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It's true!

Are you looking to buy a home to live in and have been looking for a great deal? HUD released an extension of their already low down payment home buying program. What this means is if you buy a HUD owned home (can be found through a HUD approved real estate agent), and use HUD financing ( I can provide or any HUD approved lender) you will be eligible to use the $100 down payment requirement.

With HUD rates on mortgages at 3-year lows this might be a great time in Colorado to pursue this option.

If you need a referral to an a qualified agent who can find you a home you can put $100 down payment on let me know. Also give a call if you have questions about this program and how it applies to you for financing these homes.

Ray (303) 779-0591 x2

Is now a good time to refinance my house?

When looking at what has changed in the last week and a half, many people have called my cell directly to ask me “Ray, rates have been dropping, should I fix my adjustable mortgage?”

This is a time for all of us to be thinking that question. Whether you have two months, or 36 months until your mortgage rate adjusts, that very question probably has crossed your mind. I know it has mine on my houses.

First, lets analyze what has happened in the last week from the Federal Reserve meetings. We all know that by now that the two recent meetings resulted in a reduction of the fed funds rate totaling 1.25% from where it was. How does this affect all of us? Did mortgage rates drop 1.25% from where they were before last week? Just look around and ask yourself. If rates were sitting at or below 6%, did they drop below 5%? NO WAY!

The impact of the rate reduction is actually tied to short-term lending. Credit cards, auto loans, and Home Equity Lines of Credit are examples of things affected by the reduction in the fed funds rate. Mortgages on the other hand are tied to the bond market directly and the trading of the mortgage backed securities.

As much as we are seeing the lowest rates in over 3 years right now, it is not because of what chairman Bernanke did. The drop in mortgage rates over the last 2 months has come from a result of a weak job market, market performances, and inflationary situations.

Should you refinance your house right now?

If you have an adjustable rate mortgage, you should look at the potential of refinancing right now if you plan on being in your house beyond the date your loan is set to adjust. The reason for that is one way or another you will have to face the reality of refinancing sooner or later.

You may have bought or refinanced with an 80/20 mortgage in the last 3 years or so (maybe even with a 30 year fixed mortgage), you probably have a higher rate (say at least 6.5% on your first and 9% on your second). You originally did this no doubt to remove your need for mortgage insurance. Although one thing that has changed, is that mortgage insurance is now tax deductible until 2010, at least. Now if you could refinance into one loan with a rate of say 5.5-5.875% (30 year fixed) with a slight bit of mortgage insurance, which mortgage would you prefer?

If you have an interest only mortgage currently, you should look at your financial picture. Are you taking the difference between your interest only payment and what it would be if it were principal and interest and applying it to debt, investing it, or using it wisely? If so you are in a good loan. Is your interest only mortgage an adjustable? If so, you should analyze refinancing the current mortgage into a 30-year fixed mortgage that offers a 10-year interest only option. What this means is that for the first 120 months your payment will be the interest only portion. Then from months 121-360 your payment becomes a principal and interest payment to pay off your home after a total of 30 years. The safety net on this loan is that it offers a fixed rate with the flexibility of an interest only option. And the increase in payment after 120 months is about $300 per month.

Overall, mortgage underwriting guidelines have tightened and housing values are flat are down in certain parts of Colorado. It is more then ever important that you work with someone who is experienced is all areas of mortgages and LOCAL where you can sit in front of them in a professional setting. This will help insure that your income will be calculated accurately if you are self-employed, commissioned, or earn bonuses. This will insure that when you buy your home or refinance yours or your investment property, that you are explained and actually offered options that meet your needs. This will insure that you understand your mortgage through straight talk and with a credible source. This will insure that you receive competitive terms and fees to go along with the mortgage that is specific to your life. Afterall, your mortgage is a tool that can grow wealth if aligned with your life and goals. It can also cost extra monies in refinancing fees and interest paid over time, if you have the wrong mortgage.

No joke~

HUD has a program out there that will allow you to buy or refinance your home and create an escrow account to build in the repair costs.

For example, You find a house you want to buy but it needs repairs beyond what you can afford out of pocket. Traditionally you would secure financing to secure the house, a rehab or construction loan (with high rates and short amortization times), and permanent financing after the work is done.

HUD's program will allow you to buy the house and create an escrow repair account, so long as the work is done within 6 months. You can even roll in 6 months of mortgage payments to allow for the time the work is done and house may be vacant.

Items to consider for repair escrows are: room additions, remodeled bathrooms and kitchens, permanently installed appliances, heating, air conditioning and electrical systems, whirlpool bathtubs, roofing, flooring, tiling, carpeting, double pane windows, insulation, and major landscape work as ideas.

You should allow for 60-90 days for this type of refinance or purchase contract to close efficiently. There are different processes and it is much more labor intensive then a normal home purchase or refinance. With great patience comes great reward.

If you have questions about this program or want information you can either email me or call (303) 779-0591 x2~ Ray 

With all the changes in the mortgage industry that have evolved due to the foreclosure epidemic in our country it is going to be important to understand how to qualify for home loans in the future.

If you are self-employed, earn commission, and buy (or look to buy) investment properties or even your own home, then you are probably accustomed to not verifying your income on paper (with tax returns). It has always been easy and quite frankly your mortgage consultant may not know how to read tax returns. This can be a costly mistake because of how much more you will put down on the house or pay in costs or interest on the life of that loan. It is interesting that we are seeing the changes to qualifying for a mortgage take place at a time while all of us are thinking of income taxes. Here is a live example of the impact of being able to qualify on paper versus not being able to qualify on paper.

In the past (last year) I was able to buy an investment property with 0 money down and not verify my income on paper. My rates were high, but the mortgage didn't have a prepayment penalty so I was happy. After I remodeled the property, I refinanced it and recaptured the expenses of remodeling the property. My new refinance occurred when the mortgage industry was upside down this spring. At that time I then took a loan in the range of 8% fixed for 7 years. Now that rates have hit 3-year lows, I have been looking to secure long-term financing for the future.

This is where it gets tricky. I have to be able to qualify on paper (2 years tax returns)! Why you ask? If I can't, with all of the changes in the mortgage market I would have to keep my current mortgage and pay $1250+ per month in interest. That is simply because the new rules of the mortgage industry have limited the abilities for folks with investment properties to purchase or refinance unless they can verify their income on paper with 2 years tax returns. You also are limited in the terms of taking equity out of investment properties (85% of the value of the property) or purchasing a property, now requires 15% down. If you can't verify your income that mortgage will cost you around $6,500 in closing costs and a rate ranging on 8.75% for the best loan program. Pretty expensive!

Back to my example: I will be able to drop the monthly interest by $350 per month with the new loan. If I were to take the monthly savings difference and send it back to the mortgage every month I would be effectively in about a 15 year loan, and would save well over $100,000 in interest over the life of the mortgage.

Being that it is the time of year that we are getting ready to file our taxes. Make sure you are looking at your deductions and monitoring taking excessive deductions. The reason I say this is, if you are self-employed, earn commission income and actively play in real estate (or even are buying your own home) you will need to be able to work with someone who can advise you on how to qualify for mortgages into the future. Part of what this means is you will have to show income on your tax returns for two consecutive years. If you take advantage of doing it for 2007 while you are filing your taxes here shortly, you can do an amendment to your tax return for 2006 to get your 2nd consecutive year. This will allow you to show the income on paper you need to qualify for mortgages moving forward.

If you are currently purchasing/refinancing your home or an investment property, are self employed or receive more then 25% of your income in commissions, give us a call (303) 779-0591 x2 to talk about how to qualify on paper and get the best mortgage for your future.

Ray