If you’re considering buying a home anytime in the near future, please think twice before purchasing your next car. I’ve had a couple different scenarios lately where the car payment has really impacted the home buyers. Don’t get me wrong, I love cars. Old and new alike. Here’s how it impacts your home purchasing power (based on a 6% mortgage interest rate amortized for 30 years):
Archives for March 2007
That New Car Will Cost You
March 15, 2007 by 3 Comments
Part 2: Know Your Credit Score
March 14, 2007 by 4 Comments
EDITORS NOTE: What is considered a “good score” has changed quite a bit since the subprime era.
In Part 1 of the Subprime Series, you should have found your Note and contacted your Mortgage Planner. The next step is to review your credit report. I suggest having your Mortgage Planner pull a tri-merge report. They may or may not charge a fee for the cost of the report (around $20).
Whats your mid-score? Just last year, a score of 600 was an easy mortgage transaction (for subprime)…now the bar is raising due to all of the foreclosures. Typically, your “mid score” is going to be how you’re judged by the mortgage companies. With a tri-merge report, you should have 3 scores ranging from 350 – 850. Your mid score is literally the number between the highest and lowest score. 680 and above is considered to be a good credit score. 720 and higher is excellent.
Another Option for People with Subprime Mortgages
March 13, 2007 by Leave a Comment
Dan Green did an excellent post today on…what else? Subprime mortgages. He suggest that subprime borrowers look at refinancing now (if they plan to not sell their home) instead of waiting until the prepayment period is over. His thoughts, which are valid, are that there may not be products available in the future when the time is right for a person to refinance out of their subprime loan. To read Dan’s post, click here. [Read more…]
Humor and Taxes
March 13, 2007 by Leave a Comment
With April 16 rapidly approaching, the phone calls and emails from clients begin to really pick with with questions about their tax deductions. I recommend using a CPA to help you with your taxes, especially if you’re itemizing (which you need to do in order to deduct mortgage interest). Here are a few links you may find helpful regarding mortgage income tax deductions:
Your Home as a Tax Shelter: Top Ten Tax Deductions for Owning Your Home
10 Real Estate Tax Breaks You Should Know
IRS Publication 530/Tax Information for First Time Homeowners
Now…a little humor to lighten this post up a bit.
"The only difference between a tax man and a taxidermist is that the taxidermist leaves the skin." Mark Twain
"The hardest thing in the world to understand is the income tax." Albert Einstein
"The purpose of a tax cut is to leave more money where it belongs: in the hands of the working men and working women who earned it in the first place." Robert Dole
If you find you’re getting a nice big return back on your income taxes, you may want to consider adjusting your withholding by increasing your exemptions. Again, this is a matter to discuss with your CPA. There’s no reason to give the Government an interest free loan of your money when you can be taking home a little extra each month…just my 2 cents!
Part 1: Do You Need to be Concerned?
March 11, 2007 by Leave a Comment
This is the beginning of my official "what to do if you have a subprime mortgage" series. I truly want to help as many home owners as possible who have subprime loans get out a potential pickle.
I’ve posted many warnings about the changes in the subprime market and lack of mortgages for consumers with credit scores under 620.
The first step is… determining IF you have a subprime mortgage. The mortgages that are receiving a lot of attention in the press these days are 80/20 mortgages. Not all are subprime.
Here are a few questions to consider (you should dig out all the papers from your last mortgage…this is important):
- Do you have a prepayment penalty (this will be on your Note* and disclosed on your final Truth in Lending). If you do have a prepayment penalty, when is the penalty period over? Some slick loan officers might have told you that it’s "only a penalty if you prepay more than 20% of the principle" or they might have called it something like a "commitment period"…dig out your Note and check it out.
- How much time do you have before your rate is scheduled to adjust? Again, this calls for you to dig out the Note* you signed at the escrow company when you obtained your last mortgage. If you have less than one year before the rate adjust, please contact your Mortgage Planner for a credit review to make sure you’re on track. Often times, the subprime mortgages are fixed for 2 or 3 years on the first mortgage. If mortgage is subprime or not, please do check to see when your ARM (if you have a short term fixed rate) is scheduled to adjust.
- How much will your payment adjust? Your Note will show you what your interest rate is based on. You may either have an ARM or a balloon payment with your mortgage. If your mortgage is subprime, the adjustments to your payment are typically steep. Caps (the limit on how much your rate can adjust) will be on the Note.
- If you’re unsure of questions, please contact your Mortgage Planner. They can confirm whether or not your existing mortgage is "subprime". Since you have your mortgage papers out of your filing cabinet and you have your Mortgage Planner on the phone, schedule an Annual Review of your mortgage to assess if it is still the right course for you in light of the current market conditions.
So what if you do have a subprime mortgage? In some ways, you might consider yourself lucky if you have taken steps to improve your credit and you can pay your debts on time you should be able to refinance when your prepay is up just fine. If times are tough and your mortgage and other bills are a struggle, you might be in for a rocky road with many of the mortgages that helped you buy your home no longer available and you should maybe consider steps such as budgeting and credit repair to help you be in a good position to refinance when the time is right with your mortgage. (Actually, we should all budget and take care of our credit).
This is just the beginning of a series of posts to hopefully help families with subprime mortgages position themselves into permanent "a money" financing. Watch for Part 2: (I’m not sure what it will be called, but I do know…it follows Part 1).
*Your Deed of Trust is recorded to secure the Note (promissory note). The Note contains other details, such as prepayment penalties, than the Deed of Trust, which is recorded to become public record. You should have received a copy of the Note (along with a stack of other papers) from the escrow company when you obtained your last mortgage. Bottom line…dig out all of your papers and if you have to, contact your Mortgage Planner and provide it to them for review.
Be proactive and responsible. Take the necessary steps to make sure you’re in a good place before your mortgage rate adjusts.
Spring Forward
March 10, 2007 by Leave a Comment
Just a friendly reminder that Daylight Saving Time is early this year. You will need to "spring forward" at 2:00 a.m. on Sunday, March 11, 2007. Or, just reset your clocks before you go to bed tonight.
You want to be a WHAT?
March 9, 2007 by 2 Comments
Every so often I'll receive an email from someone who asks me about becoming a Loan Officer. Last night, just after hearing the news about Greenpoint, I had a lady contact me wanting to take the plunge into lending. "What? Now? Have you been watching the news? It's tough out there, Missy!" Okay…okay…I didn't say that to her…but I was thinking it! After getting over the shock of someone innocent and new wanting to enter into this field, I read her questions which I thought were pretty interesting (by the way, she's very persistent). I thought I would share some of them with you:
What exactly does a Loan Officer do? In a nutshell…meet with either people who are considering buying a home or refinancing their existing mortgage. A professional will explain the mortgage process, answer any questions and help the client understand what all their options are. (This could be a post on it's own!). May days are often spent completing loan applications (interviewing borrowers), learning and searching for specific loan programs and educating Real Estate Agents and borrowers on different products and guidelines as well as talking to various wholesale reps to learn about their products and reviewing files with my processor and underwriter. Every blue moon, I'm able to sneak out and make a "sales call" on a real estate office, it's rare these days.
What sort of skills do I need? If you enjoy helping people, are patient and aren't afraid of crunching numbers…you have some basic skills. You should also be computer savvy and able to constantly learn. You cannot be afraid of tons of paperwork, paper cuts and have an attention for details.
Are there any classes I can take? Check out local community colleges for classes they may offer. Contact the local lending associations, for Seattle some would be the Washington Association of Mortgage Brokers, or the Seattle Mortgage Bankers Association. Jillayne Schlicke is CEO of an excellent school called CE Forward. Many of her courses are approved with DFI and feature approved clock hours. There are also advanced programs to receive designations such as Certified Mortgage Planning Specialist.
Mortgage Originator Magazine may also be a good read for someone considering entering this business.
What is the income for someone entering the business? It can range from $0 to "the sky is the limit". In fact, you could even lose money being a Loan Officer. According to the U.S. Bureau of Labor and Statistics, the average LO made $59,350 in 2005. Something to keep in mind is that there are hundreds of thousands of LOs factored into that average. And it can cost quite a few bucks just to be a LO with marketing, leads, etc. I would recommend having a back up source of income and 6 months of living expenses in the bank before starting any career that may be 100% commission.
Jillayne Schlicke, Co-Executive Director of Ethical Lending, also suggest "if someone wants the easy route and wants a base salary and on the job training included, then they should try to hook up with a bank or credit union. If the person does not have a sales mind, then they are better off starting out as a processor because the training is INVALUABLE. The competition for these jobs would probably be higher unless the candidate is bilingual. They won't have to pass the LO test if they start out here."
Jillayne's suggestion of starting at a bank or credit union is great because these institutions may also provide leads to a new loan officer. A bank or credit union may also provide you with more strict working hours, unlike a broker where you could be "on call" depending on how you structure your business. Last, banks and credit unions will not have as many programs to learn as a Mortgage Broker where you're learning many different lenders and all of those lender's programs and guidelines.
Bottom line: I would never recommend that someone get into the mortgage business with dreams of striking it rich. You may be setting yourself up for disappointment and money should not be what motivates you when you're helping someone with the largest investment of their lifetimes…their homes.
EDITORS NOTE 2/4/2009: I have updated Jillayne's contact information on this post thanks to another person who is interested in becoming a mortgage originator.
Thanks Dustin…Is It Friday?
March 9, 2007 by 1 Comment
Okay…don’t count on every Friday…but if I do stumble across something that I find amusing…you could just wind up seeing it here on a Friday… Dustin of Rain City Guide posted his wanna-look-Dustin-instead-of-the-star-that-I am-look-a-like’s recently and I was SO inspired…
I tried my current photo…the SUPER CLOSE UP…and only a few good men matched up with me… maybe that will be my next Friday funny (if you are unlucky).
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