they are not as relevant today. Let me break it down for you:
Tip Number 1 - Shop Around:
Indeed you should. I have no argument against it. However, when you are shopping around for a mortgage rate, here are a few things you should know:
1. Mortgage brokers will offer you a wide range of lenders to choose from.
Brokers have multiple lending partners for a reason - you. If you choose to obtain your mortgage through a broker, the benefits outweigh the risks. For starters, brokers exist to shop around your mortgage for you. Responsible loan officers take into account the needs of their clients before their own needs. Why else was the CFPB created? Why else would there be a Nationwide Mortage Licensing System? Both entites exist to protect the consumer, so each new rule laid out by the CFPB is enforced through the rigorous process of obtaining a mortgage loan originator license through the NMLS. The NMLS ID number next to an MLO's name is a badge that says "I have passed the rigorous testing so I can knowledgeably coach you through the loan process." It serves as a reminder to the consumer that a licensed loan originator knows what he/she is talking about, and can be trusted.
So why shop around? Let your mortgage broker worry about the best program for you and your family. After all, that is why the broker exists! (So, I guess you want point number 2, huh - see below):
2. Mortgage Loan Originators that work for a Mortgage Broker are required to be licensed - Bank Employees have NMLS ID numbers, but not all are licensed originators
Tip Number 2: Figure your break-even point:
Have you ever wondered if a refinance was really in the cards for you, but you just were not sure? There is a way to figure this out - it is called the "40-Month Rule."
If you do not make back what you have spent on your intial transaction in a 40 month time frame, a refiance is not in the cards for you. Where this rule came from is unknown to me, however, it is used by one of our top lenders in determining the feasibility of the refinance. Now, I'm not saying "do not pay attention at all" to the tip in the referenced article we are going through here. But what I am saying is that you should calculate your monthly savings with the new interest rate - a good way is to use our mortgage calculator - and then figure out how much time it will take you to recouperate those costs. Here is an example:
Borrower A has incurred on her refinance a total of $2235 in closing costs
She is currently paying $565.52 in Principle and Interest on her home
With our new loan, Borrower A will pay $390.67
The way the equation works is as follows:
The difference of $565.52 and $390.67 is $174.85
Now we divide $2235 and $174.85 to come up with the number of months it will take to recouperate Borrower A's closing costs
We come up with 12.78 months
Of course, all of this is based on taxes and insurance staying the same as before. So, if you are thinking that maybe now is not the time, play around with the mortgage calculator and determine if today's rates are sufficient enough to pull the trigger on the transaction. You will be surprised at what you find out. (By the way, the above figures are actual figures taken from a transaction I completed this time last year. This stuff really works).
Tip Number 3: 'No-closing-cost' deals really have closing costs:
This is 100% true. There is no such thing as a 'no-closing-cost' loan. Our good friend Erin Lantz is actually quoting the Economist Milton Friedman when she says ..."there [really] is no such thing as a free lunch." Friedman established this in his book of the same title. What he means by this is simple - nobody works for "free." You just do not see that anywhere, or else the economy would tank in a heartbeat.
Indiana does not have lawyer fees because we are not in a state that requires attorneys present at closing. That is a HUGE relief. Indiana only requires a licensed Notary Public. Fees can be covered by Lenders and Sellers, if not the Borrower. It is vitally important to discuss seller-paid fees when purchasing a home, and lender-paid fees can be a great selling point on refinances if you can afford the higher interest rate as a result.
Tip Number 4: Consider a 'cash-in' refinancing:
This tip is absolutely untrue. Nobody in this economy has the money to both refinance their home AND pay down their principle - or else they would just pay down their principle!
Where this tip is a fallacy lies inside the following two points for people that may be underwater, or close to it:
1. You have to have a minimum of 5% equity in your home to refinace
Fannie Mae and Freddie Mac purchase mortgages on the secondary markets. These are government entities that protect mortgage securities and either make money by holding them or lose money. Both agree on one thing - you do not have to have 20% equity in your home in order to refinance. Certain property types require certain guidelines, but on a primary residence, this simply is not the case.
2. Programs exist for underwater borrowers
An underwater borrower has more debt on the home they live in than what it is worth. Let's get that out of the way first. If you owe more than what your home is worth, there are two government-sanctioned refinance programs available to you so you can take advantage of lower interest rates. Foreclosures happen. There is no way around them for good. These two programs exist to help established homeowners avoid it. They are as follows:
Home Affordability Mortgage Program (HAMP) aka: Home Affordability Refinance Program (HARP)
Government versions: FHA Streamline & VA Interest Rate Reduction Refinance Loan
Both programs offer ways of reducing your interest rate on your first mortgage while allowing you to keep your second mortgage. Both combined mortgages equal more money than what the home is actually worth on the market. These programs are great if you think you cannot get out of your current first mortgage because you cannot afford it anymore. Feel free to give me a call on either.
Tip Number 5: Get a rate-lock confirmation:
Why this is even a "tip" is beyond me. A responsible mortgage loan originator will always keep you informed of the happenings on your loan. When your loan rate is locked, the lender has you sign another set of forms which indicate on them that your rate is locked! If you, as the consumer, are not paying attention to what you sign, then that is your fault. The MLO should explain to you that your rate is locked, so this is why you are signing these forms! Oh, and if you request a 60-day lock period, be prepared to pay for it. Most loans - especially refinances - can be closed much quicker with borrower participation throughout the process. Sixty days is a long time to wait if you do not have to.
I hope you have at least learned a thing or two about how the refinance process works. When you read content posted online from various news sources, be sure to check out other resources first before making any decisions. Winterwood Mortgage exists to help consumers make informed decisions on their next mortgage. Some of the aforementioned tips were really faux pas that are widely believed by the general public. I believe there should be transparency between your mortgage lender and yourself, don't you? That is why I commend you for reading this article, and I encourage you to ask questions and seek the advice you need to be successful in your next mortgage transaction.
A longtime mortgage professional and former employee of mine used to have on his business card the mantra "Experience Matters." That could not be more true today as it was then. Recently, an article in Mortgage News Daily promoted the Nine Reasons that Argue Against Being in the Mortgage Business. In this article, Karen Deis outlines nine different reasons why she believes you are in the mortgage business - either right or wrong. Since Winterwood still believes that "Experience Matters," I have written in response to her nine reasons a new set of reasons as to why Winterwood Mortgage Group is the right mortgage group for you.
Here are the Nine Reasons to use Winterwood Mortgage Group, LLC in BLUE preceeded by the point from Deis' article.
"You’re In It for the Money—LOs can make an obscene amount of money, but not without doing what it takes to be successful, including investing in education, classes, database software and marketing strategies." We are not in it for the money - We service our client's needs first, and we believe profitabiliy will follow
"You Are in Charge of Your Own Schedule—Of course you are, but the failure to “schedule” each day and each activity will hold you back." We service you on your schedule, not ours
"They Told You It Would Be Easy—If that were true, everyone would be doing it." We have originated over $5,000,000,000 (that's five billion) in loans, and we have an established pattern of success
"People Like You, So They’ll Do Business With You—While being likeable and sociable will get clients in the door, it isn’t enough to keep them there unless you know how the entire loan origination process works." We earn your trust and respect
"No Sweat! You Are Supported by a Team—While that’s great, what would happen if one of the team members left? Do you have the skills to fill in? Continually improve your own skills, because you won’t always be on a team." Winterwood has been in business for over 20 years - many employees have been with us for over 15 of those
"You Are Good at Marketing and Getting Leads—See No. 4." Our prior clients support our years of success
"You Work for a Top Company—Well, every company calls itself a “top” company. While the company is important, people only do business with people who can help them through the complicated mortgage process." Winterwood is consistently in the top twenty of mortgage originators in Central Indiana
"You Are a Hard Worker—Yes, this business is hard work. But if you spend every waking hour at the office or on the phone, you are working “hard” and not “smart”and will eventually burn out!" Our job is to make the process easy for you
"They Promised to Train You—You are not getting business because you are sitting around waiting for someone to train you? If the company promised to train you, constantly bug them to get the training you need. If they still aren’t training you, take on the responsibility of training yourself." All of our loan officers are licensed, trained, and most of all very experienced
Divorce can be a rough time for a family. Mom and Dad are not experienceing the same marital bliss they once were. There is a chasm that is splitting two lives apart. If children are involved, this can bring chaos to a family that will never truly experience "normal" again - at least with their original family members. . .
(What a way to start off this post, huh? Let me further explain where I am leading you).
So what does divorce have to do with the mortgage business you ask? Homes are always the largest investment a couple will make together - in fact, purchasing a home is the single most expensive investment most people make in their own lives. When divorce is involved, the marital household gets divided up like everything else. For the remainder of the post below, I will explain how a divorcee can recover from his/her separation and purchase a new home to start fresh. Here we go. . .
First of all, divorce hurts. We all know that. But it can hurt less if the following steps are taken to present the best possible loan application post separation. Trust me, if your Realtor does not understand that divorcee's are different than traditional borrowers, your deal could be DOA.
You have to have a completed Separation Agreement/Divorce Decree in hand before trying to qualify for a loan on a new home OR refinancing the marital household to remove the other spouse from chain of title. Assets are divided (like I said earlier) 50/50 in the State of Indiana as long as what came into the marriage from both parties was not protected by a prenuptual agreement. What was gained while married by either party is also split 50/50. Obviously, you cannot split a home in two - that would not make sense - so whomever keeps the kids generally keeps the house as well. Typically, that's the mother. The courts do this so the kids can continue to live as close to "normal" as possible. Whatever "normal" they now have left.
The Divorce Decree will outline how the other assets are divided, who is paying what expenses for the kids, how the kids will be taken care of, etc. If the home is kept by one of the cleaving spouses, a Quit Claim deed needs to be filed on the other spouse's behalf to remove that party from any legal claim they have to the marital property. If this is not done after the first five years of separation, the other spouse becomes a Tenant in Common - and personal judgments can then attach as liens to that home. This can leave the spouse in the household responsible for debts that do not even belong to them personally.
So how do you get a Quit Claim deed prepared? Most title companies will do that for you if you refinance your home right away. It may be cheaper than having your divorce attorney write one up. Title companies are sometimes run by property law attorneys, so that means they have relatively cheap means of drafting said deed. After closing the loan, this just becomes another disclosure you sign to acknowledge consent. . . yada yada yada.
Where am I going with all of this, you ask? If you do not file your Quit Claim deed immediately upon separation of the divorce finalizing, you may be in a world of hurt that will stop you from any finance work on your home you are left with. You cannot even sell the home without the other person's consent. Would you like that? I wouldn't.
Divorce still remains a top contributor to triggering mortgage refinances. Interest rates can be sky high and this will still occur. So what do you need to know in order to streamline the process? I recommend consulting one of us here at Winterwood. Every loan and every family is different. The best thing to do is to take what you have learned here, call me or email me if you have any questions about how to proceed, and we will begin to get your life back in order. But, if you are still holding onto that Quit Claim deed from five years ago - go to the courthouse now and file it! If you have not begun the process yet, but will, my sympathies go out to you and your family. Divorce sucks. Don't make the aftermath harder than it has to be.
One of the most common questions that I get is “How much home can I afford?”
A good rule of thumb on conventional financing is three(3) times your annual gross income. So if your household income is $80,000 per year then a good starting point is a $240,000 house. But, even if you can afford to buy that much, you may want to consider living below your means to save money for college, making debt payments, or anything else necessary in our modern financial lives.
However, once we get an idea of what your maximum house amount would be, let’s talk about what can be approved. The following information is assuming you are trying to get a conventional loan. There are other types of loans available such as FHA, VA and Rural Housing that might be more appropriate for your situation, so I would encourage you to get in contact with me so we can discuss specifics.
One of the things a lender will look at in approving your loan is what is called DTI or Debt to Income ratios. A good rule of thumb is that your monthly income vs. your total monthly debts (after buying your new home) needs to be at a ratio of 45% or less. Other debts besides your new house payment that are included in your ratios would be things like auto loans, credit cards, student loans and alimony/child support if continued for the next 12 months or longer. (A common misconception is that utility bills are included in this calculation. For our purposes, they are not. You still have to pay them, but in order to qualify for a new home purchase, utliities are left out of the equation).
To start to calculate your ratios, let’s begin with the house payment. Your new mortgage payment will be made up of the following 4 components:
Principle and interest - you can go to any principle and interest calculator online such as http://www.ajdesigner.com/fl_loan/loan.php
Homeowners Insurance – roughly ½% -3/4% of loan amount / 12
Property Taxes – roughly 1% of value / 12
PMI (Mortgage Insurance) - PMI is avoided if 20% down. If 5% down estimated amount is .78 x loan amount /12, 10% down is .52 x loan amount /12 and 15% down is .38 x loan amount /12. (Mortgage insurance can be avoided altogether if you do what is called piggybacking - or obtaining a second mortgage for the remainder of the amount you need to put 20% down - and closing the second at the same time as your new first. This is a common practice in avoiding mortage insurance with tax benefits).
You would add this payment to other monthly debts that you have and this will give you a rough idea of your debt to income ratio. If you were to obtain a second mortgage along with your first, that payment would also factor into your new debt to income ratio. Very important to not forget that!
So let’s look an example to pull all of this together. If you are buying a $240,000 house with 5% down then the loan amount is $228,000. Let’s use 5% interest rate for 30 years and it has a principal and interest payment of $1223. Insurance would be around 240000 x .005 = 1200 /12 = $100/mo, taxes would be about $240,000 x .01 = 2400/12 = $200/mo. PMI would be $228,000 x .0078 /12 = $148/mo.
So you have a total payment of $1671.
Now let’s assume that this person has a car payment of 300/mo and student loan payments of $100/mo and minimum credit card payments of 50/mo. and also pays child support of $100/mo. So the debts used in calculating the DTI are $1671 + $300+ $100+ $50+ $100 which total $2221.
Our annual income is $80000/12 = $6666 / mo.
So our debt ratio is 2221/6666 = 33%. We can have debt ratios of a maximum of 45% as a general rule so this person should be financeable as long as they have their down payment money and decent credit history.
Now, I know numbers don't appeal to everyone. But savings per month do! If you are at all interested in finding out more information, please do not hesitate to contact me or any of our representatives. Follow the link below to my personal page and let's get started today!