Thursday, March 31, 2011

Locking Your Interest Rate

What is a Rate Lock?
  • When a loan originator (loan officer) locks the interest rate for a home loan, they are making a commitment to deliver that loan to the lender.
  • When the interest rate is locked, it cannot go higher or lower until the rate lock expires.
Do You Have to Lock the Interest Rate?
  • Yes, the interest rate MUST be locked before the lender can issue the final loan approval.
  • Here’s why: if the rate is not locked, it could go higher, and the borrower may no longer qualify for the loan.
  • Most lenders require the interest rate to be locked at least 10 days before the closing.
Are All Rate Locks the Same?
  • No, they are not! An interest rate is locked for a certain number of days – usually in 15-day increments (15 days, 30 days, 45 days, etc.).
  • If the rate is not locked through the closing date, then the lock could expire before the loan closes.
  • The rate quote the lender gives you should be for a rate lock that extends through the closing date.
Float-Down Locks
  • Some lenders offer “float-down” locks, meaning the interest rate can go lower if the market interest rates go lower. It still cannot go higher.
  • Float-down locks are a bad idea, because the lender ALWAYS charges you a higher interest rate to begin with.
What Happens if the Lock Expires?
  • The lender can always extend the rate lock, but it usually will cost the borrower some money. It can cost hundreds (or thousands) of dollars to extend a lock.
  • ALWAYS make sure your interest rate is locked through the closing date!
When Can You Lock the Interest Rate?
  • For a purchase transaction, you can lock the rate as soon as you have a fully-executed sales contract (both the buyer and seller have signed it).
  • For a refinance transaction, you can lock the rate as soon as the loan application is completed.
How Do You Know the Rate is Locked?
  • Colorado law requires the loan originator to give you a rate lock disclosure within 3 days of completing the loan application.
  • If the rate is not locked at that time, the disclosure must say the rate is not locked.
  • Once the rate is locked, the loan originator must give you a new disclosure saying that the rate is locked.
  • No lender is exempt from this law in Colorado.
How Do You Lock the Rate?
  • The lender locks it for you.
  • All you have to do is tell your lender to lock your interest rate. It takes the lender about 30 seconds to lock the rate.
  • You should never pay for a rate lock. It does not cost the lender anything to lock the interest rate.
When Should You Lock the Rate?
  • As soon as you can!
  • Rates can always go lower, but they can also always go higher. You are just gambling if you don’t lock the interest rate. You do not want to gamble with your mortgage.
How Do You Know if Rates Will Go Up or Down?
  • You cannot possibly know if rates are going to go up or down. No one knows if rates are going to go up or down.
  • Interest rates depend on how the mortgage-backed securities bond market is trading.
  • If someone knew where rates were going, they would not be selling mortgages, or dispensing advice about interest rates. They would be making billions of dollars a week trading bonds on Wall Street.
  • NEVER trust anyone who tells you they know where interest rates are going! They are making it up.

Want to watch a video of this tip?  Check it out on our web site:
http://www.mtgsupportservices.com/Mortgage_Video_Tips.html

Want to make sure your loan closes?  Call The Mortgage Experts at 303-345-3683.

Monday, March 28, 2011

Some Title Companies Are No Longer Accepting Bank Checks

Some title companies are now requiring buyers to wire funds to their office if the funds due at closing exceeds a certain amount. In the past, just about every title company allowed buyers to bring a bank check. If your buyer doesn't know about this, it could delay the closing because it sometimes takes a few days to arrange for a wire.

Not every title company has this new requirement, but it's certainly worth asking about.

Check out our mortgage tips on video at:

http://www.mtgsupportservices.com/Mortgage_Video_Tips.html

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Want to make sure your loan closes? Call the Mortgage Experts at 303-345-3683.

Thursday, March 24, 2011

How to Find and Buy a HUD Home

What is a HUD Home?

HUD stands for the Department of Housing and Urban Development. HUD is the US government agency that oversees the FHA loan program.

A HUD home is a house that used to have an FHA mortgage, but it went into foreclosure. HUD now owns the property.

How to Buy a HUD Home

• HUD homes are sold by bidding on them.
• HUD lists a sales price on their web site, but you can bid more or less than the price listed on the web site.
• You must use a real estate agent to place the bid for you.
• Not every real estate agent is signed up with HUD to place bids, but it is very easy and quick for them to do so.

How to Find HUD Homes

Here is the web site to find HUD homes:
http://hudhomestore.com/HudHome/Index.aspx

Special HUD Home Programs

• Occasionally, HUD will offer special programs so they can sell HUD homes faster.
• Some examples: HUD homes for $100 down, closing costs paid by HUD, special incentives to real estate agents.
• Check the HUD home web site for details and to see if any specials are in effect now.

Financing a HUD Home

• HUD will accept any type of loan or cash for one of their properties.
• If the financing is going to be an FHA loan, the web site listing will tell you which types of FHA financing are available for that particular property.

Common Misconceptions

• You do NOT need to get FHA financing to buy a HUD home.
• HUD homes are NOT just for first-time home buyers. Anyone can buy a HUD home.
• An individual CANNOT buy a HUD home for $1 down. That program is reserved for non-profits and government agencies.
NOT all HUD homes are destroyed. Some are in good shape and some are in bad shape, just like other properties.

Want to watch our video of this tip? Check it out on our web site by clicking here.

Want to make sure your loan closes? Call the Mortgage Experts at 303-345-3683.

Sunday, March 6, 2011

Miscellaneous Income

Here's what you need to know about using various types of miscellaneous income to qualify for a mortgage.

Alimony or Child Support

• A divorce decree or other legal document must show that the income will continue for at least three years
• Must document that full, regular, and timely payments have been made for the past 12 months
• 6-12 months is acceptable, provided the alimony or child support is not more than 30% of the total income used to qualify the borrower

Capital Gains Income

Only acceptable if the borrower can document the following:
• Capital gains income has been received for the previous two years – income tax returns are required. The income is then averaged over the past two years.
• The borrower must document that they have additional property or assets that can be sold to pay the mortgage

Disability Income

• If the income will continue for at least three more years, it can be counted
• If the borrower is currently receiving short-term disability, which will be converted to long-term disability in the next three years, and the payments will decrease, the lower, long-term payments must be used

Income from Employment-Related Assets

• Examples: 401(k), IRA, SEP, and KEOGH retirement accounts – income is NOT being withdrawn
• The assets must be available for withdrawal without penalty – borrower must be old enough to withdraw
• The assets must be owned individually by the borrower, unless the only other owner is the co-borrower
• Only 70% of the assets can be counted
• Income is calculated as: total assets x 70% / 360
• Example: $500,000 in assets would be calculated as $972 per month in income500,000 x 70% / 360 = 972

Retirement, Government Annuity, Social Security, and Pension Income

• Must document that the income is being received – W-2’s or 1099’s, retirement award letter, etc.
• Must document that the income will continue for at least three years

Foreign Income

• Must have been received for the previous two years
• Must be converted into US dollars

Foster Care Income

• Must have received the income for the previous two years as shown on tax returns
• 12 months is acceptable if the foster care income is not more than 30% of the income used to qualify the borrower
• Must document that the income will continue at a level high enough to qualify for the mortgage

Interest and Dividend Income

• Must show that interest or dividend income was received for the previous two years
• Income is averaged over the past two years
• Must show that it will continue for at least three years

Non-Occupying Co-Borrower Income

• Example: parents buy a condo for their child – often referred to as a “kiddie condo” loan
• Income from the non-occupying co-borrower is allowed for FHA loans
• It is not allowed for conventional loans, unless the occupying borrower can qualify by themselves, without the income

Tip Income

• Must document that the income has been received for the previous two years
• The tip income is averaged over the previous two years
• The borrower’s employer must state that the tip income is likely to continue


Want to watch our video of this tip? Check it out on our web site by clicking here.

Want to make sure your loan closes? Call the Mortgage Experts at 303-345-3683.