Living In Tucson Blog

 Making Homes Affordable Program

The Obama Administration unveiled the final details of its “Making Home Affordable Program,” which is designed to help up to 9 million American families refinance or modify their loans to a payment that is affordable now and into the future.

One of the initiatives in this program is aimed at helping responsible homeowners “refinance” their loans to take advantage of historically low interest rates. Here are some common Questions and Answers about the Refinancing Initiative in the program.

REFINANCING INITIATIVE

Who is eligible?

You may be eligible if:

• You own and currently occupy a one- to four-unit home.
• Your mortgage is owned or controlled by Fannie Mae or Freddie Mac.
• You are current on your mortgage payments.
• The amount you owe on your first mortgage is about the same or slightly less than the current value of your house.
• And, you have a stable income sufficient to support the new mortgage payments.

How do I know if my loan is owned or controlled by Fannie Mae or Freddie Mac?

Simply call or email me. I’ll help you determine if your mortgage is backed by Fannie Mae or Freddie Mac.

I owe more than my property is worth. Do I still qualify to refinance under the Making Home Affordable Program?

Eligible loans will include those where the first mortgage will not exceed 105% of the current market value of the property. For example, if your property is worth $200,000 but you owe $210,000 or less, you may qualify. The current value of your property will be determined after you apply to refinance.

If I am delinquent on my mortgage, do I still qualify for the Refinance Initiative?

No. But the good news is, you may qualify for the Modification Initiative. Contact me to discuss your situation and review your options.

I have both a first and a second mortgage. Do I still qualify to refinance under Making Home Affordable?

As long as the amount due on the first mortgage is less than 105% of the value of the property, borrowers with more than one mortgage may be eligible for the Refinance Initiative.

Will refinancing lower my payments?

That depends. If your interest rate is much higher than the current market rate, you would likely see an immediate reduction in your payment amount.

However, if you are paying interest only on your mortgage, you may not see your payment go down. BUT… you will be able to avoid future mortgage payment increases and may save a great deal over the life of the loan.

What are the terms of the refinance and what will the interest rate be?

All loans refinanced under the plan will have a 30- or 15- year term with a fixed interest rate.

The interest rate will be based on market rates at the time of the refinance. Currently, interest rates are at historical lows, which makes this a good time to examine your refinancing options.

Will refinancing reduce the amount that I owe on my loan?

No. Refinancing will not reduce the principal amount you owe. However, refinancing should save you money by reducing the amount of interest that you repay over the life of the loan.

Can I get cash out to pay other debts?

No. Only transaction costs, such as the cost of an appraisal or title report may be included in the refinanced amount.

How do I apply for the Refinance Initiative?

Call or email me today to discuss your specific situation and to examine your options. If this plan is right for you, we can begin working on your refinance immediately.

As part of the discussion, we may need to look at the following information:

• Recent pay stubs to help determine your gross (before tax) household income.
• Your most recent income tax return.
• Information about any second mortgage on your house.
• Account balances and minimum monthly payments due on all of your credit cards.
• Account balances and monthly payments on all other debts, such as student loans and car loans.

As always, if you have any questions or would like to discuss how this may specifically impact you, I’d be happy to sit down with you. Just call 520.977.3300 or email me at david@davidwolsky.com to set up an appointment.

With mortgage rates at record lows and credit so tight, it is imperative to have high credit scores to assure the best possible terms for loans. Up until recently, having a 700 FICO score assured you of the lowest rates when borrowing. That paradigm has now changed. 740 is the new 700. The median credit score is 723. FICO scores range from 3o0 to 850. Fannie Mae and Freddie Mac now charge a “delivery fee” for loans with credit scores below 740 that translates to a higher rate or higher points for those borrowers depending on the loan-to-value ratio (LTV). Your rate will be better when you refinance with more equity in your home and if you are purchasing, your rate is better if the your down payment is bigger, especially if your FICO scores are 740 or higher. Conversely, your rate goes up if your scores are low and your LTV is high.

If you need to raise your scores, be patient because it takes time, effort and money! There is no quick fix. Let’s examine the anatomy of a credit score. There are five key criteria that goes into scoring borrowers.

1. 35% — punctuality of payment history (only includes payments later than 30 days past due) and derogatory credit such as bankruptcies, foreclosures, collection accounts and judgements 
2. 30% — the amount of debt, expressed as the ratio of current revolving debt (credit card balances, etc.) to total available revolving credit (credit limits)
3. 15% — length of credit history
4. 10% — types of credit used such as installment, revolving and consumer financing 
5. 10% — recent inquiries for credit and/or amount of credit obtained recently

You are entitled to obtain a copy of your credit report every year. The only place to go is the website www.annualcreditreport.com. This website was set up by Trans Union, Equifax and Experian. The report is free. If you want to get your FICO score, there is a modest fee.  

Here are some tips to improve your scores. Make sure you pay your bills on time! I know it sounds simple, but a late payment on a credit card can decrease your credit score significantly. If your credit report has a late payment, time will heal the wound. Every month from the most recent late payment will continue to improve the score as long as there aren’t any subsequent late payments. If you feel that you have a legitimate dispute with a creditor, you can write a letter to the three credit bureaus to challenge the information. Yes, ALL THREE BUREAUS. A good resource for further information is the Federal Trade Commission. Click here to go to their website. It is full of useful information. 

You can also hire a credit repair company to outsource the task. An initial consultation usually runs about $250 and then expect a monthly fee of $75. It takes about six to twelve months, but your scores will improve by 50 to 100 points. You will recoup the fees through lower interest rates on your car loans, home loans and credit cards. Please make sure that you work with a reputable company. Feel free to contact me for a referral!

Be aware that paying off a collection account will not remove it from your credit report. It will stay on your report for seven years once it is paid. If you are having trouble making ends meet, contact your creditors and set up payment plans. This won’t improve your score immediately, but if you can begin to manage your credit and pay on time, your score will eventually improve.

As for the amount of debt compared to the available limit, try your best to keep the balance below 50% of the limit.  Even if you pay down your balance, there may still be complications because banks have been lowering credit card limits lately because credit is so tight. If you pay off a balance, I recommend that you keep the acount open with a zero balance. If you keep switching to new credit cards, you may compromise your score because of the length of time that you have credit accounts. Of course, if you are new to credit, there is not much you can do about the length of time for credit. Time will take care of it. Don’t open a number of new credit cards that you don’t need, just to increase your available credit. This approach could backfire and actually lower score.

Home loans or credit cards are higher up the credit food chain than revolving debt from finance companies, furniture stores or consumer electronics stores. Beware of come ons like 90 days — same as cash! Too many consumer finance credit accounts will hurt your score.

Lastly, don’t apply for lots of credit accounts at the same time. Space out your credit requests over several months. There is a must readcalled Do You Make These 38 Mistakes with Your Credit? How increasing your credit scores will improve your lifestyle.

To see how much your scores will increase click here.

 
Another big move today was made by the Fed….my they have been busy lately! The finally have a plan in place to clear out the toxic assets from the financial sector. It’s a public-private plan that would have private investors and the Treasury put in equal amounts of money that would then be backed by a loan guarantee from the Federal Deposit Insurance Corp. to buy loans and mortgage-backed securities from the banks. Both the taxpayers and the private investors would gain from any profits if the assets eventually gain value. The taxpayer would take most of the downside risk. There has already been interest into the plan by private sector companies such as Pimco. Stocks went through the roof today with the Dow gaining almost 500!

Personally, I share the same bailout fatigue that most Americans feel, but I wonder if the price of doing nothing is far greater. What is it that we do not know?

There has been a lot of talk in the media about mortgages since the Fed announced that they are continuing their scheme of buying mortgage bonds and long term treasury debt. The Fed is determined to keep the rates down this year to help stabilize the housing market to make homes affordable whether borrowers are refinancing or purchasing. With all of the government intervention, why aren’t rates lower? Why is everyone talking about loan rates at 4.5% when the Freddie Mac weekly survey has rates at 4.98%? We saw some some great rate sheets after the FOMC meeting concluded the other day. By the next morning, rates bumped up a bit. Lenders are trying to control the flow of business by raising and lowering rates. Most lenders have not increased their staffs even with the increase in business. When they get inundated with rate lock requests, they bump up rates to slow the flow as if it was a faucet. Because lenders only have so much capacity, raising rates a bit slows down the flow of volume.

Rates are not one-sized fits-all. Amongst the factors influencing rates include credit scores, loan-to-value ratios, taking additional cash-out when refinancing and even the size of the loan. Are you willing to pay points (origination fees and discount points)? If so, you can expect a better rate! If you’re calling a loan officer and asking ”what’s your rate?”, expect your loan officer to quiz you on your qualifications. Don’t expect a quick response.  A professional will ask the right questions and even pull a credit report to get an actual read on your qualifications.

I have been originating mortgages in Arizona since 1994. Sunstreet Mortgage, LLC offers conventional, FHA and VA loans. Call me at (520) 977-3300 for all of your mortgage related questions.