Questions to ask your mortgage broker or lender

Questions to Ask Your Lender or Mortgage Broker

  1. What loan programs and options are available to me?
  2. Will my loan be Conforming, Super-conforming, or Jumbo?
  3. What type of loan is available to me?  Adjustable, Fixed, or a hybrid?
  4. What loan program would be best for my situation?
  5. So I qualify for any special programs such as Below Market Rate Units, Mortgage Credit Certificate Programs, Mayor’s Office of Housing Programs, or FHA programs?
  6. Will private mortgage insurance be required in my loan?  How much will it cost?
  7. How long is the approval process?
  8. What information is necessary to get my approval?
  9. What documents are necessary from me to approve my loan?
  10. How much will be closing costs be?  What will they include?
  11. How much are your fees, and who pays them?
  12. How much is a loan lock, and how long is it good for?
  13. If rates go down during the escrow period, will I be able lower my rate?
  14. How long will it take to close my loan?
  15. Is there are prepayment penalty on my loan?
    1. Why?
    2. How long?
    3. How much will the penalty cost if I pay my loan off early?
  16. Who will service my loan?

Finding the right financing for you does not have one answer; there are many different options which may work for your situation.  The above is broad in scope, and may not cover your specific situation; please consult a mortgage broker and/or accountant to help you in your financing goals.

What do loan limits mean?

You’ll hear the term ‘loan limits’ as you talk more and more about financing. There are three types of loan limits: conforming, super-conforming and jumbo.  This is important, because the government buys loans in the secondary market, which puts more money back into lenders’ pockets to lend out even more money.  The government has limits on the size loans they will buy, so they will only buy conforming and super-conforming loans.  The loans that fall outside these categories are jumbo loans. 

The conforming loan limit is a permanent limit (subject to change by the government) and the super-conforming limit is temporary, based on median income in a region.  Interest rate pricing for the conforming loan limit is generally the lowest of the three.

Jumbo loans are financed through private investors, and not eligible to be purchased in the secondary market.  When financing tightens, it’s generally in this category, as there may be fewer investors willing to risk their money to people borrowing money at this level.  Pricing for this financing is generally higher than it is with conforming.

Here are the current limits:

http://www.fanniemae.com/aboutfm/loanlimits.jhtml

Scammers take advantage of Natural Disasters

Watch out for Disaster Fraud

From the California Association of Realtors:

Tip of the Week: Justice Dept. raises awareness of disaster fraud hotline
The Dept. of Justice, the FBI, and the National Center for Disaster Fraud remind the public there is a potential for disaster fraud in the aftermath of a natural disaster.  Suspected fraudulent activity pertaining to relief efforts associated with natural disasters should be reported to the toll-free NCDF hotline at (866) 720-5721.  The hotline is staffed by a live operator 24 hours a day, seven days a week, for the purpose of reporting suspected scams perpetrated by criminals in the aftermath of disasters.

In the wake of natural disasters, many individuals feel moved to contribute to victim assistance programs and organizations across the country.  The Dept. of Justice and the FBI remind the public to apply a critical eye and to conduct due diligence before giving to anyone soliciting donations on behalf of victims.

Special loan programs for buyers in San Francisco

“MCC” – San Francisco Mortgage Credit Certificate Program

Essentially is a tax credit on your mortgage payment.

Program Limits:

  • First-time homebuyer (cannot have owned for past 3 years)
  • Purchase price limits
  • Income limits-this changes year to year because it is based on median income

For more information:

MCC Program Highlights

 

Down payment Assistance Program (DALP)

This program is very cool.  It is for low to moderate income buyers.  The city makes a second on any property in San Francisco that is silent, meaning that there are no payments made on the loan by the borrower for 40 years.  The loan must be paid off in 40 years along with 20 percent of the appreciation.

  • Income limits
  • Purchase price limit
  • Loan amount limit
  • First time buyer
  • Must be owner occupied-unless approved by Mayor’s Office of Housing (may allow temporary rental)

DALP Program

 

“BMR”  – San Francisco Redevelopment Agency Below Market Rate

This program is for specific properties in the program.  The units are intended to always remain in the program, so you wouldn’t get the benefit of appreciation as you would in market rate housing.

Program Limits:

  • First-time homebuyer
  • Income limits
  • Limited equity program: You cannot resell at market price, essentially cannot sell for a profit or build equity except for mortgage pay downs
  • Must enter a lottery for chance to submit an application

For More Information:

Below Market Purchase Program

FHA Financing

A federally backed loan program that allows buyers to make smaller down payments. Pre-approved lenders have this program available.  You do not have to be a first-time buyer, but you do need to be an owner occupant.

  • Allows 3.5% down payment
  • Allows lower credit scores
  • Loan limits
  • Requires upfront mortgage insurance premium (which can be financed) plus monthly mortgage insurance premium (adds about .5% to the interest rate)

Many mortgage brokers can help you with this financing.  If you need a referral, please let me know.

 

Types of financing available

There are three types of loans available for your purchase of real estate.  You can expect each lender to have different qualification requirements depending on your own financial ability. 

Adjustable Rate Mortgage (ARM)-have a mortgage interest rate that changes over the life of the loan, usually tied to an index and can adjust as often as once a month or as little as once a year.  The type of loan carries more risk to the borrower, as the interest can go up frequently over the life of the loan.

3, 5, 7, or 10-year fixed rate loans-have a fixed interest rate for a period of time usually three, five, seven or ten years, then turn into an ARM which adjusts once a year.  Once the loan changes to an ARM the payments fluctuate and the loan is amortized-meaning set to pay off for the remaining duration of the loan.  This type of mortgage gives borrowers a steady payment for a period of time, usually with an interest rate lower than a 30 year fixed rate mortgage.  This is a good option for borrowers who plan to sell or refinance their home within 5-8 years who want some stability in their payments.  Some of these loans also offer an interest only option, meaning that no principal is paid on the loan for a period of time.

Fixed Rate Mortgage-has a fixed mortgage payment for the loan’s entire duration-usually 30 years.  A portion of the mortgage payment goes to interest and the other to principal (the amount borrowed).  Payment to principal is smaller in the earlier years, and increases over time.

 

To get a better idea of what is available to you, please contact a mortgage broker or direct lender.  I would be happy to provide you some referrals; don’t hesitate to ask me.

Getting started with financing

Property purchases usually include some kind of institutional (bank or savings and loan) financing.  There are many types of financing to consider depending on your long-term financial goals.

Mortgage brokers are popular because they have relationships with multiple lenders.  Mortgage brokers will search for the best loan programs with several lenders, and provide options for you, saving you time and energy.

Direct lenders (such as Wells Fargo or Bank of America) may be the right fit for you if you already have a relationship with a lending institution or credit union, or if the specifics of your situation call for it.  Direct lenders will usually have fewer programs available to them than a mortgage broker, so you’ll be doing your own due diligence to make sure you have the program right for you.

On-line mortgage brokers are available, but I have found that often times these brokerages are not local, nor familiar with our real estate market.

My recommendation will always be to work with a local broker or direct lender that you can meet in person.  If you need a few referrals, let me know.

Brokers and lenders will look at various financial information to get the best snap shot they can of your financial picture.  This will help them establish you as a credit risk and how much of a risk (the amount they will loan you) they will take.  They will look at such things as:

  • income, including documentation about additional income such as alimony, child support, or pension
  • assets
  • debt
  • late payments
  • bankruptcies or foreclosures
  • your work situation, length of employment, and job changes
  • two years tax returns
  • bank statements
  • source of your down payment (will this be your own money, proceeds from a stock or retirement account sale, or a gift from family)
  • reserves and retirement plans
  • credit report and FICO score

Mistakes people make when buying or selling a home

Mistakes

Prevented By

1.  Not knowing how much they can afford to pay for a house before they make an offer. Get pre-approved for a mortgage, so you know in advance exactly how much you can afford.
2.  Not finding out in advance whom the real estate agent represents.  Asking your Realtor.  Most people think their agent is working for them.  But unless the agent is working as your buyer representative, he/she represents the seller.
3.  Not realizing that the wrong mortgage can cost thousands of dollars in unnecessary interest and taxes.  Consulting with a mortgage consultant, accountant, and/or financial planner before making a final decision on which mortgage to choose.  CPAs can tell you the long-term effects on your income.
4.  Not discovering hidden defects before buying a home. Hiring a professional to conduct a pre-purchase home inspection.
5.  Not knowing how debt can affect their ability to buy or refinance a home. Asking your mortgage professional to help you review and repair your credit file in advance.
6.  Setting their asking price too high because of personal need or emotion rather than fair market value. Consulting with a professional real estate agent.  He/she can assist you in pricing your home correctly.
7.  Failing to “showcase” their home by highlighting the best features. Thoroughly cleaning, repairing, and readying your home for showing before you put it on the market.
8.  Signing a listing contract with no way out. Asking your real estate agent if you can cancel your listing agreement at any time, no questions asked, prior to signing the contract or agreement.
9.  Choosing an agent for the wrong reasons.  (For example, listing a home with the agent who works for the most popular company.) Selecting a listing agent with the best marketing plan and track record.
10.  Not knowing their legal rights and obligations. Consulting a knowledgeable, trustworthy professional who understands the technical and legal aspects of a real estate transaction. Contracts are legally binding.   Neglected details can wind up costing sellers thousands of dollars.

Loan modification fraud

Here is a video put out by the California Association of Realtors with contact information to help you get the appropriate help in the event you or someone you know is attempting to get a loan modification.  Fraud and scams are running rampant now.  It is illegal for operators to collect an upfront fee, promise that they can get you a modification, or guarantee that they can keep you from foreclosure.

If you are trying to do a modification on your loan, or know someone who is, please take a look at this video for some good tips on how to spot fraud.  They seem like common sense, and they are; if you are in crisis, it’s also easy to not think straight.

Loan Fraud up-expect more

 Loan modification help

 

If you have had a bad (or good) experience, please share to help others!