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Posts Tagged ‘Mortgage’

You don’t have to go very far to find the news that mortgage interest rates are at historic lows.  And with rates this low, common sense might tell you it’s time to lock in that low fixed rate loan, right?

Not so fast!

Remember that when fixed rates are low, that means adjustable rates are even LOWER!  So that attractive 4% fixed rate might look good, but a 2.5% adjustable rate might look even better.

So now that we’ve established that low rates also apply to adjustable rate loans, let’s take a closer look at the factors that might help you determine if an adjustable rate loan is right for you.

What is an adjustable rate mortgage?

A variable-rate mortgage, adjustable-rate mortgage (ARM) or trackers mortgage is a mortgage loan with the interest rate on the note periodically adjusted based on an index which reflects the cost to the lender of borrowing on the credit markets.

Basically what this means is that the borrower benefits from reduced margins to the underlying cost of borrowing compared to fixed or capped rate mortgages, allowing adjustable-rate mortgages to be a great way to save you money today.
Benefits of an adjustable-rate mortgage include:

• Statistics show that adjustable-rate mortgages owe back less over time than traditional fixed-rate mortgages.
• Mortgage maturities can be applied for up to 25 years instead of the 10 year maximum for traditional fixed-rate mortgages.
• Adjustable-rate mortgages allow the borrower to pre-pay principal (or capital) early without penalty.

Adjustable – as the name implies, are flexible to your financial needs. In this ever changing financial climate, secure yourself with a mortgage that can flex and change to keep up with your ever changing life.

3 signs an adjustable mortgage rate might be right for you

• You need the lowest possible payments for your mortgage over the short term.  If money is tight, or you would like to put a plan in place to save the maximum amount on your mortgage payments than an ARM might be the right choice.
• You may be transferring or selling your home in the near future.  ARMs offer the lowest mortgage payment options over the short term, so if there is a good chance you will be selling or moving before the fixed term ends an ARM makes sense.
• You need flexibility of terms.  A fixed rate mortgage is just that – fixed.  But there are several choices with ARM loans including 1, 3, 5 and 10 year fixed rates that can suit a variety of needs.

Choosing between an ARM and Fixed Rate

It can be a daunting experience when considering a new mortgage. Whether you are looking to refinance or to start a new mortgage, where do you start looking? With a multitude of mortgages, technical jargon, and everyone trying to commit you to monthly repayments, it’s hard to know where to turn for help.

The best advice I can give you when shopping for a mortgage is this:

• Research the different options available to you.
• Always ask questions if you are unsure of what is currently available.
• Develop a relationship with a mortgage lender.  If you simply shop around all the time you may simply get a quote.  But a good mortgage lender can be like a financial advisor and give you advice you NEED to hear instead of what you WANT to hear.
• Don’t be scared to say, “No, this isn’t right for me.”

NOLA Lending will never steer you into a mortgage we are certain won’t meet your exact needs. One of our examples of a mortgage which might be of interest to you is the adjustable-rate mortgage.  The lower initial payments seem great, but for some borrowers it may not make the most sense.  Our job is to provide you with sound advice based on our experience to help you make this decision.

If an adjustable-rate mortgage is not the right solution for you, fear not. We have a mortgage solution for everyone.  Just ask NOLA Lending how we can help you today and one of our friendly advisors will go through each option with no obligation.

How do I apply for an adjustable rate mortgage?

If you do decide an adjustable rate mortgage is right for you – NOLA Lending is proud to offer a wide range of adjustable-rate mortgage services to meet your specific requirements. Whether you are a first time or current homeowner, NOLA Lending is confident they can find the right refinancing, or adjustable-rate mortgage to suit your needs.

Why not contact one of our fully trained members of staff today to find out how you could save money by switching to an adjustable-rate mortgage today?

It’s one of the most stressful things mortgage originators, realtors and buyers ever face – last minute emergencies with closings.  Without careful and considerate management, it is easy for a client to find themselves in a strung-out paperwork battle and a fight against time.  But fortunately, the mortgage lending process doesn’t have to be this way for you.

Let’s take a look at the different steps in the lending process and how you can avoid being left with little to no time left on the clock!

The Lending Process explained

In theory, the lending process shouldn’t be a difficult process to tackle; it essentially breaks down into six basic steps:

1. Application
2. Pre-approval
3. Contract
4. Conditional Approval
5. Final Approval
6. Closing

Theoretically, once the mortgage application  is complete, it can be pre-approved with validating documentation and a contract can be drawn up so that the client can progress. This should take a reasonable length of time and come with as few complications as possible.

However, not every lender makes life as simple as NOLA Lending!  But even NOLA Lending sometimes gets stuck with last minute issues during verification (usually things the buyer didn’t disclose) or if someone such as a 3rd party drops the ball.

Common problems in the lending process

Unfortunately, some lending agents from other companies often choose to incorporate drawbacks into the lending process. NOLA Lending always advocates against these tactics and aims to secure your loan as quickly and accurately as possible.

Other lenders can delay your closing by a few extra weeks for any number of reasons such as:

• Lack of experience
• Poor management
• Incompetence
• Lack of communication

How a 30 day contract can be misused

Let’s take a look at how you could lose time and money by negotiating with an irresponsible lender.

First, understand that if you write a 30 day contract to close but you have the lender wait 10 business days for inspection and responses the close date is already in jeopardy.  A lender cannot get officially started without ordering an appraisal, so if you put that on hold for inspections the lender may not have enough time to close.

Below are steps to understanding a 30 day contract, title, and submitting the file for approval from a lender’s prospective:

1. Receive ALL client docs including the contract.  Delaying sending the lender a document can “pause” the whole process.
2. Order title
3. Order appraisal
4. Order insurance
5. Request additional documentation from clients and/or agents
6. Lender waits…
7. Documents are returned (hopefully quickly)
8. The loan is presented to the underwriter
9. Lender waits…
10. Underwriter issues conditional approval
11. Lender works approval and requests all required items from 3^rd parties
1. Updated income or assets should be obtained
2. Missing signatures on real estate forms should be completed including amendments, etc.
3. Explanation letters may be required
4. Updates or corrections to appraisal or title, or any other issues should be addressed
12. Lender waits… until everything is received from ALL! We cannot submit for final approval without these final docs!
13. Once ALL documents are received from ALL parties, submit for final approval and Clear to Close.
14. Receive final approval and Clear to Close
15. Send closing package
16. Close!

After a successful closing!

This may seem like a simple process, but let’s take a look at what is really going on here.

• The contract is written – so far so good
• The clock starts 30 days counting down – Those 30 calendar days are really only about 22 business days
• Lender waits on inspections (only if Agent or Client requests the lender to do so).  This may mean up to 10 – 12 days of additional delays
• Now there are only 18-20 days left and counting down quickly
• All paperwork must ordered from different parties which can take time while we wait on what we asked for
• The time in between dwindles down to about 5 business days or less of close very quickly

As you can see, not everything is quite as simple as it seems. Unfortunately, these delays are all too common.

How a 30 day contract can be further delayed

Other legitimate examples of how the lending process can be delayed can include:

• Insurance company waits until the last minute to submit insurance as it is needed long before the close date (express a sense of urgency with your insurance agent)
• Clients employer takes a while to provide information (same as above)
• Client takes a while to produce docs (work urgently and diligently to provide info & docs)
• Agents may take a while to produce required certificates or inspections

So if a poor lender wastes valuable time and everything doesn’t come back to the lender within 48 hours from the closing, and it takes 24-48 hours (generally) for an underwriter to review submissions; last minute issues can appear quickly, and worst of all, appear to be all the lenders fault although it really is not.

Study documents at the closing!

How to get the most from the lending experience

NOLA Lending wants you to know there are many responsible lenders out there and we hope you chose one of us to work with, and that there are simple ways you can help combat unnecessary delays in the lending process.

Here are some quick tips NOLA Lending advocates to help you save valuable time and money:

• Research the company you are going to work with
• Talk to an loan agent and see if you agree with their attitude and competency
• Make sure you uphold your part of the contract and submit paperwork immediately
• Feel comfortable being able to discuss the progress with your lender
• Feel comfortable being able to discuss any discrepancies
• Use “Full Disclosure” with your lender

NOLA Lending wishes you the very best in your lending process and hope that you have a fulfilling and profitable experience. If you have any questions regarding something you have seen here, or about lending in general, please feel free to contact one of our friendly agents at NOLA Lending in Covington who will be more than happy to answers any and all questions, with no obligation.

So what are you waiting for? Find out how NOLA Lending in Covington can help you today!

When applying for a mortgage , your lender may ask you to sign and submit a Form 4506. It is a form we get directly from the IRS which some mortgage lenders may require you to complete as part of your loan application.

What is a 4506 used for?

Form 4506 T, as it is most often requested, is also called a Request for Transcript of Tax Return. This document allows for a copy of your tax return to be obtained from the IRS directly. A mortgage lender may request this to verify your income documentation that you have provided as part of your loan application.

There are a few things to know about it.

1. This form may be necessary if you are a self-employed borrower and the lender wishes to see official documentation of your most recent earnings from the IRS.
2. This form is also used to detect fraud in cases where there is an apparent discrepancy. If there is some reason the lender does not believe your reported income is accurate, they may take steps to verify it through this manner.
3. Many mortgage companies also use this tool randomly within their business. For example, during the course of the day the lender may request a certain number of these documents. This is often for a quality control measure and those who receive the request are selected randomly.

4506 as part of the loan process

The fact that your lender has asked for a signed 4506 doesn’t necessarily mean they suspect fraud or have identified an issue with your loan.  It may simply be part of their regular process.

During any loan application, it is necessary for mortgage lenders to verify the information you provide to them.  So as a rule, when filling out documents to obtain a loan, always provide the most accurate information. Ensure that all statements you make are accurate and verifiable to avoid any problems with this step or other verification steps the lender will take.

A mortgage calculator is a handy tool, but it cannot replace a mortgage professional. A mortgage calculator can give you a ballpark figure for what you can afford, however, based on your income and, depending upon how sophisticated the calculator is, the local tax rates and the cost of homeowner’s insurance for the properties you’re considering.

Caveats

Homeowner’s insurance rates will vary considerably depending upon where the home you’re looking at is located – especially in southern Louisiana – where the ability to get private coverage or having to go with the state Fair Plan may make or break your mortgage application!

You have to take this into account and using national averages is really not that useful as a means of determining how much you’re going to end up paying for this necessary cost. An insurance company is really the only reliable source for this info, or a mortgage broker that can find out from an insurance company for you.

You’ll also want to make sure that you consider taxes into the equation. These will vary from place to place and not all online mortgage calculators even consider this. If your taxes are around $3,000 per year, you can count on that amount being added to the cost of owning your home. This may put the cost of the home over the edge for you where affordability is concerned.

Make sure you take into account the fact that a mortgage calculator just gives you a number based on a percentage. For instance, a mortgage broker works with you in a way that mirrors how a bank will determine your suitability for a loan. This will include taking into account the amount of expenses you have already. Your car loan, insurance payments, credit card debt and so forth will all factor into how much you can afford in the way of a mortgage.

A mortgage calculator will usually just give you a percentage, somewhere between 28 and 33 percent, of your total income and factor in a few other numbers to determine how much you could borrow.

Calculators Have No Lending Authority

A mortgage calculator is handy and can give you some rough ideas of your borrowing capacity. However, it’s important to remember that banks don’t make lending decisions based on what these calculators say you can afford.

So while a mortgage calculator can get you started, give you an idea of how much you should seek and so forth, it takes a home mortgage professional to really determine how much you can borrow.

As mortgage lenders, one question we are often asked is whether or not you can refinance a home mortgage into just one person’s name.  There are some cases where you may want to have your mortgage debt in one name only. This can be done, but it will depend upon a couple of things:

Credit Ratings

In most cases, it will require that the person who is taking the debt into their name be able to qualify for it on the basis of their credit score and income alone. The refinance, however, is secured by the property, so this isn’t quite as hard as you may think. In most cases, one member of a married couple will be able to do this without any difficulty.

What About the Title?

You should still be able to leave the title in both names, even if the refinancing is only done under one name. The refinancing is just a loan and it’s used to pay off the first mortgage. This should only affect the financing, not the actual ownership of the house from a legal standpoint.

How Do We Do It?

NOLA Lending will help you fill out all the paperwork for the refinance and get you started on the process. Changing from one name to two will usually just be a matter of letting your lender know that this is something you want to do. Beyond that, the process won’t be any different than applying for any other form of refinancing.

Before getting started though, we will check the new borrower’s credit, so that aspect of applying for the loan will not change. The only difference will be that the paperwork will contain one name rather than two and that the refinancing will be done completely against one person’s credit and income. If that person happens to have excellent credit, it may be worth it to remove someone else from the application and to have it written against the name of the person who has the better credit. The loan is secured, of course, but credit still does play a part.

In days past, if you had a less than perfect credit rating it usually meant that someone was irresponsible or simply unethical in how they handled debt. Today, many hard working people have less than perfect credit due to a number of reasons not all of which are under their control.

At the same time, banks are being much pickier about whom they lend money to and that means that the credit ratings required to get loans are higher than ever. Finding a mortgage lender that can help you if you have less than ideal credit will require that you accept a couple of things.

You May Pay Higher Interest Rates

Credit ratings improve when you’ve been on time with payments for a while and when you’re re-established that you’re not an extreme risk to creditors. One way of doing this is to take out a high interest loan for a while and, when you’ve been paying on it regularly, to re-apply for a better loan.

Higher Down Payments

Another effect of having weak credit is that you may have to come up with more money for your down payment on your loan. This does have some advantages, however. Principally, it lessens the amount that you have to pay interest on and that means that your home is more affordable from the start.

Mortgage Insurance

Everyone needs mortgage insurance for higher LTV loans.  However the amount and rate of mortgage insurance may increase if your credit isn’t so good and this will have to be factored into the loan. A good mortgage broker that helps people with less than perfect credit can make sure that you understand this insurance and can make sure that you don’t end up overpaying for it. This insurance may well be the only reason that you’re even able to finance a home, so don’t be put off by the additional cost that it adds to the purchase price.

A good mortgage broker that helps people with less than perfect credit can find most anyone an affordable, valuable loan that will make a home a realistic option for them.  And at NOLA Lending, we take pride in serving the needs of our customers so that you get Your Loan, Your Way!

Cash out refinancing is a way that you can borrow money against the investment you have in your home by refinancing more than the balance you owe on your home mortgage. It’s important to remember that this is, in fact, a loan. It’s not a profit that you’re making off of your home and is definitely not “free money”. That being said, there are some significant benefits that you may be able to take advantage of by using this form of refinancing.

Benefit #1: Money

The most significant benefit is the money you walk away with. The cash out is literally money in your pocket. The amount that you’re allowed to borrow will depend upon the company you’re working with and your credit worthiness. In some cases, you may be able to borrow a high portion of what the home is worth (as much as 85% LTV) and, in some cases, you may have to settle for 70 or 80 percent of the home’s value in the total amount of the refinance.

The actual sum of the money you walk away with depends on how much you refinance for and the difference between that amount and the value of your house. You pay off the balance on your mortgage with the money you refinance and walk away with the balance in your pocket.

Benefit #2: Interest Rate Savings

You may be able to get a lower interest rate by refinancing. This is a strategy that some people use to offset what they’d pay in interest if they kept their current loan. For instance, if you owed $100,000 on a home and had a bad interest rate, you may find that refinancing the home for $120,000, paying off the $100,000 and using the additional $20,000 to pay off other bad loans may get you out of some interest debt that’s coming down the road. This is a rather popular strategy and can save you thousands in interest payments.

Benefit #3:  Taxes

If you use the money you get out of your cash out refinance to pay off credit cards or other debt, you may be able to basically transfer that debt to a form—your mortgage debt—that can be written off of your taxes in part. This means that you get more out of the money you pay toward your debts and also means that you can get out of some very common credit traps.  You should consult your NOLA Loan Officer as well as your tax advisor to find out what’s best for you!

Some people also use these loans for home improvements, which is a way to bring up the value of the home and, if you plan on selling it, a good way to finance improvements that may end up netting you more out of the sale.

Calculating how much you can afford on a home mortgage is a lot more complex than calculating how much you can afford in rent. In the latter case, a third of your income is usually a good measure for the most you want to pay in rent. Where a mortgage is concerned, you have to take some other considerations into account when you’re shopping around for houses.

Property Taxes

The amount you pay to finance the cost of the house is only the first part of determining how much the mortgage will actually cost you. You’ll also have to take into account the cost of property taxes in the area where you’re buying. Because this is an unavoidable expense, you have to factor it in from the start. If you don’t, you’ll almost certainly underestimate the costs you’ll pay each month.

Take the yearly taxes on the property and add a 12^th of that sum to your monthly payments as most people pay this monthly via their escrow account.  That way you avoid paying a large sum at one time each year to satisfy your property tax bill.

Homeowners, Flood & Mortgage Insurance

Homeowner’s insurance will be a necessity, as well. You’ll have to factor this into the cost of your home every month. Remember not to go by an average in this case. The homeowner’s insurance could be much more expensive if you live in an area that’s prone to flooding or to fires. This could vary by the neighborhood, so be sure that you’re making a good estimate of what you’ll have to pay.

Unless you show up with a very large down payment, you’ll also need mortgage insurance. This protects the lender from taking all of the risk if you should happen to default on the loan. You’ll have to factor this into the total cost of the mortgage, as well. Make sure your mortgage loan officer can explain this to you and make sure you understand the amount you’ll have to pay.

Debt to Income Ratios

Generally speaking, your mortgage should cost you somewhere between 28 and 33% of your gross monthly income. This cost has to include all the aforementioned expenses, as well as any others that may exist, such as neighborhood association fees and so forth.

The mortgage loan officers at NOLA Lending will be able to help you find a suitable loan that fits your income. One of the things that caused the housing crises was people buying way more than they could realistically afford. If you make smart decisions and buy within your means, a mortgage can be an affordable form of financing that offers you a lot of joy for the amount you pay every month.

Please contact us to assist you in calculating your estimated monthly payments!

There are some situations where you may be able to sell off your property and still retain the mortgage. There are also situations where you may end up with more than one mortgage at a time. Obviously, this latter situation is one that you won’t want to endure for long, unless you’re a property investor.

Situation #1:  Moving to a New Home

Right now, one of the most common—and frightening—phrases that people hear is “underwater mortgage”. This is a situation that arises when the balance on your mortgage is higher than the value of the property it’s written for and, of course, that means that the homeowner is in a bad situation. This makes some homeowners wonder if they could take their existing mortgage to a new property.

Generally, you cannot “move” a mortgage loan as your loan is secured by your real estate.  However, if you’ve been a good customer, they may offer you a mortgage much like the one you have. In fact, because there were so many bad mortgages being written in the past, you may even qualify for something better than you have right now.

Situation #2:  Lease to Own

This is one situation where you may be able to keep your mortgage and sell your home. Under this arrangement, a new tenant moves into the home and takes over the payments on your mortgage. In Louisiana, you may hear this arrangement referred to as a “bond for deed.”

Some people who make these arrangements do them at a profit and make a bit of money off of the tenant’s payments. Sometimes they simply have the tenant make the regular payments, however.

This is sometimes done by property investors as a way to balance having more than one mortgage and to still keep it affordable.

Situation #3:  Short Sales

If your mortgage is underwater, you may be able to sell it off in a short sale, which is a sale of the home for less than the value of the sum left on the mortgage. This requires approval from the bank and will depend upon your situation. It will impact your credit, so be careful about taking on such an arrangement.

Most often, a new home will require a new mortgage. You can talk to the mortgage lenders at NOLA Lending to see if we can find you something very similar to what you have, however, or even something a bit better.

Simply put, mortgage insurance (also called “PMI” or sometimes simply “MI”) is designed to provide additional security for home mortgage lenders to ensure that they’ll be insured in the event of a default. The insurance doesn’t cover the homeowner: it covers the mortgage lender or banker. Mortgage insurance is a requirement for some mortgages and, if you don’t have a large enough down payment, you’ll almost certainly have to pay for this coverage.

Why it’s Necessary

When a lender is financing 80 or more percent of the cost of your home, they’ll usually require that you have mortgage insurance. This is because they’re taking a substantial risk in providing this funding and, if you default, they need to make sure that they’re not taking all the risk.

When you apply for your first mortgage, you’ll have to count on this cost being added to the cost of your mortgage as a whole. Most lenders will not be willing to finance a home without some type of risk reduction which is what this insurance provides.

Do You Really Need This Extra Expense?

In a way, mortgage insurance is purely another cost to the homeowner. There are some potential ways that you can lessen it, however. Tax codes allow mortgage insurance to be written off of your taxes, but you’ll have to have an accountant guide you through this process to make sure that you’re doing it correctly, and confirm your income qualifies you for the deduction.

You should also keep in mind that the mortgage insurance may be the only thing that’s even making it possible for you to buy your home. When the lender is putting down over 80% of the purchase price to secure the property, they’re taking a lot of risk. It makes sense for them to demand some way to make sure that they’re not taking on the full amount of that risk and, with mortgage insurance, it’s lessened for them somewhat.

Avoiding Mortgage Insurance

The only way to avoid paying for mortgage insurance is to offer a bigger down payment on your home – typically at least 20%. If you can do this, the lender will forego the requirement for the mortgage insurance. If not, however, you’ll have to factor this cost into the total cost of your mortgage.  There are also options for PMI buyouts, single premium or buy downs for discounted premiums monthly.  You should discuss these options with your NOLA loan advisor.

The laws that govern mortgage insurance have been changed a bit to make it a more valuable product for consumers and easier to understand. While it may seem like something of a disappointment to have to add this onto your payment for your home, it does make it possible for many people to get the home they want with smaller down payments.