Mortgage Borrowers Beware: Separating Fact from Fiction on the New Credit Score Tax – Shared from Chris Carr

Several of you have reached out to Chris regarding the main stream media’s pick up of the story I covered back in January.

Shared From SOURCE

Mortgage Borrowers Beware: Separating Fact from Fiction on the New Credit Score Tax

Shared From YOURLENDERCHRIS APRIL 24, 2023

Chris Carr NMLS# 1466899 | Cell ‭(650) 207-4364‬

Here is an excerpt from the excellent website, Mortgage New Daily:

Before you stop paying your bills in the hope of cashing in, let’s separate fact from fiction. First and most importantly, you will absolutely NOT get a better deal on a mortgage rate if your credit score is lower, even if your nephew just texted you a screenshot of a news headline saying “620 FICO SCORE GETS A 1.75% FEE DISCOUNT” and “740 FICO SCORE PAYS 1% FEE.” MATTHEW GRAHAM – MORTGAGE NEWS DAILY

I strongly encourage you to read the rest of his article here: https://www.mortgagenewsdaily.com/markets/mortgage-rates-04212023 It is well-written and informative and takes the political bias and opinion out of the explanation. Just the facts. And yes, it has gotten more expensive to get a home loan–for everyone.

But to really understand what’s changed, you need to first understand that mortgage rates have a price. In other words, each rate on a rate sheet is associated with a price or fee and that price/fee goes up and and down with the rate you choose, based on how much money you want to borrower, what your credit score is and how much down payment you’re bringing to the purchase. There are a few other factors that determine rate and that is why it is so difficult to answer your question: “What are rates like today?”

With that out of the way, sometimes an interest rate comes at cost to you (that’s what we all know as “Points”) and sometimes that price/fee is a rebate to you (that’s how some lenders will quote you a “no cost loan”). What’s in the middle is something called “PAR”. This is the fancy Wall Street word for “Neutral”, meaning you don’t pay points and you don’t get a rebate. The price for mortgage rates has been increased at the direction of the Federal Housing Finance Administration because they don’t believe they are making enough money and raising these fees (because inflation). The FHFA believes this will help them maintain the financial health of Fannie Mae and Freddie Mac–the two Government Sponsored Entities that purchase many of the home loans that are originated in the United States.

Here’s a picture proving that home loans for the purpose of purchasing just got more expensive for us all:

Now, Fannie and Freddie have what is called a “Duty to Serve” and that requires them to be focused on helping first time home buyers get into homes. That is why the chart above shows that a smaller down payment and a lower credit scores appears to be getting a better deal than say someone with higher credit and a larger down payment.

But let’s take the following example, if you have two borrowers, one with a 700 FICO and 20% down, and another with 640 and 5% down, the LLPAs (1.500%) are in fact the same, creating an “equal” playing field. However, if you have both come in with 5% the higher FICO score gets an improvement to LLPA of 0.625%, whereas if the lower FICO borrower comes in with 20%, their LLPA is 1.375% higher. With the latter, a mortgage of $600,000 results in $8,250 of additional costs to the lower credit score borrower. The point here is that the FHFA is working to create more affordable housing for those that have lower credit scores and by assumption a smaller down payment.

After Weeks of Decline, Mortgage Rates Increase

For the first time in over a month, mortgage rates moved up due to shifting market expectations. Home prices have stabilized somewhat, but with supply tight and rates stuck above six percent, affordable housing continues to be a serious issue for potential homebuyers. Unless rates drop into the mid five percent range, demand will only modestly recover.

Primary Mortgage Market Survey® U.S. weekly averages as of 04/20/2023

Current Mortgage Rates Data Since 1971xlsx

Opinions, estimates, forecasts, and other views contained in this document are those of Freddie Mac’s economists and other researchers, do not necessarily represent the views of Freddie Mac or its management, and should not be construed as indicating Freddie Mac’s business prospects or expected results. Although the authors attempt to provide reliable, useful information, they do not guarantee that the information or other content in this document is accurate, current or suitable for any particular purpose. All content is subject to change without notice. All content is provided on an “as is” basis, with no warranties of any kind whatsoever. Information from this document may be used with proper attribution. Alteration of this document or its content is strictly prohibited. ©2023 by Freddie Mac.

Week of April 17, 2023 in Review

The latest data showed signs of strength in the housing market while the labor sector is getting weaker. Plus, an important recession signal continues to reflect a slowing economy. Don’t miss these stories:

What the Media Gets Wrong About Home Prices
Home Builders Need to be “Starting” Something
NAHB Reports Cautious Optimism Among Home Builders
Job Market Getting Weaker
Recession Signal Flashing

What the Media Gets Wrong About Home Prices

Existing Home Sales fell 2.4% from February to March to a 4.44 million unit annualized pace, per the National Association of Realtors (NAR), which was in line with estimates. Sales were 22% lower than they were in March of last year. This report measures closings on existing homes, which represent around 90% of the market, making it a critical gauge for taking the pulse of the housing sector.

What’s the bottom line? While it’s true that buyer activity slowed in March, February was an especially strong month for closings, so a slight pullback last month was understandable.

In addition, multiple data points suggest that demand remains strong. Homes stayed on the market on average for 29 days, down sharply from 34 days in February. Plus, 65% of homes sold in March were on the market for less than a month, which is up from 57% and shows homes are selling quickly when they’re priced correctly. Meanwhile, investors accounted for 17% of transactions last month, making up roughly one out of every six deals. Clearly investors are seeing the opportunity in housing right now.

Also of note, there was a 0.9% decline in the median home price to $375,700 from a year earlier. However, this is not the same as a decline in home prices as some media reports implied.

The median home price simply means half the homes sold were above that price and half were below it, and this figure can be skewed by the mix of sales among lower-priced and higher-priced homes. In fact, we could see home prices increase across all price categories, but the median price could still fall if the concentration of sales was on the lower end. Actual appreciation numbers are higher, not lower, on a year-over-year basis according to key reports from Case-Shiller, CoreLogic and the Federal Housing Finance Agency.

Home Builders Need to be “Starting” Something

Construction of new homes slowed in March, with Housing Starts falling nearly 1% from February. Building Permits, which are indicative of future supply, also fell 8.8% for the month. While Starts and Permits for single-family homes both ticked higher from February to March, they were significantly lower than in March of last year.

What’s the bottom line? The housing sector is undersupplied, and not enough inventory is heading to the market. Starts for single-family homes have been on a downward trend over the last year, with the pace of 1.191 million units in March 2022 falling all the way to 861,000 units this March. Single-family permits have followed the same pattern, declining from a pace of 1.163 million units to 818,000 over the same period.

With single-family homes remaining in high demand among buyers, the imbalance between supply and demand should continue to be supportive of prices.

NAHB Reports Cautious Optimism Among Home Builders

The National Association of Home Builders (NAHB) Housing Market Index, which is a near real-time read on builder confidence, rose one point to 45 in April, marking the fourth straight month this measure has increased. Among the components of the index, current sales conditions rose two points to 51 while sales expectations for the next six months increased three points to 50. Buyer traffic remained unchanged at 31.

What’s the bottom line? Home builder confidence has now risen 14 points since the low of 31 in December. Present sales conditions returned to expansion territory (over 50) for the first time since last September, while the future sales outlook is right at the breakeven between expansion and contraction at its highest level since June. Even though the overall confidence reading remains below 50 in contraction territory, sentiment continues to rebound in the right direction.

Job Market Getting Weaker

Initial Jobless Claims continued to move higher this month, with the number of people filing for unemployment benefits for the first time rising by 5,000 in the latest week to 245,000. This tied the third highest reading so far this year. Continuing Jobless Claims also surged to 1.865 million, up 61,000.

What’s the bottom line? Continuing Claims measure people who continue to receive benefits after their initial claim is filed and this data clearly shows that hiring has slowed. While the number can be volatile from week to week, the overall trend has been higher with an increase of around 576,000 since the low reached last September.

Plus, there’s greater evidence of workforce reductions as the four-week average of Initial Jobless Claims, which smooths out some of the weekly fluctuation among first-time filers, has hovered around 240,000 at a yearly high in recent weeks.

Recession Signal Flashing

The Conference Board released their Leading Economic Index (LEI) for March, which was down 1.2%, falling to “its lowest level since November of 2020, consistent with worsening economic conditions ahead,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators. This report is a composite of economic indexes and can signal peaks and troughs in the business cycle.

What’s the bottom line? The Conference Board explained that a warning signal occurs when the LEI 6-month growth rate on an annualized basis breaks beneath 0%. But a break beneath -4.2%, like we saw last month, is a recession signal that has been highly accurate historically. The Conference Board also stated that they believe the U.S. will enter a recession “starting in mid-2023.”

What to Look for This Week

More housing news is ahead, starting with Tuesday’s release of home price appreciation data for February from the Case-Shiller Home Price Index and the Federal Housing Finance Agency (FHFA) House Price Index. March’s New Home Sales will also be reported on Tuesday, while Pending Home Sales follows on Thursday.

Also on Thursday, the latest Jobless Claims data will be released along with the first reading for first quarter 2023 GDP. Friday brings perhaps the biggest news of the week with March’s reading for the Fed’s favored inflation measure, Personal Consumption Expenditures.

Technical Picture

Mortgage Bonds were able to stay above their 50-day Moving Average after testing it earlier in the day last Friday. The 10-year tested support at its 200-day Moving Average but remained above it at the end of last week.

Shared From Lender Chris Carr NMLS# 1466899 – SOURCE

If you are considering a sale or purchase of Real Estate – The Caton Team would love to interview for the job as your Realtor. We love what we do, let us take care of you.

We believe to be successful in the Silicon Valley Real Estate Market we have to think and act differently. We do this by positioning our clients in the strongest light, representing them with integrity, while strategically maneuvering through negotiations and contracts.

A mother and daughter-in-law team with 40 years of combined, local real estate experience, knowledge, and know-how – wouldn’t you like The Caton Team to represent you? Let us know how we can be of service. Contact us any time. Call | Text | 650.799.4333 | Email | Info@TheCatonTeam.com

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The Caton Team believes, in order to be successful in the San Fransisco | Peninsula | Bay Area | Silicon Valley Real Estate Market we have to think and act differently. We do this by positioning our clients in the strongest light, representing them with the utmost integrity, while strategically maneuvering through negotiations and contracts. Together we make dreams come true.

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Are Interest Rates Stopping You From Buying Real Estate Today? It doesn’t have to…

The news is full of bad news – that’s why The Caton Team is here to change the narrative. Yes – rates did jump 2nd Quarter of 2022 and it rippled through the Real Estate Market. Today – late January 2023, rates have settled down a bit from their nightmarish high of around 7% – today we’re seeing 4.5-6% popping up again.

BUT… it’s still not the 3% we loved in 2021! So, if Buying Bay Area Real Estate is still a goal – when the news says the market is down – now is the time to act – so let’s talk about solutions.

Welcome Home Funding, a division of Berkshire Hathaway HomeServices, is offering two products to help wishful home buyers get into a home while the market is soft – i.e. – that short window when it’s a buyer’s market here in the Bay Area.

Welcome Home Funding is offering a RATE BUY DOWN. Take a look at the example below. Year 1 – the interest rate is nice and low, getting a buyer into a property and each year it goes up a point*.

Next up is the Welcome Home Funding – RATE REBOUND. No one knows when the market will peak or where interest rates will land but with RATE REBOUND a buyer can rest assured that if rates drop further they can take advantage of the lower rate with NO lender fees on the refinance within 5 years of their purchase AND get a $1000 credit to go towards third parties fees associated with refinancing – like the appraisal report and new credit pull. Please note this product has a promotional lifespan. Homes must be IN Contract by 6.30.2023 and Close Escrow by 9.30.23 to qualify. Please note lender fees do apply to the original purchase loan with Welcome Home Funding.

For more information – contact The Caton Team|Cell 650.799.4333| EMAIL|

Or Mike Kamienski with Welcome Home Funding |Cell (650) 484-6488 | EMAIL|

Got Questions? The Caton Team is here to help.

We love what we do and would love to help you navigate your sale or purchase of Residential Real Estate. Please reach out at your convenience for a personal consultation. Please enjoy our free resources below and get to know our team through our clients’ words. Testimonials.

HOW TO SELL | HOW TO BUY

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HOW TO SELL during COVID-19 – HOW TO SELL – HOW TO BUY during COVID-19- – HOW TO BUY – MOVING MID PANDEMIC – TRUST AGREEMENTS and HEALTH CARE DIRECTIVES – OUR TESTIMONIALS

Got Real Estate Questions? The Caton Team is here to help.

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Things To Avoid After Applying for a Home Loan – Shared Article

SOURCE

Once you’ve applied for a mortgage to buy a home, there are some key things to keep in mind. While it’s exciting to start thinking about moving in and decorating, be careful when it comes to making any big purchases. Here are a few things you may not realize you need to avoid after applying for your home loan.

Don’t Deposit Large Sums of Cash

Lenders need to source your money, and cash isn’t easily traceable. Before you deposit any amount of cash into your accounts, discuss the proper way to document your transactions with your loan officer.

Don’t Make Any Large Purchases

It’s not just home-related purchases that could disqualify you from your loan. Any large purchases can be red flags for lenders. People with new debt have higher debt-to-income ratios (how much debt you have compared to your monthly income). Since higher ratios make for riskier loans, borrowers may no longer qualify for their mortgages. Resist the temptation to make any large purchases, even for furniture or appliances.

Don’t Co-Sign Loans for Anyone

When you co-sign for a loan, you’re making yourself accountable for that loan’s success and repayment. With that obligation comes higher debt-to-income ratios as well. Even if you promise you won’t be the one making the payments, your lender will have to count the payments against you.

Don’t Switch Bank Accounts

Lenders need to source and track your assets. That task is much easier when there’s consistency among your accounts. Before you transfer any money, speak with your loan officer.

Don’t Apply for New Credit

It doesn’t matter whether it’s a new credit card or a new car. When you have your credit report run by organizations in multiple financial channels (mortgage, credit card, auto, etc.), it will have an impact on your FICO® score. Lower credit scores can determine your mortgage interest rate and possibly even your eligibility for approval.

Don’t Close Any Accounts

Many buyers believe having less available credit makes them less risky and more likely to be approved. This isn’t true. A major component of your score is your length and depth of credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both of those aspects of your score.

In Short, Consult an Expert

To sum it up, be upfront about any changes when talking with your lender. Blips in income, assets, or credit should be reviewed and executed in a way that ensures your home loan can still be approved. If your job or employment status has changed recently, share that with your lender as well. Ultimately, it’s best to fully disclose and discuss your intentions with your loan officer before you do anything financial in nature.

Bottom Line

You want your home purchase to go as smoothly as possible. Remember, before you make any large purchases, move your money around, or make any major life changes, be sure to consult your lender – someone who’s qualified to explain how your financial decisions may impact your home loan.

My Two Cents: Your home loan is the most important part of your homeowner journey. The Loan Approval is literally a snapshot of your current financial picture and you DO NOT want to change that picture. If you need to move money around, gather gift funds, pay off debt, etc – do so BEFORE YOU APPLY and keep a paper trail! However, The Caton Team highly recommends that you speak with a lender before you do anything. This ensures you’re doing the right things that do not impact your credit score negatively.

Got Questions? The Caton Team is here to help.

HOW TO SELL | HOW TO BUY

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Got Real Estate Questions? The Caton Team is here to help.

We strive to be more than just Realtors – we are also your home resource. If you have any real estate questions, concerns, need a referral or some guidance – we are here for you. Contact us at your convenience – we are but a call, text or click away!

A mother and daughter-in-law team with over 35 years of combined, local Real Estate experience and knowledge – would’t you like The Caton Team to represent you? Let us know how we can be of service. Contact us any time.

The Caton Team – Susan & Sabrina
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The Caton Team does not receive compensation for any posts. Information is deemed reliable but not guaranteed. Third party information not verified.

Mortgage Forbearance Is Not All It’s Cracked Up To Be—Here’s the Ugly Truth

By Clare Trapasso

When Nicholas Dahl, 36, called Chase Bank to find out about his options for mortgage forbearance at the end of March, an automated voice informed him the wait time would be 43 hours and 45 minutes. Dahl, who runs his family’s art transportation business, hasn’t been able to draw a paycheck since all nonessential businesses in Illinois were shuttered on March 21 due to the coronavirus pandemic. And he doesn’t know how much longer he and his wife will be able to keep making payments on the three-bedroom house in the Chicago suburbs where they’re raising their 8-year-old daughter.

After three hours and 45 minutes on hold, and several times where he heard a woman saying “hello” before going back to the call music, he finally hung up. He emailed the bank for information instead.

Chase responded that he could receive mortgage forbearance for 90 days. During those three months, Dahl wouldn’t have to make his payments and wouldn’t incur late fees, get reported to credit agencies, or risk foreclosure. But once that period was over? All of the missed payments would come due at once.

(After this piece was published, a Chase Home Lending spokesperson contacted us with this statement. “Over these 90 days we will be in communication with our customers to make sure they have the help they need. … We’re just holding tight for [government agency] guidance on how to handle each of these loans.”)

“I don’t really think it’s worth it,” says Dahl, who’s losing about $5,000 in income each month his business is closed. “I don’t really want to pay four mortgage payments in one.”

Dahl is one of many thousands of Americans who are having trouble making their monthly mortgage payments due to the coronavirus pandemic—or will soon, if the crisis drags on. In the past month, nearly 17 million Americans have filed for unemployment as shelter-in-place orders, social distancing measures, and nonessential business closures went into effect. Last week, economists estimated the unemployment rate was about 13%—worse than during the Great Recession. And those numbers don’t even include many out-of-work, self-employed, and gig workers along with those who’ve had trouble filing their claims because unemployment offices are overwhelmed.

The widespread misery spread by COVID-19 has left many homeowners scrambling to figure out how to pay their mortgages. Homeowners with government-backed loans—and even many without—are being offered up to 12 months of forbearance, doled out in 90-day chunks. But this temporary fix could result in another wave of foreclosures if additional assistance isn’t provided.

Many homeowners could be asked to pay back all of those missed mortgage bills in one lump sum at the end of the forbearance period, a near impossible feat for many who can’t afford their payments today and don’t know when the economy will recover.

Fannie Mae, Freddie Mac, and the Federal Housing Administration say their borrowers, who make up slightly more than half of all buyers, are never required to make lump-sum payments. They also offer various assistance plans, some more generous than others.

But even those homeowners will also eventually have to make good on what they owe, a hardship for those out of work. Those who can’t could eventually lose their homes.

“We are concerned about what’s going on right now, with many people going into these forbearance plans without a clear sense of what will happen at the end,” says Joseph Sant, deputy general counsel for the Center for New York City Neighborhoods. The nonprofit organization promotes and protects affordable homeownership.

“If we don’t see further action from Congress to fill this hole … we could see another foreclosure crisis when these forbearances end,” warns Sant.

Dahl’s uncertainty over what would happen at the end of his forbearance period prompted him to tap his savings and his wife’s ongoing salary as a dental assistant to make his $1,700 mortgage payment for their Rolling Meadows, IL, home. But the family can’t afford to do this indefinitely if he can’t get back to work. He’s already lost out on thousands of dollars of annual revenue, as many of the bigger art shows have been cancelled.

“I don’t like to leave things to chance, and I don’t want to lose my house because of something that is out of my control,” says Dahl. “Mortgage companies should be a lot more flexible. If they show flexibility, we will not have a repeat of ’08.”

The foreclosure crisis was in the rearview—until the coronavirus

Before the pandemic, the foreclosure crisis that followed the housing bust and lingered after the Great Recession had seemed firmly in the rearview.

In January, just 0.4% of mortgages were in some stage of foreclosure, according to the most recent data released by real estate data company CoreLogic. Meanwhile, only 3.5% of mortgages were delinquent, which means they were at least 30 days late.

But there are troubling signs those numbers could rise. About 3.74% of all mortgages were in forbearance in the week ending April 5, according to the Mortgage Bankers Association, a national trade group. That’s compared with just 0.25% of loans in forbearance in the week ending March 2.

The association expects the number of homeowners requesting forbearance to steadily increase.

About 15 million homeowners could rely on forbearance to get them through this crisis, or nearly a third of all single-family mortgages, predicts Mark Zandi, chief economist at Moody’s Analytics.

That could result in roughly 2 million foreclosures, says Zandi. To put that into perspective, there were around 7 million foreclosures as a result of the last housing bust.

“I don’t think a lump sum works, at least for most homeowners,” says Zandi. If there isn’t additional assistance offered, “there will be a lot of credit problems down the road, delinquencies, defaults, and foreclosures.”

Housing advocates are urging different kinds of assistance

Sant, with the Center for New York City Neighborhoods, is worried about the lack of uniformity among mortgage assistance programs, particularly between government-backed loans and non-government-backed loans. So available help can vary even though many mortgage companies and servicers follow the steps that Fannie and Freddie take.

Instead of forbearance, Sant would like to see the creation of a program to keep mortgage payments affordable, similar to the one the federal government created after the housing bust of more than a decade ago. It helped to save more than a million homes from the clutches of foreclosures and short sales. The program granted things like loan modifications, which could lower monthly payments, and deferments, which tacked missed payments onto the ends of loans, thereby extending their duration. These actions helped homeowners remain in their properties.

Many of the government-backed loans offer similar options.

(However, the federal government’s Home Affordable Modification Program was widely criticized for not helping nearly enough homeowners. And about a third of the borrowers who participated in the program wound up falling behind on their mortgage payments again.)

“There tends to be this initial, naive hope [from government officials] that, let’s put the situation off, let’s pause for a few months and hopefully at the end of it, people will recover and they won’t need deeper relief,” says Sant. “But we need to be planning now to provide meaningful relief.”

Many homeowners seeking mortgage assistance are wary of forbearance

Since the crisis began, Seattle-area business owner and author Debrena Jackson Gandy‘s income has dropped by about 30%. Her husband, an Uber driver, has seen his take-home pay fall by about 40%. And the couple were worried about paying both the first and second mortgages on their four-bedroom home in the Seattle suburb of Des Moines, WA.

So in late March, Jackson Gandy, 53, called her mortgage companies. The first one, where she has her primary mortgage, agreed to defer her April payment and add an extra payment onto the end of her loan. But her experience with Bank of America, where she has her smaller, second mortgage, didn’t go as smoothly.

The representative she spoke with offered her three months of forbearance instead. She could apply for a loan modification at the end of that period. There was no guarantee it would be granted.

“It was really shocking,” says Jackson Gandy. She runs Masterminds, a personal and organizational development company that hosts events, some of which have been moved online while others have been cancelled.

“If one month is a challenge, then how can I pay four months at once?” she asks.

She was a week late in making her April mortgage payment to Bank of America, because she had to wait for her husband’s earnings to come in.

(Bank of America offers deferments on its own loans, but it provides only forbearance, not deferments, on the government-backed loans it services. Chase is also a mortgage servicer for government-backed loans. Jackson Gandy isn’t sure if she has a federal-backed mortgage.)

“If you can make the payment, make the payment now,” says Rocke Andrews, a mortgage broker at Lending Arizona in Tucson. He’s also the president of the National Association of Mortgage Brokers, a trade group.

“Don’t take [forbearance] if you don’t absolutely need it. It all becomes due, and who knows what happens between now and then,” he advises.

I read this article HERE

Got Real Estate Questions? The Caton Team is here to help.

Call | Text | Sabrina 650.799.4333 | Susan 650.796.0654

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The Caton Team does not receive compensation for any posts. Information is deemed reliable but not guaranteed. Third party information not verified.

Mortgage Forbearance Could Spark More Financial Woes

With business closures and job losses due to the coronavirus outbreak, about 2 million borrowers so far have applied for mortgage forbearance programs. But homeowners should fully understand what forbearance means before entering into such an agreement with their lender, financial experts advise.

Many homeowners who take forbearance options will be on the hook for making up missed payments in a lump sum at the end of the program. As one homeowner in Chicago realized, taking 90 days of forbearance on his mortgage would have meant he would have to pay three monthly payments at once at the end of the period.

In the last month, nearly 17 million Americans have filed for unemployment, as social distancing measures have prevented most businesses from operating as normal. This has left many homeowners scrambling to figure out how to pay their mortgages. Many homeowners with government-backed loans or private loans are being offered up to 12 months of forbearance. Homeowners will want to check on what happens at the end of the forbearance period: Will they be asked to pay back all of those missed payments in a lump sum?

Fannie Mae, Freddie Mac, and the Federal Housing Administration say they never require their borrowers to make lump-sum payments. Banks may also work out repayment plans with borrowers.

Joseph Sant, deputy general counsel for the Center for New York City Neighborhoods, told realtor.com® that he is concerned that the lack of uniformity among mortgage assistance programs may spark greater confusion among the public. “We are concerned about what’s going on right now, with many people going into these forbearance plans without a clear sense of what will happen at the end,” Sant says.

Financial experts are urging homeowners to weigh forbearance options carefully. “If you can make the payment, make the payment now,” mortgage broker Rocke Andrews, president of the National Association of Mortgage Brokers, told realtor.com®. “Don’t take [forbearance] if you don’t absolutely need it. It all becomes due, and who knows what happens between now and then.”

I read this article HERE

Got Real Estate Questions? The Caton Team is here to help.

Call | Text | Sabrina 650.799.4333 | Susan 650.796.0654

Email | Info@TheCatonTeam.com

The Caton Team – Susan & Sabrina
A Family of Realtors
Effective. Efficient. Responsive.
What can we do for you?

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The Difference Between Mortgage Deferment and Forbearance

More homeowners are in search of mortgage relief due to the COVID-19 pandemic, and options like mortgage deferment and mortgage forbearance are becoming readily available to those in need.

But “we are seeing the terms being used interchangeably,” Sara Singhas, director of loan administration for the Mortgage Bankers Association, told realtor.com®.

Mortgage deferment and mortgage forbearance allow borrowers to temporarily stop making their monthly payments, but they differ in what happens afterwards. At the end of a forbearance period, the amount of payments missed are due in a lump sum, Singhas explains. However, lenders may choose to work with borrowers to structure a payment plan.

On the other hand, deferment is allowing borrowers to repay the money over time or add it to the end of their loan period.

“Technically, a mortgage forbearance agreement is when you’ve possibly been late, and the lender agrees not to foreclosure during that forbearance period,” Krista Allred, a mortgage loan originator, told realtor.com®.

In the current landscape, many borrowers haven’t become past due on their mortgage yet. But an the pandemic causes unemployment numbers to rise, borrowers are in a rush to seek help before they default.

“The moral of the story right now is to call your lender,” Allred says. “Don’t just assume you can skip a payment. Call them, let them know, and make arrangements.”

Forbearance and deferment aren’t the only options. Some lenders are doing loan modifications, too.

The bottom line is that lenders want to remind consumers: Nothing is free.

“It’s not free mortgage payments; it’s not free money. [Forbearance] is temporarily hitting the pause button on your mortgage, and not having to make the payment,” Mary Bell Carlson, a certified financial planner who operates a blog under “Chief Financial Mom,” told realtor.com®. “It does not necessarily pause the interest that is accruing, and it does mean that you’re going to have to make that principal and interest payment at a later date.”

Source: “Mortgage Deferment and Mortgage Forbearance—Is There a Difference?” realtor.com® (April 7, 2020)

I read this article HERE

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Falling mortgage rates will likely hit a floor. Here’s why.

I thought I would share this info on Interest Rates…

Falling mortgage rates will likely hit a floor. Here’s why.

The Federal Reserve has taken emergency action to cut rates to zero. While 0% interest rates sound great to anyone who owns a home or is planning to buy, it’s important to slow down and talk through a couple of things.

First, the Fed does not control mortgage rates. Their cuts apply to rates for loans between the Fed and banks or from one bank to another.

Second, the Fed’s actions most quickly impact the rates on U.S. Treasury Securities. These markets can influence Mortgage Backed Securities, which will then influence mortgage rates.

However, in times of uncertainty, other factors can overrule the norm. This happened in 2008. Despite aggressive cuts by the Fed, mortgage rates hit a floor and never fell further. The same is happening now.

Why?

The volume of business. Demand for mortgage loans is stretching the industry’s capacity to serve. To slow demand, rates may hover at higher levels.

Reduced investment. When investors know borrowers will refinance early, they expect to lose income. This risk means fewer investors will buy new mortgage backed securities. Less demand equals higher rates.

Extra costs to lenders. When loans are refinanced quickly, lenders often pay back their earnings. Similarly, additional expenses can occur when rates shift too quickly for in-process loans. These costs are reflected in higher rates.

The Bottom Line

A 0% Fed funds rate will not lead to a 0% mortgage loan rate. Mortgage bonds will always have a level under which investors simply will not purchase them, and mortgage rates reflect that.

The Good News

Mortgage rates are at or near their lowest levels ever. That spells opportunity to save significantly by refinancing or locking in a great rate on a purchase.

I read this article from Welcome Home Funding

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Homebuyer Do’s and Don’ts

Buying a home is serious business and your home loan is your number one most important TO DO on your list – even more important that the home itself! Please do and don’t do the following….

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The Caton Team does not receive compensation for any posts. Information is deemed reliable but not guaranteed. Third party information not verified.

First Time Home Buyer Loan Programs

Happy New Year!

I wanted to share this article about loan programs becuase owning your own home is a goal near and dear to my heart. If you’re looking to make homeownership your goal – contact The Caton Team – we love what we do and we love helping people achieve their goal of homeownership!

Summary: First-time homebuyer loans and programs

FHA loan program: A loan insured by the Federal Housing Administration. Good for those with low credit scores and little money saved for a down payment.
USDA loan program: A loan program 100 percent guaranteed by the U.S. Department of Agriculture for lower-income borrowers in eligible rural areas.
VA loan program: A loan backed by the U.S. Department of Veteran Affairs that allows no down payment for military personnel, veterans and their families.
Good Neighbor Next Door buyer aid program: A HUD program that provides housing aid for law enforcement officers, firefighters, emergency medical technicians and teachers.
Fannie Mae or Freddie Mac loan program: Conventional loans backed by Fannie Mae or Freddie Mac require 3 percent down. Good for those with strong credit.
HomePath ReadyBuyer Program: A program that provides 3 percent in closing cost assistance to first-time buyers. Must complete an educational course and buy a foreclosed Fannie Mae property.
Energy-efficient mortgage program: Backed by FHA or VA loan programs and allows borrowers to combine the cost of energy-efficient upgrades onto a primary loan upfront.
FHA Section 203(k) loan program: Borrow the funds needed to pay for home improvement projects and roll the costs into one FHA loan with your primary mortgage.
Local first-time homebuyer programs and grants: Many states and cities offer first-time buyer programs and grants for down payment or closing cost assistance.
Native American Direct Loan: This VA-backed program provides direct home loans to eligible Native American veterans to buy, renovate or build homes on federal trust land.

1. FHA loan

Best for: Buyers with low credit and smaller down payments.

Not having enough money for a 20 percent down payment may deter you from buying a home, but it shouldn’t. Insured by the Federal Housing Administration, FHA loans typically come with smaller down payments and lower credit score requirements than most conventional loans. First-time homebuyers can buy a home with a minimum credit score of 580 and as little as 3.5 percent down or a credit score of 500 to 579 with at least 10 percent down.

FHA loans have one big catch called mortgage insurance. You’ll pay an upfront premium and annual premiums, driving up your overall borrowing costs. Unlike homeowners insurance, this coverage doesn’t protect you; it protects the lender in case you default on the loan.

Learn more about finding the best FHA lender for you.

2. USDA loan

Best for: Borrowers with lower or moderate incomes purchasing a home in a USDA-eligible rural area.

The U.S. Department of Agriculture, or USDA, guarantees loans for some rural homes and you can get 100 percent financing. This doesn’t mean you have to buy a farm or shack up with livestock, but you do have to buy a home in a USDA-eligible area.

USDA loans also have income limits based on where you live, meaning they’re geared toward folks who earn lower to moderate incomes. Typically, you need a credit score of 640 or higher to qualify for a streamlined USDA loan. If your score falls short, you’ll have to provide extra documentation on your payment history to get a stamp of approval.

3. VA loan

Best for: Active-duty military members, veterans and their spouses.

Many U.S. military members (active duty and veterans) are eligible for loans backed by the U.S. Department of Veterans Affairs, or VA. VA loansare a sweet deal for eligible borrowers because they come with lower interest rates than most other loan types and require no down payment. A funding fee is required on VA loans, but that fee can be rolled into your loan costs and some service members may be exempt from paying it altogether.

Other VA loan perks include no PMI or minimum credit score. If you struggle to make payments on the mortgage, the VA can negotiate with the lender on your behalf to take some stress from the equation.

4. Good Neighbor Next Door

Best for: Teachers, law enforcement, firefighters and emergency medical technicians.

The Good Neighbor Next Door program is sponsored by the U.S. Department of Housing and Urban Development (HUD). It provides housing aid for law enforcement officers, firefighters, emergency medical technicians and pre-kindergarten through 12th-grade teachers.

Through this program, you can receive a discount of 50 percent on a home’s listed price in regions known as “revitalization areas.” Using the program’s website, you can search for properties available in your state. You must commit to living in the home for at least 36 months.

5. Fannie Mae or Freddie Mac

Best for: Borrowers with strong credit but minimal down payments.

These government-sponsored enterprises, or GSEs, set borrowing guidelines for loans they’re willing to buy from conventional lenders on the secondary mortgage market.

Both programs require a minimum down payment of 3 percent. Homebuyers also need a minimum credit score of 620 (or higher, depending on the lender) and a relatively unblemished financial and credit history to qualify. Fannie Mae accepts a debt-to-income ratio as high as 50 percent in some cases. You’ll still pay for PMI because you’re putting less than 20 percent down, but you can get it canceled once your loan-to-value ratio drops below 80 percent.

6. Fannie Mae’s HomePath ReadyBuyer Program

Best for: First-time homebuyers who help for closing costs willing to buy a foreclosed home.

Fannie Mae’s HomePath ReadyBuyer program is geared toward first-time buyers interested in foreclosed homes that are owned by Fannie Mae. After taking a required online homebuying education course, eligible borrowers can receive up to 3 percent in closing cost assistance toward the purchase of a HomePath property. The trick is finding a HomePath property in your market, which might be a challenge since foreclosures account for a smaller chunk of listings today.

7. Energy-efficient mortgage (EEM)

Best for: Homebuyers who want to make their home more energy-efficient but lack up-front cash for upgrades.

Making a home more energy efficient is good for the environment, and good for your wallet by lowering your utility bills. Making green upgrades can be costly, but you can get an energy-efficient mortgage, or EEM loan, that’s insured through the FHA or VA programs.

An EEM loan lets you tack the cost of energy-efficient upgrades (think new insulation, a more efficient HVAC system or double-paned windows) onto your primary loan upfront — all without a larger down payment.

8. FHA Section 203(k)

Best for: Homebuyers interested in purchasing a fixer-upper but who don’t have a lot of cash to make major home improvements.

If you’re brave enough to take on a fixer-upper but don’t have the extra money to pay for renovations, an FHA Section 203(k) loan is worth a look.

Backed by the FHA, the loan calculates the home’s value after improvements have been made. You can then borrow the funds needed to pay for home improvement projects and roll the costs into one loan with your primary loan amount. You’ll need a down payment of at least 3.5 percent, and improvements must cost more than $5,000.

9. State and local first-time homebuyer programs and grants

Best for: First-time homebuyers who need closing cost or down payment assistance.

In an effort to attract new residents, many states and cities offer first-time homebuyer grants and programs. The aid comes in the form of grants that don’t have to be repaid or low-interest loans with deferred repayment to cover down payment or closing costs. Some programs may have income limits, too. Before buying a home, check your state’s housing authority website for more information.

Contact a real estate agent or local HUD-approved housing counseling agency to learn more about first-time homebuyer loans in your area.

First-time homebuyer programs by state:

10. Native American Direct Loan

Best for: Eligible Native American veterans wishing to buy a home on federal trust land.

The Native American Direct Loan provides financing to eligible Native American veterans to buy, improve or build a home on federal trust land. This loan differs from traditional VA loans in that the VA is the mortgage lender.

The NADL has no down payment or private insurance requirements, and closing costs are low. And you’re not limited to only one property; you can get more than one NADL. Not all states are eligible, though.

Learn more:

I read this article at: LOAN PROGRAMS

Got Real Estate Questions? The Caton Team is here to help.

Call | Text | Sabrina 650.799.4333 | Susan 650.796.0654

Email | Info@TheCatonTeam.com

The Caton Team – Susan & Sabrina
A Family of Realtors
Effective. Efficient. Responsive.
What can we do for you?

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Berkshire Hathaway HomeServices – Drysdale Properties

DRE # |Sabrina 01413526 | Susan 01238225 | Team 70000218 |Office 01499008

The Caton Team does not receive compensation for any posts. Information is deemed reliable but not guaranteed. Third party information not verified.

How to apply for a mortgage: Your 4-step guide.

Applying for a home loan is the first step to take when getting serious about buying a home. It will help you understand how much house you truly can afford. Get ready for the application process by gathering your financial info, finding a lender to work with, and getting pre-approved. You can always shop around and pick another lender once you get an accepted offer.

Mortgage loan pre-approval means approaching a lender with financial, credit, debt, and other information that will help them determine if you qualify for a loan at a certain amount.

There are four essential steps involved with mortgage pre-approval:

Gather financial information
Select a lender
Get a mortgage pre-approval
Close on your home

This article will give you an idea of how to get pre-approved for a mortgage and why pre-approval is important for buying a home.

How to get pre-approved for a home loan

Step 1: Gather financial information

Before heading to your lender’s office, gather and prepare the following financial information:

Credit Information: Your credit score and reports will determine the size of loan you may qualify for and the type of financing plan you will be offered. For example, a borrower with a credit score below 740 will usually have a higher interest rate associated with their loan. A borrower with a score below 580 will usually have to put down a higher down payment.

Pro Tip: Check your credit score for free with credit.com.

Debt Information: Gather and prepare any of your debt obligations. This includes student loans automobile loans, and credit card payments.

Pro Tip: If you have a significant amount of debt, the amount that you’re pre-approved will likely be smaller or rejected. Before applying for your pre-approved mortgage, try paying off your debts and minimize the number of new debts you take on.

Income Information: Gather and prepare income information from the previous two years. This includes tax returns, W-9s, pay stubs, and additional income information (from second jobs, overtime pay, social security payments, alimony or child support payments, etc.).

Asset Information: Asset information refers to assets you own other than your income. This involves gathering bank statements, property statements, investment information, and money received by family members.

Personal Information: Bring a personal ID such as a driver’s license or passport and your social security number to your lender’s office.

Employment Information: This includes your proof of employment and the length of time you’ve been with your employer.

Budget Information: Before going to see a lender, determine your budget for buying a new home.

Pro Tip: Your total housing payment budget should not exceed 35% of your pre-tax income. The ideal percentage is 25% of your pre-tax income.

Step 2: Select a lender to work with

There are two types of lenders you can work with (1) big lenders (aka the bank) or (2) small lenders (aka small, community banks or small mortgage lenders).

There are pros and cons associated with each type of lender:

Pros of big lenders:

Security: You can trust that big banks will protect your sensitive information as it’s a crucial part of their reputation.
Customer support: Banks usually offer 24/7 customer support.
Availability: Making an appointment for a loan will be easier with big banks as they have a larger number of loan officers available.

Cons of big lenders:

Rates: The rates of the big banks are usually higher than the rates at small loan offices.
Approval: Banks have a specific ‘credit model’ that they like to use as a guideline for approving people looking for loans. You may have a hard time being approved for a loan by a big bank if you don’t fit this ‘credit model.’

Pros of small lenders:

Rates: Small lenders tend to have better rates than the big banks. Furthermore, smaller lenders generally let their customers exit early. In other words, small lenders allow their customers to pay off their mortgage early and either sell their house or find a better mortgage.
Approval: Small lenders will generally approve loans to freelance workers, property investors, or someone who doesn’t fit the bank’s credit model.
Customer Service: Small lenders provide more personalized customer service and usually have faster response times.
Specialized Financing: Smaller lenders offer more specialized financing options than big banks. For example, if you’re looking for a small mortgage, most big banks won’t accept your application because it’s not worth their time. The smaller lender, however, will be happy to work with you.

Cons of small lenders:

Vulnerability: Due to their size, small lenders are more sensitive to market fluctuations.
Availability: Smaller lenders may not have as many available lenders as the big banks.

Should I get pre-approved by multiple financial institutions to compare rates?

Yes, because you can still shop rates before locking into a rate and accepting an offer. Research different lender’s reputation, search for their past clients, read their online reviews, and give them a call to get a ‘feel’ of whether or not you want to work with them.

Step 3: Get pre-approved

Most first-time home buyers are confused about the pre-approval process. So, to clear things up, we answer “how to get pre-approved for a mortgage” and the 6 other common questions first-time home buyers ask about mortgage pre-approval:

1. How do I get pre-approved for a mortgage?

Gather Documents: Gather the necessary documents (as listed in step 1).
Organize Documents: Create a Google Drive or Dropbox where you can organize all information in one, easily-accessible place.
Contact a Lender: Call, go online or visit a loan office/bank. The loan officer will review your documents and give you a preliminary estimate of how much house you can afford, your monthly mortgage payments, and mortgage interest rate.
Find out if you’ve been pre-approved: You will receive a pre-approval letter that secures your interest rates for the next 90-120 days (more on this below). On the other hand, your lender will notify you that you have not been pre-approved.

2. Why get pre-approved for a mortgage?

Benefits of Pre-Approvals:

Accurate: The best pre-approvals will give you an accurate idea of how much house you can afford. Furthermore, you’ll get an idea of your monthly mortgage payments and your short-term mortgage interest rates.
Protection: When you apply for a mortgage pre-approval, there is usually a 90-120 day protection against rising rates. In other words, pre-approvals lock-in interest rates and allow you to search for a home without worrying about interest rates increasing significantly.
Trustworthy: A pre-approved mortgage signals to sellers and real estate agents that you’re serious about buying a home.
Advantage: A pre-approved mortgage may be the deciding factor between you getting a home over another home buyer.
Free: Getting pre-approved for a mortgage is free, and there is no obligation to use the lender that pre-approved your mortgage.

3. What is the difference between pre-qualification and pre-approval?

Pre-qualification: During the pre-qualification stage of securing a mortgage, a lender will interview you to determine your income, expenses, and assets. The purpose of getting pre-qualified is to give you a rough estimate of how much house you can afford.
Pre-approval: During the pre-approval stage of securing a mortgage a lender will look through your income, expenses, and asset more thoroughly. A pre-approval is a more concrete estimate of how much house you can afford.

4. What if I don’t get pre-approved for a loan? Now what?

If you don’t get pre-approved for a loan, your lender can tell you why you were rejected. Lenders can also offer advice of how to get approved in the future.

For example, you may have to:

Build Credit: If bad credit was the reason you aren’t pre-approved, then pay off your credit cards and try not to miss your debt payments for the next 6-12 months.
Build Savings: Lenders usually want to see a significant amount of cash reserve in your savings account. Again, pay off your debts and try to save some money before applying for a pre-approval again.
Build Income: If your lender says that you don’t make enough income for a certain loan amount, either try applying for a smaller loan or, if you’re married, ask for a joint-loan with your spouse.
Build Employment History: Usually, lenders don’t like to see inconsistencies in employment history. Wait until you’ve been at the same job for two years before applying for a loan.

5. Does pre-approval guarantee a loan?
Pre-approval does not guarantee a loan. It is only a review of your qualifications for how much you might be able to borrow.

A buyer receives their pre-approval letters, searches for their dream home within their pre-approved amount, has their offer and financial structure accepted by the sellers, and then submits their proposal to the lender.

The lender then reviews the proposal, the buyer’s finance details, and the details of the property. If everything goes smoothly (i.e., the home doesn’t look like a money pit), the buyer will be approved for a mortgage.

However, the pre-approval letter alone does not guarantee a mortgage.

6. How long does it take to get pre-approved for a mortgage?

Depending on who you’re working with, you can get pre-approved for a mortgage in minutes. Sometimes all it takes is a phone call.

7. What impact (if any) will this have on my credit?

The short answer here is that it depends.

As mentioned above, lenders will look at your credit score and history to determine if you’ll be pre-approved. These are called credit report inquiries.

First-time home buyers usually don’t have to worry about inquires damaging their credit score. However, the more inquires your credit history shows, the more it can damage your credit score.

Inquires hurt your score because it shows lenders that you could be doing something with your credit that puts you at risk.

Step 4: Close on your home

Once you’re pre-approved for a mortgage, you can start the process of searching for a home, within your pre-approved amount.

The process of closing your home looks like this:
1. Application: The mortgage application involves submitting the documents outlined in step 1.

Time it takes: 1 day

2. Loan estimate: The lender analyzes your financial information and produces a loan estimate. A loan estimate describes the details of your loan including the terms and the predicted costs associated with your loan.

The loan estimate does not tell you if you have been approved for a loan. It simply estimates what your loan would look like if you’re approved and will help you determine if you would like to move forward with the mortgage application process.

Time it takes: The law states that you must receive your loan estimate 3 days after submitting your mortgage application.

3. Open a file: Your file is submitted to a loan processor who analyzes your financial documentation and property information. The loan processor places all this information into a loan package that is to be submitted to the underwriter.

Time it takes: 1 day

4. Loan underwriting: An underwriter analyzes your loan to determine the risk of approving your mortgage. Essentially, the underwriter is the key-decision maker and determines if you’re a good candidate for a loan based on the likelihood of you paying your mortgage each month.

The duties of an underwriter:

A. Assess: The underwriter assesses your risk by verifying that your credit, debt, income, and savings information is true. For example, they may call your employer to confirm that you do in fact work x amount of hours and are paid x amount of dollars.

B. Appraise: This is where the underwriter determines if your desired property’s price is comparable to the prices of similar properties. The purpose of the appraisal is to determine if the money you would like to borrow matches the value of the home you would like to purchase. If the appraisal is less than the loan amount, the underwriter will usually disapprove the mortgage or suggest another loan amount.

C. Approve or reject: The underwriter considers all this information and then approves or rejects your loan application.

Time it takes: 1-7 days

Pro Tip: The underwriting process generally takes longer and requires more documentation if you’re self-employed.

5. Mortgage Commitment: If the underwriter approves your loan, you are officially locked-into an interest rate.

Time it takes: 2-4 days

6. Closing: This is the step in the home-buying process where you sign all the necessary documents to own the home officially.

I read this article at: Open Listings

Got Real Estate Questions? The Caton Team is here to help.

Email Sabrina & Susan at: Info@TheCatonTeam.com

Call us at: 650-568-5522 Office: 650-365-9200

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Berkshire Hathaway HomeServices – Drysdale Properties

Sabrina DRE# 01413526 / Susan DRE #01238225 / Team DRE# 70000218/ Office DRE #01499008

The Caton Team does not receive compensation for any posts. Information is deemed reliable but not guaranteed. Third party information not verified.

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Don’t Deposit Large Sums of Cash

Don’t Make Any Large Purchases

Don’t Co-Sign Loans for Anyone

Don’t Switch Bank Accounts

Don’t Apply for New Credit

Don’t Close Any Accounts

In Short, Consult an Expert

Bottom Line

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Mortgage Forbearance Is Not All It’s Cracked Up To Be—Here’s the Ugly Truth

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Mortgage Forbearance Could Spark More Financial Woes

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The Difference Between Mortgage Deferment and Forbearance

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Summary: First-time homebuyer loans and programs

1. FHA loan

2. USDA loan

3. VA loan

4. Good Neighbor Next Door

5. Fannie Mae or Freddie Mac

6. Fannie Mae’s HomePath ReadyBuyer Program

7. Energy-efficient mortgage (EEM)

8. FHA Section 203(k)

9. State and local first-time homebuyer programs and grants

First-time homebuyer programs by state:

10. Native American Direct Loan

Learn more:

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How to get pre-approved for a home loan

Step 1: Gather financial information

Step 2: Select a lender to work with

Step 3: Get pre-approved

Step 4: Close on your home

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