Archive for the ‘Mortgage News’ Category
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Feb
05
Posted by Mark Clawson
Top Ten Things to Know if You’re Interested in
a Reverse Mortgage
Mark V Clawson - 702-351-7912 - markvclawson@gmail.com
Reverse Mortgages are becoming popular in America. The U.S. Department of Housing and Urban Development (HUD) created one of the first. HUD’s Reverse Mortgage is a federally-insured private loan, and it’s a safe plan that can give older Americans greater financial security.
1. What is a reverse mortgage?
A reverse mortgage is a special type of home loan that lets a homeowner convert a portion of the equity in his or her home into cash. The equity built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence. HUD’s reverse mortgage provides these benefits, and it is federally-insured as well.
2. Can I qualify for a HUD reverse mortgage?
To be eligible for a HUD reverse mortgage, HUD’s Federal Housing Administration (FHA) requires that the borrower is a homeowner, 62 years of age or older; own your home outright, or have a low mortgage balance that can be paid off at the closing with proceeds from the reverse loan; and must live in the home. You are further required to receive consumer information from HUD-approved counseling sources prior to obtaining the loan.
3. Can I apply if I didn’t buy my present house with FHA mortgage insurance?
Yes. It doesn’t matter if you didn’t buy it with an FHA-insured mortgage. Your new HUD reverse mortgage will be a new FHA-insured mortgage loan.
4. What types of homes are eligible?
Your home must be a single family dwelling or a two-to-four unit property that you own and occupy. Townhouses, detached homes, units in condominiums and some manufactured homes are eligible. Condominiums must be FHA-approved. It is possible for individual condominiums units to qualify under the Spot Loan program.
5. What’s the difference between a reverse mortgage and a bank home equity loan?
With a traditional second mortgage, or a home equity line of credit, you must have sufficient income versus debt ratio to qualify for the loan, and you are required to make monthly mortgage payments. The reverse mortgage is different in that it pays you, and is available regardless of your current income. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA’s mortgage limits for your area, whichever is less.
Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow. You don’t make payments, because the loan is not due as long as the house is your principal residence. Like all homeowners, you still are required to pay your real estate taxes and other conventional payments like utilities, but with an FHA-insured HUD Reverse Mortgage, you cannot be foreclosed or forced to vacate your house because you “missed your mortgage payment.”
6. Can the lender take my home away if I outlive the loan?
No! You do not need to repay the loan as long as you or one of the borrowers continues to live in the house and keeps the taxes and insurance current. You can never owe more than your home’s value.
7. Will I still have an estate that I can leave to my heirs?
When you sell your home or no longer use it for your primary residence, you or your estate will repay the cash you received from the reverse mortgage, plus interest and other fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs. None of your other assets will be affected by HUD’s reverse mortgage loan. This debt will never be passed along to the estate or heirs.
8. How much money can I get from my home?
The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA’s mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow.
9. Should I use an estate planning service to find a reverse mortgage?
HUD does NOT recommend using an estate planning service, or any service that charges a fee just for referring a borrower to a lender!
10. How do I receive my payments?
You have five options:
· Tenure - equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
· Term - equal monthly payments for a fixed period of months selected.
· Line of Credit - unscheduled payments or in installments, at times and in amounts of borrower’s choosing until the line of credit is exhausted.
· Modified Tenure - combination of line of credit with monthly payments for as long as the borrower remains in the home.
· Modified Term - combination of line of credit with monthly payments for a fixed period of months selected by the borrower.
Call me today or send me an e-mail and I would be happy to help you find out if this type of program will work for you. There may be other alternatives and I will help you find the best program that works for you.
Mark Clawson - markvclawson@gmail.com - 702-351-7912
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Feb
04
Posted by Mark Clawson
What Makes a Good Loan Officer?
Ten Reason to Consider Us for Your Local Lender
There are a number of concerns that need to be addressed when selecting a loan officer. I believe that the loan consultant needs to be your trusted advisor. You need someone who will work hard for you and go beyond the norm to find a loan program that works for you. You need someone who is client centered and not just working to make a commission.
Some thoughts:
1. Experience, especially given today’s market, should probably be on top of the list. Colleen Jane McGrath is my partner on this blog site. She has been in the business for 35 years and she processes all of our loans. Colleen was recently interviewed, regarding the refinance market, on Channel 8 News here in Las Vegas. Colleen is an advocate for our clients and she fights for them whenever it is necessary. In fact, over the last week we have been working with a retiree in Michigan. He has some concerns over his reverse mortgage. We are helping even though we know there is no fee to earn. Colleen recently wrote an Open Letter to Our Senate and Congress on the housing crisis. You can click here to read her thoughts.
2. Housing affordability is a key issue for most homebuyers. There are many community lending initiatives that still allow for no down payment. You can click here to read a post that I wrote on these products. You want an affordable loan and a loan that will not put you in jeopardy three to five years down the road.
3. Purchasing a home starts with the client getting pre-approved. This allows the real estate agent to know what the client can truly afford. There is no sense in getting excited about a new home and then finding out that you can’t afford it.
4. You will want to make sure that you have a realtor and a loan consultant who is available to you 24/7; purchasing a home is a major event and you don’t want to feel that you’re being neglected. 5. A loan consultant is often only as good as his loan processor. A good partnership between the loan processor and the loan consultant is imperative. This will facilitate the entire loan process and make it much easier on the borrower. You want to make certain that the money will be there in time for closing and you don’t want to have any surprises when you are closing your loan.
6. I will preface this thought with the fact that I work for a mortgage broker. I believe that a mortgage broker can be a better source for identifying the best loans programs with the lowest cost. A lender typically concentrates on certain loan programs and may not be competitive across the board. A mortgage broker has access to numerous lenders and the loan consultant can find the most competitive rate for their borrower.
7. There have been many studies on loan costs. Many suggest that the mortgage broker may be able to quote lower fees since they are not brick and mortar like the large banks. I believe that this is true. Remember, it is extremely important to have a loan consultant of high integrity who is more concerned with you than he is his commission.
8. I think it is important to have a loan officer who educates and is with you through the entire process. Showing up at the closing, while not always necessary, is just another way of showing your client that you care.
9. You may want to avoid using the real estate agent as a loan officer. There is an inherent conflict of interest involved that I just can’t get past. Mortgage Financing is in a huge state of flux and you need someone who is working full time looking after your loan. Doing both real estate and mortgages is blending two related, but still different occupations.
10. What you want is a loan consultant who has experience working with real estate agents, that won’t charge high fees, will deliver as promised, will close on time, will honor rate locks, and will work with lenders who will keep their word.
Mark V Clawson 702-351-7912 markvclawson@gmail.com
Colleen Jane McGrath 702-445-5681 colleen@colleenjanemcgrath.com
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Jan
30
Posted by Mark Clawson
The Fed cut rates again! The Fed cut the Fed Funds Rate and the Discount Rate .50% today.
The Fed uses the federal funds rate to control the supply of available funds. When the Fed lowers the federal funds rate this encourages banks to borrow from one another, using the reserves to grant more loans which in turn helps to fuel the economy.
The Discount Rate is the interest rate the Fed offers to member banks and thrifts who need to borrow money to avoid having their reserves dip below the required minimum. If the fed lowers the discount rate, the prime rate will come down, and mortgage interest rates will dip (this is usually only true for shorter term adjustable rate mortgages) to more favorable levels. This can boost a slumping housing market.
Remember, thirty year fixed rate mortgages are not really impacted by the types of cuts that the Fed made today. The moves by the Fed could be considered inflationary and this could actually increase the rate on 30-year fixed rate mortgages.
The last time the Fed had a long cutting cycle was back in 2001. The Fed cut eleven times in eleven months, and eight of those cuts were by .50%, for a total of a 4.75% drop in the Fed Funds Rate. But fixed rate mortgage rates were actually higher at times because inflation ticked higher. The most recent example of this would be when the Fed cut .75% just last week. The 10 year Treasury note yield moved up from below 3.4% to 3.6% and fixed rate mortgage rates moved higher. This is happening again today with the 10 year now at 3.75%.
I still think that it is possible for rates to move lower. The reason will be the stock market. It is obvious that the Fed fears a recession and that became more than clear today. The market rallied about 160 points and then sold off. If this continues then a flight to quality strategy by investors could move more money into bonds and then rates go down.
Hope I haven’t confused you too much.
For a further discussion of the actions of the Fed and mortgage rate trends click here.
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Jan
25
Posted by Mark Clawson
As part of the new stimulus package; we are seeing the real possibility of an increase in the conforming loan limit. This is almost a done deal and should be realized by the end of next month. The cap will likely be 125% of the median home price, with a maximum around $730k. This is particularly good news for homeowners or buyers in California where median home prices are high ($600,000 in the Bay area). In Las Vegas our median home price is only about $250,000. No help here.
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Jan
22
Posted by Mark Clawson
What does it mean when the Fed cuts rates?
The Federal Reserve Board controls the federal funds rate. The Fed has the power to raise or lower the federal funds target rate and this can influence the market for shorter-term securities. The Fed funds rate is the rate banks charge other banks for overnight loans. This can stimulate the economy. A lower Fed Funds rate means that banks are more willing to borrow money to keep their reserves at the mandated level. Banks lend more, businesses expand, home loans are cheaper (primarily short-term mortgage loans), the housing market improves, and homeowners take out home equity loans (since the prime rate typically goes down).
The Fed may raise the rate to keep inflation in check, to slow the economy or it may lower the rate to stimulate the economy. By cutting like they did today they are trying to stimulate the economy.
You should recognize that the Fed doesn’t have much control over long-term interest rates. This can be seen by the fact that the Fed raised the Fed funds rates for a long period of time and mortgage rates and long-term interest rates stayed about the same.
Long-term rates are market driven. The market is driven by inflation expectations, perceived changes in the economy, and the strength of the dollar (which can impact demand for our Treasury securities).
Mortgage rates have been moving lower as the stock market has been declining. This is because there has been a flight to quality. When the market does find a bottom you can expect that mortgage rates will move higher. Investors will move out of bonds and back into the stock market.
If you have any questions or comments please click on comments and let me know what you are thinking.
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Jan
22
Posted by Mark Clawson
The Fed cut rates ahead of their scheduled meetiing. The stock market has been down as much as 500 points and is currently down about 300 points. Good time to refinance or buy more later.
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Jan
21
Posted by Mark Clawson
On Saturday I posted an article about the stock market. I mentioned that weakness in the stock market can help mortgage interest rates since investors tend to adopt a flight to quality strategy. I indicated that we could easily see the markets give up another 1,000 points.Today, it looks like this could happen sooner than I had imagined. The futures market for the Dow Jones Industrial Average is already down 500 points and the NASDQ is down 80 points. So, we could be in for quite a ride come Tuesday morning.Markets across the world are showing sharp losses with Asian and Euopean markets losing about 5%. The German DAX down 6% and markets in India were down over 7%. There is continuing concern about the potential for a US recession and some don’t think that President Bush is saying or doing enough to change that view.
A 6% drop in the Dow Jones Industrial Average translates into about 750 points.
To read the full article from Saturday’s post click here.
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Jan
21
Posted by Mark Clawson
Can I still find a zero down mortgage loan program?
The turmoil in the sub prime mortgage loan industry has impacted many mortgage loan programs. However, there is a Fannie-Mae program called MyCommunityMortgage that is great for first time homebuyers. MyCommunityMortgage is a flexible mortgage product for low and moderate income borrowers.
Is this Mortgage Right for You? If any of these situations describe you, MyCommunityMortgage might be a good fit:
You have limited savings for a down payment and/or closing costs.
You do not have a “traditional” credit history, but can show other ways you have handled credit well, such as paying rent.
You receive rent payments from boarders, or income from government benefits, or other sources.
MyCommunityMortgage is available to help you buy or refiance a home that you will live in as your priimary residence. You will need to fully docuement your income. Less than perfect credit will not affect your payment amount or interest rate.There are maximum income limits that will vary depending on where you live. Certain communities have no income limits. We can provide that information to you.
Key Features
- No minimum borrower contribution.
- Up to a 40-year term.
- Options for lower initial monthly payments with a 5-year or 10-year interest-only period.
- Funds for down payment and closing costs can come from a wide range of sources, such as a gift from a family member; a gift, grant or loan from a nonprofit organization, municipality or employer; or the borrower’s own funds.
- Loan-to-value ratios permitted up to 100 percent for 1-unit properties.
- Extra flexibility on credit histories, including consideration of nontraditional credit histories.
- Extra flexibility on income sources including consideration of boarder income even if boarders are not related to the borrower.
- Cash reserves at closing not required in most cases.
- Part-time and overtime income is considered.
- Purchase a single-family home (including a condo or co-op), a two-, three-, or four-family home to live in one unit and rent out the others (minimum 3 percent borrower contribution for two- to four-unit properties).
The following options for MyCommunityMortgage may provide additional flexibilities for qualified borrowers:
Community Solutions for teachers, police, firefighters, and healthcare workers.
Community HomeChoice for borrowers with a disability or a family member with a disability.
Please call if you have any questions or needs. 702-351-7912
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Jan
19
Posted by Mark Clawson
The stock market seems to be in free fall these days and this is good for mortgage rates. I wrote a post on August 9th (click here) talking about the problems in the sub prime loan market. I mentioned that weakness in the stock market can help mortgage interest rates since investors tend to adopt a flight to quality strategy.
The article mentioned the possibility of the Dow Jones Industrial Average reurning to the 11,000 area. The chart above shows that we are now approaching the 12,000 mark and there is a threat that it may go lower. You’ll note in the next chart (the 10-year Treasury Note yield) that rates have been moving down in simpathy with the stock market.
Remember that the rate on the 30 year fixed mortgage tends to mirror the movement in the 10-year Treasury Note yield. It is my belief that investors have been pricing in a rather large 3/4 point cut in the fed funds rate later this month.
What strategy should you be considering?
The markets may well bounce and hold these levels and if this occurs funds will start to move out of bonds and back into stocks. The market may continue to dive; another 1,000 points can come very quickly. Here again when a bottom is put in, people will move back into stocks. Eventually mortgage rates are going to stop going down.
It is time to prepare yourself in advance of the event. Get yourself pre-approved and start looking for that house now! If you are thinking about a refinance get started now!
I was working at UBS as a financial advisor in 2000. At that time technology stocks were selling at incredible multiples. That is not the case today. I think we may be getting closer to a bottom and this could mean that mortgage rates may go higher in a few months.
Never hurts to get ahead of the game.
Give me a call at 702-351-7912.
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Jan
18
Posted by Mark Clawson
A reverse mortgage is a special type of home loan that lets a homeowner convert a portion of the equity in his or her home into cash. The equity built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence. HUD’s reverse mortgage provides these benefits, and it is federally-insured as well.
I want to remind you that there are also some issues with reverse mortgages. Reverse mortgages can be expensive since the fees can be high. The loan officer can help to reduce these fees by accepting less than what is commonplace. I have always felt that the fees were too high and make adjustments on an individual basis based on the loan amount.Another issue that has recently emerged is the combination of a reverse mortgage and other inappropriate financial products. This seems to be double dipping for fees and may not be in the best interest of the homeowner.
The high costs associated with a reverse mortgage loan, make is very difficult to come out ahead using the proceeds to buy annuities, other insurance products, or securities. I would be wary of anyone who links a reverse mortgage pitch with a push to sell a senior something else. Borrowing money from a reverse mortgage for investment purposes is almost always a bad idea. Make sure that you consider not just the potential gains but the loan costs and tax effects of any investment deal.
Better yet, give me a call.
For more information on Reverse Mortgages click here.
Mark Clawson 702-351-7912
