Palm Beach Real Estate and Loans

'Transparency' is one of those terms that gets thrown around a lot in the mortgage world these days.

It's actually pretty simple - you as the Client should be able to see everything that's going on with the home loan that you are getting for your purchase (or re-finance).

Nothing should be hidden, you should know where every dollar is going in the transaction, what all of the charges are for, etc.

Simple.  Can you imagine wanting it any other way?

No one in their right mind would want to borrow large sums of money and not know what's going on!

And no Mortgage Broker / Lender / Bank would ever try to cover anything up - right?!?

OK Alice, when you're back from Wonderland, we'll talk....................................

See the 'little' mess the country is in right now?  

People saw more money available then they ever thought possible and they wanted it - quite a few closed their eyes at that point.

Combine that with the BS artists who would gloss over the specifics of the loan just to make another commission!

Out of the entire loan package the two biggest items are the Good Faith Estimate (GFE) and the Truth in Lending statement (TIL).  These two items are put together so that you understand everything about your new loan.  If you don't understand something, ask for clarification.  If there is any hesitation on the part of the Broker to explain something, you should start to wonder..... and if you're ever told 'oh, don't worry about that' just get up and leave!

You also need to know if the person you're dealing with is making anything for the rate on the loan - Yield Spread Premium (YSP) - there's nothing wrong with it IF it's disclosed.  Make sure you understand EXACTLY how it affects rates / closing costs.

I could go on all day, but I do have to get to the office!

Call me if you have any questions- 

Today's post was provided by Jason Price of Knightlines Mortgage Services:

Looking to buy a bank owned property?

Is that bank Fannie Mae?

Or does the seller currently have a FNMA secured loan?

If so, you have a new loan program on your side.  FNMAs Home Path offers all the normal benefits of a conventional mortgage program offered by the loan giant, but with a few unique twists.

Just what are these twists?:

• No appraisal required.  LTV is based solely on the purchase price.  They already hold the mortgage on the property (or own it), so they know what the property is worth to them.
• No Mortgage Insurance.
• 6% (not 3%) contributions towards closing costs or pre-pays (cannot be used towards down payment).

There is however one main catch... yes, everything has a catch.  The property that you are trying to buy must be on "the list." . That list is FNMA's list of approved homes.  Not on the list, got to go with another program.

In addition, you will have to come up with 5% to put down on the property.  This 5% can come from a family member in the form of a gift if you are unable to put the money down yourself.

Time is running out, as home prices are starting to go back up.  Buy a new home today before rates start going up, too.  Call us to find available homes in your area and get the process started.

Jason Price of Knightlines Mortgage Services provided today's post:

 Homeowners and prospective homeowners in Palm Beach Gardens, Florida could see, as early as next week, rates on 30 Year Fixed Rate mortgages in the 4% range.  This move could come about as a result of a push by Republican lawmakers to include this provision in President Obama's $900 Billion stimulus package.

 The strategy has two main objectives to help stimulate the economy.  The first being to stop the falling housing market.  By dropping rates below already historic low rates, prospective homeowners may jump on them to buy matching historic low housing prices.  The second would stimulate consumer spending. Existing homeowners will be able to refinance (provided they are not already upside-down), thus lowering their monthly obligations.

 The provision is aimed towards Fannie Mae and Freddie Mac, not FHA.   Hope for Homeowners will not be an option for homeowners that are owing more than the current appraised value since it is an FHA program.  The plan will allocate $300 Billion to the mortgage giants, so timing is critical to home buyers and homeowners looking to jump in on the action.

 Democrats, who are currently showing favoritism to the provision, are expecting to vote on the package as early as this Friday.  With that being said, my advice is that if you are thinking of buying or refinancing, now is the time to do it.  As soon as the rates drop, lock your loan.  Do not wait till tomorrow to see if it drops another .125% because it could go up .25%.

President Obama is moving quickly to fix the problems in our country's financial system - and there is an incredible amount of work that needs to be done.

"Officials say they will make wide-ranging changes, including stricter federal rules for hedge funds, credit rating agencies and mortgage brokers, and greater oversight of the complex financial instruments that contributed to the economic crisis."

I've never been for increased government control.  However, one big cause of the of the mortgage / real estate mess that we're facing right now is the fact that there was absolutely no control at all!

You can make all of the laws that you want and you can go on about ethics all day long but if no one is enforcing these standards you wind up with a big mess.

The subprime mortgage situation that existed for the last few years was a great example.  It was basically a lending free-for-all.  Lots of money that was virtually thrown at people.  It wasn't irresponsible, it was idiotic.

'Let's lend someone (that can't repay) more then 100% of the current value of a home, even though the value looks like it will keep going DOWN!'

Hunh?

You don't need a degree in finance to see that there's something wrong with that.

Oh, I can here the complaints already!  "Marc, people need to be responsible for themselves, they shouldn't need to be TOLD what to do!"

Good point.  But when the actions of a few have negative effects for the entire country someone needs to put a halt to it.

Before we turn this into an exchange about philosophy & politics, let's wish Obama the best and help to get this mess cleaned up.

Jason Price brought up a good point as he was ignoring the Steelers game yesterday:

We get bombarded with home loan information - the problem is that most of it is so totally over the average person's head that they tend to get lost in the babble.  Which is exactly what the advertizers want!  It's the old "Baffle them with BS" - thing.

Before you can REALLY make a good decision about financing (or refinancing) your real estate you need to understand the BASICS.  After that, if you want to go on to mumble about what the Government may or may not do and blah, blah.... go right ahead.

Here are the most basic basics - make sure you understand them and the whole process will be a lot easier for you and your family:

Note: This is the IOU that you sign where you promise to pay back the money you borrowed from the bank.  The note outlines the terms of how you are to pay back the loan (term, interest rate, payment, and principal amount).

Mortgage: This the lien that a bank places against your home.  Think of it as collateral for the bank.

Term: This is the length of time that your note is amortized over.  The most common term is 30 years.  Basically, this is how long it will take to payoff the note.

Interest Rate: This is the percentage rate that a bank charges for you to borrow the money.

Annual Percentage Rate (APR) : This is NOT the interest rate! This is the true cost of your note (closing costs, interest paid and principal amount repaid) expressed in terms of a percentage.  The closer the APR to the interest rate, the less expensive the loan will be.

Principal Amount: This is the amount that you borrow.

Amortization: This is a schedule of payments showing the break down of each payment toward principal and interest over the term.

Escrows: This is an account that is funded by monthly payments to ensure the ability to pay taxes and insurance.

Mortgage Insurance (MI): This is insurance for the bank for loans over 80% loan-to-value.  It is designed to protect the bank in case of default.

Loan-to-Value (LTV): This is a ratio calculated by taking the loan amount and dividing it by the value of the home.

Debt-to-Income (DTI): This is a ratio calculated by taking the total monthly debt obligations of the borrower and dividing it by the total monthly net income.

Underwriting: The process of reviewing a file for approval by a bank.

Title: A document showing the ownership of the property, the liens on the property, and the legal description of the property.  Issued by a title company to ensure a lender a clean property.

Fixed Rate: A note where the interest rate is fixed for the term of the note.

Adjustable Rate: A note where the interest rate is fixed for a portion of the term of the note.  Once the fixed term expires, the interest rate will change.

Good Faith Estimate (GFE): This is an estimate of the closing costs that you will be charged for your mortgage.  A properly completed GFE should include lender fees, title fees, government fees, third party fees, and the mortgage broker fee.  Also, recently required on the GFE is Yield Spread Premium.

Truth-In-Lending (TIL): This is a form that shows the APR and how it is calculated.  It also includes your monthly payments over the term of the loan.