In a discussion of Mortgage Products, many questions come to mind including, what is a mortgage, why are there different types of mortgages, and how is interest calculated. I will try to answer those questions below. For explanation different kinds of home mortgage products, please click on each category.
What exactly is a mortgage: The American Heritage Dictionary defines it as "As a temporary and conditional pledge of property to a creditor for the performance of an obligation or repayment of a debt." So basically a mortgage is a promise to pay back a loan, and in our context it is for a piece of real property. A lender puts up an amount of money to allow a buyer to pay a seller of the property. A mortgage is the amount money in the form of a loan, which makes up the difference between, what the buyer puts up as a down payment and what the property's selling price. The lender, the mortgage holder, could be an individual, a bank or a company that makes it's money by making home loans for a group of investors sometimes referred to as a mortgage banker. A mortgage broker works with both banks and mortgage bankers to secure the money to complete the purchase of a home. Both banks and other lenders usually sell the mortgages to third parties liike Fannie Mae. A portfolio lender retains the mortgage and receive the interest income as part of their investment portfolio. Mortgage Brokers provides an advantage over a traditional bank, because of the number of available lenders including banks, with a wider range of products and lenders they can offer the home buyer. The variation of home products are as varied as the the property buyers and their individual requirements. The broker understands the mortgage market and we will provide the best product at a great low rate to our clients. Whether ithere is a problem with past credit history, or great credit the mortgage lender is here to help. It doesn't if the borrower needs a $5,000,000 Jumbo loan or there is a need to combine the repair costs for a run down or severly damaged home into the mortgage, I and other mortgage borkers are here find a loan for you. People needs are different and there is mortgage product that can fit the individual needs of the home buyer.
How are rates determined? The lender uses the 10 year treasurey rate as a basis for 30 year fixed. So, the bond market causes mortgage rates to fluctuate. The Fed raise or lower effects the bank rate that effects the Treasury lends it's member banks that effects bond market indirectly. The bond market rates are also at mercy of the stock market. Generally speacking if stock market raises, the rates on the bond market go down and vice versa if there is a sell off on the stock market the bond and mortgage rates fall. Based on supply and demand of those seecurity. Banks and Mortgage Banks contract with wall street investors for a package of funds, perhaps a $100,000,000 million ot more to make home loans at market rate on the day the interest rate is locked for certain number of days of the locik period. The closed mortgages are package and then sold on the secondary market and process is repeted.
The lender eqaluates the Amount of Risk they are willing to take based on the type of property and the reliability of borrower weighted against the money the lender has contracted with their investors. There are many mortgage products available to American public and each can vary as to interest rate, based on those risks. For example a single family home (1 to 4 units) and owner occupied is generally considered the least risky for lenders and carries lower interest rates than other types of property. Non-owner occupied properties, rental units, are consided more risky and the rate tends to be higher along with a greater down payment. A owner occupied property can be broken down into two categories: the primary residence (low risk) and a second home/vacation property (more risk). The rate will allso be deteremined by evaluating risks associated with the borrower. The home buyer's credit history, FICO scores, income, assets, lenght of employment , tax returns and more go into determining the credit worthyness of the borrrower and the "risk" he/she represents.
Your rate is complicated! It all starts with the credit report and the type of mortgage needed. The home buyer should be aware that his or her credit history, amount of down payment influence the type of lender and type of loan. If a mortgage is be available to though the traiditional mortgage lender or speciality lender the rate could vary. Tyipcally a credit report covers the last seven years of the borrowers credit history, however FICO scores are most heavily weighted on the last 2 years. So even if you had bad credit in the past, it does not mean an applicant can not qualify for a mortgage now, or at least in the next two years, nor does a bankrupties or a foreclosure prevent you from getting a home loan. That is not to say these factors won't effect FICO scores or the lender's underwriter won't take them into account, when considering to approve or decline the loan based on the guidelines of the loan the borrower is applying for. FICO is a big consideration in determining an interest rate.The type and kind of property, and whether it is owner occupied or not, if it is a single family residence or a condo. How many units can play a factor, as well, in determinining interest rates. Depending on the lender if there is acrage and how many acres. If the driveway is paved can even determine, which lender the broker can use. The type of loan whether FHA vs Conventional 30, or 15 year fixed, or an adjustable rate mortgage also has an effect on the rate. The amount of down payment, the loan amount, if it is interest only or not, even the state where the property is located can play a part in determining what rate the borrower will have to pay. Like I said, it is complicated!
I am often get asked, as loan officer, when I first speak with a client or taking an application, "I want to buy a $350,000 house. What is your rate?" or "How much will it cost me per month?" Well, I have to say: "I don't know! Rates are very good right now. I will need to take an application and learn more about you and the property you want to buy. Then I can give you an idea of the rate or payment if we locked today! That could be what you might expect. Today! But that is not what you will probably get. No one knows, what the interest rate wil be, when the loan is eventually locked days, weeks or even months down the road. Once you found your dream home and have your offer accepted. I can calculate your rate. Please understand interest rates float or change every day. They can even change several times a day. A lock secures your rate for a period of time: 15, 30, 45 or even 60 days. The more typical lock period is 30 to 45 days. But, only when your loan is locked can I tell you exactly how much your rate will be and what your actual payment wil be." If anyone one says they can promise you a specifc rate, you shoud run the other way. Either they don't know what they are doing, or they are misleading you! Either way it is not good! Other factors that weigh a lot on the rate and loan approval decision, is your actual income, as reported on the last two Federal IRS Tax Returns, and the current pay stubs, other assets. including real estate, cash, 401K, etc., owner occupied or non-owner occupancy, employment history and FICO scores and credit history. All goes into determining the credit worthyness of a mortgage applicant. The credit history, asset s and income determine the type of loan the borrower qualifies for and the rate the borrowe will receive. To learn about the various mortgage products click on any of the links below.
Other questions: I am asked is "How can I buy a home, I don't have 20% down, or I have had a foreclosure or bankruptcy. You can buy a home as little as "0" zero down, 1% down, 3%, 5%, 10%, 20% or more down. You can be 1 year out of foreclosure, and 1-day out of a barkruptcy. So, you can buy a home! If friends tell you, you can't get loan, don't belive it .There are a varietly programs available and one for almost anyone. Until a professional looks at your particular situation, don't rule it out. Call or email me and I will get you qualified and explain how it can be done! You just need at least 580 FICO, income that can support the mortgage (PITI) and a two year work history. Down payment and closing costs can even be a gift. So what are you waiting for? I can explain how to buy a home even if you don't have those items, just ask. It never costs you a dime for my expertise. I can't get paid for anything until ,I actually get you a loan, and then the commission is often paid by the lender. I can not take a dime from you directly! So it only costs you regular closing costs, appraisal and credit reports and non of those costs come to me. If someone asks for money to get you qualified run the other way fast! It is aganist the law to for a licensed loan officer to take money to qualify a borrower.
If you call to see if you qualify there is never an obligation to use our services are they are provide without cost.
Jaren can provide you a FREE 10 Page Report, a Home Estimate of Value for your home or the home you may want to buy, sell or refinance! This is not an offical appraisal, however, it is considered by the lenders to be pretty accurate. This will give you advantage of knowing a head of time if and how much you can "Cash Out" money from your home, and where your home value is heading. If a home you are thinking of buying is fairly priced or if you should offer less or more the home you wish to purchase. It is FREE, even if I don't do your loan with us!
Get your FREE Value Report! Call Jaren TODAY at: 510.2151743
Changes to Fannie Mae Guidelines as of July 29, 2017!
Allowing more borrowers to qualify for home purchase loans!
1. Debt to Income ratios increase from 45% to 50%.
2. Future employment income is allowed without new pay stubs.
3. Disputed tradeline on the credit report may not needed to be removed.
4. Paying off Student Loans in a refinance will not be considered a "cash out".
5. Alimony payments maybe "netted" out of the income if you don't wish it included, but can be included if it is an ongoing source of income for at least two years. If you are paying alimony it is considered a liability and is deducted as monthly expense.
Adjustable Rate Mortgages - Good or Bad?
Adjustable Rate Mortgages allow you to have an initial lower rate mortgage. However, the mortgage industry considers them to be one of the factors that contributed to loss of homes during the the great recession 2006-2009 and beyond. According to the real estate text book, "Economic Trends in California Real Estate: Realty Almanac 2018-2020" by Realty Publications Inc., it states: "That adjustable rate loans came to be known as "RIPOFF" mortgages, which stands for "Reverse Interest and Principal for Optimum Fast Foreclosure" or the alternative name "ZAP" for the borrower's to frequent "Zero Ability to Pay" particularly when short term rates jump in an effort to halt rapid inflation".
Adjustable rate mortgage can be useful in certain circumstances, however for those who are new to real estate, I would recommend, stay away and stick with Fixed Rate Mortgages. The adjustable rate aspect to these vaiable rate mortgages can catch you and bite you where it can really hurt. Do what the real estate professionals recomend and stay away and stick with a fixed rate. If you would like to learn more about adjustable rate mortgage call or email Jaren, Your CA Mortgage Advisor. He will be happy to explain how they can work for you or not!
What is The HARP Program?
When you have little or no equity n your home or owe as much or more on your mortgage than your home is worth, it can be difficult to find a lender willing to help you refinance. But for borrowers who remain current on their mortgge, and have loans by Fannie Mae or Freddie Mac, there is hope. It is called HARP.
Introduced in 2009 HARP enables borrower with little or no equity to reinance into a more affordable mortgage with new or additional mortgage insurance. HARP targets borrowers with loan-to-value (LTV) ratios equal to or greater than 80% amd who have limited delinquencies over the previous 12 months prior to refinancing.
Since 2011 changes to the program have made it easieer to qualify for this program. For example: LTV ceilings were removed, property appraisals requirements were waived in certiain circumstancees, certain risk fees for borrowers selecting shorter amortization terms were eliminated and warrenties were waived. The eligibility date was moved to to the date on note, from when Fannie Mae acquired the the loan and now their is no minimum FICO score.
A HARP Program loan can lower the the interest rate, get a shorter term or change an adjustable to a fixed-rate mortgage. With simpler qualification guidelines, even people who were previously turned down may qualify.
Given Jaren a call and see if you can reduce your monthy mortgage costs and have more money end of the month and save your home frome possible foreclosure.. Get Qualified Today in a Blinjk and click on the red "Get Qualified" button now!