- Good Faith Estimate (GFE) 2010 is introduced January 1, 2010. Six items now required before the loan originator can provide you with a GFE: Name, Property address, Estimated Property Value, Loan Amount, Income, and Social Security Number (Credit Report). Fees locked for 10 business days from issuance of GFE. Designed to protect the consumer from an increase in fees and encourage comparing options. Most likely, will lead to less comparing since a GFE can’t be issued until the loan originator can pull credit.
- Legislation on the table to repeal HVCC.
- Federal Reserve Board debating over Yield Spread Premium (YSP). In the past, YSP was a credit that had been paid to the loan originator by the lender. GFE 2010 changes YSP from a loan originator credit to a borrower credit.
- HUD to suspend the 90 day anti-flipping rule for one year starting February 1, 2010. Existing rule prevents a home owner from selling a home that they have owned for less than 90 days. Lenders still have to approve this new rule.
Archive for the ‘Understanding Your Mortgage’ category
How to Claim Your First Time Home Buyers Tax Credit
November 24th, 20092009 was a very good year for the 1st Time Home Buyer. Many of you out there purchased a home and now qualify for the 1st Time Home Buyer Tax Credit worth up to $8000, but how do you get it. My first suggestion is to have you taxes done by a professional but for those of you who still enjoy filing your taxes yourself here is the process you will need to complete:
- First begin Form 1040.
- Be sure to take note of your adjusted gross income, which you enter on lines 37 of the form. Form 5405 actually requires you to note your modified adjusted gross income, but that affects few people, so most will just use their adjusted gross income.
- When you come to Line 69 you’ll be asked to enter your tax credit amount. To do that, you’ll need to first complete Form 5405.
- Once you complete Form 5405, enter the amount on Line 69, then complete your return.
- Attach Form 5405 to your return.
IRS Form 5405 can be found by CLICKING HERE!
*Please note that this form can only be used for homes that were purchased before November 7th, 2009. The new form for purchases between November 7th, 2009 and June 30th, 2010 will not be available until December 2009. The Kunselman Team will post the form here when it becomes available.
What is Yield Spread Premium and Why is it Beneficial?
September 28th, 2009Today’s “Know Your Mortgage” article is going to cover Yield Spread Premium or YSP. This is becoming a hot topic in the news right now because the Federal Reserve has purposed a new rule that would make it illegal for banks to pay yield spread to any loan originator. This rule, if passed will have a very detrimental impact on your ability to get a new mortgage. So in that light, I thought it would be good to explain what YSP is and how it facilitates mortgage lending.
Yield Spread Premium is money that is paid to a mortgage broker, by the bank, for originating the mortgage. The dollar amount (of the Yield Spread Premium) paid by the bank is determined by the rate of the new loan. The third and forth component of the pricing of a new mortgage is the origination and discount points. Both of these are costs paid by the consumer. It is the relationship between all four components that make up the majority of costs of a new mortgage. If you are paying discount points, the broker is not receiving any yield spread. If you are not paying any origination points, the broker is getting paid in Yield Spread Premium. Some of the benefits of Yield Spread Premium are:
YSP allows the consumer to use other sources besides banks to get a mortgage done.
YSP allows for lower closing costs because that lender is paying a portion of the closing costs.
YSP allows for better flexibility on rates.
YSP paid to mortgage brokers allows you the consumer to see how much money is being paid on your mortgage.
Yield Spread Premium allows for more consumer options by allowing non-bank companies to originate mortgages for the consumer. The largest collections of these companies are mortgage bankers and brokers. In fact, it’s very likely that many of you reading this today got your mortgage through one of these sources. Some of the ways that mortgage brokers and bankers help facilitate the mortgage process is by offering more programs, better rates and fees, and probably a shorter time frame. In addition, because most mortgage brokers are paid strictly commission, they will work harder for that business because they don’t get paid unless they get you into a loan that works for you.
Yield Spread Premium has also allowed for consumers to have lower closing costs and more flexibility on rates. When a loan originator works for a bank, they have very stringent pricing guidelines to follow. A mortgage broker on the other hand has the option of looking around with multiple lenders to see which one has the best pricing.
The other benefit that Yield Spread Premium brings to the table is that the consumer gets to know what is being made on their new mortgage. When you are working with a mortgage broker, Yield Spread Premium must be disclosed from the beginning of the loan process now in addition to on the final settlement statement. What that means is that you the consumer see from start to finish, what a mortgage broker is making on a new mortgage. Banks also have a yield spread premium but they are not required to ever disclose. This does not mean that money isn’t there. It just doesn’t have to be disclosed.
The Fed’s argument against YSP is that it gives incentive for brokers to give their clients worse loan programs because of their own personal gain. And even though, law requires full disclosure about the Yield Spread Premium, the Fed believes that the American consumer is not smart enough to protect itself so YSP must be eliminated. The reality is that many consumers “shop” around when looking for a new mortgage or they work with someone they know and trust. If you have had a bad experience in the past with a mortgage broker, odds are you either didn’t “shop” around or were not working with someone you trusted. If you don’t know any good mortgage brokers, ask a friend. If you don’t have any friends, check out your local real estate association. Any of these sources should be able to provide you with a list of reputable mortgage brokers.
To read more about the new Federal Reserve Board Ruling Regulation Z – Truth in Lending – Closed-end Mortgages [R-1366] check out http://www.federalreserve.gov/newsevents/press/bcreg/20090723a.htm. The purposed rule is currently in its public comment period, so please leave comments!
We hope that you found this information useful and as always, if you would like to see what it feels like to work with a mortgage team that can bring a little sanity to an insane world, give The Kunselman Team a call.
What is Public Information?
September 24th, 2009The question of what information is private and what information is public is an issue that comes up a lot anymore. Every time you sign a legal document, you have to sign a privacy policy. Even though we sign so many privacy policies, there is still a lot of information that is public. This article will give some examples of public vs. private and give you some tips to help make more of your information private.
Anyone who has or has ever had a mortgage has received a letter or phone call from someone who seems to know a lot about their mortgage. Information like property address, home purchase price, loan amount, original lender and sometimes even your current interest rate. These are all examples of public information. Every county in the state of Colorado keeps detailed records of every real estate transaction. These records are public so that anyone can look them up. Not all the information is public; things like closing costs and usually interest rates are kept out of these records. Two ways to access these records are through the county and/or their website, (Boulder County’s website is http://map.co.boulder.co.us/basemap/disclaimer.htm) or through a title company.
Another bit of information that is semi-public comes from the Credit Bureaus. While things like your social security and account numbers are private information, things like when you apply for credit, or your general credit rating or types of credit are semi-public information. This means that a company can request (for a fee) from the credit bureaus a list of all people who fit their specified criteria. An example of this is those “You’re Pre-Approved” credit card offers you get in the mail. Another even sneakier example of this is when you apply for a mortgage. There are companies whose entire business model involves finding out when someone is applying for a mortgage, contact them and then try to undercut their competition by promising what ever they can to get your business.
If you would like to minimize the amount of junk mail offers and junk phone offers your receive, there is an option for you. If you go to the website https://www.optoutprescreen.com/ you can choose to opt out of receiving offers for five years or permanently. I have personally done this and it has reduced my junk mail substantially.
The last two things that I would like to mention are public records or Bankruptcy and Foreclosure. These two items show up on a credit report in the section of public records. This will also include the Elections and Demands statement that was filed with the county (Start of foreclosure proceedings). So while the specifics of your credit history are private, if you declare bankruptcy or have a property that goes into foreclosure, these items will show up in public records. These items can stay on your credit history for 7 to 10 years.
If you would like more information about anything that you have read in this news letter, please email Service@TheKunselmanTeam.com.
Interest Rate vs. APR
September 24th, 2009Today, The Kunselman Team is going to explain a sometimes confusing part of the mortgage process. The differences between the interest rate and the Annual Percentage Rate (APR) can raise some questions that can be difficult to explain.
Most everyone understands what their interest rate is. It is the rate of interest that they will be charged for the money they borrow. It is also used to calculate your monthly payment. Annual Percentage Rate or APR even though is sounds similar can be quite different.
APR is a calculation of the annual cost on a loan over the full term of the loan and it is found on the Truth in Lending Disclosure (TIL). The APR not only factors in the monthly interest cost, but the upfront costs of the loan too. The idea behind the APR is that if you are trying to compare two or more loans, this APR should give you a better idea of which is the better program from a strict numbers perspective. Let’s look at two example loans. One has an interest rate of 6.00% and an APR of 6.50%. The other loan has an interest rate of 5.75% and an APR of 6.75%. Strictly on a cost perspective, loan number one is the better choice because it’s APR is 6.50% compared to the seconds loans APR of 6.75%. The reason behind this difference is in the fees that the brokers are charging on the two loans.
Something to keep in mind also is that the new Mortgage Disclosure Improvement Act requires that if the initial APR that a lender disclosed to you changes by more that .125% by the end of the transaction, you the borrower must be notified and given three business days to review the new figures. It is not uncommon that there could be a slight change in the APR because legitimate fees do come up during the loan process. If there is a large change, it would be wise to sit down with your mortgage broker and get clarification on why there was such a large change.
We hope that you found this information useful and as always, if you would like to see what it feels like to work with a mortgage team that can bring a little sanity to an insane world, give The Kunselman Team a call.
Just don’t fall for it?
September 24th, 2009We have all heard the saying, “If it sounds too good to be true, it probably is”, yet we have all fallen for someone who promised us the world and only delivered us disappointment. In the last month or so, we at The Kunselman Team have started to hear a lot of stories about people who were promised great things from some mortgage broker that they didn’t really know and surprise surprise, the broker did not deliver on their promise. This is not that uncommon in this market because many mortgage brokers are desperate for business and will tell people anything to get a loan. We had a client call us last week because they had decided to work with a broker who promised to close their loan in two weeks when we said it would take about 30 days. The loan didn’t close in two weeks and it still hasn’t closed.
The Kunselman Team has a much better philosophy. We believe in under promising and over delivering. While many brokers will leave 3rd party fees of their Good Faith Estimates to make it look like they are charging less, The Kunselman Team puts every fee that can come up so that there are no surprises except maybe that your are getting back more money than expected. We are also realistic about the time it will take to close your loan. Loans just take longer to do now than they did in the past. Lenders are looking at every detail much more closely than they have in the past and that takes time. If you are working with someone who promises to close your loan in two weeks, get it in writing and make sure you get something if they don’t deliver on their promise.
As always, if you would like to work with the best in the industry, give The Kunselman Team a call so we can help you with all your mortgage needs.
100% Financing to Buy a Home Still Available!
September 24th, 2009Did you know that the United States Department of Agriculture wants to help you (or someone you know) buy a home? The USDA has a rural development loan that will provide up to 100% financing for you to purchase a home in an area that is considered rural. Now rural does not necessarily mean out in the middle of now where; rural in this case is as close as Frederick and Firestone. This program has an upfront guarantee fee that is included in the new loan (like FHA) but there is No Monthly Mortgage Insurance! What that mean to you is lower monthly mortgage payments.
This is a program with some restrictions so let’s take a look at some of those limitations:
-The location of the property is restricted to “rural” areas. These areas include (but are not limited to) Frederick, Firestone, Berthoud, Ft. Lupton, Johnstown, Miliken. (Call for details)
-This program is income restrictive based on the number of people living in the house. (Call for details)
-You cannot own any other properties either, but you do not have to be a first time home buyer.
There are a lot on little exceptions with this program so if you are considering buying a home and interested in looking in more “rural” areas, this might be the perfect program for you.
Do you already own your home and not planning to move anytime soon? Great, don’t forget to tell your friends who don’t own a home yet. They may be able to own a home and don’t even know it.
To see if you qualify for the USDA Rural Program, contact the Kunselman Team at www.TheKunselmanTeam.com or call Luke at (303)579-1441 or Shelley at (303)818-6597.
What is the Truth in Lending/ RegZ Form
September 24th, 2009The Truth in Lending Disclosure or Regulation Z form is also know as the TIL. This along with your Good Faith Estimate are two forms designed to help you the borrower understand the actual cost of your new mortgage, regardless of what a lender may call their fees. While the GFE itemizes all the fees associated with getting a new mortgage, the TIL takes those fees and annualizes them or calculates the Annual Percentage Rate (APR). This APR is most always higher than your loans actual interest rate. The only way that the APR could actually be the same as your interest rate is if there were no fees associated with the new loan. Let’s take a look at how to read a TIL Disclosure.
The four boxes across the top of the TIL is usually the most confusing part of the Truth in Lending so let’s start there. The first box is where the APR of the loan is listed. This rate is calculated by taking the “Finance Charge” in the next box, and then annualizing the number. The “Finance Charge” total includes the interest for the life of the loan, Private Mortgage Insurance for the life of the loan and any Prepaid Finance Charges. Prepaid Finance Charges include Origination and Discount Points paid by the borrower, Interest on the new loan from the date of closing to the end of the month, Prepaid mortgage insurance premium, mortgage insurance escrow and the tax service fee. The next box is the “Amount Financed.” This represents your new loan amount minus all the prepaid items that we mentioned above. The last box is as simple as it sounds. It is the total of all of your payments if you were to pay the scheduled payment on this loan for the entire term of the loan. That last number is usually a pretty scary looking number because most of the time, it is a little more than double your original loan amount. (Check out www.DebtFreeLongmont.com if you would like to see how you can reduce your total payment substantially without having to change your lifestyle.)
The Section below the four boxes is the payment schedule of the new mortgage. This section can be a little misleading if you have and adjustable rate mortgage. This is because a mortgage professional cannot with any accuracy tell you where interest rates are going to be when your interest starts to adjust. They can just put an estimate down based on where indexes are today. But if you have a 30 year fixed, with no mortgage insurance you should see 359 payments of the same amount and then 1 payment that is slightly different just to close out the loan. There are many variations on this section so it is best to just make a mortgage professional like The Kunselman Team explains your particular situation to you.
The bottom section of the Truth in Lending Disclosure has a lot of little sections that explain things like if you are getting credit life insurance or credit disability insurance, what kind on insurance you have to keep on your house when you get the loan. It also outline the property that the mortgage will be secured against as well as outlining penalties for late payments and details about prepayment penalties and/or assumption of this loan. Here is what you should see in this section. Most of the time, you will not need any of the Credit Life/Credit Disability Insurance but you will be required to keep hazard insurance on your property. (You may also need Flood insurance if you house is located in a flood zone.) The typical late charge is 5% of the payment and this is only assessed after the 15th of the month. That means you can pay your mortgage anytime between the 1st and the 15th of the month without paying any penalty. Also, make sure you check whether or not your new loan will have a prepayment penalty. You don’t want any surprises with this down the road.
The last thing that I really want to say about the Truth in Lending form is that this is not a contract. If the calculated APR changes by more than .125%, the mortgage professional is required to re-disclose a new TIL but quite often that doesn’t happen. This disclosure is only as good as the person providing it to you so make sure that you are working with a Mortgage Professional you Know and Trust, like The Kunselman Team.
