FREQUENTLY Asked Questions
The basics are supply and demand pressures. Mortgage money is raised (Borrowed) in the bond market by mortgage lenders selling mortgage backed bonds to investors. When the demand for them goes up the rate they need to pay for that money goes down. That bond rate is what drives our mortgage rates.
Usually Stocks and Bonds compete for the investment dollar. So when Stocks are rising and look as if they will provide a higher rate of return, then Bonds must raise their rates to attract investment dollars away from stocks. It’s like a see saw.
These days Stocks and Mortgage Bonds both continue to move lower. It’s easy to understand why stocks are plunging, why then are bonds not benefitting? The stock markets’ dive lower has resulted in an avalanche of margin calls and that is causing many to dump everything, including bonds and treasuries, to come up with the money. Additionally, the $1 Trillion in stimulus that the Fed is planning on has to come from somewhere. The way the Treasury raises those funds is by selling Treasury Bonds. Adding more supply. So we have Bonds flooding the market and weakened demand due to uncertainty. Cash sitting on the sideline. If you have much more supply coming into the market and not enough demand, that causes prices on Bonds to fall and interest rates to rise.
Another factor is a play. When the Stock market began to react to the COVID-19 threat back in early March rates did drop initially in classic fashion. What happened then that there was an unforeseen Tsunami of refinances which flooded lenders with new loans, swamping their systems exhausting their existing supply of money to fund these loans. They in effect exhausted their cheap money and had to go out and find more at a higher price which squeezed their margins. They had to turn off the spigot and they did so by raising rates…. drastically. I was actually on the phone with a client trying to lock and when I got through to get pricing rates had risen by half a percent from what I had priced a few minutes earlier.
As of this writing rates continue to rise everyday. Personally I believe rates will remain high for the next few months. Hang on the see saw is broken and it’s now crack the whip and I feel like I’m on the end!
If you are asking the question you are probably hearing what others have too, and it may already be too late. Rates are volatile in this age of instant worldwide communication. It is vital to be in position to take advantage of rate movements that may last only a few hours.
Here is what I advise. Get Pre-Approved for a refinance now. The most important step is to talk to your lender and determine what are the benefits you want and the rate at which you can achieve them. Then go through the steps to get Pre-Approved. In many cases these are few. For a salaried employee it is often just an ID, most recent W2 and a pay-stub.
You will need to get your credit pulled to determine what rates you qualify for and complete an application (These are good for 90 to 120 days but once done can be easily refreshed). This under normal circumstances will take about 15 minutes at most.
I am happy to take the time to explore your situation and give you the best advice I can. I will prepare a Spreadsheet so you will know exactly how much you can save, what your costs are and what your break-even point would be on a range of interest rates and programs. Give me a call and get prepared today.
It depends on your definition of ‘good’. Not to be flippant but the loan is designed to help those who can’t qualify for a standard mortgage because their income is too low to qualify. People older than 62 can access equity in their home up to roughly half of its value.
It is great to own your home free and clear or have a lot of equity built up. The problem is you cannot access the equity unless you sell the home or have enough income to qualify for a 1st mortgage or a Home Equity Line of Credit. Qualifying can be impossible for people living on a fixed income.
The idea behind this loan is to allow older people, whose major or only savings is represented by the equity in their home, the ability to stay in their home and access that equity. The fact is that many older Americans don’t have sufficient retirement income or savings to make either payments on a mortgage or cover living expenses. They have paid off their home but now can’t afford to live there.
The Reverse mortgage allows our seniors the option of using their savings as represented by their home equity to make their mortgage payments for them. The way you make payments is flexible, you have the option of paying some of it or all of or none of it every month. If you don’t choose to pay from your available savings you can elect to make no monthly payment and the amount of that payment will be added to your mortgage balance. You can continue to make payments from your equity for as long as you live in the home, even if you owe more than it’s worth.
It’s important to remember that with a Reverse Mortgage you still own your home exactly like you do when you have a standard mortgage.
The Reverse Mortgage Program is overseen and insured by FHA, the Federal Housing Administration and is officially named the Home Equity Conversion Mortgage (HECM).
Below is some information from the Hud.Gov web page.
If you’d like to talk about this program and if it is right for you contact me here:
The following eligible property types must meet all FHA property standards and flood requirements:
For fixed interest rate mortgages, you will receive the Single Disbursement Lump Sum payment plan.
Mortgage Amount Based On
The amount you may borrow will depend on:
If there is more than one borrower and no eligible non-borrowing spouse, the age of the youngest borrower is used to determine the amount you can borrow.
You can pay for most of the costs of a HECM by financing them and having them paid from the proceeds of the loan. Financing the costs means that you do not have to pay for them out of your pocket. On the other hand, financing the costs reduces the net loan amount available to you.
The HECM loan includes several fees and charges, which includes: 1) mortgage insurance premiums (initial and annual) 2) third party charges 3) origination fee 4) interest and 5) servicing fees. The lender will discuss which fees and charges are mandatory.
You will be charged an initial mortgage insurance premium (MIP) at closing. The initial MIP will be 2%. Over the life of the loan, you will be charged an annual MIP that equals 0.5% of the outstanding mortgage balance.
Yes, of course. The mortgage industry loves you too! I have done hundreds of mortgages for self-employed people. For a conventional loan, like all borrowers, they have to prove they make enough money to qualify for the mortgage they are applying for, and that their income is stable.
There are a few things to understand and this is where things get a little complicated. As it turns out there are more than one type of income. In the mortgage world there is what is termed Qualifying income. That is the income you will get credit for when it comes to qualifying for a loan. Basically, you get credit for the income you pay taxes on, which is what is reported on your Personal 1040. You can also add back in some costs which you deducted from your Gross business income like depreciation and amortization expenses.
Part of my job is to educate and coach people on how their tax returns will be evaluated by an underwriter so that they can make the decision on how much they should write off. Some times it comes down to a tradeoff. Pay more taxes to qualify or pay less and don’t get as large a mortgage.
Another factor is that a business will generally have to be in business long enough to have two full years of Tax Returns. If income is going up then your income will be averaged. If income is declining then you will get credit for the lower, most recent year, but you will have to explain the drop in income and convince the underwriter that it will not continue to decline.
There are other loan products available that do not require Tax Returns but instead look at the business’s cash flow. These carry a decidedly higher interest rate. As much as 3-4% higher than conventional.
Online you can find lots of lists on what you should do, these are not a bad place to start but they can’t tell you the whole story. The truth is that the loan qualification process is complex and to add to the uncertainty, constantly changing.
For instance, many contain “Save for a down payment” but they don’t tell you how much or how much is right for you in your situation. Your situation is unique and matching you with the right programs takes knowledge of different lenders, program types, restrictions, features, in short, a professional will save you lots of time, energy and stress.
There are also in the Denver area several organizations like CHFA and CHAC among others who specialize in helping you with down payment assistance if you qualify.
The truth is that the government wants you to become a homeowner because they believe that’s good for the country, and Lenders want you to be able to buy because they’re in the business of making loans!! That’s good news! Our job is to make it easy for the Lenders to say yes to you! The challenge is to make it easy for them to say yes to you.