I’m an April Fool

March 30, 2007 by 5 Comments

Vows11This April Fools is my first anniversary with my husband, Rob.   We were married in St. Helena, California at Harvest Inn near Napa.   We were suppose to have an outdoor ceremony next to vineyards. However, due to rain (I guess it followed us) we were married indoors underneath an "exit" sign.   I was thankful Rob didn’t look up and read the sign.   He could have bolted for the door!

April Fools also marks my first day in the mortgage business.  I "retired" from fourteen years in title and escrow industry and began my mortgage career at Mortgage Master seven years ago.   I must admit, I was hesitant to become a Mortgage Planner.   In the title and escrow business, you typically spend an hour with the consumer towards the end of transaction when they’re signing.   Often times, the buyer or seller may be feeling pressure even under the most ideal transactions. Buying or selling a home is not something most people do everyday and there is a lot of money at stake. 

I also did not have the have the highest opinion of loan originators.   A majority of the borrowers that I would sign did not understand their loan program and would expect escrow to explain it (this needs to be done by the Loan Originator well before your signing loan documents).   

I have learned so much in these past seven years.   It’s incredible.   And of course, the industry continues to evolve and new programs and products emerge.   My father in law, Bob, is Chairman of Mortgage Master and retired in his young 70’s just a few years ago!   This is a wonderful career.  I’ve had the opportunity to help hundreds of families with buying homes, restructuring their mortgages and debts or financing their goals.   If I have my way, I’ll have my mortgage practice as long as Bob did (he still receives phone calls from clients).

I guess I take some pretty crazy leaps on the first day of April!   Maybe this year, I’ll try bungee jumping or sky diving?

Filed Under: Current Affairs, Escrow and closing, Just for Fun, Mortgage

The Low Down on Fannie Mae Flex

March 28, 2007 by 2 Comments

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Update: This is a classic example of the trouble with writing about mortgage programs…some are no longer available. When researching about mortgages on the internet, please be sure to check the date of the article.

With many of the zero down options tightening up, it's time to return to the mortgage programs that were popular a few years ago before the 80/20s were all the craze.   One such program worth considering is the Fannie Mae Flex (97 and 100).   This is truly a low down program offering either a minimum $500 borrower contribution or 3% flexible contribution.   

The Fannie Mae Flex allows for flexible sources of funds for closing costs and prepaids:

  • Borrowers own funds (including loans against a 401(k) account or cash-valued life insurance policy.
  • Gift or unsecured loan from a relative.
  • Grant from non-profit or employer.
  • Interested party contributions (to be applied to closing costs and prepaids) such as a Builder or Real Estate Agent.

The Flex program utilizes automated underwriting so minimum credit scores, reserves and qualifying ratios are determined by Desktop Underwriter. 

There are no income limitations, such as with My Community programs.   The program is limited to conforming loan limits (currently $417,000 for a single family dwelling).   

There is private mortgage insurance with this program.   However, with a credit score of 620 or higher, a borrower may qualify for LPMI (Lender Paid Mortgage Insurance).   The rate with LPMI may or may not pencil out, depending on the credit score and loan to value.   Also, private mortgage insurance is tax deductible this year if you meet income limitations.

Sorry folks, this program will not work for manufactured homes.

Currently, I'm helping a couple buy their first home with this program.   They are utilizing a gift from their parents for the down payment and the real estate company they are working with rebates part of the commission which will cover their closing costs (including a 1% discount towards their interest rate).   The couple will not have to dip too deep into their savings or 401(k).   The current interest rate for the 30 year fixed rate is in the low 6%s with a loan to value of 97%.   They will pretty much be getting into their first  home with the earnest money investment of approx. $2,500 (special thanks to Mom and Dad).

Here's a quick re-cap of the Fannie Mae Flex program:

  • Low down payment
  • Higher debt to income ratios allowed
  • Forgiving of credit scores

Remember, always check with your Mortgage Planner to see which strategy for your home financing best suites your personal needs.

Filed Under: Adjustable Rate Mortgage (ARM), Mortgage, Refinance, Residential Purchase

Would You Like Your Mortgage Blended, Shaken or Stirred?

March 27, 2007 by 4 Comments

Mpj028975400001Many home owners have two mortgages on their properties.  A first mortgage and a second mortgage that may either be fixed or a home equity line of credit.    Do you know what your effective rate is?   Basically, this is if you factor in what your paying on both mortgages, and then figured out what your interest rate is on your payment.

Here’s how to determine what your “blended rate” is:

[Read more…]

Filed Under: Interest Rates, Mortgage, Refinance Tagged With: , , ,

My Biggest Fear

March 26, 2007 by 4 Comments

FearNext to snakes, spiders, deep water and falling down stairs (okay…I have a few phobias!)…and actually this is no laughing matter.   There is so much hype in the media right now about the subprime industry and home owners in trouble with 80/20 loans and interest only ARMs, etc.    Many people are contacting me to confirm they’re okay or to see if the need to refinance.   So far, none of them need to refi (but I’m glad they’re checking with me).  Either they’re planning on selling or their ARMs won’t be adjusting for a couple more years and they’re actually quite happy with payments once they step away from the fear factor.   These home owners with ARMs and/or 80/20 financing are prime targets for unsavory loan originators to scare them into a refinance (there are even ads on TV soliciting home owners to do so) when they don’t need to.   Costing them at least a couple thousand dollars in their equity and rewarding some loser with a commission they shouldn’t have.   

How do they do this?  For starters, the local title companies can provide list of home owners if they have financing through certain lenders (like New Century, for example), or if they financed within a certain time period with an ARM.   The lender may call you (ignoring if you’re on the DNC) or send you a letter stressing their "sincere concern" over your current mortgage scenario.   Please don’t buy into it.   

  1. Contact your Mortgage Planner if you have any concerns with your current mortgage.   Now may be a good time for a credit and mortgage review–you may not need to refinance (everyone’s situations vary).
  2. Get a second opinion if you feel you need one.   Ask a friend, co-worker or family member for a referral.   Most professional Mortgage Planners are happy to discuss your situation without running your credit.  (If your Mortgage Planner all ready ran your credit, you can provide your scores to the person you’re getting the second opinion from). 
  3. Do not do business with lenders who have to "cold call" for business.  Rely on either your past Mortgage Planner or get a referral. 

Bottom line, don’t panic.  The worst decisions are made when someone is being emotional and scared.   Lenders who are predatory prey on the emotions of scared people.    This type of loan originator is ultra smooth…could probably out-sell me (and I’m sure has) on my best day.  (I do not view my career as "sales").  Take a deep breath and do some homework.  Make the hoopla over subprime loans into a personal opportunity to review your credit and get your finances in order.   It will save you in the long run.   

With all this said, some people are in trouble…they are not the majority and regardless, it is unfortunate.  If you are in financial troubles or if you feel you may be near it, please do contact your Mortgage Professional (or get a referral) right away. 

Filed Under: Mortgage, Predatory Lending, Subprime Lending

My Encounter with The Seattle Bubble Blog

March 24, 2007 by Leave a Comment

Mpj040113000001 My husband teases at me when I talk about the Bubble Bloggers…not because they’re funny (they can be), it’s simply the phonetics.   Our local bubble bloggers are a very serious and determined group of individuals.  In a nut shell, they believe that Seattle’s home values will plummet or burst like a popped bubble and when this happens, it will reek havoc for current home owners.   Many of them feel it is much better to rent than to own a home for financial purposes.     The Seattle Bubble is probably the most well known local blogs on this topic.   

Recently, an article I posted on Rain City Guide, The Great Rent vs. Own Debate, was featured (or should I say, "flogged") on the Seattle Bubble and Priced Out Forever (these blogs share writers).    Eleua, one of the "bubble bloggers" asked me if they could do this and I must tell you, I was a bit nervous about how this would all shake down.  For starters, where ever there are numbers and stats, there is opportunity for debate.  Numbers can be twisted and recalculated to prove anyone’s theory.   I must say they were very fair and kind in their "flogging" of my post.

Here are some points they make on why it’s better to rent than to own a home (I’m not going to debate these points in this post):

  • Renters are not responsible for repairing or maintenance of the building.   (I do spend many weekends at Home Depot with my husband to work on our house…and I love it).
  • Freedom to pick up and move when your lease is up without the cost of selling a home (approx. 8-10% of the sales price including commissions, 1.78% excise tax for King County and closing costs).
  • You can invest the funds you would use for down payment and earn interest on it (your home equity does not earn interest).
  • You may be able to rent a nicer home than what you can afford to buy for the same payment.
  • The standard tax deduction may be better than the deductions you’re allowed as a home owner itemizing your mortgage interest and taxes.  (As always, check with your CPA regarding any tax matters).
  • And of course, home values are going to tank once the Seattle bubble bursts.

I wrote The Great Rent vs. Own Debate over an exchange of comments on one of Rain City Guide’s post where I stated something along the lines of "owning a home is an automatic savings plan for some borrowers".    I still believe this to be true based on what I’ve seen in my past seven years as a Mortgage Consultant.   

Many people are not putting away money into savings accounts, retirement, planning for college…you name it.   When you make a mortgage payment (assuming it’s not interest only), you are applying a small portion of that mortgage payment towards reducing the principle balance.   For Americans who do not put 10% of their gross income (or anything) into an investment vehicle (no…not a new car!), this is their only source of savings.   They are at least putting some money away where they do not have immediate access to it (unless they treat their home equity like an ATM).   

I will be the first to admit that a big reason why I have bought homes is emotional.  I have "a need" to own a home.  I grew up renting and moving around quite a bit as a kid. I feel grounded and I have control over the home…it’s mine!   With that said, owning a home has proven to be the best investment for me.  I would not have realized the appreciation and profits from renting that I have as a home owner over the past 18 years.   

Home ownership is not for everyone.   Especially people who are careless with their credit and spending.   You need to be responsible, plan for repairs and improvements and make your mortgage payments on time.  Buy a home because you want to live in it and you want to be your own "home sweet home".

Filed Under: Financial Planning, Mortgage, Residential Purchase, Seattle, Weblogs

That New Car Will Cost You

March 15, 2007 by 3 Comments

Mpj043319200001If 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):

[Read more…]

Filed Under: Credit Scores and Reporting, Debt Restructuring, Financial Planning, Mortgage, Residential Purchase Tagged With: ,

You want to be a WHAT?

March 9, 2007 by 2 Comments

Mpj028514200001Every 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. 

Filed Under: Mortgage

The Times…They ARE a Changing

March 8, 2007 by 3 Comments

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For the first time ever in my career, I had to contact a client to tell them that the Good Faith Estimate that I had provided him earlier today is no longer valid.   This is a person who was getting ready to buy a condo utilizing an 80/20 and stated income.  His mid credit score is above 750.

I received an email just after 7:00 p.m. tonight from Greenpoint Mortgage (more of an “alt-a” than a subprime lender) stating that all 80/20 mortgages must be funded by the end of this month.    Regardless of how high the credit score is or even if the loan is “full doc”, Greenpoint, along with many lenders, is pulling in the reigns tight.   

Just another warning to double check your preapprovals if you’re planning on buying zero down, stated income, interest only…even if you’re not considered subprime.

Filed Under: Current Affairs, Mortgage, Refinance, Residential Purchase, Subprime Lending
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