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.

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!

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.

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.

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.

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.

Over the last couple of years, the government has made many attempts at trying to help home owners keep there homes.  Many of these attempts have been disappointments at best or all out failures at their worst.  There are a couple of programs though that are working to help home owners lower their mortgage payments, and get them into good, stable 30 year fixed mortgages.  The two programs I speak of are the DU Refinance + and the Freddie Mac Open Access and they are part of the Making Home Affordable Program.  These two programs are designed for home owners who have seen a decline in their properties value, but have still kept making their payment on time.

Here is a brief synopsis of how the program works and what is required to qualify for it.  These loan programs will allow a home owner to refinance their 1^st mortgage into a 30 year fixed mortgage without mortgage insurance, even if their new first mortgage is more than 80% of their homes value (up to 125% of the homes value).  You have to qualify the same way you would with a regular refinance and the rates will (in many cases) be similar to what you would get if you were refinancing with an 80% loan to value (LTV).  There are two main requirements for this program though.  First, your loan must be serviced by Fannie Mae or Freddie Mac.  To check this go to the website http://www.makinghomeaffordable.gov/loan_lookup.html and follow the links.  Remember too that just because you are not making your monthly payment to Fannie or Freddie, doesn’t mean they aren’t the servicer.  Either check the website above or give the Kunselman Team a call and we can look it up for you.  The second qualifying factor for this program is that your original first mortgage had to be for less than 80% of the homes value at the time you got the mortgage.  So if you have had or currently have mortgage insurance on your mortgage, you don’t qualify for this program.  That being said, there may still be options for you as long as you have not missed any of your payments.  You are allowed to have a 2^nd mortgage on the property (this is perfect for all of you who got an 80/20 when you bought or refinance) as long as the existing 2^nd mortgage company is willing to re-subordinate their mortgage.  You cannot get cash out on this refinance but you can save a lot of money by lowering your interest rate.

The Kunselman Team has helped many home owners with these amazing programs, and have lowered some peoples interest rates by over 1.50%.  The Making Home Affordable Programs are shining diamonds in the trash pile of the many failed government programs out there and while it won’t work for everyone, it may just work for you.  So give The Kunselman Team a call to see if you qualify and take advantage of the low interest rates before they go up.

Interest rates for mortgages over the last 6 months have been amazing.  Most borrowers have been able to get rates in the low 5% without paying any points or high 4% if they wanted to pay some points.  There is a lot of speculation in the market right now about what is going to happen with rates.  There are really only two arguments, rates are going to go up or rates are going to stay the same.  Here is the basis of both of these arguments.

Rates are going to go up:
Rates have been kept artificially low over the last year.  The government has been investing billions if not trillions of dollars into the purchase of mortgage backed securities.  The government has only committed to buying mortgage backed securities through the end of the first quarter of 2010.  This news raised a lot of chaos in the market toward the end of last year.  Rates stepped up about a half of a percent on this news.  The government cannot continue to keep purchasing more and more of these securities.  If they do, the value of the dollar will continue to go down as well as the risk of another housing bubble.

Rates are going to stay the same:
The government has spent the better part of two years attempting to stabilize the housing market.  The most successful aspect of this effort has been the purchasing of mortgage backed securities to keep interest rates low.  If the government stops buying these mortgage backed securities, who will be there to buy them?  The market has not shown a strong appetite for these securities since they first crashed a few years ago.  The only reason that banks are still writing new mortgages is because there is someone buying them on the secondary market.  If the secondary markets disappears, the banks will all but shut down the market.  The government showed the big banks that they would not let them fail and the banks know they hold all the cards.  Until a new investor shows up in the secondary market, that wants to buy mortgage backed securities, the US Government is going to be obligated to keep buying them.  Failure to do so would result in another crash of the housing market.

1. The $8000 first time home buyer tax credit that didn’t have to be paid back is introduced.
2. Foreclosures declined but short sales were on the rise.
3. Stated income loans went away, making it difficult for self-employed income borrowers to get a new mortgage.
4. New mortgage guidelines tightened up.
5. Large investors (unless they are cash buyers) got bumped out of the market.
6. Resurgence of the small/first-time investor.
7. Resurgence of the USDA 100% financing mortgage for rural areas.
8. The Government injected lots of capital into the mortgage backed securities keeping interest rates low.
9. The Government injects billions into the banks in the form of the TARP (Troubled Asset Relief Program) with the intent to modify existing mortgages.  The banks modify only a very small percentage of these mortgages.
10. Fannie Mae and Freddie Mac introduce the DU Refinance + and the Home Access Programs designed for home owners to refinance who initially had 20% equity when they first got their mortgage and have seen their home values decline.  Program is a moderate success.
11. Rates went up and rates went down.
12. The Home Valuation Code of Conduct (HVCC) is introduced in May.  Appraisals must now be ordered through Appraisal Management Companies (AMCs). Many reports indicate this system is very flawed and has lead to higher costs to the borrower in obtaining a new mortgage.
13. The Mortgage Disclosure Improvement Act (MDIA) is introduced in August.  It gives borrowers more information upfront before any money can be collected, but adds costly time to the mortgage process.
14. The Government extended the $8000 First Time Home Buyer Tax Credit to June ’10 and added a $6500 repeat home buyer tax credit.  Experts say there will not be any more extensions.

When I (Luke) first got into the mortgage business over 6 years ago, the world was a very different place.  The government and financial institutions were operating under the idea that everyone in America should own a home.

The first company I worked for specialized in Stated Income Stated Asset mortgages.  While this sounds risky, these loans were only given to people with a great credit score and credit history and a verifiable income source.

The next company I worked for specialized in subprime loans.  These were loans designed for people with less that stellar credit and these types of loans were designed to be a short term fix.  In fact, many people who received these loans would have lost their home at that time, if it were not for these subprime loans.

The idea was that real estate was always a safe investment for banks because property values always went up. If the borrower defaults (went into foreclosure) the lender would get the property back and be able to sell it to get most of their money back.  But nobody really thought about what would happen if too many homes went into foreclosure and property values started to drop.  Well, as we all know, that worst case scenario did happen and as a result, getting a new mortgage in today’s market can be very difficult.  This month’s article is going to give you some tips about how to make getting a new mortgage as painless as possible.

The first and most important thing to remember in today’s mortgage/real estate market is that YOU MUST DOCUMENT YOUR INCOME! There are no more stated income loans.  For self-employed borrowers such as myself, this can often pose a problem.  The best advice I can give to all of you self-employed people is to have a professional mortgage broker review your file to see if you can document enough income to qualify.

The second tip that can make getting a mortgage go much quicker is to Collect All Your Documents Ahead of Time.  Here is a short list of documents that are required on most loans today: 2 years tax returns including W-2s, 30 days of Paystubs for all jobs, 2 months of banks statement for all bank accounts (including retirement accounts), Copy of drivers license and social security card.  These are just to start.  Your mortgage broker professional could have a list of additional items for you to collect.  It is very important to get the requested documents back to your mortgage broker ASAP.

The final tip that I would like to give you about getting a new mortgage is Have Patience.  The mortgage process is not longer a streamlined process.  Lenders are all asking for more and more documentation.  As long as you are working with a Professional Mortgage Broker, they will guide you as quickly and painlessly as they can through the mortgage process.