gsf aurora

Shorten Your Mortgage

The low mortgage rates are sparking many homeowners interest at refinancing.  It is the really smart ones that are looking at refinancing not just as a lower rate, but also for a shorter term.  Many people are finding out that they can drop to a lower rate, a shorter repayment period and not increase their monthly payments.

 More than one-third of all refinancers this year have chosen loans shorter than 30 years, and one in four chose a 15-year loan, according to CoreLogic, which tracks mortgage statistics.

In 2007, only about 15% of borrowers chose shorter-term loans, and fewer than one in 10 opted for a 15-year loan.

In one way, the trend is counterintuitive. Shorter loans mean bigger payments — the monthly cost of a 15-year loan can be 45% higher than that for a 30-year loan — and many people are trying to economize right now.

Additionally, the gap in rates between 15- and 30-year loans has narrowed in recent months, which means you don’t get as much of a break for shouldering a shorter loan. Lending standards have tightened to the point where most people getting refinanced are considered “high quality” borrowers. They have decent credit scores, steady incomes, some equity in their homes and not too much debt.

These borrowers refinancing today, are the type who are more likely to have their financial acts together enough to swing 15-year loans.

Rates have fallen to the point where people who missed the past few opportunities to refinance at lower rates can now opt for shorter loans without busting their budgets. If you still have a loan around 6% and have paid down your loan for a few years, you may be able to make the switch without a big increase in monthly payouts.

For baby boomers looking at retirement, today’s low rates may offer a kind of break that they may need – an opportunity to pay off a mortgage sooner without stretching their budget.  Paying off a mortgage before retirement is a smart move for most people. It greatly reduces their cost of living.

If you would like to discuss your mortgage in more detail, contact me at GSF Mortgage, Aurora, IL.

gsf aurora

How Low Can Mortgage Rates Go?

As surprising as it seems, mortgage rates are nearing lows not seen in over 40 years.  Many home owners used the month of August to lock in at a great rate.  But this is the start of a new month.  Will September bring the unthinkable mortgage low of below 4%?  Many potential borrowers are wondering and so is the mortgage industry.

The first week of April brought with it the start of the mortgage rate decline.  The rate has been steadily declining since that point.  This was unexpected as many lenders and investors believed that the rate would have gone up once the fed stopped purchasing mortgage backed securities in March.

The rates continuing to decline is not a fluke.  There are many reasons behind this.  Obviously, the economy has had an effect on the rates.  Many investors are concerned with the current state of the US economy that they are purchasing more Treasury bonds which in turn lowers those yields.

In turn, these investors purchasing these mortgage-backed securities are requesting higher yields from Fannie, Freddie and the FHA to justify their risk.  The rising yield is dropping mortgage rates further. 

So where will rates go from here?  If the economy takes another hit from inflation – rates will rise because lenders will try to make up from the hit they will take from the value of real estate investment they expect to lose.  The Federal Reserve does not see inflation as a potential problem and they announced in August that they’ll hold the federal fund rate at this historic low and continue to buy Treasurys, which surged at month end, to help try to stimulate the economy.

Another factor is that investors don’t think that the economy is recovering, but rather another recession will hit causing rates to drop even further.  So borrowers that are playing the waiting game could very well see the rate drop below 4% and could end up saving thousands of dollars in their monthly mortgage payment. 

If you would like to take advantage of these record low rates either by financing or buying your next dream home, contact GSF Mortgage in Aurora today!

gsf aurora

4 Things Not To Do Before Closing

Going through the mortgage process, you have been inundated with tasks and forms that you need to do and complete.  Due to Fannie Mae’s Loan Quality Initiative, lenders are looking closer at credit and doing checks in the final hour even minutes before closing.  Here are 4 things that you should not do, no matter what, before closing on your new home or the refinancing of your current home.

The First – Take a Loan out on a Car

Let’s say you purchase a car days before you are closing on your new home.  The lender is not aware of the new car loan and closes on the home.  A few months down the road, you fail to make your mortgage payments.  If Fannie Mae digs back into your files and credit history and discovers the undisclosed car loan, Fannie Mae can make the lender buy back the bad loan.  Obviously the lender loses money.

Number 2 – Apply for a New Credit Card

It seems that every store has a credit card and retailers often offer discounts to customers if you carry their card and use it.  Even if the card sits in a box untouched, your FICO and debt to income may be affected by the new card.

If you fail to make a mortgage payment down the road, the lender would be responsible for your actions and would need to purchase the bad loan back from Fannie Mae.

The Third – Max Out Your Credit Cards

Yes, another credit card warning.  It is understandable that you have this new home and no way to furnish it.  The way not to is by charging everything to your cards. 

Your mortgage is based on your debt-to-income ratio and the approval for how much the lender is willing to give you relies heavily on this number.  Just because you have been approved by the lender doesn’t mean the deal can fall through at closing. Fannie Mae urges lenders to recalculate the debt-to-income ratio before the closing.  If the lender see this ratio increase, you loan may be denied.

The Fourth Point – Changing Jobs

Fannie Mae likes to see history and documentation.  If you switch jobs, obviously you don’t have that anymore.

And don’t rule out switching positions within the company.  If you go from being salaried to an hourly wage or one based on sales and commission, your prior documentation of income may not be usable.  If this happens, you may not qualify for the loan amount you did prior to the recalculation.

If you have any questions regarding your current or future mortage, do not hestitate to call me at GSF Mortgage in Aurora.

gsf aurora

FHA Mortgage 101: Required Documents for Obtaining an FHA Loan

As more borrowers are considering FHA loans, they should know and learn what the necessary documents are to have to be approved.  It also needs to be noted that the market is constantly changing as are HUD’s guidelines and requirements.

The primary borrower must provide a copy of their social security card and current driver’s license. If they are not a citizen, they must provide a permanent residency card or proof that they are eligible to work in the U.S. by producing an employment authorization document. A co-borrower, whether occupying or non-occupying, must present the same required documentation and are subject to the same underwriting guidelines.

Income
For an FHA loan, borrowers must show 2 years of consistent work in the same field or with the same employer while maintaining a steady income. Documentation for income is as follows:

·         Two most recent years of W2s (with name and address of employer as lender may perform a verification of employment.

·         One month of pay stubs which document year to date (YTD) earnings.

·         Recent income tax returns (if requested).

·         Social security, pension and retirement income are documented with the most recent award statements.

·         Disability, workman’s compensation and child support must be supported with documentation that shows it will last for a minimum of 3 years.

·         Commission income requires 2 years recent tax returns and current pay stubs. Any un-reimbursed expenses will be subtracted from income before 2 year average is computed.

·         2nd job requires 2 years of W2s and current pay stub with year to day earnings.

·         Overtime and/or bonus (averaged for 2 years) is only used if it has continued for 2 years and must be documented with W2s.

·         Borrowers employed by a family business must provide pay stubs. The business must also verify whether the borrower has any ownership in the company through a written statement from the accountant that verifies ownership. In most cases, both the borrower and company tax returns will be required.

Credit
Although FHA is more lenient with credit issues, a borrower’s most recent 2 year credit history is very important as the overall performance of paying outstanding debts will be evaluated. Documentation for credit is as follows:

·         Credit report (provided by the lender) must have 2 lines of credit.

·         In lieu of active credit, borrower must document utility bills, rent payments, cell phone bills, etc. for a period of 12 months (all with no late payments)

·         Name, address and telephone number of landlord (lender will perform a verification of rent).

·         Court ordered judgments must be paid in full and documented.

·         Delinquencies on federal debts, such as student loans or tax liens, must be paid off or arrangements must be made and documented.

·         Child support must be documented with court ordered child support agreement showing how long payments will continue. Any payments remaining 10 months or longer must be included as debt.

·         Any debts that are to scheduled to begin payments within 12 months, such as student loans, will be counted as debt.

·         Chapter 7 Bankruptcy discharge documents (allowed after 2 years).

·         Chapter 13 Bankruptcy documents detailing the restructure of debts (allowed after 1 year).

Assets
Documentation of assets is necessary for an FHA loan in order to verify the borrower’s reserves as well as the source of deposit and down payment. Documentation for assets is as follows:

·         2 months of the most recent banks statements or 30 days most recent bank statements and verification of deposit (performed by the lender).

·         Copies of investment statements, 401ks, annuities, etc.

·         Large deposits in bank accounts must be documented for the source of funds.

·         Earnest money deposit canceled check and copy of the bank statement showing the balance before the deposit left the account and the ending balance after the deposit cleared.

·         Bank statements must show that there are sufficient funds to close the loan.

Gifts
FHA will allow a monetary gift that comes from a family member, close friend, borrower’s employer or labor union. This gift must be documented to show that no repayment is expected and that the donor will not place a lien on the property. Documentation needed for gifts is as follows:

·         Original signed gift letter (provided by the lender).

·         Document transfer of funds from the donor’s account to the borrower’s account with a copy of the canceled check or withdrawal document and deposit document.

·         Certified check is needed if gift is received at closing along with a copy of the withdrawal receipt from the donor’s bank account.

·         If the donor borrowed funds for the gift, documentation that these funds were not borrowed from a party in the transaction or the mortgage lender.

·         No cash on hand is allowed.

Although this may appear to be difficult, FHA loans are quite easy to obtain provided the borrower supplies us at GSF Mortgage with the necessary information. At any time during the processing and underwriting of the loan file, a borrower must be prepared to submit additional documentation to the lender.

The entire lending experience will be less stressful if borrowers prepare themselves with FHA Mortgage 101 and have the required documents for obtaining an FHA loan ready for the lender at the start of the application process. 

If you have any more questions regarding FHA loans, do not hesitate to contact GSF Mortgage in Aurora today!

gsf aurora

How Can You Cash in on Low Mortgage Rates?

With the mortgage rates being so low, more homeowners and homebuyers are looking to save money on new home loans. Current homeowners can save monthly by refinancing at a lower rate. Some borrowers are opting for a shorter mortgage term of 15 years because the monthly payments are more affordable. And not only are people saving money, but lower rates can shave thousands of dollars off the total loan amount over time.

Homebuyers can afford a larger loan because the mortgage rates are low and they, too, are opting for shorter loan terms.

But in spite of low rates, not everyone can take advantage of the opportunities these low mortgage rates provide. Borrowers need to meet today’s tightened credit guidelines to qualify.

To be approved for a low rate, borrowers need to have a high credit score. Typically – scores need to be 740 or higher. Additionally, borrowers need to have a reasonable debt-to-income ratio. The qualifying percentage is usually a max of 45 percent of overall debt to household gross income.

A good credit score can have a big impact on qualifying for the lowest mortgage rates, and therefore on the monthly budget. A recent example on MyFICO.com compared mortgage interest rates and monthly payments on a $300,000 mortgage at different credit scores.

Borrowers with the highest credit scores (760 to 850) could qualify for a mortgage rate of 4.378 percent and a monthly payment of $1,490.  Borrowers with a lower credit score (620 to 639) would qualify for a mortgage rate of 5.917 percent, resulting in a monthly payment nearly $300 per month higher, at $1,783.

Make sure your credit score is as high as possible before applying for a loan to take advantage of low mortgage rates today. At GSF Mortgage we have the tools to check in on your credit score to see if you can qualify for a low rate or to purchase that dream home you have your eye on. Contact us today to see how we can help you!

gsf aurora

Some Mortgage Tidbits from the Dodd-Frank Mortgage Reform Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act devotes more than 200 pages to a section called the Mortgage Reform and Anti-Predatory Lending Act.  This new financial reform legislation includes provisions to prevent lenders from offering mortgages borrowers can’t afford or understand.

The legislation says its purpose is “to assure that consumers are offered and receive residential mortgage loans on terms that reasonably reflect their ability to repay the loans and that are understandable and not unfair, deceptive or abusive.”

So how is this legislation going to affect your next mortgage?

The Act sets Minimum Standards for Lenders
The most basic new standard of this act prevents a creditor from offering a residential mortgage to a borrower without “a reasonable and good faith determination … that … the consumer has a reasonable ability to repay the loan.”

Ability to repay is a straightforward calculation for fixed-rate loans. For adjustable-rate mortgages, the lender must ignore the introductory (or “teaser”) mortgage rate when determining whether a borrower can afford the loan.

Instead, the lender has to calculate what the payments would be if the borrower got a fixed-rate loan at the ARM’s fully indexed rate.

The Act is to Give Favorable Treatment for “qualified mortgages”
The legislation terms qualified mortgages as plain vanilla, straight forward mortgages.  Lenders can sell qualified mortgages to investors with fewer strings attached. That gives lenders an incentive to give consumers mortgages without tricks and traps.

To be a “qualified mortgage,” the loan:

Doesn’t have a balloon payment.
Is fully amortizing — that is, it’s not interest-only or an option ARM.
Has taxes, insurance and assessments included in the monthly payments.
Meets debt-to-income standards.
Can’t be longer than 30 years.
Has reasonable points and fees.
The legislation says points and fees generally shouldn’t exceed 3 percent of the loan amount. There are exceptions for smaller mortgages.

The lender also has to verify and document the borrower’s income and savings, and there are limits on prepayment penalties on qualified mortgages. If a lender offers a loan with a prepayment penalty, the lender also has to offer a similar loan without a prepayment penalty.

The Act Restricts “Non-Qualified Mortgages”
The legislation imposes restrictions on loans that do not meet the criteria of a qualified loan.

Prepayment penalties are banned on nonqualified mortgages. This ban will make it easier for homeowners to refinance out of tricky mortgages. It probably also will make such mortgages less profitable to lenders.

Essentially, if a loan offers the possibility of negative amortization, the lender must tell the borrower that getting the loan is a bad idea. A first-time borrower won’t be able to get an option ARM without first getting housing counseling from a HUD-certified agency.

Setting Free the Truth
The Act also makes illegal some of the practices that were common during the mortgage boom.  The lender cannot “steer” a person with good credit onto a subprime mortgage when they can qualify for a low-rate prime loan.  This practice is now illegal. It is also illegal to lie about the appraised value of the property being mortgaged.

Most of the practices in truth have been implemented by the companies that are still in business. Those companies that dabbled in shady lending are out of the business now.

You can rest assured that GSF Mortgage abides by all the rules of the new legislation. Please feel free to contact or call me in regards to the Dodd-Frank Wall Street Reform and Consumer Protection Act and I can answer any questions you may have.

gsf aurora

Will Your Home Remodel Pay Off?

Remodeling certain areas of your home is a great way to increase your property value – or so you may have thought. Not all projects are created equal when it comes down to how much of an increase you are looking for.

Think Before You Build
The return on investment or ROI of the remodeling project that you are planning is dependant on the local market, the residential real estate market and its condition when the property is sold and the overall craftsmanship of the renovation. On average, there are certain projects that yield a higher ROI like a wood deck, an updated and upgraded kitchen and bathroom as well as window replacements no matter where the property is located or how the market is responding.

Consider Your Location
When considering any type of remodeling project, you need to make sure that any improvements made are appropriate for not only your home, but the neighborhood as well. Buyers are attracted to a particular area because of the services located nearby and because houses are in that buyer’s price range.

Additions or finishing off the basement or attic as well as fixing structural issues will add value for much longer than projects like updates to kitchens and bathrooms or technological improvements, such as new air conditioning systems, because these do become outdated over time.

Project Returns on Investment
Of course the ultimate reason behind remodeling is to enjoy living in an updated home. Secondary is the ROI that may be had on the particular remodel.

If you are interested is finding out if the project you are planning, below is a quick look at ROI for the most common projects.
This should give you a broad idea of which projects have the greatest probability of returning a bulk of the project cost at sale. Differentials in average recoveries are explained by the scope and quality of work performed, with smaller, less-useful projects being on the lower end of the range.

Project	Avg. Recovery %
Wood Deck Addition	80-85%
Siding Replacement	75-83%
Minor Kitchen Remodel	75-83%
Window Replacement	75-80%
Bathroom Remodel	70-78%
Major Kitchen Remodel	70-78%
Attic Bedroom Remodel	65-76%
Basement Remodel	65-75%
Two-Story Addition	65-74%
Garage Addition	60-70%

 

Improvements, such as office and bedroom remodeling had the largest recovery ranges: from 50-70%. The large spread is due to differences in the size of the renovations and the importance the room has on the overall design of the home, such as guest bedroom versus master suite.

Conclusion
When contemplating any remodeling project, the most important consideration is the value you will receive from the improved home over any cost recovery that may be forthcoming from the sale of the home. If you are concerned about the ROI, be sure to research local real estate guides to determine which projects are most likely to pay for themselves.

Remember that bigger is not always better, and spending more does not always ensure a greater amount of value creation. Home prices will always reflect the tastes of local property buyers and the amounts that buyers are willing to pay in a particular neighborhood or subdivision.

If you are looking to fund a remodeling project, the government offers a 203 loan for this purpose.  Call me today at GSF Mortgage in Aurora for more information about this loan product!

gsf aurora

Managing Your Mortgage the Right Way

The one sure bright spot for borrowers: ultralow mortgage rates. According to Freddie Mac’s weekly survey, the 30-year mortgage averaged a record low 4.69% for the week ending June 24, down from 4.75% the week before and 5.42% a year ago. CAll GSF Mortgage Aurora today for the most current rates!

Given the favorable rate environment, borrowers might be feeling pretty smart after snagging a great rate on a home loan. But there’s plenty of room for financial slipups while you’re paying off that mortgage. Here are some pitfalls to watch out for while managing your mortgage.

Not refinancing when you should

Homeowners can lower their costs by refinancing, but only if they can recover the refinancing costs in a short period of time relative to how long they expect to be in the house. If you foresee living in the house for another five years, for example, and can expect to recover the associated costs within two or three years, then refinancing is a savvy move.

Refinancing when you shouldn’t

Some borrowers assume that refinancing from a 30-year loan at 6% to a 30-year loan at 4.75% will save them in reduced interest payments. That’s not always the case if you’re essentially extending the term of the loan. If you have just 10 years left on a 30-year mortgage and you’re offered an opportunity to reduce the payments by taking out a new 30-year mortgage, it’s not a win.

Getting complacent about your adjustable rate

Homeowners who have adjustable-rate mortgages have seen their payments go down as rates have decreased. But these rock-bottom rates can’t last forever, and before you know it, you’ll get hit with a nasty rate increase when your ARM resets. One way to avoid that potential surprise is to refinance into a fixed-rate loan before the impending reset. Locking in a rate now is a particularly good idea for borrowers who had gotten an ARM with the intention of living in the home for, say, five or six years, but who, because of the bleak housing market, have decided to stay longer to wait out a rebound in values.

Not prepaying when you should

Think of prepayment as one type of investment. If you have a good amount of cash sitting in the bank earning a paltry 1% or 2%, you should seriously think about using that money to pay down your mortgage balance. Paying down your loan amount earns a return equal to the rate on your mortgage.

gsf aurora

3 tips for using your GSF Mortgage GFE

If you are purchasing or refinancing a home with GSF Mortgage, you should be getting a document 3 days prior to the actual loan application.  This document is called a Good Faith Estimate (or a GFE) and was mandatory beginning in 2010. 
 
In prior years, the GFE was a non-binding and often inaccurate account of the mortgage costs for the borrower.  The feds required the GFE to provide an accurate and bottom-line mortgage cost.  The first 4 months of the year – lenders like GSF Mortgage were given slack on the GFE.  Now that is not the case. As of May 1, the government is expecting all the mortgage fees to be estimated accurately.
 
Make sure you do get the GFE within 3 days of receiving a loan application. Some lenders are scooting around the law by providing worksheets.  The fee estimates on the worksheets do not need to be accurate whereas a GFE does.  An inaccurate GFE could cost a lender thousands of dollars.  Obviously lenders are nervous about underestimating the fees and overestimating could shoo away lenders.

The requirement of an accurate GFE was to encourage borrowers to shop around.  It was a means to an end for regulators. 

Do realize that the GFE does not include all the numbers you may need.  Cash to close is the biggest line of information that borrowers need when closing the loan.  Some lenders will provide this information on a supplemental worksheet.  So in closing costs – a worksheet is something that you should want and ask for.

If you are still unsure of the fees when your lender hands or mails you the GFE, please call GSF Mortgage in Aurora today!

gsf aurora

Selling Your Home – Make Money in 2010 with Your Home

If you hope to sell your home or rebuild lost equity, there’s new hope. One plus is that Congress has recently extended the first-time homebuyer credit, and even expanded it to include those with higher incomes and current homeowners.

Here are some steps to make money on your home in 2010:

Sellers: Postpone listing your home, if possible. Sellers next year will be unloading property at what’s likely to be the very bottom. Ouch. Hold out for a few more years, so you’ll compete against fewer foreclosures, increasing the chances your home will fetch a higher price.

If delaying your sale isn’t an option, act fast before prices drop further. To expedite a sale, don’t try to compete on price with foreclosures and short sales. Instead play up your home’s strengths. Foreclosures typically need a lot of work, and short sales can take months. Make sure you make the necessary repairs, throw in a paint job and new carpeting since buyers may be short on cash after the down payment, and offer a fast and flexible closing date. That will attract people willing to pay more for a home that’s in move-in condition and a deal they can close quickly.

« Previous Page