Tag Archives: mortgage

TRID For The Borrower- What It Means

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There are officially t-minus two days until ‘TRID Day’, and whether you are a potential borrower or an existing lender, there are no reasons to panic. On October 3rd, 2015, the TRID (also known as the ‘Know Before You Owe Rule’) Rule  will be implemented by the Consumer Financial Protection Bureau (CFPB) as a way to better inform and protect borrowers during the lending process. TRID (short for TILA-RESPA Integrated Disclosure) is the merging of the Truth In Lending Act and Real Estate Settlement Procedures Act that aims to make the mortgage process more streamlined and highly functioning for regulators, borrowers, and lenders. Its goal is to create a more informed and therefore better protected consumer through regulated time constraints and clear, comprehensible documents for the consumer-which is why the act has attained the nickname ‘Know Before You Owe’.

The change comes in a time where transparency in every industry is essential for consumer trust and transaction, and when the Real Estate Industry has a need to shift priorities from stimulating the economy towards borrower comprehension in the lending process (seeing as it is one, if not THE biggest financial decisions they will make in their lives). The idea is that more time and more consumer-friendly documents will create breeding grounds for an all around more informed borrower.

So what specifically is changing under the TILA Act, you ask? Not too much. Here are the biggest two changes in the process:

1) Loan Estimate– As Rayce Robinson explains, what was originally the Good Faith Estimate has now changed to become the “Loan Estimate” or LE. The LE is created at the beginning of the lending process following the application submission of the borrower to their preferred lender and provides potential borrowers with a clear and accurate disclosure of any estimated fees during the lending process. The LE breaks things down for the buyer as well as makes it easier for buyers to compare estimates between firms.

2) Closing Disclosure– The Closing Disclosure, or CD, replaces the HUD-1. The CD is a detailed and accurate disclosure of every fee needed to close. The main difference with the CD is that lenders are required to provide borrowers with the document 3 days prior to closing to give them adequate time to compare the document to the LE as well as ask any questions they may have. Since last minute changes tend to occur when buying a home, after the borrower signs off on the CD, the lender need not add additional 3 days for changes unless they fall under three exceptions. 1) The last minute change caused APR to become inaccurate, 2) Borrower wants to change loan program, or 3) a pre-payment penalty was added to the loan.

The idea is to integrate the 3 days, not add them- something that will require planning, focus, and organization from all parties involved in the lending process.

TRID is going to be a refreshing change for the consumer in the Mortgage industry, and the biggest takeaway a potential borrower can get from the change is that there will be more transparency in a more simplistic fashion. It is important to find a lender who is trained, has tested, and integrated TRID methods into their practice- and at Alpha Mortgage, our loan officers are trained, tested, integrated and PREPARED to provide you with the best experience possible. Contact us today!

*Note: If you are looking to secure Home Equity Lines of Credit (HELOCs), a reverse mortgage, or a mortgage secured by a mobile home or dwelling not attached to real property, it is important to recognize that TRID won’t apply to you. *

How Much Does It Cost To Refinance My Mortgage

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You’ve done your research on the best time to refinance your mortgage,and you are ready to start the process before the Federal Reserve decides to start raising interest rates again. It seems like everything else is in place: you plan on staying in your home for a long time, lending conditions have eased, and current mortgage rates are extremely low. Refinancing or “resetting” a mortgage is a great option for homebuyers that want to take advantage of market conditions like lower interest rates over time, take the opportunity to reduce the term of their original mortgage, or acquire cash from the home’s equity value to use on other purchases through cash-out refinance transactions. Homeowners can also benefit from refinancing by reaping the rewards of an improved credit standing in most situations.

But how much does refinancing your mortgage actually cost? One thing that most homeowners forget to consider when considering a refinance is that there are fees associated with the process. These fees vary based on location and company, which is why it is essential to shop around before you refinance your mortgage. Below are some fees to keep in mind and to discuss with your lender before making a refinance decision:

  • Administrative Fees: Just like when applying for your original mortgage, there are administrative fees that cover generating the information and data necessary to obtain refinancing contracts. Administrative fees to expect include paperwork fees, appraisal fees, application fees, loan origination fees, points fee, inspection fee, survey fee, title search/insurance fee, and others similar.
  • Closing Fees: Once you have been approved for your refinance, closing fees come into effect under names like paperwork fees, attorney review/closing fees, or closing costs. These can get pricey, so it is important to take them into consideration before applying.
  • Other Fees: It is crucial to understand the terms and conditions of your refinance like the back of your hand. Discuss with your loan officer things like prepayment penalties (fees that can cost anywhere from 1-6 month’s interest payments) that charge you for paying off your existing mortgage early, and other penalty fees that could impact you financially.

Most mortgage-related fees are paid upfront at closing, however some lenders offer “no-cost” refinancing, which includes these fees in your loan balance or interest price during the term of your refinance. Once you take into consideration all of the fees that will be associated with your refinance, calculate the break-even point of your new mortgage through online resources. If the refinance still makes sense financially, sign the papers! If you’re feeling overwhelmed, don’t fret. The Home Ownership and Equity Protection Act (HOEPA) protects those who refinance from high fees and interest rates.

Alpha Mortgage is proud to serve North and South Carolina with the best mortgage rates and informed loan officers. Need more information about refinancing your mortgage? Contact us today.

Can I Afford A House?

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When it comes to purchasing a new home, there are always many questions and factors to consider before putting down an offer. “Why is the owner selling? Do I like the location and surrounding area? Does the home have all of the amenities I am looking for?” The first, however, should be “Can I afford this home?” What would seem to many to be a simple ‘yes or no’ is actually one of the more complex questions when it comes to home-buying-101.

The question, ‘Can I afford this home,’ seems for the most part straightforward. You either can or you can’t. But what goes into determining the answer is where the complexity sets in. Below we have compiled a list of 5 important things to keep in mind when determining if you can afford a home or mortgage that you are interested in purchasing.

  1. Income Factors
    • Income before taxes is one of the most important factors in determining if you can afford a home and mortgage payment. But “income” doesn’t only refer how much you make per year before taxes. Income should also be evaluated by job security (the probability that you will keep your job), opportunity for raises and bonuses, confidence in keeping steady commission if your job operates off of this, chances that salary will stay the same or increase, and other considerations such as if you are planning on having kids soon.
  2. Monthly Spending
    • Monthly spending or your typical monthly budget is another factor that should be evaluated when determining if you can afford a house. Living expenses such as bills/utilities, transportation, health, fitness, home, kids, travel, personal care, pets, shopping, taxes and other expenses should be calculated, multiplied by 12, and then subtracted out of your income to get a clear picture of how much money you have left to work with. It is extremely important to be honest with yourself when calculating your monthly budget.
  3. Down Payment & Closing Costs
    • Monthly mortgage payments are not the only thing that you have to worry about paying when you plan to purchase a home. Once you decide on a home and have calculated your monthly spending and compared it to your yearly income, the next things that should be considered are down payments and closing cost. According to Mortgage 101, ‘Traditionally mortgage down payments range from 10 to 25 percent of the total purchase price of the property.” However, there are now more options that can potentially lower your down payment that our loan officers can help you decipher and apply for. Just as a rule of thumb, it is best to prepare to pay within that percentage for a down payment. Along with a down payment, closing costs should also be considered when determining if you can afford a home. Closing costs vary individually based on location and property values, but typically will include the costs to transfer property deeds, titles, land transfers, legal fees, loan fees, etc. On top of this remember that typically the closing itself will usually cost you 2-3% of the home price.
  4. Taxes/ Insurance
    • Once you purchase a home, taxes and insurance must be paid in order to protect both you and the lender. The main tax that a homeowner will pay is a yearly “Property Tax.” What a property tax does is quantifies the value of your property and home and gives the tax money you pay to the government. Normally, people set up Escrow Accounts that take money from your accounts monthly to go towards your end-of-year property taxes and insurance bills, and then accumulates that money until it is due (so you don’t have to come up with the lump sum all at once, which can be overwhelming). If you own your property outright, some people do choose to pay their yearly property tax at outright without an Escrow Account.
    • Homeowners insurance varies based on many factors including location, and risk factors, but is also something that you are required to pay. This can also be deposited monthly into an Escrow account. The main thing to remember with homeowners insurance is the more risk your property has, the more money you will pay on a policy. Basic homeowner policies usually include (but are not limited to) Dwelling Protection, Personal Property Protection, Natural Disasters, Other Structure Protection and Injury Liability. Another insurance you will likely have to pay is a mortgage insurance to ensure you will pay your monthly dues. Sometimes Private Mortgage Insurance (PMI) is required if you as a buyer are putting less than 20% down on a house and better protects the lender.
  5. Monthly Mortgage Payment
    • Monthly mortgage payments will be what you pay every month that goes towards the principal (money you borrowed) and interest on that money. They also sometimes include some of the home’s insurance and taxes. Mortgage payments vary depending on the home, location, money put down on the property and individual’s credit score. To see an estimated monthly mortgage payment you can click here, but until you meet with a lender, this will just be a projection.

Along with income factors, monthly spending, down payments and closing costs, taxes and insurance, and monthly mortgage payments, there will usually always be random “other” costs included when purchasing a home including homeowners dues, home maintenance, home inspection, etc. When predicting if you are going to be able to afford a house, it is always best to over-price your projected spendings. Don’t forget that according to CNN, Total debt payments (credit cards, student loans, car payments, etc.) should be less than 36% of gross income because that has been shown to be a level of debt that most borrowers can pay back comfortably.

Buying a house is a difficult process, but here at Alpha Mortgage, we are ready to assist you in any way possible. Contact us today!

5 Things that will Destroy your Credit while looking for a Mortgage

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In the lending process, one of the most important things that brokers look at when determining if an applicant should be approved or denied for a mortgage is credit score. Credit score refers to the three-digit number that represents how well you handle money. Credit scores are calculated through data records that come from previous statements, monetary amounts owed, length of one’s credit history, new credit, and types of credit used. There are three different credit scores: Experian, TransUnion, and Equifax. FICO scores are what most lenders check when applicants are applying for a loan. There are three FICO scores checked, one for each respective bureau, to determine risk. FICO scores range from 300 to 850, and the higher the number is, the better credit one has.

According to the FHA, “Generally speaking, to get maximum financing on typical new home purchases, applicants should have a credit score of 580 or better.” Lenders will look at your score before approving you, and often during the loan process as well to make sure that nothing has changed. If your score is a bit lower than 580, don’t sweat it. As long as your credit future looks promising, you still can potentially get a mortgage, you just may have to pay a higher down payment. If you’re in the clear, congratulations! You are one step closer to owning your dream home. However, regardless of score, it is essential to avoid these 5 things when you’re applying for a mortgage that can potentially destroy your credit score.

1. Opening up a new line of credit– There are two types of inquiries when it comes to someone wanting access to your credit- soft inquiries and hard inquiries. A soft inquiry occurs when you want to check your own credit score, potential employers run background checks on you, or other small questions. A hard inquiry is a serious check into your credit either conducted by a lender, credit card issuer, or other financial institution. These hard lower your credit score for a few points and stay on there for up to two years. They must be authorized. When you open up another or multiple lines of credit during the lending process, this raises a red flag to your lender that you’re desperate for credit.
2. Closing a credit card account– On the opposite end of the spectrum, closing credit card accounts can also lower your credit score and cause issues when you are applying for a mortgage. According to Next Avenue, when you close out a credit card or consolidate all of your credit card debt onto one account, your credit score will take a ding. The article states “when you close a credit card account, you lose the amount of available credit on that card. This increases what’s known as your credit utilization ratio, or CUR, a figure that compares the amount of credit you’ve used with the total amount of credit you have available. The way to maximize your credit score is to have a low utilization ratio.” Avoid this when applying for a mortgage.
3. Not paying your bills on time– This is a given… but sometimes we forget that even the smallest slip in not paying bills can be an issue when it comes to your credit score. If you don’t already, set up reminders for every bill that needs to be paid a few days in advance to the due date.
4. Shopping around for a mortgage– It is extremely important to check your options when looking for a mortgage in order to secure the best rate possible. However, your FICO score takes a hit with multiple inquiries from different lenders. To compensate for this, within 30 days of a mortgage inquiry, additional inquiries are lumped into the first. What does this mean? If you are shopping around for the best mortgage rate, do so within a concentrated 30-day or less period.
5. Co-signing loans– As a parent, helping your child with a loan may seem like the best option to help them build credit, but be very careful when co-signing with your children for finances. It is in fact a good way to build their credit up, however, if they miss a payment it could shave up to 50 points off of your credit score. If you do co-sign, make sure to set reminders for when payments are due to remind your child and ensure that no payment will fall through the cracks. Yikes!

Want to apply for a mortgage? We can help.

Mortgage Market Update 03-17-2014

Economic data had little impact t on the capital markets today as all eyes continue to focus in on the geopolitical news out of Europe. The republic of Crimea has voted to break off from Ukraine and join Russia. President Obama has stated that Crimea’s vote “would never be recognized” by the U.S. and warned of further military action toward other parts of Ukraine.

The New York Federal Reserve reported that its Empire Manufacturing Index rose to 5.6 in March, above the 4.5 recorded in February and nearly inline with estimates. Within the report it showed that both the new orders index and the employment component both saw positive gains. Readings over 0.0 indicates improving conditions, below indicates worsening.

Over in housing news, the National Association of Home Builders (NAHB) March Housing Market Index rose to 47 in March from the 46 recorded in February and below the 50 that was expected. The NAHB said that poor weather and difficulties in finding lots and labor weighed on the index. A number below 50 indicates that more builders view conditions as poor than good.

Mortgage Market Update

Fannie Mae released its January 2014 National Housing Survey this week revealing that consumers are positive regarding access to mortgage credit while their views towards the economy are improving. 52% of respondents thought it would be easier for them to get a home loan today, an all-time high. The share of respondents who say the economy is on the right track increased 8 percentage points from last month, to 39%.

History was made today when new Federal Reserve Chair Janet Yellen became the first woman to head the central bank in its 100-year history. Ms. Yellen is in front of Congress this week testifying on the state of the U.S. economy, along with monetary policy. Ms. Yellen did say that the labor markets have made some progress, but still have a lot of improvement ahead. Ms. Yellen went on to say that the Fed policy makers could pause on easing back on stimulus if the economy weakens.

The Labor Department reported this morning that its JOLTS report, Job Openings and Labor Turnover Survey, showing a second straight month fall in the hires rate, now at 3.2% and the lowest since June of 2012. Compared to December, the total job openings rate fell 0.1% to 2.8%. The hires rate is the number of hires during the month divided by the number of employees who worked or received pay for the pay period that includes the 12th of the month.

Mortgage Market Update

The Labor Department reported this morning that employers added just 113,000 jobs in January, which was below the 175,000 expected, but up from the paltry 75,000 created in December. A freeze in hiring in the health care sector is one of the factors to the lower numbers. The Unemployment Rate fell to 6.6%, the lowest level since October 2008, but that can be due in part to people falling out of the work force than finding jobs.

Filling up at the pumps will begin to be more expensive as spring nears due to more drivers being on the road along with refineries shutting down for winter maintenance, which reduces supplies. The national average price for a regular gallon of gasoline is at $3.26. For 2014, AAA predicts that the nationwide average price will peak between $3.55 and $3.75 per gallon with the average price around $3.49.
The Census Bureau reports that the share of Americans who own their own homes was 65.2% in the fourth quarter of 2013, down from 65.4% in the previous quarter. Higher borrowing costs coupled with tight credit were the two factors behind the decline. The rate peaked at 69.2% in June of 2004.

Mortgage Market Update

Consumers opened their wallets in December and spent on holiday shopping across the nation. Personal Spending rose by 0.4% last month, above the 0.2% expected. However, Personal Incomes were unchanged and below the 0.2% expected. Digging into the report it revealed that consumer inflation pressures were almost non-existent.

Manufacturing activity in the Chicago region declined in January from December. The Chicago PMI fell to 59.6 from 60.8 and was the lowest reading since November. Within the report it showed that the employment component fell, while the prices paid number rose. In addition, Consumer Sentiment fell to 81.2 in late January and down from the 82.5 registered in December.

Today marks the last day in office for Federal Reserve Chairman Ben Bernanke as Janet Yellen takes over the reigns as Fed Chief on Monday. Mr. Bernanke steered the US financial system through one of its worst periods in history after the financial and housing markets blew up in 2008. Ms. Yellen becomes the first woman to head the central bank in its 100-year history.

Mortgage Market Update

The Mortgage Bankers Association reported this morning that its Market Composite Index, a measure of total loan application volume, rose by 4.7% in the latest week as home loan rates fell to lows not seen since November. The refinance index increased by 10%, but the purchase index declined by 4%.

In corporate earning, revenues at Coach were weaker than expected, IBM’s revenue declined while Texas Instruments forecasted weaker than expected net income. In addition, United Technologies beat earnings expectations while revenues fell. There have been 61 companies in the S&P 500 that have reported with 56% topping estimates.

The first Federal Open Market Committee meeting of 2014 will take place next week with the closely watched monetary policy statement being released at 2:00pm ET. The investing public will be looking for any additional news on the Fed’s massive stimulus program, dubbed QE III or Quantitative Easing III. The Fed revealed last May they it may begin to taper its purchases of Treasury and Mortgage Backed Securities, which sent home loan rates for a 30-year fixed from the mid 3% level to the current level of 4.5%. The Fed did begin to taper its purchases from a total of $85 billion per month to the current pace of $75 billion.

May 23rd Moorings

Hello and welcome to this week’s edition of Moorings, your source for local and national news from the Mortgage Industry. Let’s jump right in and take a look at Housing Starts and Building Permits, which are leading indicators of the new home construction market, and both came in below expectations that were already low. If you consider the significant amount of foreclosures and inventory overhang weighing on the market, it is no surprise to see a weak indicator on new home construction. Broadly speaking, foreclosures and short sales are expected to continue weighing on new home construction for the next couple of quarters… but as we all know, real estate is very local. For instance most new construction in our area that is priced right (under $300,000) is moving steadily enough.

 

Also, the major undercurrent theme of the economy is that economic growth will slow, which recent reports seemed to indicate. The recent rally in bonds and home loan rates (rates are down), seem to be sparked by this notion. And when you also factor that the only two ways the government can lower the budget deficit is either by cutting spending or raising taxes – or some mix of both – the austerity measures could indeed slow the economy.

 

Now that we have the major news behind us, let’s take a look at a rate or two for this week. A client looking to purchase a two hundred thousand dollar home, with 5% down on a conventional thirty year mortgage would likely have an interest rate of 4.75%, assuming their credit score and other assets qualify them. Even better are 100% USDA loans which are currently being offered at 4.625%. This is truly a phenomenal bargain on a mortgage for anyone looking at a home that qualifies for USDA financing. Just keep in mind that rates are down right now for a reason, and eventually they will go back up.  Contact your preferred lender now if you want to discuss refinancing or purchasing a home.

 

Last but not least, I thought I would discuss the question of paying off your mortgage early. I recently had a client tell me they were dead set on paying off their newly refinanced 15 year mortgage in less than ten years. I cautioned them to examine this thought process carefully and discuss it with a tax specialist. While not having a mortgage payment may seem attractive to many people, the money you will put into that endeavor may likely be put to better use in a safe investment acquiring interest. In addition, mortgages are what many people consider “good debt” in that it allows you to claim a vast amount of tax deductions over the course of your loan, which can greatly help you each year. A financial planner or tax specialist can help you plan your path to a prosperous future and retirement. Well that’s it for this week, until next, Be Blessed and Numbers 6:24-26 be on you.