Category: Home Loans

6 Tips for a Successful Loan Modification

Below is a great article I read from Inman News that I thought I would share regarding loan modifications.  Please enjoy…

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6 tips for a successful loan mod

Avoid rookie mistakes when preparing, submitting your document packageMillions of mortgage borrowers who can no longer afford their mortgage payments but can afford a lower payment can avoid foreclosure by getting a modification of their loan contract. While the path to a modification remains torturous, it is not quite as bad as when I wrote addressed the issue in a 2009 column.

Are you unqualified?

It is not possible for borrowers acting on their own to determine whether they qualify for a modification because they don’t have access to all the criteria. Some is kept under wraps by loan servicers. However, borrowers can determine that they are not qualified for a government-supported modification by accessing aquestionnaire provided by the U.S. Treasury Department.

Bear in mind, however, that servicers also offer modifications outside of the government’s program. You might qualify for one even if you don’t meet the government’s requirements.

Compiling the information the servicer wants

The single most important step in obtaining a loan modification is providing the servicer with the exact information the servicer needs to make a decision. Each servicer has its own set of forms that must be completed, and its own requirements for the documentation you must provide.

In my first stab at this problem, I placed the information required by each of the major servicers on my website. Now borrowers can access the DMM Document Wizard, provided at my request by Default Mitigation Management LLC, which is a lot better. Based on your answers to the questions it asks, you will be provided with a customized list of forms you must complete and documents you must provide. It is free and will take the guesswork out of what you need.

Don’t exaggerate your financial shortcomings

Warning: The servicer will examine your statements of income and expenses to determine whether you can afford a reduced payment. Exaggerating your financial weaknesses may open his heart but close his purse, if it makes you appear to be a lost cause.

Assuring accuracy

Having the right form is one thing, but filling it out correctly is something else. Some industry executives estimate that about 95 percent of all packages submitted are incomplete or contain errors. A package with obvious errors may fall to the bottom of the pile, or it may lead the servicer to conclude that you do not qualify for a loan modification when, in fact, you do. Remember what you were taught in second grade: Neatness counts!

In addition:

1. Use a cover sheet that identifies all documents in your package.

2. Write your name and loan number on every page.

Assuring delivery

Preparing an accurate and complete set of documents is one thing, but delivering the package to the servicer is something else. Servicer systems have been overwhelmed by requests for help, and documents routinely get “lost.” You want to minimize the chances of that happening to you.

Using fax or certified mail: Make sure you have the correct contact information. Treasury providesaddresses and fax numbers of every mortgage servicer. Certified mail is more reliable than fax, but neither guarantees prompt attention by the servicer, or even that the documents won’t subsequently be misplaced or lost.

Using the DMM portal: The best way to deliver documents to servicers is to use the DMM portal, available through the DMM Document Wizard by clicking on “Submit,” or visit www.dclmwp.com. I have no financial interest in DMM.

Using the portal, your documents are delivered to the servicer electronically, and the portal then becomes a direct communication channel to the servicer. The servicer uses the portal to acknowledge receipt of your documents and to request additional information or documents. You use the portal to make corrections, to send additional information, and to update yourself on what has been completed and what remains to be done.

Questions by you are automatically directed to the specific employee who can answer them. All communications are time-stamped and remain in the portal as a record of borrower/servicer exchanges.

Unfortunately, not every servicer subscribes to the DMM Portal. The list of those that do is shown on the DMM Wizard.

Follow up, and then follow up again

Because the process of modifying mortgages remains slow and error-prone, you may need to nudge the servicer. If you faxed your documents, you should follow up to make sure the papers haven’t been lost and the case is in an active queue. But even if you use the DMM Portal, you should follow up with the servicer regularly to make sure your application is on track.

By Jack Guttentag
Inman News®

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Shopping for the Best Interest Rates

THE lowest interest rates in decades sound enticing enough, but they are often out of borrowers’ reach.

Mortgage lenders adjust their rates based on perceptions of risk, so unless you can show you’re a low-risk borrower, you are unlikely to qualify for a rate that matches those seen in all the advertisements or headlines.

The rates quoted by Freddie Mac and others are averages drawn from a variety of financial institutions, and lenders use varied approaches to set them. As its base line, for instance, the Brooklyn Cooperative Federal Credit Union uses rates posted on the Credit Union National Association Web site for New York, according to Daniel Alejandro González, the credit union’s director of lending. Others, like Chase Mortgage, use markers like Treasury yields and agency mortgage-backed securities issued by Fannie Mae.

Consumers who want to try for the lowest rates available need to consider these basic factors.

CREDIT SCORE The ideal borrower has a FICO score of 740 or higher, said Thasunda Brown Duckett, the senior vice president of Chase Mortgage’s East Region. “That puts you in the best place for pricing,” said Ms. Duckett, whose office is based in Manhattan. According to MyFICO.com, borrowers in New York with scores of 760 to 850 could qualify for an annual percentage rate of 3.95 percent on a $500,000 30-year fixed-rate mortgage, while those with scores of 620 to 639 qualify for 5.53 percent.

POINTS The lowest rates usually are decreased by paying a fee called a point, or 1 percent of the loan amount. “You need to buy points in order to get the best rates at many banks,” Mr. González said. In Freddie Mac’s weekly survey on mortgage rates, points have averaged 0.7 percent on loans in the last year. Points might make sense depending on your financial situation and how long you expect to stay in a home. So ask for a zero point quote, too, and compare.

PROPERTY TYPES If you’re buying a duplex or a four-unit building, your rate will almost certainly be higher. Condominiums may also have a rate premium, especially if they are newer or your down payment is below 25 percent. Lenders charge more if you are not planning to live in the home. Commercial properties like apartment buildings have the highest rates, as they are considered riskier, Mr. González said.

DOWN PAYMENT Ms. Duckett says that borrowers who put down at least 25 percent are more likely to obtain “attractive pricing” at Chase. Lenders offer different breaks on rates if equity is higher, so you should ask what is available.

LOAN LENGTH A lot depends on how long you plan to live in a home. If you’re likely to move in a few years, an adjustable-rate loan with a low interest rate fixed for, say, three to five years, and adjusted afterward, might work best. Also, rates on 15-year fixed-rate loans are lower than those on the 30-year — 0.77 percentage points, on average, last year, according to Freddie Mac. “Some people may not need a 30-year mortgage,” said Jed Kolko, the chief economist of Trulia, the real estate information Web site.

Borrowers may also be able to reduce their mortgage rate when they enter into a “lock-in” agreement with a lender.

“Lenders typically offer a lower rate for a shorter lock period,” Mr. Kolko said.

Lenders typically agree not to change an offered interest rate for 60 days, but borrowers confident of a quick closing may be willing to accept a 45-day rate guarantee, or even a 30-day lock, in exchange for a small discount, because the transaction’s speed helps the lender reduce its risk.

Borrowers must make sure, too, that they consider the entire cost of a home, looking carefully at monthly payment calculations. According to Mr. Kolko, about a third of homeownership costs are in addition to the mortgage — among them property taxes, insurance, maintenance and repairs.

Article Shared via California Association of Realtors Newsletter and the New York Times

Got Questions? – The Caton Team is here to help.  Email us at Info@TheCatonTeam.com or visit our website at:   http://thecatonteam.com/

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Loan Limits Have Changed… check out this site…

For more information on the change in loan limits – visit the Fannie Mae webiste at:  https://www.efanniemae.com/sf/refmaterials/loanlimits/

-Sabrina

Got Questions? – The Caton Team is here to help.  Email us at:

Info@TheCatonTeam.com

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WHAT YOU NEED TO KNOW ABOUT UPCOMING CHANGES TO FHA LOANS

WHAT YOU NEED TO KNOW ABOUT UPCOMING CHANGES TO FHA LOANS

As you may know, unless Congress extends the expiration deadline, Federal Housing Administration (FHA) loan limits set in 2008 will drop significantly beginning October 1. Congress raised the loan limit amount in response to the housing crisis to help spur the homebuying market. FHA loans offer borrowers very competitive rates and terms, and they only require a 3.5% down payment. Allowable debt ratios are higher than the typical debt-ratio limits imposed for conventional loans, and there are no income limit qualifications, so more people can qualify for them.

If the loan limit drops on October 1, many California homebuyers will face higher down payments, higher mortgage rates and stricter loan qualification requirements. Borrowers seeking larger mortgages will have to apply for conventional loans or jumbo loans, which may be subject to higher interest rates and down payments. Here are four things you should know to help your clients now.

1. LOWER LOAN LIMITS. The conforming loan limit determines the maximum mortgage amount that FHA, Fannie Mae and Freddie Mac can buy or guarantee. If your client wants to stay under the current loan limits, then encourage them to purchase now and close by September 30th.

2. DROPS BY COUNTY. Under the new FHA loan limits, some counties will see significant drops in their loan limits. San Diego County will experience a $151,250 drop, Sonoma County a $141,550 reduction, while Orange and Los Angeles Counties will drop by $104,250. To see a full, county-by-county list of changes, click here.

3. JUMBO LOANS. The current FHA loan limit is $729,750. After October 1, that limit may drop to $625,500. Mortgage loans higher than that amount will be considered non-conforming jumbo loans, which typically have rates that are 0.875% to 1.5% higher than conforming rates, depending on the loan product, and require higher down payments.

4. MORE STRINGENT REQUIREMENTS. FHA loan requirements may allow for lower credit scores. So an applicant with a lower FICO score can still qualify for an FHA loan, even if they can’t for a conventional loan. Your clients may be able to obtain an FHA loan three years after defaulting or having a loan foreclosed.

Got Questions? – The Caton Team is here to help.  Email us at:

Info@TheCatonTeam.com

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NEWS – Changes in Conforming Loan Limits on the Horizon

There’s been a lot of talk in the news lately about the conforming loan limits on mortgages being lowered.  This affects all buyers, but in particular those in high price areas like the San Francisco Bay Area, where they will face higher down payments, higher mortgage rates, and stricter loan qualification requirements if conforming loan limits on mortgages backed by the Federal Housing Administration (FHA), Fannie Mae, and Freddie Mac are reduced beginning October 1, 2011.

Despite the Obama administration claiming it will support a one-year extension of the current higher loan limits, on July 1st Bank of America lowered their loan limits for all new loans and other banks will soon follow suit.

Background 

The current loan limits have been in place since February of 2008, when they were passed as part of the Emergency Stimulus Act.  Housing conditions have not improved enough to warrant letting the limits drop. Unless Congress acts, these loan limits will drop to 115% of the local area median home price.  For the San Francisco Bay Area the decline in loan limits would be more than $104,000 from the current loan limit of $729,750 to $625,500.

Housing Markets are Rebounding, but the Recovery will be Slow.

With tight underwriting constraining mortgage availability, lowering the FHA/Fannie/Freddie loan limits will only further restrict liquidity. Even with the current higher limits, borrowers are finding it more and more difficult to obtain affordable mortgage financing. Making the current limits permanent at levels appropriate in all parts of the country will provide homeowners and homebuyers with safe, affordable financing and help stabilize local housing markets.  It will allow homebuyers in higher cost areas (such as the San Francisco Bay Area) to have access to affordable mortgage financing and not find it necessary to fall into a Jumbo Loan category with even higher interest rates.

The Caton Team, as well as other REALTORS® nation-wide, have contacted Congress and communicated clearly that a housing recovery depends on keeping mortgages affordable and that Congress needs to prevent these lower loan limits from taking effect.

We’ll keep you posted on what transpires as the weeks progress.  We’ve got our fingers crossed too.

We are dedicated to our industry and making the American Dream of home ownership attainable for all.  What can we do for you?

Got Questions?  The Caton Team is here to help.  Email us at Info@TheCatonTeam.com or visit our website at http://thecatonteam.com/

Please enjoy my personal journey through homeownership at http://ajourneythroughhomeownership.wordpress.com/

Ready to Get Pre-Approved? Here is your checklist…

The first step in becoming a home owner is getting pre-approved for a home loan.

These days, a  minimum of 3.5% is required  for FHA loans up to $417,000.

Otherwise you’ll needed between 10% and 20% for a down payment for purchases above $417,000.  Depending on your financial picture.   Note you will also need about 3% of your purchase price for closing costs.  We’ll review what closings costs are when we sit down together.

Before you contact a lender, gather the following items:

  • 3 months worth of pay stubs per person or other proof of income
  • 3 consecutive & most recent months of Bank Statements:  Checking, Savings, IRA’s, 401k, Retirement & Investment Accounts
  • Most recent Tax Return
  • Social Security numbers

To prepare for your appointment, take time to calculate your monthly/yearly household budget and determine you comfort level.  This will help you decide whether or not purchasing a home is right for you and your family.  Prepare a:

  • Household Budget
  • Bills & Expenses Budget
  • Future Budget factoring in your new home expenses.

We are here to help you each step of the way.

Got Questions – we’re here to help.  Email us at Info@TheCatonTeam.com or visit our website at http://thecatonteam.com/

 

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All That Real Estate Jargon

When considering the purchase of a home many factors come into play. Budget, Goals, Needs and Wants are all key players when deciding your next step.

Here are a few things to remember and consider:

Determine your Budget. Lenders will allow up to 30% of your monthly income to go to all debt. That includes your car loan, student loans, credit card debt and the mortgage.

When talking about your monthly mortgage payment – we uses the term PITI:

PRINCIPLE: How much of your monthly payment that goes towards your loan principle

INTEREST: How much of your monthly payment goes towards your interest rate

TAXES: Property Tax is 1.25% of your purchase price (and rises yearly), we divided it by 12 and add it to the monthly cost of homeownership. (It is actually paid in two installments, Feb & Nov)

INSURANCE: A home or condo needs homeowners insurance, we estimate the yearly premium and add the monthly cost to the total.
This gives the borrower and accurate picture of the monthly cost of the home, even though many of the payments are annual or semi-annual.

DOWN PAYMENT: These days a borrower needs a minimum of 3.5% for their down payment to qualify for an FHA loan. FHA loans do have strings attached and Private Mortgage Insurance is an expensive cost of putting less than 20% down. It’s best to sit down with a lender to discuss your loan options. We have several trusted lenders you can work with.

CLOSING COSTS: Many borrowers expect the need for a down payment but do not understand what “closing costs” are. Closing Costs are the fees associated with purchasing a home. Closing costs run about 3-4% of your purchase price and must be liquid and available. Closing Cost Fee’s included:

Lender Fees: Costs for your loan, including but not limited to, appraisal fees, credit report fee, points (1% of loan amount to pay down your interest rate up front), doc prep, underwriting, administration fees, and wire transfers to name a few.

Title & Escrow Fees: When purchasing property you will also purchase two Title Insurance Policies to ensure the property is yours and no one can stake a claim to your property. The Title & Escrow companies also charges Escrow Fees for handing the monies, loan docs, and recording the property with the county.

Inspections Fees: There are also fees that are paid outside of escrow, such as Inspections on the property that are often given a discount if paid at time of the inspection.

Gift Funds: When a borrower is receiving monies for the home as a gift, the lender will require a paper trail, including a Gift Letter signed by the person giving the gift expressing the money is not a loan and will not expect the money to be paid back. Also, it is best to get that Gift Money upfront to “season” the money in the borrowers bank account. Banks like to see 3-6 months of “seasoning”.

Got Questions – we’re here to help.  Email us @  Info@TheCatonTeam.com or visit our website at http://thecatonteam.com/

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