What is the Secondary Market?
The Secondary Market is a group of investors (mainly banks), that will buy a mortgage from a mortgage banker or mortgage broker.
What are the benefits of selling loans to the secondary market?
For lenders:
-creates liquidity for them to create more loans
-allows lenders to generate more money for more loans
-allows lenders to transfer the risk on to the investor
For borrowers:
-Makes the process more efficient
-Allows for the creation of new loan programs ~ meaning more options
-Helps to maintain LOWER INTEREST RATES
Monday, May 17, 2010
Tuesday, May 4, 2010
No more tax credit? You may be eligible to still get $ from the government!
Yes, we are all sad that there is no more tax credit for first time home buyers. However, if you live in Missouri, you may still be able to get money out of the government.
MHDC or the Missouri Housing Development Commission offers a Cash Assistance Loan. This means that MHDC gives you 3% of your down-payment, and being that FHA only asks for 3.5% down, you would only need to bring in 1/2% as a down-payment. If you are buying a $150,000 home, you are getting $4,500. This is not a bad deal.
As with any loan, you have to qualify for it...there are some extra qualifications for MHDC....
1. You must be a first time home buyer.
2. You can not buy a home over the amount of $258,690 in a non-targeted area. (Targeted areas are labeled by MHDC)
3. The income level (in St. Louis) of a 1-2 person household cannot exceed $67,900. It doesn't matter if someone living in a house is on the loan or not, their income must be counted.
4. The 3% that MHDC will give you is considered a "forgivable loan". This means that every month you live in the home, more of the loan is forgiven (in other words, you don't owe it anymore). After 5 years, the entire loan will be forgiven.
5. You must occupy the home within 60 days of closing.
For more information on this, feel free to contact myself or go to the MHDC website.... http://mhdc.com
MHDC or the Missouri Housing Development Commission offers a Cash Assistance Loan. This means that MHDC gives you 3% of your down-payment, and being that FHA only asks for 3.5% down, you would only need to bring in 1/2% as a down-payment. If you are buying a $150,000 home, you are getting $4,500. This is not a bad deal.
As with any loan, you have to qualify for it...there are some extra qualifications for MHDC....
1. You must be a first time home buyer.
2. You can not buy a home over the amount of $258,690 in a non-targeted area. (Targeted areas are labeled by MHDC)
3. The income level (in St. Louis) of a 1-2 person household cannot exceed $67,900. It doesn't matter if someone living in a house is on the loan or not, their income must be counted.
4. The 3% that MHDC will give you is considered a "forgivable loan". This means that every month you live in the home, more of the loan is forgiven (in other words, you don't owe it anymore). After 5 years, the entire loan will be forgiven.
5. You must occupy the home within 60 days of closing.
For more information on this, feel free to contact myself or go to the MHDC website.... http://mhdc.com
Friday, April 2, 2010
Debt to Income
What are lenders looking at when they are verifying income?
First, you need to give them your past 30 days paystubs and your past 2 years tax information. The lender will then figure out your yearly income by taking the 2 years and dividing it into months.
When a lender does that, they are making sure that you can make a payment every month. The way they do this is by figuring out what your "debt to income"(DTI) ratio is.
Debt to income ratio: How much monthly debt you have versus how much you make in a given month.
*** Let's say you make $2,000/month. You have monthly debts of $1,000. Your debt to income ratio is 50% because your debt takes away from half of your income. ***
There is a top DTI and a bottom DTI. Your top DTI represents how much your mortgage payment takes away from your income. Your bottom DTI represents how much your total monthly debts take away from your income.
***Let's say you make $2,000. Your mortgage payment is $800. Your total monthly debts are $1,000. Your top DTI is 40% and your bottom is 50%. *******
What is a good DTI?
- There are different guidelines for DTI.
Fannie Mae - 28/36 - means your mortgage payment can take up 28% of your income and your other monthly debts cannot exceed 36% of your income.
Freddie Mac - 33/38 - means your mortgage payment can take up 33% of your income and your other monthly debts cannot exceed 38% of your income.
FHA - 31/43 - meand your mortgage payment can take up only 31% of your income and your other monthly debts cannot exceed 43% of your income.
First, you need to give them your past 30 days paystubs and your past 2 years tax information. The lender will then figure out your yearly income by taking the 2 years and dividing it into months.
When a lender does that, they are making sure that you can make a payment every month. The way they do this is by figuring out what your "debt to income"(DTI) ratio is.
Debt to income ratio: How much monthly debt you have versus how much you make in a given month.
*** Let's say you make $2,000/month. You have monthly debts of $1,000. Your debt to income ratio is 50% because your debt takes away from half of your income. ***
There is a top DTI and a bottom DTI. Your top DTI represents how much your mortgage payment takes away from your income. Your bottom DTI represents how much your total monthly debts take away from your income.
***Let's say you make $2,000. Your mortgage payment is $800. Your total monthly debts are $1,000. Your top DTI is 40% and your bottom is 50%. *******
What is a good DTI?
- There are different guidelines for DTI.
Fannie Mae - 28/36 - means your mortgage payment can take up 28% of your income and your other monthly debts cannot exceed 36% of your income.
Freddie Mac - 33/38 - means your mortgage payment can take up 33% of your income and your other monthly debts cannot exceed 38% of your income.
FHA - 31/43 - meand your mortgage payment can take up only 31% of your income and your other monthly debts cannot exceed 43% of your income.
Friday, March 12, 2010
What does "paying points" mean?
Sometimes you will call a lender, and you will ask them about rates.
They may tell you that you can get a certain rate without "paying points." But, you can get a lower rate if you pay a certain amount of points. What do they mean by this?
When a lender refers to paying points, they mean that you can pay a percentage point of the loan amount to buy the rate down.
Is this beneficial?
Well, that is in the eyes of the beholder....I'll give you some examples.
Let's say that a lender says, "I can give you a rate of 4.75% if you pay 2 points, or I can give you a rate of 5.125% if you do not pay points." Your mortgage is worth $100,000. If you had a 30 year fixed rate, your payment would be $521.65 with a 4.75% rate. Your payment would be $544.49 with the 5.125% rate. Two points are worth $2,000 of your loan. It would take you over 7 years to recover that $2000.
So, you need to ask yourself....is having liquid money worth more to me right now? Or is having a lower payment by $22.84 more worth it to me?
There is no right or wrong answer. Everything depends on the person that is buying the home and getting a mortgage. Assess your goals, and you can decide what is the best way to go.
They may tell you that you can get a certain rate without "paying points." But, you can get a lower rate if you pay a certain amount of points. What do they mean by this?
When a lender refers to paying points, they mean that you can pay a percentage point of the loan amount to buy the rate down.
Is this beneficial?
Well, that is in the eyes of the beholder....I'll give you some examples.
Let's say that a lender says, "I can give you a rate of 4.75% if you pay 2 points, or I can give you a rate of 5.125% if you do not pay points." Your mortgage is worth $100,000. If you had a 30 year fixed rate, your payment would be $521.65 with a 4.75% rate. Your payment would be $544.49 with the 5.125% rate. Two points are worth $2,000 of your loan. It would take you over 7 years to recover that $2000.
So, you need to ask yourself....is having liquid money worth more to me right now? Or is having a lower payment by $22.84 more worth it to me?
There is no right or wrong answer. Everything depends on the person that is buying the home and getting a mortgage. Assess your goals, and you can decide what is the best way to go.
Monday, March 8, 2010
Some Basic Tips on Getting a Mortgage
Here are some basic tips on getting a mortgage:
1. You need to remember that you will not just be paying principle and interest. You will also be paying for: Property Tax, Homeowner's Insurance, maintenance, and possibly Private Mortgage Insurance. Add about 40% onto your basic monthly costs.
2. Gifts are a great source for downpayments! But, make sure that the person giving you a gift will sign something saying that it is a GIFT, NOT a LOAN.
3. Closing costs can cost up to 2 to 3 percent of your mortgage amount. Some of these costs can be rolled into the loan. In a buyer's market, the seller may pay for some of your closing costs, but be prepared to offer them more on the price of the home. Be prepared to pay closing costs no matter what.
4. Mortgage bankers and brokers will shop around for the best loan deal for you.
5. Set a price limit before you go shopping. If you should get into a bidding war, walk away once the price exceeds your limit.
6. Your home must pass an inspection, and it must appraise out at the amount you offer to pay. So, if you offer $100,000, and the home only appraises for $90,000, you need to go back to the drawing board and re-negotiate with the sellers on your contract.
7. Make sure when you are shopping around for your loan, that you are finding a company and loan officer that is easy to talk to and deal with. You don't want to be stuck in a hairy situation with someone who is unwilling to step up their game for you. You also want someone who will be honest with you, and who will not put you in a mortgage that you will be unable to afford.
1. You need to remember that you will not just be paying principle and interest. You will also be paying for: Property Tax, Homeowner's Insurance, maintenance, and possibly Private Mortgage Insurance. Add about 40% onto your basic monthly costs.
2. Gifts are a great source for downpayments! But, make sure that the person giving you a gift will sign something saying that it is a GIFT, NOT a LOAN.
3. Closing costs can cost up to 2 to 3 percent of your mortgage amount. Some of these costs can be rolled into the loan. In a buyer's market, the seller may pay for some of your closing costs, but be prepared to offer them more on the price of the home. Be prepared to pay closing costs no matter what.
4. Mortgage bankers and brokers will shop around for the best loan deal for you.
5. Set a price limit before you go shopping. If you should get into a bidding war, walk away once the price exceeds your limit.
6. Your home must pass an inspection, and it must appraise out at the amount you offer to pay. So, if you offer $100,000, and the home only appraises for $90,000, you need to go back to the drawing board and re-negotiate with the sellers on your contract.
7. Make sure when you are shopping around for your loan, that you are finding a company and loan officer that is easy to talk to and deal with. You don't want to be stuck in a hairy situation with someone who is unwilling to step up their game for you. You also want someone who will be honest with you, and who will not put you in a mortgage that you will be unable to afford.
Wednesday, March 3, 2010
Cute Condo in Webster
2 BDR/1.5 BA in quiet Webster Groves neighborhood. Recently updated kitchen with custom maple cabinets, granite countertops, and ceramic tile flooring. Private back patio with new privacy fence and balcony off the master bedroom. Walk-in closets in both bedrooms, updated bathrooms, and wood-burning fireplace. Covered parking included. Convenient to all major highways. Recently lowered the price to $159,900. If you want information on loans for this home, please call me at 314.878.7900.
For information on this home, call Amanda Winnick at 314.968.5446. They are having an open house on Sunday, March 6th from 1:00-3:00pm. Stop by and check it out!
Monday, March 1, 2010
Tips on Credit
I got these tips from Suze Orman. Love this book, Young, Fabulous and Broke. If you don't already own it, I suggest getting it.
1. Check your credit reports at least once a year to make sure there are no mistakes that could make your FICO score lower. You can get one free from each credit bureau at http://www.annualcreditreport.com/.
2. File a fraud alert with a credit bureau if you think you are a victim of ID theft.
3. Complete an ID fraud affidavit if your account has been stolen or "borrowed" by a financial criminal.
4. You can also check your FICO score on http://www.myfico.com/. If your score is below 760, there are things you can do to change it over time.
5. Pay your bills on time, even if it is just the minimum, to keep your FICO score strong.
6. Do not cancel your credit cards as a way to improve your FICO score. It may actually cause your score to drop.
7. Keep your mortgage shopping under a 2-week period, so your FICO score will not be negatively affected.
8. Keep a partner with a low FICO score out of the mortgage. If you are buying a home with a life partner or spouse, and one of you has a low FICO score, the partner with the higher score should apploy for the mortgage alone. That way, you will get a lower interest rate.
9. Pass down your FICO score to your kids. One of the best ways to educate your children on smart financial management is to send them off to college with a great FICO score and an appreciation of why that's a very big deal. Add a child to your card and they will inherit your credit profile.
1. Check your credit reports at least once a year to make sure there are no mistakes that could make your FICO score lower. You can get one free from each credit bureau at http://www.annualcreditreport.com/.
2. File a fraud alert with a credit bureau if you think you are a victim of ID theft.
3. Complete an ID fraud affidavit if your account has been stolen or "borrowed" by a financial criminal.
4. You can also check your FICO score on http://www.myfico.com/. If your score is below 760, there are things you can do to change it over time.
5. Pay your bills on time, even if it is just the minimum, to keep your FICO score strong.
6. Do not cancel your credit cards as a way to improve your FICO score. It may actually cause your score to drop.
7. Keep your mortgage shopping under a 2-week period, so your FICO score will not be negatively affected.
8. Keep a partner with a low FICO score out of the mortgage. If you are buying a home with a life partner or spouse, and one of you has a low FICO score, the partner with the higher score should apploy for the mortgage alone. That way, you will get a lower interest rate.
9. Pass down your FICO score to your kids. One of the best ways to educate your children on smart financial management is to send them off to college with a great FICO score and an appreciation of why that's a very big deal. Add a child to your card and they will inherit your credit profile.
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