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Need Cash From Your Home Equity Line Of Credit? Get It While You Can!
If you have a Home Equity Line of Credit (HELOC) that you have not used, now is a good time to evaluate whether or not you think you will *ever* need the cash.
If you think that you may need the cash in the future, it may be wise to withdraw it out and put it in another account.
Why?
Because banks are closing HELOCs with little or no prior warning leaving people with no line of credit where they thought they had it in place and could draw upon it.
I have heard more than one story about this happening with more than one large HELOC lender — and even got my hands on a letter from FDIC/Indymac who is paying people to close their HELOC account.
So if you think that you will need access to the cash from your HELOC it may be a good time to go get it!
FHA Up Front Mortgage Insurance Premuim (UFMIP) Changes
Yesterday, the new FHA Up Front Mortgage Insurance Premium amounts were announced and will be effective October 1, 2008. This makes for the 2nd change this year in the amount of money it costs a borrower up front to get into an FHA loan.
Back in June, we wrote about the UFMIP changing as of July 14. As a result of the new housing Bill passing into law in late July, the amount that a borrower will pay for UFMIP is going to change again. Effective October 1, 2008 the UFMIP calculations are going to be:
- For all FHA loans that are “full doc” refinance or purchases, the new UFMIP amount will be 1.75% of the loan amount.
- For all FHA Streamline refinances, the new UFMIP amount will be 1.5%.
- For all FHA Secure refinances, the new UFMIP amount will be 3%.
In addition to the UFMIP changes, there are also changes to the monthly mortgage insurance factors for FHA loans. Monthly mortgage insurance is calculated by taking the factor and multiplying it by the loan amount which will give you the total annual amount and then divide by 12.
- For loans with an LTV greater than 95% and terms longer than 15 years, the new factor will be .55%.
- For loans with an LTV less than 95% or below and terms longer than 15 years, the new factor will be .50%.
- For loans with an LTV greater than 90% and a 15 year term, the new factor will be .25%.
- For loans with an LTV at 90% or less and a 15 year term, there is no monthly mortgage insurance.
- For FHA Secure loans, the new factor is .55% for loans with an LTV over 95% and .50% for loans with an LTV less than 95%.
There has been a fairly technical debate as to whether “risk based premium pricing” has merit or not going on for years. I thought it was interesting that just as risk based premium pricing was implemented, it was “outlawed” and replaced with a simple system that doesn’t take into account a borrowers FICO score as the risk based premium pricing schedule did.
What does this mean in simple terms to the people who are wanting to get an FHA loan?
In short: if you have great credit and want to get an FHA loan, you are going to pay slightly more than you would under the risk based method. If you have poor credit and want to get an FHA loan, you are going to pay slightly less than you would under the risk based method.
And no matter what, regardless of credit score, everyone is going to pay slightly more when getting a full-doc FHA loan than they would have paid in the system prior to the July 14th implementation of the risk based premium pricing method.
While on the surface, that may not make any sense — the underlying math and logic behind the math is more complex — which I would be happy to discuss with you if you really want to know!
Was Your Short Sale Rejected? Do You Owe More Than Your House Is Worth?
Have you tried to sell your home in a short sale, but were unsuccessful in getting the lender to accept the offer?
Have you tried to refinance your home, but currently owe more than it is worth and as a result, were turned down?
Have you missed a few mortgage payments and as a result have a credit score that currently won’t allow you to qualify for a loan?
You are not alone, we talk to many of you each day and we tell many of you that there is one last option left — Loan Modification. We have talked about the concept of loan modification before (more than once), but here is a video that does a nice job of sharing one person’s experience:
<NOTE: for some reason, this video was taken down, it was a newsclip at WBAY in Green Bay about one person’s loan modification experience. I will keep trying to see if I can find it and re-post it.>
Is loan modification right for you?
It is for sure worth a try to get on the phone and try yourself first — because if you are successful, you have only invested your personal time. The story that we get from the people that we talk with every day though is that the vast majority of them are unsuccessful when they approach their lender, so they quickly go find help.
And while there are many companies popping up who claim to help borrowers get their loan modified, we personally recommend LoanSafe.org if you find yourself in this situation. Call us if we can be of help pointing you in the right direction or explaining more about the process.
Are You Getting A “Good Deal” From Your Loan Officer?
The media today is filled with stories of people who somehow ended up with a loan that they couldn’t afford and now are in serious financial trouble and facing choices that are not pleasant.
Were all of these people ripped off by a faceless army of unscrupulous loan officers who have now moved on to other industries to sell other things to unsuspecting victims?
Maybe.
Maybe not.
I don’t know for sure — but I will bet you a Diet Pepsi that most of the people who are now facing terrible options couldn’t tell you exactly how much money the company/loan officer made by “selling” them their loan.
And if you ask me, this “mystery” is a key player in the whole mortgage mess — the consumer has no idea how much the product (mortgage loan) and service (lenders services such as sales, processing, underwriting, etc) they are paying for.
It is just too complicated.
And it still goes on today.
So, here are 3 quick tips that you can use to tell if you are “getting a good deal” or if you are “getting ripped off”.
Get a Good Faith Estimate from at least three lenders.
When shopping for a loan, there are three things that are key to getting a good deal — Interest Rate/Program, Total Fees and Service. Two of the three you can put into numbers. One, you cannot.
The only way to get an apples to apples comparison is to get a Good Faith Estimate from each lender and compare. Sometimes they come in slightly different formats, but usually it is somewhat easy to look at all three and see who has the best deal. The only thing a Good Faith Estimate won’t tell you is how good the service is that the loan officer will provide.
If you still can’t tell who has the better deal based on the Good Faith Estimates — give a copy of all three to each loan officer and say something like “uh, can you please tell me who has the best deal?” and watch them scramble… except for the one with the best deal! If you aren’t comfortable doing that, you can always ask a friend who works in a related industry, usually they have enough knowledge to help you decipher the mortgage-mumbo-jumbo-jargon that makes up the Good Faith Estimate.
Be aware that a “par” rate may be completely different at each lender, but start your shopping by getting the loan officer to use a “par” rate.
Have you ever called a mortgage company and started the conversation by saying “Hello, I was wondering what your rate is today?” If so, it is a fair question — or at least, it should be a fair question. The problem with this question is that each lender has many different rates sometimes many different times each day, so there really isn’t an exact answer.
Rather spending time on a long-winded explanation of mortgage rates, just be aware that you want to have the loan officer quote you a “par” rate to start with. You may want to buy your rate down for a lower interest rate or you may want to accept a higher interest rate in exchange for lower closing costs once you know who you are going to work with — but to begin the shopping process, always get the loan officer to quote you their “par” rate.
Check references on a loan officer from at least 3 clients before you decide to go with her or him.
Once you have narrowed your search for a great loan officer down to two or three of them, ask them for references of happy clients. You may be surprised to know how many people don’t do this. I rarely, rarely see it done. But it should be done all of the time! Who better to ask if a loan officer can deliver on what he or she promises or is someone that you can trust than the people that they have helped recently?
If they have happy references, they will easily be able to provide names and numbers and even tell you that they will be happy to take your call. If they don’t have happy references? Watch the red flags start flying and just try not to miss the bright red blinking light that this will set off.
In my experience, there are many loan officers with many happy clients and there are many loan officers with many unhappy clients. There are very few loan officers “somewhere in between”.
If you do these three things, there is still no guarantee of a happy, successful financing or refinancing of your home — but it will cut the risk of you being disappointed down substantially. By asking loan officers to quote you a par rate, comparing at least three Good Faith Estimates and diligently checking references, you can increase your chances of getting a “Good Deal”!
From The Inbox: “Is Quicken (Rock Financial) A Reputable Lender?”
As our blog continues to grow, we are getting more questions each week — all good questions and it is fun to meet so many new people who are in so many different financial situations.
Tammy and I were talking and we thought that it would be fun to take a question that seemed like it may apply to more than just one person and write our view of “the answer”.
This question came from Michelle:
“Is Quicken (Rock Financial) a reputable lender?”
My Answer:
Michelle, first let me say that it would be unwise for us to say anything about a particular lender, not because we are worried about what they “will do to us” if we “said bad things” but because in our experience, there really isn’t such a thing as a “good” or “bad” lender, only good and bad loan officers.
Due to the sheer number of people who work at any given lender, it has been my experience that there are reputable and good people at almost every organization that I have come in contact with. There are also not-so-reputable-and-good people at these same places!
So, as mentioned on RealPhoenixLiving this week, you really want to focus on finding a good loan officer that has a network of people who can verify that the loan officer gives great service at a fair price. Look for more in the coming weeks on “how to find a good loan officer coming soon to RealPhoenixLiving” as we continue our series there.
That said.
As I worked with Michelle and learned more about her situation, it became clear that many people who are currently shopping for a mortgage aren’t aware of how to calculate what is a good deal and what means that they are getting ripped off.
So if you are a consumer, how exactly do you tell if you are getting a good deal or getting ripped off by your loan officer? Be sure to check back tomorrow!
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Arizona Mortgage Newsletter
