A Guide for Consumer Choice in Your Next Mortgage

Are You Looking for a Refinance in Indianapolis?

Posted by Joel Asbury on Mon, Mar 10, 2014 @ 04:02 PM

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.

mortgage, refinance, home finances

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.


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Topics: home financing tips, refinancing tips, financial responsibility

Recently Divorced and Need a Mortgage?

Posted by Joel Asbury on Wed, Jan 08, 2014 @ 06:13 PM

divorce marriage ends

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.

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Topics: mortgage tips, refinancing tips, home purchase, divorce

Sub-Prime Lending: Be Wimpy

Posted by Joel Asbury on Tue, Sep 10, 2013 @ 05:24 PM

mortgage app, application

If you are even remotely contemplating an application for a mortgage, you need to think about how your monthly bills stack up. Are you paying too much in extraneous debt such as credit cards, automobile loans, or equity lines on your current home? Do you have a second mortgage with an interest rate that is sky high so all you can afford to pay is the minimum interest payment? That is scary. In today's market, it is easy to find yourself underwater on your mortgage. Let me walk you through some of the steps you can take to avoid over extending your credit.

Take a look at this article posted on the Fannie Mae website. Dave Ramsey is renowned for counseling people who need credit help. Fannie Mae is a Government Securities Agency (GSA) that sells loans on the secondary market to investors. The purpose of Fannie Mae and Freddie Mac (the other most popular GSA) is to buy mortgages and sell them as securities in the public securities market. When they are inundated with sub-prime mortgages, our markets can become unstable and lead to the situation we had in 2008 that brought down our economy. It only takes a few weeks to go through Ramsey's program, but it will save you a lifetime of credit woes. Now take a look below at an example I came up with based on what Ramsey and other financial guru's might tell you.

The first thing you should consider when either purchasing a new home or refinancing your current is where is all of your money per month going once you receive it? Is it being saved at least 10%? Is it being given to charity at least 10%? Can you comfortably live on the 80% you have left? Now, this formula is typically what a financial planner or religious leader may tell you in a sermon about finances. Honestly, it works. If you are unsure how it does, let me spell out the actual figures for you:

1. Say you make $4000 per month

2. That is a comfortable $48,000 per year in just gross earnings

3. Ten percent of that is $4800 - you won't ever see it until you need it if you use automatic deposit features your bank or employer offer

4. Ten more percent is another $4800 to support your local charities - you WILL see that as a tax write off on your IRS Personal 1040s. This is a bonus you didn't think about, huh?

5. $38,400 is what you are left with in actual cash on hand (in a non-income taxed world) - now all of a sudden $43,200 is what your taxable earnings are before factoring in other write offs such as exemptions and maybe even some self-employment income for jobs you do on the side to supplement your yearly income... chances are pretty good now that you will get a refund from Uncle Sam that you can save for later or pay down some of your bad debts

So what do all of these figures mean? Simple - if you have $38,400 left per year after saving and doing your charitable justice to humankind, you can live pretty comfortably if your debts are minimal. (Obviously, if you are married and your spouse brings in more bacon than you do, just add his/her income to yours and work out your formula to find your personal number, but you get the picture here). Controlling your debts is what it takes to maintain financial stability.

In a world that is full of desires for things that cost money - cars, homes, designer clothes, jewerly - you can rack up a large credit debt bill. Even if you live responsibly and within your means, credit card debt can be a huge temptation to make like Wimpy from the classic Popeye cartoon series and "gladly pay you Tuesday for a hamburger today." We need to break that statement down in the next paragraph to see what that means exactly... so here we go!

Credit is something that you should use sparingly and only in times when cash just isn't the best option. For instance, if you are buying gas for your car - most gas stations now require prepayment - you can get up $100.00 per pump transaction per visit to a station. With rising prices, I hope you have a small tank! I don't know about you, but I don't carry that kind of cash with me at all times. Use a credit card, but watch your limit and alternate cards if you have more than one. If you have one with a higher limit, use it the most. But here's the kicker, you have to pay the hamburger man TUESDAY with CASH from YOUR income stream if you buy a hamburger today. Don't wait until Wednesday, Thursday, or Friday. If you don't immediately pay back the credit you used, your credit score suffers. But here's another kicker, keeping balances at 30% of your limit or less is actually better than paying it off completely. Funny how the credit algorithm works...

Now, after Wimpy pays the man for his hamburger, what does he do next? Easy - he gets another one. But this time, he pays cash because it is after pay day. Do you see where this is going? Wimpy has cash to spend. He's not on credit because he doesn't need it. Never use credit unless you absolutely need to. This is where many people run into trouble. "But what about people who have no income and are just trying to live?" I'll answer that question next.

If you have experienced credit shock and (hopefully) avoided bankruptcy in the past, don't be turned away. It may still be possible for you to obtain a credit consolidation loan. If you have late payments because you lost your job, or you had to obtain a few extra credit lines to make ends meat - you're not alone. This happens in times of poor economy, and when mortgage rates increase, these types of borrowers emerge as primary customers. They are known as sub-prime borrowers because their credit is just that - sub-prime - or sub-par for you golfers out there (but in this case, below par isn't good)! We want to work with you to provide a means for getting out of the sub-prime market and into the prime market. It may take some counseling or patience - or both - but it can be done. But obviously, you have to be gainfully employed for this to even be considered.

So remember this guy -

wimpy, tuesday hamburger

... and pay up on time!

As always, tell us your thoughts in the comments below. I'd love to hear them. I want you to be as informed as you can be, especially if your credit history isn't that great. Loans are there for you to consolidate debt, but you may have to do some work first to get one. We all want to own our own homes, and cash really isn't an option for all of us. So... here's a great example of when to use credit! Click the button below if you're ready to talk to one of us about this topic directly...

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Topics: bill reduction plan, refinancing tips, financial responsibility

Winterwood Mortgage's Debt Consolidation Summer Program

Posted by Joel Asbury on Wed, Jul 17, 2013 @ 05:36 PM

Mortgage Calculator, finance questions, buy a home
When the weather warms up, new home buyers go out shopping for what they hope is the home of their dreams. Older families that are experiencing unexpected (or expected) growth revisit moving into a larger home to accommodate the changes because their other kids are out of school. Younger families that are just beginning to take shape are experiencing a higher proportion of decisions to actions because these families are entering new beginnings. After all, they just want to build the right foundation for their family (no pun intended - seriously).

Summer in Indiana means families are on the move. This subsequently means Winterwood Mortgage is hard at work making sure these families are well equipped to. As for us now? Here we are, past the pivotal halfway point of the year where we all take inventory of what the last half of the year can provide. Does that mean a new beginning? Does that mean rediscovering financial responsiblity by lowering my monthly bills? Does that mean getting the kids prepared for another successful year at school sooner than ever before?

We want you to succeed at whatever endeavor your family is undertaking. Currently, I know of several families we are assisting in lowering their monthly bills while using the equity in their homes to pay off extraneuous debt. Some of these families are going through personal hardships that required swift financial decisions to pay for medical expenses, losses from weather related incidents, or just too many credit lines against their income. That's where Winterwood comes into play.

By offering debt consolidation through FHA, VA, or Conventional loan programs, Winterwood Mortgage Group has what it takes to safely and effectively consolidate your monthly bills while maintaining a level of comfort for you and your family. Many people overlook the possibility of how their homes can work for them. For instance, a Reverse Mortgage Loan can be an effective tool for Seniors aged 62 and over. By converting (the "C" in Home Equity Conversion Mortgage - the industry term) their equity into quick cash, Seniors can use that money any way they need to. All other refinance programs work well for those under the age of 62, as well.

By taking a cash-out refinance, the money available to you can be as simple as how much you have paid into the principle balance on your home. I have recently completed a transaction on a primary property where the borrower took out as much equity as the appraisal would allow for, and then turned around to consolidate his bills - including a refinance on his investment property!

These are all examples of how Winterwood Mortgage Group provides financial programs designed to assist you. No matter what stage of life, no matter what season of the year - you can count on Winterwood to be there to serve you.

For questions, comments, or concerns, please submit them below by clicking on the orange button or leaving a comment. We want to get started today before interest rates get any higher. Hurry. There are no guarantees what the markets are going to do. We're waiting for you.



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Topics: home financing tips, mortgage tips, bill reduction plan, refinancing tips, reverse mortgage

About Our Authors


Tony Gregory regularly contributes to this blog. He is an experienced loan officer in both residential and commercial lending from a commercial banking background. He participates daily in the economic and political activities that continue to shape this industry. You can email him directly at:


Joel Asbury is Sr. Vice President of Compliance Operations for Winterwood Mortgage Group, LLC as well as a licensed Loan Officer. He regularly consults potential clients for the Sales Team while maintaining relationships with former ones via multiple marketing channels as well as developing new business through new lending channels. You can contact him directly:



Linda Begley regularly contributes to this blog as a Reverse Mortgage Commentator. She has been a teacher in the Public School and Private School sectors, but then after retirement decided she could no longer take not being able to teach! It is her life passion to educate, which she carries on with her Reverse Mortgage seminars for not only the Public Sector, but the Financial Planning and Accounting business sectors as well. Linda has recently rejoined Approved Mortgage A Winterwood Mortgage Group as a Reverse Mortgage Consultant. Email her today at:


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