If You’re Holding Your Breath for 4.75% Interest Rates, You’d Better Read This First 

 The last few weeks in the mortgage industry have been a flurry of activity to say the least.  Mortgage Professionals have had little chance to dial out and reach our clients.  With all the incoming questions about refinancing or picking up the pace on finding a new home and take advantage of great rates, it’s all we can do to keep up with the inquiries.  (No complaints mind you-can I get a Hallelujah?)

The persistent question is, however, “Where is the 4.5% rate I’m hearing about?  Can’t I at least get 4.75% rates?” 
Answer:  “YES!” 
Addendum:  “It’s gonna cost you to get it”

Case in point, I had a long standing client call to tell me that a bank affiliated with his insurance company called to offer him a 4.375% 30-year fixed loan, with $0 closing costs.  He was going to take the deal over my offer of 5.25% 30 year fixed with $0 closing costs.  I called him back immediately and told him if he could truly get that deal, he should SIGN the paperwork NOW!!  I couldn’t offer him the same deal and if they were serious, it wouldn’t last long.

I offered him one last bit of free advice.  He was, after all, a good client and I couldn’t help but look out for his interests.  “Get a Good Faith Estimate” I told him.  I’d be happy to look it over with you and review it for you at no charge.  Just to make sure you’re getting what you deserve.  His credit is stellar, assets in fine shape, loan to value low.  He ought to get a great mortgage…he’s earned it.

He called me three days later to say he saw the GFE and it included $6,000 of (supposedly free) closing costs rolled into his loan.  His rate in writing on the GFE was now 5.375%. 

Rolling closing costs into the new loan is not uncommon.  Portraying it as “no cost” to the client is misleading.  Unless the bank is paying or the Mortgage Professional is paying, the borrower is going to pay for closing costs over time included in the new loan.  Hint:  Always verify the APR statement or Truth In Lending to check this.  If you don’t know how to evaluate what you’re really paying, ask an experienced Mortgage Professional to explain it.  It’s important.  (As a gesture of good will and thanks for my client’s continued business, my original offer was to cover his closing costs out of the commissions I was being paid from the lender.)   

Quoting someone a 4.375% is also acceptable, so long as it’s explained what it will cost to “purchase” that interest rate with discount points.  At the very minimum, it must be explained that this is a BASE rate.  Each and every change in the “standard” conventional loan process COSTS THE BORROWER in interest rate.  These are called pricing “add on’s” and they can hurt.  Increasing my client’s loan amount, for example as this bank did, raises the loan to value and costs a bump up in interest rate.  His closing date was going to be 60 days away.  That sort of delay also COSTS THE BORROWER in interest rate.

Unfortunately, advertised rates are not the final rate you will get, once all the factors to suit your INDIVIDUAL needs are put into the equation.  You must have a Mortgage Professional who will look at your whole situation and offer you options on what will suit your objectives.

Bottom line is, we weren’t looking at an “apples to apples” offer.  And it didn’t turn out to be what he’d been promised.

Result?  He’s still my client and my offer at 5.25% with $0 closing costs (for real) turned out to be a pretty darn good deal for him.

Having a Mortgage Professional who will give you the most HONEST answers is critical, especially today.  It’s important to know that person is working in your best interest.  Even if it means telling you to take the competitor’s deal when it serves you.  There are so MANY variables in today’s mortgage market, even the most savvy borrower can’t keep up with them. 

In today’s lending environment, staying abreast of underwriting changes is as challenging as keeping up with the tax code.  Even more difficult to be realistic.  Make certain you work with someone who is constantly informed and can educate you.  Uneducated mistakes will cost you not just at the closing table, but for the life of that loan.  Feel free to browse my website at www.LoansByAprille.com to find useful information such as this at your fingertips.  Or contact me directly at (314) 363-3913 or Aprille@LoansByAprille.com to get answers to your questions.

There IS 100% financing.   MHDC funds, organized and funded by the Missouri Housing Development Commission, offers the First Place program.  Currently, there remains over $11million dollars available to Missouri residents who qualify. 

How it works:

• First Place program supplies the 3% down payment funds at closing for the Buyer.
• Simple application process – you apply through your trusted mortgage professional.
• Funds are disbursed in the form of a second mortgage on the property.
• Applies to first time homebuyers and qualified veterans.
• First Place loan is a 30 year fixed rate mortgage.
• It’s used in conjunction with FHA, VA, USDA loans and is Fannie Mae qualified.

So what’s the catch?

• Not all lenders are approved (so you’ll need to ask up front).
• The interest rate is set by the government (right now, that’s a good thing).
• There are maximum income levels and maximum purchase prices (check with your lender).
• You must live in the home for a period of five (5) years (or repay the balance at sale).
• It’s a loan and not a grant – however, it’s still forgivable after five (5) years.
• There may likely be other tax ramifications (ask your tax expert).

So what’s the message to you?  There are still many options available if you are serious about buying a home right now.  It’s a fabulous time to purchase your new home and get a great deal.  The question is…what are YOU waiting for now? 

For more information on the MHDC loans, you can go to the website at http://www.mhdc.com/ or you can contact your mortgage professional directly.   I’m also available to answer your inquiries at Aprille@LoansByAprille.com  or (314) 363-3913. Once you’re pre-approved for MHDC funding, call your Realtor and get out there house hunting!

Greetings…
I’m Aprille Trupiano and I’m excited to be a part of the St. Louis Real Estate Voice community!

In today’s volatile financial market, it’s important to have expert advisors supporting your most important decisions. Along with the other professionals on the St. Louis Real Estate Voice, I look forward to contributing to those decisions for you and your family.
As a Mortgage Banker, I approach each and every consultation with my Borrowers bearing the same principal in mind – to provide sound information that is relevant to my clients’ future. I am not interested in “closing the deal” today to get you a loan that will “just do”. Today more than ever, you have to know how your financial decisions will impact you tomorrow. I am committed to securing you a mortgage that will serve your needs today as well as protect you and your family in the future.
Call me at (314) 878-7900 or email me at Aprille@FirstIntegrity.com  to get a complimentary copy of my Special Report, “How to Select a Personal Mortgage Consultant and Why Having One is Important to Your Future”. There’s no fee for the report, but being misinformed can be very costly.

For all my Anheuser-Busch friends, clients and those Financial Planners helping them make the decision on whether or not to take the early retirement offer that has been sent to them.  If they are considering restructuring their debt or refinancing, they need to do that prior to accepting the early retirement.  Once they have accepted the package, their probability of continued employment has ended, even if they are going to be employed at the time the loan closes.  Any severance package that includes income, if the income is not going to continue for 3 or more years will not be used for qualification purposes when attempting to get approved for a loan.  In the current underwriting climate, underwriters are getting better at doing their job and with all of the news coverage of the proposed merger, I would hate for someone to have a loan denied because they did not plan ahead.

For questions or comments, please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.

Tags: St.+Louis+Real+Estate, Early+Retirement, severance+package, mortgage+news

Consider a Seller Concession…

Lowering the price of your home may sell it more quickly, however offering certain incentives can actually be much less expensive and may be more effective. Major impediments to home purchase include the lack of cash and lack of income to qualify. How can you help?

For example, if your home is listed for $300,000, you can offer…

Three percent towards the buyer’s closing costs. This will lessen the cash necessary for the purchase. For example, if they are obtaining an FHA mortgage, you may have just cut the cash requirement in half!

Three percent towards a temporary buy-down of the interest rate.  In this case you would be helping the purchaser pay a lower rate in the early years of the mortgage, without the long-term risks of an adjustable rate mortgage.  A “2-1” buy-down off of a thirty-year fixed rate at 6.0% would give the buyer a 4.0% rate in the first year and a 5.0% rate in the second year. The mortgage payment would be reduced by approximately $200 or more than 10% for the first 12 months. Now more buyers can “afford” your home.

It might seem that $9,000 to $18,000 of “concessions” are expensive and certainly they are. However, .compare these numbers to the cost of lowering the price by 10.0% ($30,000) to make the house sell faster. A well-placed concession could be less expensive and make the home sell faster.

The Brother Team
Jeff, Doug, Chip, & Rachel

Gorman & Gorman Home Loans

Direct Phone: (314)812-0374

jbrother@gorman-gorman.com

Tags: St.+Louis+Real+Estate, Home+Sellers, Seller+Concessions, Gorman+and+Gorman

On July 30, 2008, President Bush signed into law the “Housing Assistance Tax Act of 2008” (the Housing Act).  It includes a $15.1 billion package of housing tax incentives.

Part One

Property Tax Deductions for Non-Itemizers

The Housing Act created a new, temporary property tax deduction for non-itemizers (i.e., for taxpayers who claim the standard deduction rather than itemizing their deductions).

Highlights include:

• The provision creates a new standard deduction for state and local real property taxes paid by non-itemizers. Since most homeowners who are paying on a mortgage have enough deductions (e.g., mortgage interest and property taxes) to justify itemizing them on their return, this new provision chiefly benefits homeowners who have paid off their homes.

• The deduction is currently only available for tax years that begin in 2008.

• The amount of deduction will be as much as $500 for single filers and $1,000 for joint filers. Since this is a deduction and not a credit (i.e., a dollar-for-dollar reduction in tax liability) the actual tax benefit will not be all that substantial.  For example, it only proves a maximum of $100 to a couple in the ten percent tax bracket and $150 to a couple in the fifteen percent bracket (and only $50 and $75, respectively, to singles in those brackets).  Granted, in this economy every little bit helps.

Part Two

Credit for First-Time Homebuyers (to be continued)

 Chris Scheer can be reached at chrisscheer@stlouisrealestatevoice.com

Here we go!

It is actually going to happen! 
The new rates for the 2008B are as follows:

CAL for Government loans 6.9%

NON CAL for Government loans 6.45%

CAL for Conventional loans 7.3%

NON CAL for Conventional loans 6.85%

The window for reservations will open at 8 am on Monday August 4th.  As soon as you have a confirmed reservation you may close loans.  All loans in this bond issue will be sold to the new master servicer US Bank.  Training with the master servicer will start on Tuesday August 5th in Columbia and on Wednesday August 6th in St. Louis.  I will go over the changes to the program in depth at the training but I will state the changes briefly in this email.

Rates
As you can see we will have 4 rates instead of 2 due to the conventional market.  Only Fannie Mae’s My Community Mortgage or Freddie Macs Home Possible programs can be used with this bond issue. There will be no charge of 1.25% for LLP and adverse market fee in this issue only.  However, there will have to be a $175 servicing fee charged to the borrower for the all CAL loans.

Down payment Assistance
As you can see I have changed the acronym from CAP to CAL.  This stands for Cash Assistance Loan and will help differentiate between the two programs.  The assistance will still be 3% of the loan amount but it will be in the form of a soft second mortgage that will be forgiven over a 5 year period.  The loan will actually diminish 1/60 per month over the 5 year period.  The borrower will then be given a 1099 every year for the amount that was forgiven that year and will have to claim that as income on the federal tax return.  If the borrower sells or refinances the loan in the first five years the remainder of the amount will have to be paid back. We have been discussing the just-enacted housing stimulus bill with FHA staff and they told us today that the just-enacted housing bill does not impose a 100% CLTV cap on FHA loans.  It imposes a 100% LTV cap on the FHA-insured first mortgage and requires the FHA mortgage insurance premium to be counted toward the LTV ratio for purposes of the 100% cap. HUD will continue to allow second liens from state housing agencies that result in CLTVs that exceed 100%.

Chris Scheer can be reached at chrisscheer@stlouisrealestatevocie.com

The wonderful thing about interest rates is that you never can truly predict what direction they are heading in.  For those of you that read my last post about rates going down, you at this point think I am a complete fool!  At some level you might be right; however the same pressures that existed when I wrote that article are still there.  They just have had some short term relief and the usual unpredictable influences that occur from time to time affect them.  Let’s talk about where we were, where we went and where we are now?

Two weeks ago today our 30 year fixed on a conventional loan was about 6.75%.  It was then that I started the article on rates dropping.  Throughout that week the rates started to fall, so much that on Friday morning of that week I locked in a purchase at 6.125% on a 30 year loan.  Around 1:00 that day it was announced that the Fed was stepping in and taking over Indy Mac bank. At that point our rates jumped up to 6.375%. 

The following Monday the market remained calm, and rates did not move.  Then on Tuesday oil prices started to drop and over the next two days oil fell over $10 a barrel.  All of a sudden Wall Street showed improvement in stock prices and the 6 week slide was halted.  That meant that money was flowing back into stocks and out of bonds.  Remember your economic lessons of previous posts, when the demand goes down the price goes down.  On bonds when the price goes down the yield (interest rate) goes up.  So by Friday of last week we were back to 6.75% on a 30 year loan. 

As we start the week, we have oil starting to climb again and one of our two Presidential Candidates trying to move troops to Afghanistan to fight the War on Terror.  As long as we are fighting Wars, we are going to have challenges controlling our markets.  These wars are costing us BILLIONS and we are paying for that with borrowed money.  Sooner or later that will have a negative effect on our economy and we will see rates come down.

For questions or comments about this please contact Chris Scheer at chrisscheer@stlouisrealestatevoice.com

Tags: St.+Louis+Real+Estate, St.+Louis+Mortgage+News, Indy+Mac

Goodbye Countrywide and Goodbye to their step brother Indy Mac

The Federal Reserve stepped in and took over Indy Mac bank on Friday. 

This comes as no shock to members of the mortgage industry as recently Indy Mac announced it was ceasing its retail mortgage operations.

So why do I call Indy Mac Countrywide’s step brother? 

For years Indy Mac mirrored all the lending programs that Countrywide created, almost to the point where unless you looked at the login page when you were visiting their site, you could not tell the 2 companies apart.  There were times when Countrywide would announce a change in a program or guideline and within hours the same change would be announced at Indy Mac.  From an originators standpoint, it was comical how the two companies mirrored each other.

When Countrywide was hammered last year and the Fed stepped in to rescue them Indy Mac started to take on a life of their own.  They for the first time were the first of the two companies to change programs and products reducing their exposure and tightening their lending practices.  It was because of these efforts that they managed to last as long as they did.  If it were not for comments made by Senator Schumer  they may have managed to right their ship and avoid the Fed taking them over.

So why does the Fed rescue one company and take over another?  Stock penetration and price.  If Indy Mac would have had the numbers of shareholders that Countrywide had world wide or even Bear Stearns, they would have been rescued as opposed to taken over. 

For Questions or comments, please contact Chris Scheer at chrisscheer@stlouisrealestatevoice.com

Tags: St.+Louis+Real+Estate, St.+Louis+Mortgage+News, Indy+Mac, Countrywide

 

 We are on the Cusp! by Chris Scheer, Cornerstone Mortgage, O’Fallon MO

Undeniably the stock market has become a Bear market.  That means that the Dow industrial average is down more than 20%.  Sooner or later, those investors are going to start to move to safer investments.  What are safer investments you ask?  Well I am going to suggest that Mortgage Backed Securities are safer investments.  For the last 12 months, this investment has been out of favor with everyone from institutional investors to foreign investors.  As housing prices have fallen drastically on both coasts the middle of the country has done a good job of holding value.  The Countrywide Mortgage debacle has turned a corner and is now Bank of America’s problem.  The Fed has not had to rescue any more mortgage companies for the last 30 days.  Second quarter earnings are being reported this week and by now all the major companies have figured out that they cannot hide the losses from the mortgage mess, so those will be dealt with in these reports. 

That leaves us with mortgage backed securities in position to be an attractive investment again; especially the Ginnie Mae government loans.  With over 70% of all loan applications that I am taking right now being for FHA or VA loans, I am confident that most other successful originators are doing the same.  This will create a huge supply for these investments and the hawkers of these securities will have the product to sell and most of these properties will not be those that are going into foreclosure but being bought out of foreclosure by people who have the means and desire to make their mortgage payments.  Sooner or later, Wall Street is going to start moving these securities and then the laws of economics will take over.  As demand goes up so does price.  On a bond, for those of you that don’t remember, when the price goes up the yield (see interest rate) goes down.  Thus, even though there is discussion of the Fed raising short term interest rates, what they really are hoping for is that the lowering of short term rates that they did months ago will finally take hold on the long rates and we will see the 30 year fixed rate get below 6% again.

Now I realize that this is optimistic thinking on my part, but if you listen to the doom and gloom prognosticators out there saying that the economy and the stock market are still in for tougher times, someone has to be willing to bet on the bond market.  Today I am that person!!!

For questions or comments on this please contact Chris Scheer at chrisscheer@stlouisrealestatevoice.com

Tags: St.+Louis+Real+Estate, St.+Louis+Mortgage+News, Bear+Market