Archive for July, 2008

Change #4 – Interest Rates

This one is a great thing. Rates have gone down over the last 3 years. Here’s how it typically works, when the economy is bad…rates are good. When the economy is good, rates are bad. There you go…it’s that simple. Well, there’s a little more to it than that but overall that’s the general idea. Currently with rates where they are at we have seen rates go up over the last 2 years and now are back down.

This creates a great opportunity for those of you to take advantage of the market and consider refinancing or better yet purchase a home. If you haven’t seen, it’s a buyers market. This means that all the buyers out there have the power, which means that not only can you get a great rate on your financing but houses are selling for cheaper. If you are on the fence about purchasing a home, now is the time to get off and move. You couldn’t have asked for a better time.

Change #5 – Loan Officer Licensing

Ok, here we go, the fifth and final change in the industry (obviously there’s more…but this is the last one I will talk about), loan officer licensing; now how does this affect you? Well, in Washington State alone up until December 2007 you were not required to be licensed to be a loan officer. This may shock some of you…yes, 2008 is the first year that every loan officer had to take a test and be licensed to originate loans. Let me repeat…What that means is that in 2007 and past, a used car salesman could get you a loan (no offense to all the used car salesmen).

How scary is that. A mortgage application is the most intrusive document you will ever come across and the individuals getting the information could be stealing your identity right in front of you. Well now it’s a safer environment…and it’s about to get better. Take a look at this article, then go to my blog and let me know if you think it’s a good idea or not… (<a href=”http://seattletimes.nwsource.com/html/realestate/2008047127_harney130.html”>http://seattletimes.nwsource.com/html/realestate/2008047127_harney130.html</a&gt;).

So there you have it, hopefully this condenses some of the rumors or confusion with the changes in the industry. The best advice that I can give you is that if you are considering refinancing or better yet purchasing a home, talk with a loan officer who has their finger on the pulse of the market (you already know what I’m going to say…). Fell free to give me a call if you have any questions.

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I have a lot of clients that ask me how the mortgage industry has changed over the past few years. My best answer is…a lot! But it’s not all for the bad, in fact most of the changes have been great for the industry and I will tell you why…keep reading.

Change #1 – Credit

This has been a big area of change for the industry, long gone are the days of not needing a credit score to get into a home. You may remember an article that I wrote a couple weeks ago about credit scores and how they are important in today’s industry. Well, the long story short is that with a bad credit score your options are much more limited.

Now that doesn’t mean that you have NO options…that’s not the case at all…I said your options are limited. FHA and VA options still exist and overall there not that bad. Great rates and programs. Even to the point were some prime borrowers are going FHA! So the best thing to do is talk with your mortgage advisor (me) to see where you sit.

Change #2 – Income Documentation

The second change that has greatly impacted the industry is the income documentation standards. Most of you may remember the days of No Doc loans…for those of you who don’t, let’s take a step back in time.

No Doc loans are loans with no documentation requirements. Literally you just have to be breathing to get a no doc loan. No income, no assets, no credit…no anything. Just appraisal, title and sign on the line. Well these are all but gone. In todays environment you are basically required to fully document your income. W2’s, paystubs or tax returns for the self – employed individuals out there.

Now you can still do the “stated” income loans…but they are greatly reduced in what the bank will lend on the house. In most cases the lender will require 25% down or more if you are going full stated income. So just be prepared to show the proof…and oh by the way, work with a loan officer who knows how to calculate income (me, again)!

Change #3 – Program Availability

Now, most of you may think…oh there has to be fewer programs available today vs. 3 years ago and to some extent you are right. If you are referring to the past programs that took advantage of borrowers and got a majority of lenders in trouble…then you hit the mark. Those programs are gone and it’s a good thing.

We have fallen back to the traditional banking model. 30, 20, 15 and 10 year fixed loans are more common and occasionally you will see the ARM loan pop up every now and then. Is this really a bad thing? Let’s consider where our economy is at today…and what do most consumers and economists consider the cause of all this…exactly.

Personally I believe that this is a good thing to see in the industry. Lets face it, if you get a 30 year fixed loan and can make the payment from day 1…there’s a good chance you can make the payment on day 10,950 (for those of you who’s head I just went over…30 years x 365 days a year!).

However, there are still alternatives to this for borrowers who clearly don’t need a 30 year fixed. But they are used more with caution than in the past and there is more lender scrutiny to offering the borrower these options. It is important to work with a loan officer that has your best interest in mind and helps you achieve YOUR goals (hint, hint…me again).

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I think you have waited long enough for the grand finale, so let’s jump right into it. Starting with Benefit of VA loan #3!

Benefit #3 No Down Payment Required

The third benefit to the VA loan program is that there is no down payment required. I told you it would be big! Now this is one thing that is not similar to FHA, this is a TRUE zero down loan. With FHA you can get close but you need everything to line up perfectly. With FHA you are required to bring at least $500 to close, but in order to do this you have to find a seller that is willing to pay for your closing costs and down payment (which may not always happen, in our market it could be more likely though).

But with a true zero down loan, this means that now the seller can just focus on paying for your closing costs and you can focus on getting your things packed and ready to move into your new home! This really should open the doors for so many veterans to take advantage of todays great buys. With no money down your opportunities are endless.

Now, this doesn’t mean that you have to do zero money down, if you have a down payment saved up, by all means let’s use it for your home to keep your payment as low as possible….just a suggestion 😉

Benefit # 4 Future Streamline Refinancing Available

Another more uncommon benefit is future refinancing. Now some of you may say…”just get me into the first loan and well think about that later…” Well, let’s just imagine for a moment that you have a VA loan and rates just dropped dramatically. Now you consider your options…hmmm, lower my rate .25%…but the closing cost could be high and then I have to document my income, assets, etc. Maybe I’ll wait.”

Well, with the VA streamlined refinance program you don’t have to wait anymore. If the rates drop you can refinance your home with no documentation and in most cases little to no closing costs. I mean it…no income, no assets, no appraisal, no employment, no ANYTHING! All you have to show is that you currently have a VA loan, your payment is current and that you would be saving money, that’s it!

SO now you may be thinking twice about future refinancing whenever the rates drop. Just imagine when the rates dropped this year down to the mid 5% range…that would be nice huh.

So there you have it…4 BIG benefits to VA loans, I hope at least one of them was new to you or maybe that I just explained a little more. Either way, if you have additional questions feel free to give me a call. Or if you would like to see if you could qualify for VA financing I would be more than happy to help, that’s why I’m here!

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A couple weeks ago you may remember that I wrote an article about FHA financing and how great of an option is was for sub prime borrowers. Well, I received a tremendous response from that article and was even able to help a client with there financing options!

For this week I want to discuss a program that although very similar to FHA has some additional benefits that you may not have known about. Anyone that has a past military (or current military) experience could be eligible for the benefits that I am about to reveal. So read on if this applies to you or someone you know…
Read all the way to the end and I will send you a Bonus Report on
“The Top 7 myths about VA loans”!

Benefit #1 No Credit Score Requirement

With VA financing there is a true no credit score requirement. This means that your score could be in the low 500’s and it really wouldn’t mater. You see the VA is not looking at your current credit score to base their loan decision off of. They would rather look at your credit history over the last 12 – 24 months.

This is very similar to FHA financing; however with FHA financing most lenders still would like to see a minimum credit score of 580 or higher. So with a VA loan there is no limit to how low your credit score can be…I think I just heard a sigh of relief…!

Now, suppose you have some blemishes over the last 12 months, don’t worry, you’re not immediately disqualified. Underwriters know that no one is perfect and things happen, so they will allow you to explain your blemishes and as long as they all make sense with a good letter of explanation, you’re in the clear. Ultimately they just don’t want to lend to someone that doesn’t care to make payments on time.

Benefit #2 No Mortgage Insurance

The second benefit that I would like to talk about is the fact that with a VA loan there is no mortgage insurance required. Just with this benefit alone you will save $100 – $200 per month on your mortgage payment. That’s pretty powerful if you ask me!

On all traditional financing and FHA loans, if your loan amount is above 80% (this means you will be borrowing more than 80% of the properties value) then you have to pay mortgage insurance each month. With FHA financing you will also have to pay a mortgage insurance premium that will be calculated in the overall closing costs. This fee is 1.5% of the total loan amount. Again…another tremendous savings for going VA!

(***Editor Note*** in most cases if you were to do FHA financing through me I would pay for your mortgage insurance premium…just a reminder)

Ok…I have 2 more amazing benefits that I want to reveal to you, but I will save them for next week. I want to respect your time and not overload your email J! If you thought the no credit score requirement was good…then you’re going to love benefit #3, I promise! So stay tuned for next Thursdays e-newsletter and remember to have a great week!

BONUS REPORT: So you want the bonus report about the top 7 VA loan myths revealed? Well I have one question for you…”How much could you save per month by not having mortgage insurance” (hint…it’s under benefit #2). Email me the answer and I will send to you the Bonus Report right away!

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Do you find it hard to get out of your comfort zone and stretch your limits? In case you don’t know…I am not a big fan of heights. I have experienced different activities in the past that pushed my limits of heights (Hiking, Parasailing, Hot Air Balloon Ride)…but one recent activity last weekend topped them all. It was a great experience that tested my fear, endurance, and definitely pushed my limits.

On Vancouver Island, about one hour north of Victoria they have what is called Wild Play Parks. Their obstacle course is called “TreeGo”. It is an Aerial Adventure Tree to Tree Course which is an elevated obstacle course set in a beautiful Douglas Fir forest and securely suspended between the trees at 10 to 50 feet off the ground!

Some of the elements of the park include zip lines, suspended bridges, scramble nets and swinging logs. This activity is a definite “must do” and was a great experience because it pushed my limits and got me out of my comfort zone.

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