Category: ‘Mortgage Tips’

Political Uncertainty Was Good For Mortgage Rates

May 24, 2017 Posted by Andre Hemmersbach

Political Uncertainty

Growing political uncertainty was good for mortgage rates this last week. Recent economic data had little impact. Mortgage rates ended the week near the best levels since before the November Presidential election.

Following the election of Donald Trump, the stock market rallied and mortgage rates rose. They did so based on pro-growth policy changes planned by President Trump. On Wednesday, allegations of Trump’s interference in an FBI investigation gave investors reason to question the President’s ability to implement these changes. Investors reacted to the resulting political uncertainty by selling stocks and buying bonds, including mortgage-backed securities (MBS). This added demand for MBS was good for mortgage rates.

Housing Starts

Tuesday’s report on housing starts contained mixed news. Overall housing starts in April declined 3% from March, which was well below the expected levels. However, this was due to weakness in the volatile multi-family segment. Single-family housing starts increased slightly in April. Also, Monday’s NAHB housing index showed that home builder confidence surprised to the upside in May and remains at very high levels.

 

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5 ways to lose money on a refinance

March 8, 2017 Posted by Andre Hemmersbach

Refinance to save money

Refinance to save money

Your home is likely your largest single investment. When refinancing your mortgage, treat it like you would any investment by analyzing how the financial costs and returns meet your goals. This requires a clear picture of the financial goals of this investment. (See a copy my refinance analysis) Do you have a constraint on the monthly housing budget? Are you seeking the lowest overall cost of ownership? How long will you be in the loan? Without answering these and other questions, you can naively lose money on your home refinance.

Here are some of the common traps:

Fall for the monthly savings seduction: Many mortgage brokers or loan officers will push a loan that lowers the monthly mortgage payment. A lower payment might be your goal, but it could come with an overall increased cost. Your total refinance cost will be based on your outstanding loan amount, interest rate, loan term, and cost of executing the loan. Extending the term of the loan will have a dramatic effect on the monthly payment. However, borrowing any amount for a longer term will increase your total interest payments (all else being equal). You can even achieve a lower monthly payment with a longer term and a higher interest rate. Don’t be seduced by a lower monthly payment if it is not required by your financial goals.

Accept the “no cost loan” lie: Loan officers may also promote a “no cost loan”. Be assured that there is no free lunch.  A refinance takes effort and someone needs to get paid for the work. That cost is always hidden in a higher interest rates on a “No Cost Loan”. Each loan institution has different rates, different costs and different ways of recognizing those costs. It is actually possible to pay some loan costs, receive a lower rate, and achieve a lower overall cost of the loan.

Don’t look at the total cost of the loan: Your mortgage refinance is an investment decision. You should compare the before and after financial results before making this important decision. A new loan will mean new fees (title, doc fees, inspection, etc.) and a new cost of execution. It will also “reset the clock” on the loan. Fixed payment loans are constructed such that the initial payments are mostly interest and the final payments are mostly principal. The effective interest rate of your existing loan could be well below what you receive from a new loan. Refinancing may not make economic sense. You can only make the determination by comparing the total future costs of the existing loan to the total costs of the new loan. Your loan officer should be able to show you the total cost of both investments before you make the decision, not as you sign the papers.

Ignore the length of time you will have the loan: You may make a loan for 10, 20 or even 30 years knowing full well that you will only be in the house for fewer years. Your investment decision should be based on your financial goals and the total cost during the true expected duration of the loan. Your loan officer should be able to show you a comparison of the total cost of the loan only for the expected duration. Different terms lengths will affect both the interest paid and the accumulation of principal. These factors could be more or less advantageous depending on your financial goals.

Forget to examine ALL the options: A bank is limited to its own offerings. A mortgage broker can match your financial goals and your credit worthiness to multiple offerings from scores of banks and other institutions. A number-crunching mortgage broker can help you calculate the returns of these offerings. (See HERE for an example of this analysis.)  An experienced mortgage broker can offer even more options to meet your need.  If the monthly budget is not a factor, perhaps it makes sense to increase the monthly payment. This could include making extra payments on the existing loan. A financially astute mortgage broker can interpret the analysis of each of these scenarios for “regular people” and help show which option best meets the individual’s financial goals.

I am an experienced, number-crunching, financially astute mortgage broker. Contact me at 310 713-3100 for a free consultation and to find out if a refinance scenario is right for you.

 

 

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Home Loans For The Self-Employed

April 9, 2016 Posted by Andre Hemmersbach

1040-Tax-Form

Home Loans for the Self-Employed

Getting home loans for the self-employed borrower may be easier than you think. Tax season normally represents a time of financial pain, but for some self-employed individuals it could represent an opportunity!

Everyone knows that one of the factors a lender will review before approving a borrower for a home loan in their income. What most people do not know, is that there is flexibility in the documentation requirements for self-employed borrowers.

A little known policy loophole in some lender’s underwriting guidelines is the ability to only use a 12 month average of net income from self-employed borrowers. Not all lenders follow the policy and some loan officers just default to asking for the industry standard 2 years returns because they do not know any better. The problem with that is once the underwriter reviews 2 years tax returns, they cannot just “lose” the documentation per their agreements with their investors; they have to use the 2 year average. On the other hand if your loan officer is aware enough to review and catch it upfront, a self-employed borrower who had a terrible 2014 but a record breaking income year in 2015 could be off and running with an approval to purchase the home they deserve!

I know the above to be true as our office usually turns around one to two deals every month that have been declined elsewhere for this very reason.

Please call me to set up a free consultation to create a plan so that you can qualify for a home loan to purchase your house.

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Mortgage Insurance Still Tax Deductible

December 23, 2015 Posted by Andre Hemmersbach

Your new home

Home Ownership now more affordable

On December 18, 2015, the President signed legislation that renews the tax deductibility of mortgage insurance (MI) premiums for qualified borrowers through 2016.The deductibility is effective for purchase and refinance transactions closed after December 31, 2014. MI premiums paid or accrued after December 31, 2014 and through December 31, 2016 may qualify for tax deductibility on borrowers’ subsequent federal tax returns as follows:

  • Borrowers with adjusted gross incomes below $100,000 may deduct 100% of their MI premiums.
  • For borrowers with adjusted gross incomes from $100,000.01 to $110,000, deductions are phased out at 10% increments for each additional $1,000 of adjusted gross household income.

Please call me to discuss your specific scenario to see how to best structure your mortgage loan.

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Lenders Only Look At Four Things Before Approving Your Home Loan.

April 20, 2015 Posted by Andre Hemmersbach

Getting a home loan is not as tough as rumor has it! The mortgage approval process simply boils down to the four basic items explained in the following few paragraphs. First time home buyers and even repeat purchasers need not be bewildered by the formulas and methods used by lenders, you just need someone to hold your hand and an expert that knows the home loan rules!

Lenders are looking for what I call the four “C”s and once you understand the concept of these basic requirements everything else starts to make sense.

  • Cash – Lenders look for “skin-in-the-game” as a way to make sure that you have a financial incentive to continue to make the mortgage payment when things get tough. The larger your down payment or equity the less they have to worry about the borrower walking away from the home loan. Minimum down payment requirements range from as little as 0% to as much as 35%

    You will need a home loan to enjoy this light filled room

    Get a home loan and then sit back and enjoy

  • Capacity – Another way of saying income. The lender wants to make sure that the borrowers have sufficient stable income to handle the mortgage, property taxes, insurance and other debts. Key words in the previous statement are SUFFICIENT and STABLE. Lenders will use a combination of pay stubs, W-2 and other documents and compare those to the only reliable source available in our financial system to prove their legitimacy….the IRS and your tax returns. The minimum requirements for income vary widely by program; lender and other factors so make sure you are working with someone that understands the rules.
  • Credit – Simply put – how have you handled other financial promises of repayment in the past? Nowadays it is easy for a lender to figure this out with a copy of your credit report and a number called a credit score. A credit score is numerical representation of your credit risk. Over 700 is good below 620 not so good. By the way there are easy ways to increase your credit score. (Call me to discuss)
  • Collateral – The property you wish to purchase. Lenders are looking for collateral (their security) to be in good shape and free of any health and safety issues. Why not a complete “fixer upper” see the cash bullet above. The lender wishes to protect a borrower from any unforeseen repairs that the borrower cannot afford. Besides the last thing a lender wants to do is to have to fix up a property after having to foreclose on a home loan.

I have been helping people finance their real estate for over 25 years. Whether you are a seasoned real estate investor or first time home buyer my experience and knowledge will insure that your home loan goes smoothly! I would be happy to meet with you for a free consultation to discuss your plans to purchase a home.

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