Getting a mortgage these days can leave YOU feeling overwhelmed and helpless. If only there was a way to know that you’re getting honest, accurate information to make informed, educated decisions about YOUR mortgage.

 I don’t know about you, but I really dislike buying a car. I dislike the whole process. There is a whole lot that goes on behind the scenes that I don’t understand. I never know if I can believe what the salesman is telling me. I never know if I’m getting a good deal or being taken advantage of.

Perhaps that is why I approach helping people get mortgages a little differently. I think that it’s important for you to have all of the information you need to make a wise decision. It’s your mortgage – you’re the one who is going to live with it for possibly the next 30 years.  You need to be certain that you’ve gotten the best mortgage to fit your needs, structured in the correct way to help you achieve all of your financial goals.

I believe that getting a mortgage doesn’t have to be a painful experience. You don’t have to simply turn over all of your personal and financial information and then just hope for the best…hope that your loan originator knows what they are doing – hope they are telling you the truth – hope they have given you the best advice on which loan option to choose – hope they know the best time to lock in your rate … Instead, once given the information you need, you can choose how to structure your mortgage and what rate to choose. I have the tools to help you do just that. Let me show you what I mean…

Things aren’t always as they seem.

If you’re not familiar with the terminology and the loan process,

how will you know if you are getting a good deal, or being taken advantage of?

(by the way… the man squatting in the picture above isn’t holding anything in his hands. All of the water, the drain, and the hose and reel– just a chalk drawing.)

When you work with me, I won’t just tell you what loan options you have and which one will be best for you – I’ll SHOW YOU.

Do you know the answer? Which is better – a lower rate with higher fees, or a higher rate with lower fees?

I won’t just quote you a rate and fees, I’ll SHOW YOU how much you will save each month and over the life of the loan.

Then YOU make the decision as to which loan option is best for you.

Should you ask the seller to help you with your closing costs? Or would it be better to ask them to help you buy down the rate instead? What is the best way to structure your offer so that you’ll save the most amount of money? I’ll SHOW YOU what the different options will mean to you in dollars and cents, and then YOU decide what is best.

Is now a good time for you to buy? Or would it be better to wait in case home prices decrease? I won’t just give you my opinion, I’ll SHOW YOU the numbers in black and white. Then YOU make the decision.

  How will you know who has the best rate? Is spending your time and energy rate shopping with several different lenders the only way to know? How will you know the best time to lock in the rate? I won’t just tell you what the markets are doing – I’ll SHOW YOU.

…and I’ll SHOW YOU which lenders are raising their rates, and which ones are lowering their rates – in real time. Then YOU decide when it’s the best time to lock in your rate.

Getting a mortgage doesn’t need to be a frustrating experience that leaves you feeling helpless.

I won’t ask you to trust me, I’ll earn your trust, by giving you the information you need to make informed, educated decisions about your mortgage.

FHA (Federal Housing Authority) is the government agency that provides federally insured mortgages. The majority of people buying homes these days use an FHA mortgage because it is the only option they have. FHA mortgages only require a 3.5% down payment, are more flexible with credit history and score, and have less expensive mortgage insurance than conventional loans. Most homebuyers don’t have a large down payment and usually have less than perfect credit. Conventional loans in Washington state currently require a 10% down payment and the mortgage insurance, although no upfront insurance required, is more costly per month.

Things are changing, though. FHA is committing to tightening their guidelines, and will be announcing the new changes as soon as January. Here are some of the changes that are being discussed:

1. Increasing the down payment requirement from 3.5% to 5%
2. Reducing the amount that sellers can contribute towards their closing costs from 6% to 3%
3. Increasing the amount of mortgage insurance required – both the upfront insurance and the monthly premium amount
4. Increasing the minimum credit score
5. Increasing the interest rate for borrowers with lower credit scores

In addition to the changes being planned for FHA loans, Fannie Mae is also tightening their guidelines, as well. As of December 12, 2009, the following underwriting guidelines will be in place for all mortgages, including both conventional and FHA.

1. Minimum credit score of 620
2. Maximum debt-to-income ratio (total monthly debt divided by total monthly gross income) of 45% (up to 50% for very strong borrowers) -note- Currently there is no set debt-to-income limit. I have seen ratios of up to 67% get an approval.

Underwriting guidelines continuing to tighten. If you are considering buying a home, but are waiting for home prices or rates to come down even more, you may find that you’ve waited so long that you no longer qualify. Rates are the lowest that they have been in 50 years. Home prices may never be this low again. It’s time to put every penny you can into savings, get your credit score up as high as possible, and make your move now. (Whatever you do, DON’T try and improve your credit score on your own! Please give me a call and I’ll be happy to go over your credit report with you.)

It’s important to keep old revolving accounts open, even if you are not using them. 15% of your overall credit score is determined by the length of history. If you close the accounts that you have had for a long time, you will shorten your credit history, thereby lowering your score.

30% of your score is determined by your balance to limit ratio. The higher the balances you are carrying in comparison to your credit limit, the lower your score will be. The credit bureaus recommend keeping your balance to below 30% of the total available limit. If you close accounts, you are lowering your overall credit limit, again, causing a negative effect on your score.

Banks and credit card companies are not making it easy. They have begun lowering credit card limits in the past couple of years, which has automatically made the balance-to-limit ratio higher for anyone carrying balances on their cards.

The government is putting limits on how much the banks and credit card companies can hike up their rates that will take effect in February. Because of this, they are raising their rates now. You have probably received a letter from your credit card companies informing you of the rate hike and giving you a choice to “opt out”. The letters state that if you “opt out”, your rate will not be raised, but your account will be closed. Please keep in mind how this will affect your score when deciding whether or not to keep your account open. If you have had the accounts for a long time and they have a substantial credit limit, the effect on your credit score could be dramatic. The best option would be to transfer the balance to another account, or pay it off if possible, and keep it open.

Navigating the credit scoring system is quite a task these days. The best way to keep a high score is to use each card frequently – at least once every 2 months, but pay the balance off in full. And whatever you do, don’t close old accounts!

Your credit score is made up of 5 components.

1. 35% – Payment History
a. On-time payments
b. Length of time that has passed since the most recent negative item

2. 30% – Credit Balance to Credit Limit Ratio
a. Keep your balances below 30% of the available limit

3. 15% – Length of Credit History
a. The longer the history, the better

4. 10% – Type of Credit
a. Ideal credit profile consists of 3 – 5 revolving credit cards, a mortgage account, an auto loan, and a line of credit

5. 10% – Inquiries
a. Inquiries stay on the report for 2 years but only affect the score for 1 year
b. Auto and mortgage inquiries occurring within a 45 day period are treated as 1
c. Many inquiries don’t count: personal, promotional and job related, insurance & account reviews

Whatever you do, be sure you are making your payments on time, especially if you plan on applying for a mortgage in the near future. The recent history carries the most weight – a 60 day late from 1 year ago will not have as much negative impact on your score as a 30 day late 2 months ago. When applying for a mortgage, your credit history from the most recent 12 months will have the most weight and impact on your score.

Every person who owns a home in the U.S. is losing value and equity in their home because of HVCC. HVCC (Home Valuation Code of Conduct) is supposed to stop appraisal fraud by not allowing loan originators to have any direct contact with the appraiser. The problem is that all appraisals must now be ordered through Appraisal Management Companies, which are owned by none other than, the banks. hmmm… what is wrong with that picture?!

Andrew Cuomo is receiving an early Christmas present today -

Mark Sevitt, past president of NAMB (National Association of Mortgage Brokers), along with Frank Garay and Brian Stevens, are delivering 50 boxes of signed petitions (120,000 signatures) of people in the mortgage industry, real estate industry, and consumers, to Andrew Cuomo’s office today, requesting that HVCC be stopped. HVCC has done nothing to stop fraud, actually appraisal fraud is up by 46% in Q3 2009. Since brokers haven’t been able to have any direct contact with appraisers since March 2009, it appears that they have been incorrectly targeted as the problem. HVCC has done nothing but slow down the housing industry recovery and cause transaction after transaction to not close. That is the last thing the housing industry needs right now.

Here is a partial list of what HVCC does:

1. The loan originator must order the appraisal through the AMC – which on average adds about one or two weeks to the process.

2. The appraisal ordered from one lender cannot be transferred to another lender, so if something with the 1st lender doesn’t work out, the homeowner has to pay for a new appraisal to be done. ($500-$600)

3. The appraisal has to be paid upfront by the homeowner, out of pocket, before he even knows if the transaction will be approved or not. The approval, of course, is based upon the value of the home. Since no one can talk to the appraiser ahead of time, there is no way to determine if the value will be there, or not.

4. The AMCs don’t choose appraisers based upon what areas they are familiar with, as loan originators used to do. The appraisals wind up being done by appraisers who don’t even know the area the home is in.

The bottom line is that HVCC, which was intended to protect homeowners from fraudulent appraiser/lender relationships, is doing nothing but hurting them, instead. It’s only accomplishment has been to give the big banks even more power and control (along with a new revenue source) than they already have. It’s time to put a stop to HVCC – now.

These days keeping your credit score as high as possible is more important than ever. Just one point can make a difference in your interest rate, costing you thousands of dollars over the life of your loan, or even stop you from qualifying all together.

Each Friday I’ll be posting a credit tip of the week, highlighting important facts that can have an impact on your score.

Today’s tip is about collections and judgments:

If you have any outstanding collections or judgments, they will come off your credit report after 7 years. If they are still appearing on your report after 7 years, you can simply contact the bureaus that are reporting them and provide them proof of the original date to have them removed. However, if the debt is owed to the government on any level, including child support and student loans, the debt can remain indefinitely. Surprise, huh?!

All three bureaus can be contacted online at:

www.experian.com

www.transunion.com

www.equifax.com

Here is an excerpt from www.nahb.org on the new and extended Homebuyers Tax Credit. Please feel free to contact me if you have any questions.

2009-2010 Homebuyers Federal Tax Credit Fact Sheet

Who is Eligible

• First-time home buyers, who are defined by the law as buyers who have not owned a principal residence during the three-year period prior to the purchase, may be eligible for up to an $8,000 tax credit. 
• Existing home owners who have been residing in their principal residence for five consecutive years out of the last eight and are purchasing a home to be their principal residence (“repeat buyer”), may be eligible for up to a $6,500 tax credit. 
• All U.S. citizens who file taxes are eligible to participate in the program. 

Income Limits

• Home buyers who file as single or head-of-household taxpayers can claim the full credit ($8,000 for first-time buyers and $6,500 for repeat buyers) if their modified adjusted gross income (MAGI) is less than $125,000.  
• For married couples filing a joint return, the combined income limit is $225,000. 
• Single or head-of-household taxpayers who earn between $125,000 and $145,000, and married couples who earn between $225,000 and $245,000 are eligible to receive a partial credit.  
• The credit is not available for single taxpayers whose MAGI is greater than $145,000 and married couples with a MAGI that exceeds $245,000. 

Effective Dates

• The eligibility period for the tax credit is for homes purchased after Nov. 6, 2009, and before May 1, 2010. However, home purchases subject to a binding sales contract signed by April 30, 2010, will qualify for the tax credit provided closing occurs prior to July 1, 2010.  

 Types of Homes that Qualify

• All homes with a purchase price of less than $800,000 qualify, including newly-constructed or resale, and single-family detached, townhomes or condominiums, provided that the home will be used as their principal residence. Vacation home and rental property purchases do NOT qualify.   

 Tax Credit is Refundable

• A refundable credit means that if the amount of income taxes you owe is less than the credit amount you qualify for, the government will send you a check for the difference. 
• For example:  
  • A first-time buyer who qualifies for the full $8,000 credit who owes $5,000 in federal income taxes would pay nothing to the IRS and receive a $3,000 payment from the government. If you are due to receive a $1,000 refund, you would receive $9,000 ($1,000 plus the $8,000 first-time home buyer tax credit).  
  • A repeat buyer who owes $5,000 would pay nothing to the IRS and receive $1,500 back from the government. If you are due to get a $1,000 refund, you would get $7,500 ($1,000 plus the $6,500 repeat buyer tax credit). 
• All qualified home buyers can take the tax credit on their 2009 or 2010 income tax return. 

Payback Provisions

• The tax credit is a true credit. It does not have to be repaid unless the home owner sells or stops using the home as their principal residence within three years after the purchase.

First-time Homebuyers Tax Credit Extension Is Official

Great news! The extension for the First-time homebuyers tax credit is official. And it’s not limited to first-time homebuyers, either! First-time homebuyers (that is, people who have not owned a home within the last 3 years) may be eligible for the tax credit of 10% of the purchase price of the home, up to $8,000.

Homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years, may qualify for a tax credit of up to $6,500.

 In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

It’s important to remember that the tax credit is just that… a tax credit – a dollar-for-dollar tax reduction, rather than a reduction in a tax liability. If you owe nothing, you will receive the tax credit in full. If you have a refund coming back, you will receive the refund plus the tax credit. If you owe taxes, you will receive the tax credit minus the amount you owe.

The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit, however, single filers who earn $145,000 and above are ineligible.

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit, however, joint filers who earn $245,000 and above are ineligible.

Qualifying buyers may purchase a property with a maximum sale price of $800,000.

————————

Remember, the new tax credit program includes a number of details and qualifications. For more information or answers to specific questions, please call or email me today.

In addition, you may be able to benefit from additional housing related provisions, including the following:

————————

Tax Incentives to Spur Energy Savings and Green Jobs

This provision is designed to help promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors, or insulation.

Landmark Energy Savings

This provision provides $5 Billion for energy efficient improvements for more than one million modest-income homes through weatherization. According to some estimates, this can help modest-income families save an average of $350 a year on heating and air conditioning bills.

Repairing Public Housing and Making Key Energy Efficiency Retrofits To HUD-Assisted Housing

This provision provides a total of $6.3 Billion for increasing energy efficiency in federally supported housing programs. Specifically, it establishes a new program to upgrade HUD-sponsored low-income housing (for elderly, disabled, and Section 8 to increase energy efficiency, including new insulation, windows, and frames.

Expanding Housing Assistance

This provision increases support for several critical housing programs. It includes $2 Billion for the Neighborhood Stabilization Program to help communities purchase and rehabilitate foreclosed, vacant properties.