In the last 60 days I’ve had 2 clients call me about looking into a reverse mortgage. I am not sure if I even shared with most that I actually DO offer this product and service.

First of all the Reverse Mortgage is NOT your traditional type of mortgage product. It does not follow the basic guidelines of lending, so most lenders do not offer it.  Secondly, it does require that the loan originator has taken some additional courses and classes and stays up to date on the rules and regulations that go along with this product.  I decided early last year, to get educated on this product because it started coming up in a lot more loan product discussions.  The reverse mortgage product basically allows you to take a portion of your equity in your home and help free up cash or income during your retirement years.  It’s a non-recourse loan, so if qualified, payments are also not required.  The title stays in the borrower/borrowers name.  The loan has certain triggers that do require the loan to be paid back.

The basic qualifications are:

• age of the borrower (must be 62 years or older)

• equity in the property vs. value of the property

• Property must be owner occupied (no 2nd homes or investments)

Let me give you an example of a qualified person.

Let’s say you are 65 years of age and just retired.  Your home is worth $300,000.00 and you owe only $40,000.00 on the home.  You plan on living in your home but want your mortgage to go away and have that extra cash for retirement to travel.  You should qualify.

The basic reasons to get a reverse mortgage:

• No repayment of the loan as long as your occupy your home
• Frees up your equity trapped in your home for your benefit
• Social Security and Medicare benefits are not affected by reverse mortgages
• You retain the title to the deed of your home and you may sell later if need be.

Using the example from above,

the homeowner could free up quite of bit of their equity to eliminate the mortgage payment, have free income to travel and put some extra money away for a rainy day.  It helps give comfort during those retirement years.

Now again, I will be the first to say that this product is NOT right for everyone, but for others with certain situations, this product can be a great option.

As we enter the month of October, and Halloween draws near, we wonder if a goblin, ghost or something scary is about to pop out at us. Many clients feel this same way with their home mortgage these days.  Some of my clients are not even aware of what type of mortgage product they have until things can get very scary for them.

I had a past client the other day realize that he had an interest only product. The product made sense 6 years ago, but today the product scares the heck out of him, and I do not blame him.  The market shifted and he needed to run away from this scary monster.  We are now getting his interest rate reduced and putting him back into a principal and interest loan.  His payment will be roughly the same, but now, part of his payment will start to amortize out the remaining balance.

I had a new client that had a scary situation when they found out that the previous lender put him into an adjustable rate mortgage. Because he was upside down on his home, he knew he could not refinance.  He was really scared of what kind of rate and payment was going to increase on him.  After I reviewed it, we realized that his adjustable rate mortgage was tied to a low margin and a low index.  I took the scary out of his situation when we figured his payment was going to go down by about $250.00 a month.

What I am saying is do not let scary mortgage concerns get out of hand. Remember, I am always just an email or call away from investigating if we are
really dealing with a goblin or not.  I always offer this service for free to evaluate your current mortgage situation and make sure it is in proper order.

Basically, I try to help take the scary out of your mortgage.

With a struggling economy and an extremely weak real estate market, clients have been looking for real options to make their ugly real estate situation go away.  Here are some questions from the unspoken that no one wants to talk about: 

Should I Short Sale my Home?

Can I get approved for a Loan Modification?

How does a Foreclosure effect my credit?

When can I buy again after a Short Sale?

Is there a way to buy again right after a Short Sale or Foreclosure?

These are all great questions and getting the right advice is the key word here.  I just try to advise all my clients about the best options based upon your unique situation.  I do not judge any of my clients no matter what your situation is.  I listen and answer what can and cannot be accomplished.  I then help you with figuring out what is best to help you out.  I will answer your questions honestly with real answers.

So if you feel like you need a question or two answered, please feel free to contact me.

Did you know that conventional loans are now offering very favorable terms to buy property with only a 5% down payment. Conventional loans still require higher credit scores to qualify, but if you have the excellent credit and are buying a home the Conventional option might pencil out better than the FHA option.

Let me try and share some loan option comparisons.

Conventional Loans:

Minimum Down Payment:  5%
Credit Score:  660 or higher
Mortgage Insurance Premium:  Vary
Competitive Rates

FHA Loans:

Minimum Down Payment:  3.5%
Credit Score:  600 or higher
Mortgage Insurance Premium:  Upfront 1% of loan amount financed, monthly, 1.15% factor
Competitive Rates

VA Loans:

Minimum Down Payment:  0%
Credit Score:  600 or higher
No MI, but a VA funding fee of 2.15% or 3.30% financed into the loan
Competitive Rates

I think the Conventional loans outshine the Government loans when you have excellent credit. Let me show you the math between a 740 credit score client going Conventional financing vs. an FHA 740 credit score client.

Mr. buyer is buying a home for $150,000.00, with a 755 credit score,

Here is how the scenario will pencil out for FHA:  $150,000.00 purchase price, 3.5% down payment:  $5,250.00, 1.00% upfront mortgage insurance financed into the loan gives you a final loan amount of $146.197.50 rounded to $146,198.00.  Lets say the rate is .125% better than Conventional rates.  The interest rate is 4.375%

FHA P&I:  $729.95, and the monthly FHA insurance is a factor of 1.15% of the loan amount:  or $140.11 per month for FHA insurance.

Total P&I payment with FHA insurance per month is $870.06

Here is how the scenario will pencil out for Conventional:  $150,000.00 purchase price, 5% down payment:  $7,500.00, no upfront mortgage insurance financed into the loan give you a final loan amount of $142,500.00.  The interest rate is 4.5%

Conventional P&I:  $722.03, and the monthly Conventional insurance is a factor of .64% of the loan amount with a credit score above 740:
or $76.00 per month for Private Mortgage insurance.

Total P&I payment with Private Mortgage insurance per month is $798.03.

Bottom line is that the Conventional option gives you a payment of $72.03 a month less.  What was the cost to you?  Good Credit and 1.5% more down payment.

Again there are other factors to consider when financing, but working with a lender who truly understand the mechanics of your best mortgage options is the most
important thing.

Looking for another option to lower your mortgage payment?  Here is some solid advice given to me by Joey Almeida with Cambridge Financial.

Another way to lower your monthly house payments, that you might not normally consider, is by reviewing your homeowner’s insurance policy. We find that people tend to buy more insurance than they really need by basing their coverage amount off of market value, rather than replacement value.  Yet if your home burned down today, the insurance company would not pay you the full market value of your home; they would only pay you the cost to rebuild your home.

This oversight is even more dramatic when you consider how high market values became.  During the recent real estate boom we saw housing prices grow by as much as 50%, while the cost of building these homes only grew by an average of 3%.  You may want to consider the following example if you purchased a home during the boom:

If you purchased a home in 2006 with a market value of $400,000 that cost $200,000 to build and like most people you insured your home for the full market value, then you have over insured your home by $200,000.  Even though you were paying the extra premium for that coverage, the insurance company would only pay you $200,000, the cost to rebuild, if your home burned down.

How much is that additional $200,000 costing you monthly?  Reviewing this one detail may lead to significant cost savings.  It’s always a good rule of thumb to review your policy annually.  In addition to reviewing the correct amount of insurance, you should also consider the answers to the following questions:

• Have you maximized all of the available discounts and tax credits?
• Do you have the most effective deductible and is it an out of pocket expense?
• What would the next highest deductible do for you as far as savings?

Many people are surprised by the answer to these questions. Reviewing your homeowner’s insurance policy may very well be worth your time. Seek the advice from a qualified agent that can help you in your endeavor to lower your mortgage payment.

Joey Almeida is with Cambridge Financial and can be reached by phone at 480-332-5167 or by email at joey@azcambridge.com

I have a funny story to share with you that happened to me the other day and thought I would share.  I got a call from my Bank.  As most I do my personal banking with one of the bigger banks here in Arizona.  Without mentioning names and protecting the innocent, here is the conversation that transpired.  “Hello Gary, Hi this is ________ with XYZ Bank and I wanted to get a hold of you and share that one of your mortgages with us is eligible for the HARP program”. HARP stands for Home Affordable Refinance Program.  “I noticed you have a rate of XYZ and you can take advantage today of getting your interest rate lowered”. Now on the surface, this sounds fantastic.  Most of you have received a call like this yourselves in the past.  Now here is the problem.  You see the mortgage she was calling about is a 1st mortgage loan tied to an investment property.  What she also did not know was that the HARP program is only eligible for primary residence mortgages.  So I asked her back , “are you aware that the property is an investment property”.  Now I hear a long pause, “Oh it is,  Well if that is the case, then you would not be eligible for this program”.  Wow, she did a quick turn around.

So here is the moral of the story:  Be careful where you get your mortgage information from. This advice was given by a personal banker at a big bank.  She is not licensed as a loan originator in the State of Arizona and she is giving you mortgage advice that ended to be false.  Most of us would have moved forward with what she stated, filled out lots of paperwork, maybe spent our hard earned money on an appraisal just to be later told by the bank that you were not eligible for the program to start with.

Be careful out there folks!

Seek Out Accurate Mortgage Information!

As most of you know, I am a licensed mortgage loan originator with the Department of Financial Institutions in the Great State of Arizona.  I give accurate, reliable advice on mortgages.

As we embark into another year, Most of us are always wondering about which mortgage options are available and what kind of rates and fees are tied to those specific products.  So let me share what I think will be the best mortgage options for 2011.

Best Refinance Mortgage Options:

This year refinances will NOT be driven by rates.  Here are some of the options that will come up this year.

Cash-Out Refinance:

Yes for you lucky ones that have equity in your home, this option will be available, understand the rates are a little higher than 2010, but not bad by any standards.

Adjustable Rate Mortgage (ARM) conversion:

Some of you will be having your adjustable rate mortgages reset this year.  The rate could go up or down but knowing your best option of either staying the course with will be important to know.  I can always do a mortgage review and help you determine if a refinance option into a fixed option makes sense for you.

Term Limit Mortgage Conversion:
30 to 15 year conversion:  This is a great option to get that mortgage paid down.
15 to 30 year conversion:  This can be a great option to help with having more cash back in your pocket.

Best Purchase Options:

Right now home prices in Arizona are at record all time lows, so the timing could not be any better to buy some property.  Here will be the hottest options for 2011.

Primary Home Mortgage Option:

If you are a first time home buyer or want to convert your current home into a rental and buy a bigger home now is the time.  Rates are still very attractive.

2nd Home Mortgage Option:

Arizona is a great place to own a 2nd home, we have excellent retirement communities for 2nd homes and great vacation homes in the mountains.  Rates are excellent and so are prices.

Investment Home Mortgage Option:

This one is got to be one of the best for investors.  Not only is our inventory of rental units affordable but our 2010 census report showed a huge growth in population statistics in the last 10 years.  Sharpen those pencils and lets make the math work out.

The Mortgage Option of the Future:

Green Home Mortgage Option:

Did you know that the Federal Housing Administration has a special program for buying green homes or converting a current home into a green home.  We have an Energy Efficient Mortgage.  Not only will it save you lots of money on long term utility costs but will be great for our carbon footprint.

As your 2011 year comes together, as always, I hope you think of me for your next mortgage, where I stand behind my advice, products and services.

“Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.”, Chinese proverb

Is the information that you are receiving about mortgages coming from credible sources? I first wrote about the topic in general back in March of this year about welcoming web 3.0 to the real estate industry.  Now fast forward to present, and I still run into numerous people who are getting BAD information from so many sources that have no idea what they are talking about when it come to mortgage advice.  There are numerous sites out there now, that you can ask questions about mortgages, but these platforms unfortunately let anyone and everyone give an opinion.  If you were going to have brain surgery, would you ask for advice about this from a friend, relative or website?  No you would probably seek out proven, reliable professionals in that medical niche about your best options.

So if you are in need of accurate, reliable and credible information about home loans and mortgages, I want to introduce you to:

(Mortgage Myth Busters)

Our Members are Licensed Professionals that come together from State to State to provide real web 3.0 information about mortgages.

Our Members Post information daily that can help home buyers, investors and real estate professionals about mortgages.  We discuss everything from rate market watches to in depth breakdown of different loan programs.  We also do a great job to expose and debunk mortgage myths put out from other sources that do not have the credibility to back up the true facts.

I had a real estate agent call me the other day that I did not know.  She was calling around looking for a lender to place a loan for her borrower.  She specifically asked me if my company can offer her client a Fannie Mae HomePath loan. I told her yes, got out my yellow steno pad and started to ask her certain questions to uncover the best loan option for her  borrower.  In some states the new lending laws are pretty clear that a loan originator must provide a borrower the best lending option based on their situation.  It just happens that Fannie Mae HomePath options do not usually offer the best terms in comparison to FHA options except in the case of 2nd homes and investment loans.  So I asked her straight up, “Why does your client want to use Fannie Mae HomePath?“, she says because her client’s wife is short selling her home (on her credit only) and this is the only way that we can do a loan is by placing it in the husbands name only.  Now on the surface this seems correct.  Go conventional, because you do not have to use the other spouses credit.  So I asked her further if the husband was living with his wife in the home that is being short sold.  She said “Yes“.  I also asked her if the wife going to be living with him in the new home once the short sale is finalized.  She answered “Yes“.  So I explained to her that even though conventional loan guidelines do allow a buyer to purchase a home in his own credit, he did live with her a had a communal responsibility for the debt that is being sold short.  Most Mortgage Investors treat this like a buy and bail and just are not comfortable with granting the new loan.  I explained further that the loan could be done, but my company (Sunstreet Mortgage, LLC) did not have an investor who would buy the loan from us.  The guidelines basically say “Yes” but the investor says “No“.  I told her politely that she would need to seek out another lender to help her with the loan.  This is when the conversation when wrong:
She says “Don’t tell the bank about the wife’s situation.“.  Beyond the fact that the investor would of figured it out, I said to her that I cannot leave out materials facts about the borrower’s situation for a loan decision. This is called “Mortgage Fraud”

Wikipedia defines Mortgage Fraud-as “a term used to describe a broad variety of criminal actions where the intent is to materially misrepresent or omit information on a mortgage loan  application to obtain a loan or to obtain a larger loan than would have been obtained had the lender or borrower known the truth. In federal courts, mortgage fraud is prosecuted as wire fraud, bank fraud, mail fraud and money laundering, with penalties of up to thirty years imprisonment. “

By leaving out the facts that the husband is married to a wife that is short selling a home in her name only is leaving out material information that could change the outcome of a loan decision (LOAN FRAUD!!).

I am still not sure if the real estate agent understood this.  A lender cannot leave out the facts to grant a good decision for a client.  Now if all information is presented to a lender and the bank that is making that loan grants a positive decision to take on the risk, then this is NOT loan fraud.  Understanding the difference is key.

I know so many people that still do not realize that their ARM (adjustable rate mortgage) might not be broken.  I wrote about this way back in March 2008. Is your ARM (Adjustable Rate Mortgage) Really Broken? Most homeowners always assume that if they have an adjustable rate mortgage that their payment and interest rate is going to go upward.  Well due to rates being so low, this is actually the opposite.  If you are truly not sure if you have a broken “ARM”, please feel free to contact me and I will be happy to review your paperwork and help you find out.  The last client who thought they had a broken “ARM” saved $550.00 a month when the interest rate when down.