Success Stories #2

August 25th, 2010 by Mortgage Master Luke No comments »

Over the last few months, The Kunselman Team has had the opportunity to work with some wonderful clients with unique situations, and was able to get them the perfect mortgage solution to fit their needs.  We would like to highlight a few of these situations here.  The names have been changed but the scenarios are real.

Client #1 John
John is a single dad with two kids heading off to college over the next 3 years.  John owns two properties (his home and a rental condo).  The condo currently has a 15 year first mortgage and a HELOC.  The rent he receives for the condo is less than what his two mortgage payments are so every month, he has a negative cash flow.  He has been making the payments just fine but realizes that with the upcoming expense of college, he needs to better his monthly cash flow.  The solution that The Kunselman Team found for John was another 15 year mortgage that lowered his payment enough so that he now has a positive cash flow on his rental property.  The refinance of this investment property did not require an appraisal.  John also refinanced his home at the same time.  The combined monthly savings of both properties was $415/month.  This will help John substantially in the next few years.

Client(s) #2 Jim and Sarah
Jim and Sarah have been in their home for about seven years.  They have looked into refinancing in the past but because of flat or declining home prices in their neighborhood, it just never made sense.  The Kunselman Team found a new loan program that would not only reduce their monthly payments but shorten the term of their loan by three years.  In eight years from now (when they may be moving) they will have an additional $22K in equity as a result of going with a 20 year mortgage, instead of another 30 year.  In addition, this refinance require no new appraisal for Jim and Sarah.

Client(s) #3 Fred and Mary
Fred and Mary bought their home just over two years ago.  They had good credit and because of their unique situation, they had to do a stated income loan to purchase the home at a rate of 6.375%.  They were concerned that they would not qualify for a refinance since the last time they applied for a mortgage, they were stated income borrowers.  The Kunselman Team reviewed their tax returns thoroughly and were able to show enough income so that Fred and Mary were able to lower their interest rate to 4.50%.  This lowered their monthly mortgage payment $200.

These are just a few examples of the unique situation that The Kunselman Team has come across in the last few months.  The only thing that is certain anymore is that EVERY LOAN IS UNIQUE! Give The Kunselman Team a call to see if we can help with yours.

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What Does It Really Take to Qualify for a Mortgage Now?

August 25th, 2010 by Mortgage Master Luke No comments »

The majority of the mortgage news you hear about these days has to do with how low the rates are and that it is a great time to refinance.  While this is true, these low rates also make it a great time to buy a home.  I thought this might be a great time to review really what it takes to buy a home in our current market.  When working with a client, The Kunselman Team review five key components: Property, Assets, Credit, Income and Transaction or PACIT.  If you want to buy a home, here is what your PACIT needs to look like.

Property: This one is really straight forward but there are a few key points to address.  The property has to be livable, you can’t buy a dump.  Additionally, a property has to appraise for what you have offered for it.  Very unique properties or the largest in the neighborhood can sometimes have trouble with this but a skilled REALTOR can help you with this.

Assets:  FHA loans require a 3.5% down payment or $7,000 for a purchase price of $200,000.  (Note: there is a program that does not require a down payment but it is both income and location restricted. Contact us for details.) Lenders will also sometimes require reserves in addition to your down payment.  Reserves are monies you have left in the bank after your down payment that can be used to help cover unexpected expenses so you don’t miss your mortgage payments.  FHA does not have a reserve requirement but most conventional loans require at least two months of reserves and the more reserves you have, the stronger your loan application becomes.

Credit: You have to have a minimum credit score of a 620 to get a new mortgage now a days.  In addition, to the score, you will usually have to have at least three trade lines reporting to the credit bureaus for at least 6 months but sometimes as many as 12 months. These trade lines are things like credit cards, card loans, student loans.

Income: Income has to be documentable for it to be counted on a mortgage application.  The type of documentation varies with the type of income but a few examples are pay stubs and W-2s for employed borrowers, tax returns for self-employed borrowers, Stamped court papers and proof of receiving the funds for child support and alimony, and award letters for pensions and social security.  The income you have is used to calculate your debt to income ratios or DTI. There are two ratios that are looked at, a front end or housing ratio and a back end or total debt ratio.  The typical ratios a borrower needs to work within are 29/41. If you wanted to buy a $200K home, you (and all borrowers) would have to document about $55K a year income.  That is one borrower who makes about $26.50/hr or two borrowers that each make $13.25/hr.

Transaction: A purchase or refinance.

If you think you might be ready to buy a home, give us a call. Rates are REALLY good right now.    Let The Kunselman Team find the right mortgage to fit your needs!

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Important FHA Changes

August 11th, 2010 by Mortgage Master Luke No comments »

On August 5th, 2010, Congress passed H.R. 5981.  This bill gives FHA the authority to change its annual mortgage insurance premium rate.  That same day, David Stevens (FHA Commissioner), came out and stated that FHA plans to increase their annual MI rate for all new FHA loans that have a case # effective September 7th, 2010.  The current rates are .50% & .55% and they plan to raise these to .85% & .90%.  Stevens also confirmed that FHA would hold true to its promise to simultaneously lower its upfront premium.  Currently the upfront premium is 2.25% and Stevens says it will be lowered to 1.00%.  These actions are designed to help FHA increase its reserves which Stevens states are “perilously low.”

FHA claims that this will save the consumer money but that seems unlikely.  It is hard to increase the revenue for HUD and lower the cost to consumers simultaneously.  Let’s take a look at an example of a $200K purchase price with an interest rate of 4.50%.

Current

Purchase Price $200,000

Base Loan Amount $193,000

Adjusted Loan Amount $197,342 (includes upfront MI @ 2.25%)

Principle and Interest (P&I) $999.91

P&I + Mortgage Insurance (MI) $1090.35 (MI rate of .55%)

After Changes

Purchase Price $200,000

Base Loan Amount $193,000

Adjusted Loan Amount $194,930 (includes upfront MI @ 1.00%)

Principle and Interest (P&I) $987.68

P&I + Mortgage Insurance (MI) $1133.88 (MI rate of .90%)


As you can see from above, the consumer does start out with a lower loan amount because of the smaller upfront premium (that is usually financed into the loan, e.g. the consumer doesn’t pay it out of pocket), but because of the large increase in their annual premium, the consumer ends up paying $43.43 more per month.

Fortunately, the Deputy Assistant Secretary Vicki Bott announced on Tuesday August 10th that FHA would delay the change from September 7th to October 4th to help the industry get these changes made in their systems.  So if you are considering buying or refinancing your home with an FHA mortgage, you need to get moving fast or it is going to cost you.

If you would like to read either of the the two letters reference above please click the links below.

David Stevens’ Letter

Vikki Bott’s Letter

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Success Stories #1

July 30th, 2010 by Mortgage Master Luke No comments »

Over the last few months, The Kunselman Team has had the opportunity to work with some wonderful clients with unique situations, and was able to get them the perfect mortgage solution to fit their needs.  We would like to highlight a few of these situations here.  The names have been changed but the scenarios are real.

Client #1 Jane
Jane is recently divorced.  Per the separation agreement, she would keep their primary residence as her home but she would be required within the first year to refinance the first mortgage on the property into only her name.  This stood to be difficult because of the 2nd mortgage that the couple had taken out on the property.  Between the two mortgages, they owed more than the home was worth.  The solution for Jane was that The Kunselman Team was able to refinance the first mortgage through the Fannie Mae DU Refi+ program into only her name as well as lower her interest rate and payment by 1.316% and $203 respectively.

Client(s) #2 Todd and Stacey
Todd and Stacey had refinance their home a couple years ago into a 5/1 Adjustable Rate Mortgage.  They had felt at the time that they would only be in their current home for about three to four more years.  Two years into that plan, it had become very clear that they would not be moving any time soon.  Their concern was that the rate they got two years ago on their current mortgage was really low.  They couldn’t take the payment shock of a large increase in their interest rate.  The solution was that The Kunselman Team was able to refinance Todd and Stacey into a 30 year mortgage at the same interest rate as their previous 5/1 ARM with a no cost refinance.  Their monthly payments did not go down significantly, but they now had the comfort and security of a 30 year mortgage.

Client(s) #3 John and Sherry
Last November, John and Sherry went to their existing lender to inquire about a refinance.  Their existing mortgage was a 30 year fixed with no mortgage insurance on it.  The lender required that a new appraisal be done on the property and unfortunately the value came in lower than expected.  With the new value, the only option their lender had for them was a new 30 year mortgage with monthly mortgage insurance on it, which would negate most of their savings from the lower interest rate.  Frustrated and out the lenders application and appraisal fee they decided not to refinance.  A couple months later, John and Stacey were referred to The Kunselman Team by a friend.  It turned out that John and Stacey’s existing mortgage was owned by Fannie Mae and they were qualified to do a refinance with no appraisal required and now monthly mortgage insurance.  Todd and Stacey’s new mortgage was 1% lower, had a shorter term and still saved them $33 a month in their payment.  The real irony to this situation is that The Kunselman Team closed John and Stacey’s new mortgage with their same previous lender that had told them no a few months prior.

These are just a few examples of the unique situation that The Kunselman Team has come across in the last few months.  The only thing that is certain anymore is that EVERY LOAN IS UNIQUE! Give The Kunselman Team a call to see if we can help with yours.

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FHA Streamline Refinance

July 30th, 2010 by Mortgage Master Luke No comments »

If you currently have an FHA Mortgage on your home, you may qualify to save hundreds of dollars on your monthly mortgage payments.  As with the Fannie Mae and Freddie Mac programs that we have been talking about for the last few months, you may not have to have an appraisal.  In addition, this program does not have any debt to income ratio requirements.  As long as you have not had any late payments on your mortgage (more than 30 days) in the last 12 months, you may very well qualify for an FHA Streamline Refinance.

The biggest differences within this program are determined by whether or not an appraisal is done.  If you are like me, the first question that comes to mind is, “If it is not required, why would you do an appraisal?”  If you decide NOT to do a new appraisal, the new refinanced loan cannot add any of your closing costs to the new loan balance (except odd days interest).  That means that you would either have to have your closing costs covered by the lenders wholesale credit or you would have to bring money to closing.  This option is actually a great value for many borrowers.  Particularly if you feel that your home’s value has declined since you took out your last mortgage.  Rates are so good right now too that you could probably get a rate in the 4% without having to bring more than one month’s payment to the closing table.  If you choose to get a new appraisal during the loan process, you will be allowed to roll any necessary closing costs into the loans so you can maybe get a lower rate without the out of pocket expense.

The other thing to remember with FHA mortgages is the up front mortgage insurance premium.  This is the amount collected by FHA upfront and is usually rolled into the new loan. (Please note that if you choose to use the no appraisal options, this is not a cost that can be rolled in.)  The good news is that on an FHA Streamlined refinance, you will get a portion of your existing upfront mortgage insurance credited back to you.  If you have had your FHA mortgage for a short period of time, the percentage of your credit will be high and the opposite is true too.

Rates are REALLY good right now.  If you have been thinking of refinancing your current home or buying a new one, now is the time.  Let The Kunselman Team find the right mortgage to fit your needs!

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Everyone Has an Opinion, But Which Ones Really Matter?

June 2nd, 2010 by Mortgage Master Luke No comments »

It is human nature.  Everybody wants to seem like they know what is best for other people.  This is never more true than during the process of purchasing or refinancing a home.  If you have ever purchase or refinance a home, you have probably experienced this.  As soon as you tell someone that you just got a contract accepted on a home, someone tells you that you should have got it for less. Or you tell a friend that you just locked in a great new interest rate, and they tell you that they hear that someone you’ve never heard of just got a better one.

Now most of the time, friends and family aren’t trying to crush your spirit or make you feel bad about your decision, they are just trying to look out for you. But would you go to your auto mechanic and ask him a medical question?  Of course not.  You would ask your doctor for his professional opinion.

Now sometime, the opinion is coming from a “Professional” (another REALTOR or Mortgage Originator).  It is important to look closely at this opinion though.  First, is this person just some random professional or someone that you know and trust? If it is, then why aren’t you working with them in the first place?  Everything else being equal, you should always work with the person you know and trust! Second, how much do they know about your personal situation?  Someone who says they can get you a better interest rate, without knowing the detail of your scenario, is just making empty promises.

You choose to work with your REALTOR and/or Mortgage Broker for a reason. If you have lost cost or trust in them, you better make sure that you have full confidence in the new professional because changing mid-stream can be costly if not done right.

As always, if you would like to work with a team of Mortgage Brokers that you Know and Trust, give The Kunselman Team a call.

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Top 10 Terms You Should Know about Mortgages

May 4th, 2010 by Mortgage Master Luke No comments »

Everyone knows that you should never sign on the dotted line without reading the contract.  This same term applies to loans.  Signing a loan without knowing the terms and what everything means can be detrimental to your finances, credit and future investments.  Before you sign on the dotted line, make sure that you know these terms and how they will apply to you.

1.  Interest rate.  The interest rate is the percentage of your loan that is added on every month.  The percentage will vary according to the economy and will make a difference in your payments.

2.  Fixed Rate.  A fixed rate will be an interest rate that stays at the same percentage throughout the entire period of your loan.

3.  Variable Rate.  A variable rate will change according to the economy and the charts that are stating what the rates should be for interest.  A variable rate usually changes every year and adjusts according to a specific given range of percentages.

4.  Principal.  The principal is what you will be paying on your actual house.  Whatever you pay on your principal is what you will see in the end as your investment.

5.  Escrow.  This is similar to a savings account of your loan.  Whatever you put in escrow will accumulate without paying directly into the loan.  At the end of the term you can use it to finish paying off the loan or to invest in another loan.

6.  Title.  A title will be what you get to your home after it is officially yours, stating that the property belongs to you.

7.  Deed.  A deed will most often be used as a title for a commercial area.  Instead of giving ownership it shows that the property is leased to the one who is using it as a business.

8.  Home Equity.  This is a loan or line of credit that you can get for your home.  It will finance up to eight percent of your other loan and get paid back later.  This helps if you want to consolidate loans or invest more into the property.

9.  Appraisal.  After an inspection of the home is made, an appraisal will be made.  This will be an estimated value of what the home is worth.

10.  Equity.  This will be the actual amount of the property that you own.  Most likely, it is what is being paid off of your principal amount.

Once you know some of these basic terms, you will be able to expand on your knowledge and find the exact loan that will fit your needs.  These basic definitions will help you in making the right decision for the type of loan that you want.

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What Makes Up My credit Score?

May 4th, 2010 by Mortgage Master Luke No comments »

One, if not the, most important factors in determining what kind of mortgage you qualify for is your credit score.  The problem is that how the credit score is calculated can be a bit confusing.  The scores can range from 300 to 850. Now while the formulas used to calculate a credit score are proprietary information, here is an approximate breakdown of what makes up your credit scores:

  1. 35% of your Score is Payment History. This includes late pays, collections, bankruptcies, & foreclosures.  Additionally, the more recent derogatory credit is, the more it affects your score.
  2. 30% of your score is based on your outstanding debt.  How much do you owe on loans cars or homes?  What percentage of your revolving credit accounts are in use?  General trigger levels are 30, 50 and 70% of your credit limits.
  3. 15% of your score is based on your length of credit history.  The longer you’ve had the accounts, the better.  A common mistake people make is closing credit cards after they pay them off.  If it is an old account, this can drastically lower your average length of credit history.
  4. 10% of your score is based on new credit.  Opening new credit accounts temporarily lowers your credit score.  This is to prevent a run of opening up excessive credit before history with new accounts can be established.  This also includes hard inquires (inquires you authorize).
  5. 10% of your score is based on the types of credit you have.  It is good to have a balanced mix of both revolving account (credit cards) and installment loans (Car loans & Mortgages).  This shows you know how to manage all types of credit.

There are three separate credit bureaus Experian, Equifax and TranUnion.  They each use their own variation of the Fair Isaac credit model. (This accounts for some of the variations in each score).  Additionally, creditors can choose to report payment history to one, two or all three credit bureaus.

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7 Things You Should Never Do When Applying for a New Mortgage

April 1st, 2010 by Mortgage Master Luke No comments »

This is a list of things to steer clear of when you are seeking to obtain financing for a home. The following items may prove to be a detriment when you wish to move forward with the loan process.

  1. Don’t open any new credit accounts, especially buying or leasing a vehicle!  Brand new lines of credit can bring your score down by lowering your average history length of your credit accounts. Lenders also look carefully at your debt-to-income ratio or DTI. A large payment such as a car lease or purchase can greatly impact those ratios and prevent you from qualifying for a home loan.
  2. Don’t transfer your assets between bank accounts!  Moving money around ends up complicating things because the transfer of money must be documented.  In addition, if you have any unusual deposits of cash, the lender is going to want to know where it came from. You can consolidate your accounts later if you need to.
  3. Don’t change jobs!  A new job may involve a probation period, which must be satisfied before income from the new job can be considered for qualifying purposes.
  4. Don’t make any large purchase during or right before the loan approval process. (This includes furniture and appliances for the home.)  New purchases can increase your debt to income ratio to the point that you will no longer qualify for the mortgage you are applying for.
  5. Don’t put your information on “lending” websites like LendingTree.com or anything similar.  These website are not lenders but marketing companies that sell your information to multiple lenders (I have seen as many as 25).  Each of these lenders will pull your credit to see what you qualify for.  ALL inquires must be explained during the lending process and too many pulls can lower your credit score.
  6. Don’t transfer balance around on your credit cards.  An experienced lender can advise you if any money should be transferred and how much.  Also, if you recently paid off or substantially reduced the balance on debt, contact the company and get something on their letterhead stating your new balance.

Do not pack away your important documents. (Tax returns, W-2s, Bank Statements, Military Paperwork, Bankruptcy Paperwork, divorce/child support papers, etc.)  These things are crucial to the loan process and having to dig through boxes to find them will only waste valuable time.

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A New FHA Refinance Program for Struggling Home Owners

April 1st, 2010 by Mortgage Master Luke 2 comments »

Last Friday, HUD announced a new program designed to help home owners who have seen a drop in their home’s value.  We do not have all the details yet, but here is a quick summary of what was announced:

1.  Existing lender must be willing to write down/reduce the loan’s principle balance by at least 10%.

2.  The new maximum loan to value (LTV) can be no more than 97.75% of your home’s value.

3.  If you have a second mortgage, your new combined loan to value (CLTV) can be no more than 115% of your home’s value.

4.  The new first mortgage will have standard FHA mortgage insurance.

5. Maximum housing expense ratio of 31% (No more than 31% of your gross income can be going toward your housing payments.

6. Maximum total expense ratio of 50% (No more than 50% of your gross income can be going toward your housing payments, credit cards, and other loans on your credit report.

7.  You MUST be current on your mortgage payments.

8.  Minimum Credit Score of 500.

9.  This will show as a Write Down or something similar on your credit report. (This means it has some impact but probably less than a foreclosure.)

10.  You cannot already have an existing FHA loan.

Now, the thing to keep in mind with this program is that even though HUD/FHA set these new rules, each lender has their own overlays that adjust the program’s qualifying guidelines.  But if this program rolls out the way it should, the new program should help thousands of home owners who want to keep from losing their home.

If you are interested in this new program, please feel free to send us an email at service@TheKunselmanTeam.com and we will keep you informed as this program is released.  Also, keep in mind the other Making Home Affordable Programs that The Kunselman Team offers which can help many homeowners who lost equity in their home, but have managed to keep making their payments on time.

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