Adjustable Rate Mortgages, also referred to as ARMs, come in many shapes and sizes. This post will be focusing on fixed period ARMs, such as the 3/1, 5/1, 7/1, 10/1…etc. that feature a fixed rate period before adjusting.
ARMS Defined
April 8, 2007 by 2 Comments
Friday Funny…
April 6, 2007 by 3 Comments
The March of the Librarians takes place in Seattle’s new library. This documentary reveals what happens when 10,000 librarians gather for an American Library Association convention. I just had to share!
How Do You Find an Ethical Lender?
April 4, 2007 by 4 Comments
On Rain City Guide, there are often debates that will arise about measuring one’s ethics (usually referring to real estate agents or loan originators). So how do you determine whether or not someone is indeed ethical? You can have a Code of Ethics plastered all over your web site and at your office…but it really doesn’t mean squat unless you do what you say.
As a Certified Mortgage Planning Specialist, I am to adhere to their Code of Ethics or I will lose my CMPS designation. This includes 11 Statements of Commitment and 8 Duties to the Client Codes of Conduct. There are 10 other Codes of Conduct that apply toward fellow CMPS members and the CMPS Institute. It’s pretty elaborate.
The Washington Association of Mortgage Brokers (WAMB), which I am a member of, also has a Code of Ethics. WAMBs Code of Ethics are more "short and sweet" than those of CMPS.
The company I am employed by, Mortgage Master Service Corporation, has their philosophy and goals on our website. And I was a Campfire Girl while in elementary school. (Our troop was the Blue Bird Blue Stars).
Jillayne Schlicke recently did a post on Vacation Mortgage about a local mortgage company who has "ethics in their name" and touts ethics on their web page. However, if you contact them about their "vacation mortgage" which is heavily advertised on the radio, instead of providing information about the mortgage and answering general program questions (I emailed on several occasions inquiring about their vacation mortgage), they want to run your credit and obtain all of your information information to make sure you’re considering the proper mortgage. Hmmm…dangling a vacation from your mortgage payment, then refusing to explain the program so they can offer you a different program…sounds like bait and switch to me. Hardly ethical in spite of all their efforts to promote being an ethical company.
This is why I will always return to relying on referrals from three different sources of individuals whom you respect to select your Mortgage Professional. Such as a friend, co-worker, neighbor, Certified Financial Planner, CPA or Real Estate Agent. Preferably, one who has recently gone through a purchase or refinance transaction themselves. 
Your referrals have all ready been tested by those you trust.
Unfortunately, you’re not able to submit a Loan Originator to a polygraph test to determine if they’re straight shooters with your best intentions at heart. And, you cannot follow them around 24-7 (legally) to see what types of decisions they make throughout the course of a day. And although the new legislation to have loan originators who work for mortgage brokers licensed (banks such as Washington Mutual, Countrywide and Wells Fargo; and credit unions are excluded from this law) is a start, it’s still no guarantee of the the person’s moral fortitude. At least unsavory LOs who work for brokers will have a license to lose (or, at least they will not be originating loans at a mortgage brokerage).
One of my favorite examples of a "Code of Ethics" is from Les Schwab Tire Company. They promote that they treat clients just like they would their own mother. I browsed through their web site and could not find a posted Code of Ethics…but I guess this is, perhaps my point. They do what they say, it’s not all talk or print. Simple. Funny, I think some of the best things are!
Go M’s!
April 2, 2007 by Leave a Comment
What a game! I love baseball. Speaking of the Mariners. Last week, I was 
pleasantly surprised by a gift. Someone shipped a very nice Mariner’s blanket to me. I’m assuming for my birthday…. However, there was no card and no one has claimed this kind act.
A mystery present! It makes watching the M’s whomp the A’s all the sweeter! 😉
Getting on Track to Buy Your First Home
April 2, 2007 by 2 Comments
Last fall, a Mom made an appointment with me to meet with her childre
n about buying a home. It was so cool. First off, she was very proud of her 18 and 20 year olds. Both were hard working individuals…being responsible young adults. Mom thought they should look at buying a house together instead of renting. It was a very interesting consultatation. I was happy to meet with this family to help make sure her young adults are on the right track of becoming home owners and mortgage payers.
Why I Don’t Like Stated Income Loans
March 31, 2007 by 11 Comments
Let me start by saying, I prefer a “No Income” over a “Stated Income” loan. If you 
have to “state” an income, you’re potentially setting yourself up for committing fraud. A “no income” verified loan (where your income is blank on the loan application) does come with a slightly higher rate than a stated income loan, however, there are no questions about what is questionable…your income!
Recently, a home buyer contacted me for a second opinion on their good faith estimate. They had just made an offer that was accepted on a home. After reviewing his information, he revealed that the loan was stated income. I did not have all of their documentation needed for self employed borrowers (2 years complete tax returns, for starters) since I was just looking at closing costs and the rate. So I asked why they were going stated income. Here is his actual response:
“Let’s just say it’s income we’re hoping to achieve, but higher than what is on our tax return.”
Does that sound a wee bit concerning to you? For one, they are stating income they don’t make in order to qualify for a mortgage. When you’re self employed your income can vary quite easily. What happens if they don’t make the income they “hope to achieve” and they cannot swing their new mortgage payment?
I asked if his Loan Originator was going to have him sign a 4506 or 4506T. These forms are sent to the IRS so the lender (and what ever company your loan is sold to) can verify the income you are stating on the loan application by accessing your tax transcripts directly from the IRS.
“I did ask [our LO] about that, and she said it’s basically a formality – that they don’t actually pull the tax return…it’s just put [the 4506 form] in the file.”
Often times, the 4506 may stay “in the file”. However, if the borrower defaults on the loan, you can bet the first thing the lender will do is to grab the 4506 to compare what was stated on the loan application to the actual income reported to the IRS.
“Since I certainly don’t plan on defaulting, I’m going trust [the LO] and the bank on this one. She’s got an interest in this as well!”
The LO certainly does have an interest in the loan. She’s going to get paid and keep her real estate agent happy. Stated income and no-income verifiers are very easy loans to do as compared to doing a full document loan for a self employed borrower where you have to review and average incomes for the past two years. Yikes…the LO might actually have to pull out their calculator and do some hard math and go through someone’s tax returns. Oh dear!
Let’s assume worse case scenario for this borrower who is all ready admittedly overstating income at what he hopes to achieve…what he suffers a loss with his business and and is not able to keep up with his mortgage? As a self employed person, your income and costs are not secure or stable. This could quite easily happen to the best of people. Now you’re in a mortgage that you could not afford to begin with because you had to over state lie about your income. Should your mortgage go into default, will the LO who put you into this loan stand by you? I doubt it. Plus, she’ll probably state something like “I had no idea they didn’t make that income.” She won’t go down holding the borrower’s hand in this case, far from it.
If you are considering a mortgage where you “state” your income on the loan application, you should know:
- Stated income loans are not created to exaggerate your income so you can qualify for a mortgage.
- Your stated income should compare to what you have reported on your gross income tax returns.
- Consider a “No Income Verified” loan vs. a “Stated Income”. The difference to rate, with good credit, is often not that significant. With no income stated, there are no figures to lie about. You’re qualifying on credit and down payment alone.
- Don’t lose sight on whether or not you can actually afford the mortgage payment. Qualifying for a mortgage does not mean that you should have the mortgage if you cannot make the payments.
Lying about your income, or anything on the loan application, is mortgage fraud. There are many other types of documentation available so that borrowers do not need to go this route (unless it makes sense–ie they actually have the income).
Still thinking about stated income? Watch this video from CBS.
I’m an April Fool
March 30, 2007 by 5 Comments
This 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?
Big Views from Queen Anne Townhome
March 29, 2007 by Leave a Comment
All the convenience of living in the city with the comforts of living on quiet street just blocks from the Queen Anne’s South Slope.
Booming views from the living, dining and the Master Suite. You even get a 2 car garage IN THE CITY.
Large gourmet kitchen featuring granite counter tops, stainless steel appliances and maple cabinets.
This seller has all ready purchased their next home and would like to sell this one.
If you or someone you know would like in Queen Anne neighborhood with a place to park your cars, this could be your next home!
For more pictures and details about this property, click here.
Offered at $875,000
MLS #270393303
3 Bedrooms/2.5 Bathrooms
This home is listed by John Blacksmith of Lake & Company. Again, I’m not a real estate agent. I’m just a Mortgage Planner helping out my client (the owner of this nice home). If you are interested in financing for this property, please contact me!
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