July 22, 2011
I am sure you will all be thrilled to know that according to Bankrate Inc., NY leads the US as the most expensive state for mortgage closing costs. According to their reserach, origination and title costs on a $200,000 mortgage in NY average $6,183. Nationwide, on the same loan average, the cost was $4,070.
Although, I cannot confirm these figures, it does not shock me. The biggest culprits that I can see are the title fees, appraisal fees and mortgage tax.
In many cases, its impossible to pinpoint your exact closing costs, especially when their are escrows involved but its critical to get a real good handle on what they will be whether it's a purchase or refinance. ask your mortgage professional and your attorney for guidance.
Friday, July 22, 2011
Wednesday, July 20, 2011
Be proactive when shopping for a mortgage
This business used to be much more simple than it is now. A few years back if you had good income, assets and credit, it was a slam dunk. Nowadays, there is no such thing anymore. That's why the buyer has to be proactive when it comes to their mortgage. The tiniest little blip can alter the financing picture and make your mortgage process a very unpleasant one. Here is just a sample of those things that I have witnessed over the last few years. Read them and take notes:
1. If you are taking an ARM product, most banks no longer qualify you at the actual rate you have. Many times they add 2% to the actual rate.
2. Borrowers must show a 2 year history of bonus at the same job. I have had many Wall Street clients that earn significant incomes but couldn't qualify because of a change in jobs.
3. If you are buying into a condo development, is the building approved? Years ago, the banks didn't care how many units were sold or in contract. Now they do.
4. Many lenders no longer allow interst only loans.
5. Many lenders no longer allow interst only on co ops for certain loan amounts.
6. Some Fannie lenders allow up to a debt ratio of 50%, while others are at 45%. Knowing the difference and who does what can make or break your deal.
7. Many lenders use the actual payment from the credit report on a Home Equity Line of Credit to qualify a borrower's liabilities. Others use 1% of the actual line amount. That can be a significant difference.
8. Credit scores that are above 740 can still have a negative impact on rates depending upon the amount borrowed. Know your credit scores!!!!
9. You can still do 90% financing at some lenders but be aware that even though the lender will allow it, the Private Mortgage Insurance Company that insures it may not. Sometimes their guidelines are tougher than the bank.
10. No interest only loans are qualified at the interest only payment anymore. Just the principal and interest payment plus the 2%.
11. If you are buying a co op, does the building have the proper fidelity bond coverage? This covers against malfeasance on the part of the managing agent. 2 years ago, this was a serious problem because almost all co ops did not have the required Fannie Mae fidelity coverage. Now, it's less of an issue but still an issue nonetheless that never existed before.
12. For refinance transactions, the appraisers are being very conservative on values. Years ago, if there was a concern of value, I would always encourage the borrower to do the appraisal before starting the loan application. This ay, it could save a lot of headaches down the road. The law states now that you can't do that.
The idea here is that you must discuss all facets of your situation before getting involved in a contract signing. Don't assume you will have no problem obtaining the financing. It could be the difference between getting your loan or not.
1. If you are taking an ARM product, most banks no longer qualify you at the actual rate you have. Many times they add 2% to the actual rate.
2. Borrowers must show a 2 year history of bonus at the same job. I have had many Wall Street clients that earn significant incomes but couldn't qualify because of a change in jobs.
3. If you are buying into a condo development, is the building approved? Years ago, the banks didn't care how many units were sold or in contract. Now they do.
4. Many lenders no longer allow interst only loans.
5. Many lenders no longer allow interst only on co ops for certain loan amounts.
6. Some Fannie lenders allow up to a debt ratio of 50%, while others are at 45%. Knowing the difference and who does what can make or break your deal.
7. Many lenders use the actual payment from the credit report on a Home Equity Line of Credit to qualify a borrower's liabilities. Others use 1% of the actual line amount. That can be a significant difference.
8. Credit scores that are above 740 can still have a negative impact on rates depending upon the amount borrowed. Know your credit scores!!!!
9. You can still do 90% financing at some lenders but be aware that even though the lender will allow it, the Private Mortgage Insurance Company that insures it may not. Sometimes their guidelines are tougher than the bank.
10. No interest only loans are qualified at the interest only payment anymore. Just the principal and interest payment plus the 2%.
11. If you are buying a co op, does the building have the proper fidelity bond coverage? This covers against malfeasance on the part of the managing agent. 2 years ago, this was a serious problem because almost all co ops did not have the required Fannie Mae fidelity coverage. Now, it's less of an issue but still an issue nonetheless that never existed before.
12. For refinance transactions, the appraisers are being very conservative on values. Years ago, if there was a concern of value, I would always encourage the borrower to do the appraisal before starting the loan application. This ay, it could save a lot of headaches down the road. The law states now that you can't do that.
The idea here is that you must discuss all facets of your situation before getting involved in a contract signing. Don't assume you will have no problem obtaining the financing. It could be the difference between getting your loan or not.
Wednesday, July 13, 2011
Communication, relationships and value are key
Good relationships,communication and value are topics that I have touched on many times in my postings. It is the cornerstone of success in the residential real estate business and there are 2 levels to it:
1. How those relationships and the communication within create value, bringing you repeat and steady business.
2. How that dynamic works once a deal is in play.
You've heard the cliche "it's not what you know, but who you know". Well, how does a cliche become a cliche? Simply by being true. Knowing the right people, building the right relationships is everything in this business. The residential real estate market is a complicated one and demands hard work, diligence, knowledge and good communication skills. The players in the game-attorneys, real estate agents and loan officers cannot do it all on their own. Everyone plays their part and must play it well and just as important, everyone needs each other or the deal will not close. For example:
1. How those relationships and the communication within create value, bringing you repeat and steady business.
2. How that dynamic works once a deal is in play.
You've heard the cliche "it's not what you know, but who you know". Well, how does a cliche become a cliche? Simply by being true. Knowing the right people, building the right relationships is everything in this business. The residential real estate market is a complicated one and demands hard work, diligence, knowledge and good communication skills. The players in the game-attorneys, real estate agents and loan officers cannot do it all on their own. Everyone plays their part and must play it well and just as important, everyone needs each other or the deal will not close. For example:
- Any real estate agent worth their salt will insist that the buyers they work with be prequalified by a mortgage professional prior to taking them to view property. I guarantee you that the vast majority of successful brokers have a "go to" mortgage professional they work with. Successful agents worst enemy is wasted time.
- After speaking to the potential buyer, the mortgage professional should call that agent and tell them exactly what the financial pedigree of the borrower is. This will give the agent all the information they need to know-purchase price, loan amount, type of property (single family, co op or condo), credit scores, etc. Now, everyone is on the same page and everyone knows what is doable and what is not.
- Once a contract is signed, it's my opinion that it's incumbent upon the mortgage professional to reach out to the buyer's attorney either before the loan has been approved or immediately subsequent to approval. During that phone call/e mail, the mortgage professional should let the attorney know where we are in the process, what conditions need to be addressed, etc. If its post approval, the real estate agent should be contacted and told the same information. Again, this is being proactive and gets everyone on the same page.
- Once the bank is ready to close, the mortgage professional should call both the borrowers attorney and the agent to let them know we are all set.
Monday, July 11, 2011
Fannie mae lenders continues to tighten guidelines
Whenever I experience something at my job that I sense will have a major impact on borrowers moving forward, I feel the urge to let you know about it. I recently closed a loan with a Fannie Mae lender that asked my borrower to do something that I have not seen before and when 1 lender starts to do it, it is inevitable that others will follow. Before discussing exactly what it is, I think a little background would certainly help:
For most Americans right now, the job market is a scary place. Companies are not hiring. Bonuses are down or non existent. Unemployment continues to hover around 9%. People are just plain scared of losing their jobs. But, the one thing that never stops are the bills. Like clockwork, they come every month and they need to get paid. For many, credit card debt continues to pile up. One way to battle that debt is to pull equity out of your home at a much lower percentage that you are paying the credit card companies. It's a valid and good way to pay off debt in a sound and reasonable manner. I have had many clients do it and they would call me afterward and say that what I helped them do "changed their lives". It's a really good feeling.
It's fairly simple to understand. Let's say you have $30,000 worth of credit card debt at 12% and you currently have a 30 year fixed loan with a balance of $120,000 at 6%. You can refinance, take out a new loan at $150,000, and pay off the credit card debt at closing. You now are paying all your debts at 6%, you have instantaneously improved your credit and you have some breathing room. Your credit card balances are now at zero. Here is how it's changed:
If the credit cards being paid at closing are revolving lines of credit, the credit card must be closed in order to close the loan.
You can no longer pay off the debt and keep those credit cards. Is that something you would want to do? For some, they would have no choice. Again, not every bank is doing this but I bet we see it more and more. The economy continues to flounder and people need choices to keep themselves going but many of those choices are disappearing.
For most Americans right now, the job market is a scary place. Companies are not hiring. Bonuses are down or non existent. Unemployment continues to hover around 9%. People are just plain scared of losing their jobs. But, the one thing that never stops are the bills. Like clockwork, they come every month and they need to get paid. For many, credit card debt continues to pile up. One way to battle that debt is to pull equity out of your home at a much lower percentage that you are paying the credit card companies. It's a valid and good way to pay off debt in a sound and reasonable manner. I have had many clients do it and they would call me afterward and say that what I helped them do "changed their lives". It's a really good feeling.
It's fairly simple to understand. Let's say you have $30,000 worth of credit card debt at 12% and you currently have a 30 year fixed loan with a balance of $120,000 at 6%. You can refinance, take out a new loan at $150,000, and pay off the credit card debt at closing. You now are paying all your debts at 6%, you have instantaneously improved your credit and you have some breathing room. Your credit card balances are now at zero. Here is how it's changed:
If the credit cards being paid at closing are revolving lines of credit, the credit card must be closed in order to close the loan.
You can no longer pay off the debt and keep those credit cards. Is that something you would want to do? For some, they would have no choice. Again, not every bank is doing this but I bet we see it more and more. The economy continues to flounder and people need choices to keep themselves going but many of those choices are disappearing.
Tuesday, July 5, 2011
What you need to know about closing costs
Whether you are buying or refinancing, it is essential to know what your costs will be prior to applying for the loan. Let's deal with purchase transactions first. Buying a home can be very stressful and confusing and you can add 2 layers to that if you are buying property in New York. You are worried about all sorts of things like down payments, movers, interest rates, etc. For the most part, the closing costs that the lender charges are minor compared some of the other items like title insurance and real estate tax escrows. Title insurance is a state mandated number based on the loan amount. Then, you have your "ancillary" title fees like searches and recording fees that quickly add up. Your title bill can easily run into thousands of dollars.
If you want to pay your taxes with your mortgage payment (as most people do), realize that the bank is going to collect any taxes due within 60 days of closing PLUS collect anywhere from 2-6 months of taxes for the escrow account. The bank wants an assurance that they can pay your taxes if you skip payments or pay late. In some parts of the the country (especially the suburbs of NY) the tax burden is tremendous and the taxes collected at closing far surpass the closing costs that the bank charges.
On a refinance transaction, your closing costs are very similar to that of a purchase. Here are the major items to keep in mind when dealing with a refinance:
1. Unlike a purchase, you can include the closing costs in the new loan and not (in theory) have to come out of pocket to pay those costs. Many people do that but they must realize that they are financing those costs over the life of the loan.
2. Even if your refinance with the same bank that owns your mortgage now, they will probably set up a new escrow account. You will get back whatever is in your old account within 30 days of closing.
3. Even though you took out title insurance when you bought the home, you arr required to get a "re issue" of title insurance for the refinance. The premium is about half of what it was when you purchased the home.
Whether you are purchasing or refinancing, you have to know what your costs are. I have heard of too many instances where the borrower gets to closing and they are shocked by the outlay of money that is needed because they weren't informed of the real costs. Don't let that happen to you.
If you want to pay your taxes with your mortgage payment (as most people do), realize that the bank is going to collect any taxes due within 60 days of closing PLUS collect anywhere from 2-6 months of taxes for the escrow account. The bank wants an assurance that they can pay your taxes if you skip payments or pay late. In some parts of the the country (especially the suburbs of NY) the tax burden is tremendous and the taxes collected at closing far surpass the closing costs that the bank charges.
On a refinance transaction, your closing costs are very similar to that of a purchase. Here are the major items to keep in mind when dealing with a refinance:
1. Unlike a purchase, you can include the closing costs in the new loan and not (in theory) have to come out of pocket to pay those costs. Many people do that but they must realize that they are financing those costs over the life of the loan.
2. Even if your refinance with the same bank that owns your mortgage now, they will probably set up a new escrow account. You will get back whatever is in your old account within 30 days of closing.
3. Even though you took out title insurance when you bought the home, you arr required to get a "re issue" of title insurance for the refinance. The premium is about half of what it was when you purchased the home.
Whether you are purchasing or refinancing, you have to know what your costs are. I have heard of too many instances where the borrower gets to closing and they are shocked by the outlay of money that is needed because they weren't informed of the real costs. Don't let that happen to you.
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