Refinancing When You're Underwater

 

If your home is  worth less than what you owe, you’re underwater, and that’s not a fun place to be, especially with interest rates at historic lows.

You can make the payments, but you’d rather not spend that much on them.  Here’s what you can do.

Step One: Are you really underwater?

Housing prices have gone up in a number of areas.  Your home may have crossed the threshold.  Or perhaps you received a low appraisal when you purchased the home.  (Please see our other blog post on tips for increasing your appraisal value.)

 

 

Step Two: Are you current on your payments?

If you can show that you’re a good lending risk and all of your obligations are current (see our post on your credit score), lenders tend to be more flexible as you’re not a credit risk.

Step Three: The details

First, figure out who guarantees or owns your mortgage.  If it’s backed by  Fannie Mae, Freddie Mac, FHA, VA or USDA, then there’s a good chance you can refinance.
There is a Federal program called The Home Affordable Refinance Program (HARP) part of the Making Home Affordable program.  They have certain requirements for refinancing:

• You are the owner-occupant of a one- to four-unit home.
• At the time you apply, you are current on your mortgage payments.
• The amount you owe on your first lien mortgage does not exceed 125 percent of the current market value of your property.

If your loan is backed by the FHA, you will want to look into the FHA Streamline Refinance program.  Their requirements are:

• You will not have made a late payment in the past 12 months.
• You will not have completed an FHA Streamline Refinance in the prior 6 months.

If you’ve financed with Veterans Affairs (VA), then you will want to find out more information about that Interest Rate Reduction Refinancing Loan (IRRRL).  Their only requirement is:

• You must refinance into a loan with a lower interest rate unless you are refinancing into a fixed-rate mortgage from an adjustable-rate mortgage (ARM).

And if you’ve been guaranteed by the USDA, there is a pilot program (only available in AL, AR, CA, FL, GA, IL, IN, KY, MI, MS, NV, NJ, NM, NC, OH, RI, SC and TN) called the Single Family Guaranteed Rural Refinance Pilot.  Their requirements are:

• You will not have made a late payment in the past 12 months.
• Your current mortgage rate must be 100 basis points higher than the refinance rate. Example: If your current interest rate is 6 percent, you would need to refinance into a rate that is equal to or lower than 5 percent.
• Make sure you contact your current servicer or the USDA Rural Development Office.

What If I’ve Missed Some Payments

Sometimes, things happen.  You had the flu and forgot to schedule the payment until it was considered late.  Money was tight.  We’ve all been there.  There is a program as well called the Home Affordable Modification Program (HAMP)

The Last Step

The final step for all of the options is to contact me and inquire about your eligibility.  As a Loan Officer, I am trained in all of these programs and monitor the rates to find the best options for you.

Why Mortgage Rates Change So Much

 

Did you ever wonder why mortgage rates fluctuate so much and you’re encouraged to lock in a rate?  Why can’t they just stay the same for a few weeks or a few months.

They’re a little like stock prices in that they change based upon supply and demand, and the rates are affected by inflation rates.  Additionally, they are impacted by the secondary mortgage market.

What Is the Secondary Mortgage Market?

The secondary mortgage market is where loans and servicing rights are sold by market leaders Fannie Mae and Freddie Mac, and also purchased by investors such as mutual fund companies, banks, hedge funds, and teacher and municipal pension funds.  (see more information in this Yahoo! Homes blog post)

What are the other things that impact the rates?

From Homeguides in the San Francisco Chronicle:

Growth

The economy naturally grows and shrinks and is very sensitive to events within the economy as well as outside the economy.  When the economy is on a growth path the demand for money increases and interest rates are pushed upward. The opposite is true when economic growth slows or stops.

Inflation

A key concern during periods of economic growth is inflation. Inflation increases prices and deteriorates spending power in the economy, which slows growth. The implication for future homeowners is that inflation pushes mortgage rates higher as lenders increase interest rates to hedge against the effects of inflation on profits, making home buying more expensive.

Federal Reserve Board

Economic activity is measured nationally to determine the appropriate interest rate.

Money Supply

Although the Federal Reserve is unable to directly set interest rates, the agency can influence rates indirectly by increasing or decreasing the supply of money in the economy. By increasing the money supply, the Federal Reserve puts downward pressure on interest rates. Decreasing the money supply puts upward pressure on interest rates. Consequently, if the Federal Reserve decreases interest rates, mortgage rates come down and borrowing for a home purchase is cheaper and encourages home buying.

We’ve written posts on how this is going to impact not only mortgage rates but fees that are charged.  With all of these factors, rates can change frequently.

So What’s This Mean For You?

Work with a reputable mortgage loan officer.   A good loan officer will diligently monitor interest rates for their clients, and advise them of opportunities to manage their mortgage debt at a better rate. They will also let you know up front about industry trends that may impact your rate, and offer recommendations as to the best time to lock in a rate during the process.

January 30, 2013

Your Best Deals In February

It’s hard to believe we’re almost at the end of January.  We hope you got some good deals for your home, but if you didn’t, there’s plenty more for February.

There are some major events in February that will yield some good bargains and opportunities, so plan ahead.  However, there are some things you may want to wait on like the iPad mini since Apple usually releases new products end of April or early May.  At that point, the prices on the prior model will drop.  Also, if you wait until July, there should be some great prices on refurbished models.  Also, there is a mobile show in Spain in late February when the companies introduce their new mobile phone models, so wait to purchase a new phone until March when the prices on the older models will go down.

Still A Good Deal

It’s still a good time to buy 2012 electronics like HDTVs and some computers.
Tax software still has some pretty good deals.
There is still a large inventory available on outerwear like winter coats.
It’s also still a good time for things like air conditioning, boats, motorcycles, etc.  And it’s a good time for wedding supplies since most people still get married in the Spring and Summer.
For your home maintenance, you should be able to find discounts from roofers and other home improvement or remodeling contractors.  The weather may delay the completion of the project, but you should get a good discount as the contractors like to stay busy.

Valentine’s Day Sales

Now, we don’t really mean buy things before Valentine’s Day as the discounts will be minor.  But after Valentine’s Day, you should be able to get some significant discounts on jewelry, lingerie, candy, cards, decorations, etc.

President’s Day Sales

During the three day event, you should be able to find some incredible bargains like 80% off of bedding, apparel, tools and furniture.  Other stores will tack on an additional 20-30% off existing sales
Furniture manufacturers release their new models in February, so you should be able to find some great deals when the stores want to clear out floor space.


Resources
MSN Money Best Deals in February
DealNews: Best and Worst Things to Buy in February
Lifehacker: Best Buys In February
Yahoo! Shine: 5 Things to Buy in February

How Often Does Your Credit Score Change?

January 24, 2013

This is a question we often get during the mortgage process.  A credit check may have uncovered some incorrect information, and you get it updated.  So how fast will it change?

What is a Credit Score?

Per the reporting agencies (TransUnion, Equifax, and Expperian), your score is a snapshot of your current credit report as well as how many pulls you have had on your report.  For example, from Yahoo:

“Right now it’s 11:40 my time,” said Rod Griffin, director of public relations for Experian, when I interviewed him for this story. “Let’s say a lender requested your credit report right now. If you apply for credit (again) in an hour your credit report could be different,” he says, referring to the inquiry that would have been generated when the first lender accessed my credit information.
“Credit reports can change as often as every day if there is new information provided to the credit bureaus,” says Barry Paperno, community director for Credit.com.
If you want to be technical about it, you don’t really have a credit report on file with the credit reporting agencies to begin with. Explains Griffin: “We have information from each of the lenders, and we go out to our databases and compile information from those databases when a credit report is requested. Your credit report represents a snapshot of your credit history at any given point in time.”
That means that the information is available in the credit reporting agencies’ (CRAs) databases at the time a credit report is requested is the information that will be reported. “You don’t have a credit report until you apply for credit and it’s requested,” Griffin says.
But it’s not like checking your online bank account and seeing the debit card purchase you made a few minutes ago in your running balance. “It’s not real time,” says Griffin.

So What Do You Recommend?

• Set up payment reminders so you never have a late payment again.  Do remember that a lot of credit card companies want the payment a few days before the due date to have time to process it.  It’s not fair since they say it’s due on a certain date, but it’s best be a few days early.
• Set up automatic payments using online banking where you can.
• Reduce the amount of debt you  owe.
• Check your credit report annually.  You can get your free report here.  Now, this won’t give you a score unless you pay for it.  But you can at least look for mistakes which do happen.
• Get your credit report 3-6 months before applying for a major loan.
• Be patient.  It can take 30-60 days for information to be updated on a credit report after you’ve made changes (like paying off a student loan, or had disputed information resolved)

8 Surprising Things That Impact Your Credit

And what would a post be without some trivia.  This is from Credit.com blog:

1. Renting a car
2. Applying for credit (even when you aren’t rejected)
3. Disputing an account
4. Having credit cards, but no loans
5. Just a single late payment
6. Closing an account
7. Divorce
8. Late library books

Three Scams to Be Aware of and Avoid

 

In a prior post, we talked about what you need to do if your identity is stolen.  In today’s post, we’ll look at some common scams going around currently, and resources for learning more about them.

Scammers rely upon the natural trust of people.  A good rule of thumb is always to trust but verify.

 

 

Secret Shopper Scams

This sounds like a great idea: be paid to shop and report back on  your experience. And there are legitimate companies out there.  Unfortunately, there are many more scammer companies.

From the Federal Trade Commission (FTC):

Don’t Pay to Be a Mystery Shopper

Dishonest promoters use newspaper ads and emails to create the impression that mystery shopping jobs are a gateway to a high-paying job with reputable companies. They often create websites where you can “register” to become a mystery shopper, but first you have to pay a fee — for information about a certification program, a directory of mystery shopping companies, or a guarantee of a mystery shopping job.
It is unnecessary to pay anyone to get into the mystery shopper business. The certification offered is almost always worthless. A list of companies that hire mystery shoppers is available for free, and legitimate mystery shopper jobs are listed on the internet for free. If you try to get a refund from the promoters, you will be out of luck. Either the business won’t return your phone calls, or if it does, it’s to try another pitch.

Don’t Wire Money

You may have heard about people who are “hired” to be mystery shoppers, and told that their first assignment is to evaluate a money transfer service, like Western Union or MoneyGram. The shopper receives a check with instructions to deposit it in a personal bank account, withdraw the amount in cash, and wire it to a third party. The check is a fake.
By law, banks must make the funds from deposited checks available within days, but uncovering a fake check can take weeks. It may seem that the check has cleared and that the money has posted to the account, but when the check turns out to be a fake, the person who deposited the check and wired the money will be responsible for paying back the bank.
It’s never a good idea to deposit a check from someone you don’t know and then wire money back.

Delivery Email Scams

You’re waiting for a package that you ordered and you get an email appearing to be from FedEx stating that they couldn’t deliver your package and to please click on a link to reschedule delivery.  Unfortunately, it’s a trap to get your personal information, or to download malware onto your computer.
From the Better Business Bureau (BBB.org)

Fake delivery emails: Phishing emails enter consumers’ inboxes claiming to be from reputable companies like UPS, Federal Express and others. They claim to link to tracking information, but are really just filled with phishing links designed to get the consumer’s personal information for fraud.

BBB tip: Don’t click on any links or attachments in emails until the sender of the email is confirmed as the company. Red flags include typos, grammatical mistakes and unsolicited emails from unfamiliar companies. When in doubt, call the company the email came from to verify the legitimacy.

Some email programs will show you the actual link when you  hover your mouse over it.  Often, you will be able to see it’s a completely fake domain.

Gift Card Scams

You bought or received a gift card but the number was written down by someone.  Once you buy it and activate it, they can clean it out of the funds before you can buy.
From Scambusters:
8 tips to protect yourself from a gift card scam:

1. Don’t buy gift cards from online auction sites. Since this is a large source of gift card fraud, these cheap gift cards may well be worthless to you. Sure, some of these cards are real, but many are stolen, counterfeit or used. It’s not worth the risk.
2. Only buy gift cards directly from the store issuing the gift card or from a secure retailer’s website – no matter how much cheaper they may be somewhere else. If you do buy a gift card online, make sure you buy it from the place that you plan to use it.
3. Don’t buy gift cards off of publicly displayed racks in retail stores. In addition, don’t assume that because gift cards are inaccessible to the public, they are safe. After all, store employees can participate in gift card scams too.
4. Always carefully examine both the front and back of a gift card before you buy it. If you can see a PIN number, put the card back and get a different one. If a gift card looks like it could have been tampered with, don’t buy that gift card.
5. Always ask the store cashier to scan the gift card in front of you. This will guarantee that your card is valid when you buy it and that it reflects the balance you just charged it with. This will also protect you from crooks who exchange worthless cards for the cards you think you are buying.
6. Always keep your receipt as a proof of purchase as long as there is money stored on the gift card. Since many retailers can track where the gift card was purchased, activated and used, if the card is stolen, some retailers will replace the card for you if you have your receipt.
7. If possible, register your gift card at the store’s website. Although not all stores offer this option, you can uncover any misuse of your gift card sooner and report it more quickly.
8. Finally, never, ever give your Social Security number, date of birth or any other unneeded private information when you purchase a gift card. No reputable company will ask for this info.

Five Keys for Successful Goal Setting

Maybe this is the year you repaint all of the rooms in your home.  Or maybe the year you finish the five projects that you’ve started over the last ten years.  Maybe this is the year you’re going to set up a garden for some fresh, organic vegetables.  Or the year you try to get your orange tree to produce good oranges instead of the bitter ones for the last few years.

Maybe you’re going to set up a business We have two prior posts that can help with that:

Thinking of Starting a Side Business?
Part 2: Thinking of Starting a Side Business?

Step One – Where You Goin’

The more clearly you can see where you want to end up, the faster you’ll get there.  Some people create vision boards where they cut out pictures of their goal achieved so they can see it every day, and feel great about their goal.  Others meditate for 15 minutes in the morning and evening about what their lives will be like when they achieve the goal.  The key is to get emotionally involved, and very detailed about what you want, how it will impact you, and how great it is now that you’ve achieved it.  Yes, your brain is only so good.  You need to think as though you’re already there.

Step Two – What Actions?

Vic Johnson often uses the example of running in the Boston Marathon.  There are some things you need to do every day, like running.  And there are things that you only need to do once, like fill out the application.  But if you don’t fill out the application, you won’t get to your goal of running in the Boston Marathon.
The key is to identify what has to be done in order to reach your goal.

Step Three – Schedule It

Sometimes, a task can be overwhelming.  Such as if you want to increase your earnings by $25,000 this year, pay off $15,000 of credit card debt, or if you want to lose 40 lbs.  But if you divide it by 12 months, the goal becomes more manageable.
Another example is if you want to increase your customers by five over the next ten weeks.  And if you get one customer for every seven referrals or twenty meetings or one hundred mailings, then you know how many you need to do (35 referrals over ten weeks is only about 3 or 4 per week).
The key is to feel that warm glow inside and say “I can do that!”

Step Four – Plan It

Successful people know what they need to do that day.  When you leave work, write down the five things you need to do the next day.  Or when you go to bed, write down on a list pad the top items you need to achieve tomorrow.  This works in a few different ways.  First, when you sleep, your brain starts problem solving, and when you wake up, you’ll have some ideas on how to get things done faster.  Secondly, if you reach a lull in your day where you’re just goofing around on Facebook or reading emails that aren’t moving you forward, you can pull out your list and remind yourself of what you need to do next.
David Allen also recommends keeping the next action associated with your task list.  For example, if you want to grow tomatoes, your next big action may be to contact your Master Gardener association and find out which ones grow best in your area, when you should plant or start from seeds, etc.  So the next step would be to find out how to contact your Master Gardeners.  Then, when you have a moment between meetings, you can sit down and google it.
The key is to always know what you could do next.

Step Five – Keep On Keeping On

This is the key of persistence.  We can be really good for a week or two, but it’s not always easy over the long haul.  That’s why goal achievement experts recommend smaller chunks with clear metrics.    Let’s say you want to pay off $12,000 of credit card debt over the next year.  Due to interest, it’s going to be more then $1000/month.  And let’s say you’re choosing to swap your large latte for a small latte, and put the difference towards paying down.
Yes, you’ll see the amount decrease each month on your statement, but it could get difficult on week three when you really want that large coffee because it’s cold and you want extra get up and go.  How to get around this?  Use a common fundraiser technique and create a thermometer or some other visual aid that you can fill in and see just how far you’ve gone.

Things to consider

Some people have difficulties with a year goal.  For them, the experts recommend setting a 90 or 100 day goal with a big reward when you hit it.
When you’re feeling weak, remind yourself of the goal and why you want to achieve it.
At first, focus on one major goal at a time.  If you want to increase your income and lose weight and repaint the house, you’ll probably fail at everything because you’re too scattered.  Once you’ve learned to flex that goal setting muscle, then you can start working on two things, and you’ll know how to focus completely on what you’re working on, and then let it go when you focus on the next thing.
And finally, give up that all or nothing mentality.  If you’ve been on a quest to lose weight and you go out for a bit special dinner, don’t get mad at yourself because you had the cheesecake!  Enjoy every last bite, and then get back on your plan the next day.  Plus, remember that it’s impossible to gain five pounds in a day.  It’s water bloat from the sodium, and if you drink water, do gentle movement, and enjoy your fruits, veg, and lean protein, you’ll see your weight continue to go down.
So what’s your big goal for January?

Consider a Vacation Home for Fun Times, Investment Returns

Glorious summer days at the lake…the grandkids frolicking at the shore…or a warm fireplace as you wait for the perfect powder at your ski retreat. A vacation home builds memories and it can be a great investment.

In most vacation hot spots, second-home prices are at five-year lows. Some in California and Florida can be had for 47 percent below their 2006 price. Bargains are likely to be available within a couple of hundred miles from where you live.

* There’s more to a vacation place than fun and up-front bargains. In the future, the home will be an appreciating asset. Economists say prices are already rising and will continue to rise for at least the next five years.

* The home is a better deal if it’s rentable. The rental potential puts money in your pocket, but it also increases resale value.

* The typical vacation property rents out about 17 weeks a year, according to HomeAway.com. Ask a property management company how much comparable properties rent for by the week. While the rent won’t pay all your expenses, it will help with the mortgage, utilities, taxes and maintenance.

* You will meet and become friends with an entirely new group of people when you own a vacation home. Lifelong friends are made with neighbors and in the community.
* You’ll have tax benefits. Rent it out for less than two weeks, and you won’t have to report the income to the IRS.
* If you rent the home for two weeks or more, you can deduct operating costs, such as maintenance, cleaning, mortgage interest and property tax. You allocate the write-off between personal and rental use.
* As with any rental property, distance is important. Less than 200 miles from your primary home is best.

Finance
* When the property is classified as a second home, you’ll get about the same interest rate and terms as on a home loan, according to HSH Associates.
* If you need the rental property income to qualify for a mortgage, it will be classified as an investment property. The down payment will be higher and the interest rate will be about 1 percent more.