Frisco Texas Mortgage, Real Estate, Events, and more

FHA MIP Changes Effective April 18 2011 

Its only a week away for yet another change which will effect homebuyers in Frisco Texas.

A few weeks back, it was announced within HUD Mortgagee Letter 2011-10 that there would be an increase in the Annual Mortgage Insurance Premium for all new FHA Case Numbers assigned on or after April 18, 2011.

If you recall, there were changes to the Mortgage Insurance Premium back in October 2010 which changed the UFMIP (UpFront Mortgage Insurance Premium) from 2.25% to 1%. That was great news, except that the Annual Mortgage Insurance Premium increased from .55% up to .90% (depending on the Loan To Value ratio).

So, how will this new change effect Homebuyers as of April 18th? Well, the good news is that the Upfront Mortgage Insurance Premium will not incease. It will remain at 1% of the Loan Balance.

The change is specific to the Annual Mortgage Insurance Premium which is increasing 25 BPS (or .25%). Below is a snap shot from the Mortgagee Letter 2011-10:

For a homebuyer, this means that your payment is going to increase on a monthly basis. If your principal balance is $180,000 with a 96.5% Loan-to-Value, your MIP payment would increase from $135.00 a month to $172.50 ($37.50 extra per month).

If you have would prefer not to have your payment increased, you only have two options. The first option is to have an offer accepted and your mortgage loan originator to create a FHA Case Number prior to April 18th. This is only suggested IF you already know the house of your dreams. Do not feel rushed to make a decision.

The second option is to look for a home that is slightly less costly. For example, instead of a home for $180,000, you could choose a home for $172,800.

This scenario may not fit your specific Texas home loan. Feel free to contact me to discuss your financial situation further.

Sometimes finding a home can be a long process, but you did it. You have finally found the home of your dreams. Now there is one thing that stands between you and your new home. It’s the Down Payment.

Some home buyers are looking to use their funds from their employer’s 401K program. There are a few things to consider when using these funds. First and foremost, these funds can not always be accessed unless you have retired, leave the company, or become disabled. Some companies will allow a ‘Hardship Withdrawal’, which is when there is an immediate and heavy financial need, including the purchase of the employee’s principal residence.

Sounds great, right? Well, the drawback to using these funds as a ‘hardship withdrawal’ is that you will pay taxes and penalties on the amount withdrawn from your plan, which often must be paid in the same year of the withdrawal. And while ‘Hardship Withdrawals’ are allowed by law, your employer is not required to provide them within your 401K plan. Before assuming you are able to withdraw these funds, check with your employer’s HR Department to confirm that your 401K program allows for ‘Hardship Withdrawals’.

Another approach to using your 401K program is to borrow against it. You can often borrower as much as 50 percent of your account balance. You will be required to pay interest on the loan, but the interest payment goes right back into your 401K account. The extra bonus about borrowing against your account is that the money is not taxable as long as it is paid back. Typically the payback period can be anywhere from five to thirty years.

A risk to point out when borrowing these funds is that you will be required to pay back the loan IN FULL, should you lose your job or leave your employer. This payback requirement is short, sometimes in as little as 60 days. If you are unable to pay it back within that time, the “loan” now becomes a “Withdrawal” and is subject to the same penalties and taxes as mentioned above. And although your 401K account can be rolled over from one employer to another employer without penalties, the loans from the 401K can not.

When the lender calculates your Debt-To-Income ratio, they 'may' include the payments you are making on your 401K account along with your car payment, credit card payments, student loans, etc. 

Something to note - FHA and FNMA do not require the lender to include the 401K loan payments towards your DTI ratio. However, there are a few lenders that will consider this payment against your DTI anyway. Before you borrower money from your 401K, be sure to check with your lender to ensure this will not be an issue to fund your loan.

You heard the radio adds, the television commercials, and your neightbor talk about the mortgage rates being at an all time low. Then you called your local mortgage company only to find out the rate was not much better than your current rate. Now what? Don't worry, you still have options and it wont take a refinance to do it.

Did you know that most mortgage companies will allow you to make additional principal payments on your loan balance? Perhaps you receive a larger than expected tax return, an inheritance, a non-taxable cash gift, or that work bonus you were not expecting. You could apply this money toward your loan principal which result in a signicant savings and shorter loan life.

For this example, I am using a loan balance of $150,000, a rate of 5.0%, and a 30 year fixed rate mortgage. Please note that these examples are useful on Conventional, FHA, and VA loan programs. The only time this will not apply is if you currently have an Adjustable Rate Mortgage.

Based on the above numbers, your mortgage payment (principal and interest only) would be $805.23 per month. If you made each payment on time, with no additional principal, then at the end of 30 years, you will have paid $289,885.27 in payments ($139,882.27 in interest).

Does your budget allow for you to make one additional mortgage payment per year ($805.23 per year) which would be applied directly toward your principal? If so, you would pay off your mortgage in 305 payments (25 1/2 years). This is a savings of $$24,524.59 in interest. Think you can save $805.23 a year?  No? How about if you broke up the $805.23 in 12 easy installments?

Look over your budget and see if you could afford $67.11 per month to add to your mortgage payment. By making this additional principal payment each month, you have increased your overall savings to $25,453.13. Your mortgage would be paid off in as little as 303 payments (25 years, 3 months).

All of this without spending ONE DIME on refinance fees. If you already have a great rate, but would like to pay off your mortgage sooner, this is the best way without refinancing to a shorter term. For best results, apply principal reductions more often rather than making one time payments each year. If making a principal reduction once a year, or once every 5 years is your only options, still do it.  The reduction should still save you thousands of dollars in the long run.

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If you live in the state of Texas and are looking for a reliable Mortgage Professional to assist you with the loan product that best fits your financial situation, give me a call. We do not charge upfront fees to run scenarios or charge unnecessary application fees.

Do you want to know all of your options? Call me today and let's discuss them further.

Always available for your Frisco Texas Mortgage needs!

John Cannata  Reliant Mortgage  p# 214.545.5604  

www.JohnCannata.com

Frisco Texas Mortgage Consultant

Mortgage rates are low, but this isn't the first time. Rates have been low in the past. As a matter of fact, between 2003 to 2005, interest rates were extremely low. It was the perfect time to take out an Adjustable Rate Mortgage (ARM)... or was it?

This adjustable rate mortgage made it possible for many buyers to get into a home of their own, and it allowed those homeowners to save thousands of dollars on their first few years of a mortgage. After all, it was probably higher than your rent payment. This was a nice stepping stone from rent, to homeownership without breaking the bank. But all good things come to an end. Many homeowners are now seeing the fixed-rate introductory period of their ARM expiring.

ARMs Can Be Complicated

There are several options, with varying dates of expiration for the initial low fixed rate interest. But they all have one feature in common... the fixed rate of the mortgage expires and homeowners are faced with a new mortgage payment that adjusted to above current interest rates.  Even if you can afford the increased mortgage payment, with an ARM loan, you aren't guaranteed that your payment won't increase again with the next jump in interest rates.  Some may not adjust again for a year, others every 6 months, and some are even more often. Homeowners find themselves in a precarious position if rates increase, which could mean financial disaster.

So what are the Solutions for Expiring ARMs? With a simple refinance, you can get a LOW fixed rate loan and a mortgage payment that you know will stay the same over the life of your loan. Although you have had an Adjustable Rate Mortgage for a few years, it has probably helped increase your credit scores, thus allowing you to qualify for a great mortgage rate today. In addition, since you have been paying on your mortgage each month, you have been building up your equity.  All great qualities when applying for a new fixed rate mortgage today.

Having an Adjustable Rate Mortgage doesn't mean that you have to stay with a mortgage payment that is sky-rocketing. There are many solutions that will make your mortgage more affordable than ever.

Talk with a Mortgage Professional TODAY about your options. Getting a home loan, at a low rate, is still very attainable.  Be sure to check out another post about Debunking Mortgage Myths. The post is written about 3 myths that are around today, although very untrue, at least in the state of Texas. 

Always available for your Frisco Texas Mortgage needs!

John Cannata  Reliant Mortgage  p# 214.545.5604  

www.JohnCannata.com

Frisco Texas Mortgage Consultant

If you've been living on another planet, you might not have heard all the media reports about the mortgage market conditions. It's been front page news for months - lots of doom and gloom that make home owners and prospective buyers doubt the wisdom of home ownership.

Guess what? The news about mortgages isn't all bad. In fact, it's quite the reverse. But if you only listen to the media stories, you may be missing out on an opportunity of a lifetime. Let's take a look at the myths that have come up over the past few months:

Myth # 1 - Mortgages rates are climbing, forcing home buyers out of the market. Actually, the opposite is true. Mortgage rates remain at historic lows. For home owners that are looking for a 30 year fixed, or 15 year fixed, interest rates are still at an all-time low. Sure, we occasionally will see ups and down with rates, but for the most part rates have been pretty steady over the past few weeks. If you are unsure, call your local loan officer to provide you with a hassle free quote. It does not have to cost you money for your loan consultant to provide you with some examples. (don't forget to get it in writing).

Myth # 2 - You'll never qualify for a loan in today's market place. In the recent past, some lenders made lending programs available to buyers that didn't have the credit history or score, income, or property value for a home. But that didn't reflect the majority of buyers. Lenders are always looking for home owners - those people that are the majority - buyers with good credit scores, sufficient income, equity in the property or a down payment, and with assets to back up the loan. The magical number for your FICO score to qualify for an FHA loan is 620.

Myth # 3 - The real estate market is in a free fall. It's true that the average home price has decreased across the country, but that doesn't mean the market is going to bottom out. When the national media talks about average home prices falling, they are averaging in home values in extremely depressed areas. Many parts of the country have seen decreases, but it hasn't been double-digit decreases. Some parts of the country had overly inflated home values, and this is simply a market correction. That's good news for buyers. You can get a great home at a far better price than a year ago. And, when the market rebounds, you've banked equity in your home. Think about it... what did your parents buy their first home for several years ago? How much would that home sell for today?

Despite the gloom and doom broadcast on the news, this is a great time to buy a home or refinance. Rates are low, there are lots of great homes to select from, and prices are set for a great investment.

Call me for more information about some of the many great mortgage programs that may be available to you.

Always available for your Frisco Texas Mortgage needs!

John Cannata  Reliant Mortgage  p# 214.545.5604  

www.JohnCannata.com

Frisco Texas Mortgage Consultant

That's right, you can save THOUSANDS of dollars.  I know, sounds impossible and you are waiting for the punchline or for me to tell you to invest in something that will have huge gains.  Nope!  That's not my job, but I am sure there are plenty of posts and/or infomercials that will take care of that for me.

This post was sparked from phone calls I received from new and previous customers.  Yes it is true that rates are still at an all time low.  But does that mean you need to refinance?  Well, that is not always the case.  What??  A mortgage consultant telling you it may not make sense for you to refinance?  Yes and No.  When I am talking with someone about refinancing, I look at many different aspects.  Obviously we are going to talk about credit so we can assess your current situation.  This post is not about Credit though.  If you need to review your credit though, take a look at my previous post which talks about getting a free credit report.

When I consider someone for a refinance, I look at their current loan balance, the term they want compared to how much time they have left, and their credit score.  Right now, more than ever, your credit score is a major driver of what interest rate you will receive.  So, let's look at a scenario where you can save yourself some thousands of dollars without refinancing.

It may not be possible for you to increase your monthly mortgage payment due to current cash-flow, but if you can that will obviously help.  Most mortgages permit you to make additional payments to your principal at anytime.  Perhaps you receive a larger than expected tax return, or an inheritance, or a non-taxable cash gift.  You could apply this money towards your loan's principal, resulting in significant savings and a shorter loan life.

Let's use the following example:

• Loan Balance $100,000
• 30 year fixed rate
• Current rate 6.5%

In this scenario, the borrower would pay a total of $227,542.98.  This is the total of all payments made over the next 30 years.  That equals $127,542.98 in interest payments.  I know that is a crazy number (for reference, this number can be found on your Truth In Lending Statement).

If the same borrower makes a one-time $5,000 payment the first day of year 6, he/she will pay a total of $204,710.75 and pay off the loan in 27 years (324 months).  This shaves off 36 months of payments with a savings of $22,832.23 in interest.  Paying a principal reduction in year 6 means nothing, except it worked into my scenario nicely.  You may make a principal reduction in year 2 or year 12.  The point is to make the principal reduction and you are guaranteed to save on interest.

So... what are you going to do with YOUR tax return this year?      

If your principal balance is over $150,000 and you are paying over 6% on your mortgage, you should call your local mortgage consultant.  It costs nothing to find out what options are available to you (in most cases) and could save you a ton of money.

You are also welcome to visit my website www.TXMortgageConsultant.com and use the mortgage and budget calculators to see your own savings scenario.  No sign-up required and no one will follow-up with a phone call.  It is set up for your use only.  If you live in Frisco Texas or the surrounding areas, give me a call and I'll be happy to do some comparisons for you.

It's no secret that your credit score plays a major role in being approved or denied for a loan.  Over the past 2 weeks, I have spoken with about 6 customers that are looking to purchase or refinance due to the great mortgage rates.  In most of the cases, the customer has no clue what their credit scores are.  I tend to ask a LOT of questions to get an idea of someone's score without pulling the credit.  If you have no clue and have not purchased anything in quite some time, it makes it harder for someone like me to guestimate your scores and provide an accurate Good Faith Estimate.

Don't get me wrong, I understand when someone does not know the exact score.  I am referring to anyone who has never looked or taken an interest until the day they decide to refinance or purchase a home.  Not just a home, but any major purchase where financing may be needed.  Back in October, I wrote a few posts about Credit Scores, what to look for, and how to improve them. Within those posts, I talked about what to look for and how to address issues, but I never really talked about who you could contact for a free credit report.  Below should help with your research.

Ultimately, if you are thinking about making a large purchase, you may need to be eligible for a loan.  The Fair Credit Reporting Act (FCRA) was amended to require each credit reporting agency (Equifax, Experian, and TransUnion) to provide a credit report to you each year, at your request, completely free of charge.

How do you get the free credit report?  The three credit reporting agencies have set up one central website, toll-free telephone number, and mailing address through which you can order your free annual report.

One the web:  www.annualcreditreport.com

Telephone:  877-322-8228

Mail in the Annual Credit Report Request Form to:

Annual Credit Report Request Service

P.O. Box 105281

Atlanta, GA  30348-5281

Once you receive your report, call a local Credit Counselor to review it with you and offer assistance.  You may also be able to have a local Loan Officer review the report with you and offer suggestions.  Please note that Loan Officers review credit reports in detail and can offer suggestions, but they are not the experts.  For serious delinquencies, contact a Credit Counselor because they are familiar with credit laws & guidelines.  Somethings can be removed where as others need specific attention.

I hope that you have found this information useful.  Feel free to contact me with any questions or concerns and I'll be happy to assist and/or direct you to a Professional Credit Counselor.

It was announced earlier this week that Citigroup has initiated a plan to place foreclosures on hold.  They are implementing a similar plan as Wells Fargo, Morgan Stanley Chase, and Wachovia (soon to be Wells Fargo).  This moratorium will affect properties that are in foreclosure and properties that have been moving toward foreclosure.  The focus will be primarily in the areas where foreclosure and unemployment rates are higher, which includes states like California, Arizona, Michigan, Indiana, Ohio, and Florida.

So, who qualifies for this moratorium?  Initially it will be the loans that are owned by Citigroup, but they are working on expanding the plan to include loans where they are the servicer for other investors.  The borrowers will need to also meet certain criteria: want to stay in the home, show good faith by working with the lender, and their income must support paying the mortgage.  Borrowers that do not meet this minimum requirement will continue through the foreclosure process because any adjustments will not help their situation.

The plan is to restructure the loans to benefit the homeowner and save the property from going into foreclosure.  The fact is, lenders are not in the business to own property and do not want to take on the additional expenses associated with owning and selling properties.  With this in mind, the lender is willing to reduce the loan balance and extend the amortization period which will ultimately lower the mortgage payment.  To top it off, they are reviewing the borrowers interest rate and adjusting it accordingly.  Ultimately, they are attempting to help the homeowner in any way possible.  This is a large effort which will require almost 600 bank employees to ensure its success and will not be completely overnight.

Citigroup is one of many companies that suffered greatly from the subprime crisis.  They are finally at a point where they realize that working with the borrowers will prevent foreclosures.  It may not be the quickest way, but is certainly more effective and beneficial to everyone involved.

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John Cannata    p# 214.545.5604  

www.TxMortgageConsultant.com

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Credit... Your Greatest Asset

In my first post, I discussed what to look for on your credit report, such as checking for accurate data.  Starting with the basic information like you name, employment, and address.  Then moving on to your payment history to ensure the creditors are publishing the payments and there aren’t any lines of credit open that you are unaware of.

In my second post, I discussed how to Build or Rebuild Your Credit.  These techniques are basic and can help you whether you filed for Bankruptcy in the past or maybe have never had credit at all.

   So... Why is Credit Your Greatest Asset?   

The simple truth is that good credit saves money.  In some people’s minds the system works backwards.  Those that can least afford it pay the highest interest rates and other fees for using someone else’s money.  People that save, spend wisely, and use credit sensibly  are rewarded with lower rates and greater opportunities to borrow money and use credit cards.

As I mentioned in the previous posts, when it comes to buying your home, the difference you pay for your loan may amount to thousands of dollars.  Even starter homes in most markets cost over a hundred thousand dollars, and in many areas they’re far more than that.  Just one percentage point in interest multiplied over the life of the mortgage mounts up quickly.  Additionally, if you are considered a high risk, you are sure to pay more in other fees and be required to take out mortgage insurance.

Too many people concentrate on how much they pay each month for their house, car, or other major purchases.  What they should look at instead is how much the loan is costing them over its lifetime.  Wouldn’t you rather pay $25,000 for a mortgage than $75,000?  Make it your new habit, if you don’t already do it, to calculate how much each credit card or installment loan is really costing you.  Once you start, you’ll be excited to learn how much you can save by using smart financial practices.

Make it your goal to ensure that your credit truly is Your Greatest Asset.  There isn’t a better win-win situation in which to find yourself.

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Are you are looking to buy or sell a home in Frisco or another city in North Texas?  If so, then I can help.  I am a licensed Mortgage Consultant located in North Texas with over 15 years experience in the industry.  I can help you get pre-approved for your new home loan in Texas and even suggest some very knowledgeable and professional Real Estate Agents in your area of choice.  If you are available to talk, I am available to listen.  Give me a call any time or visit my website for more details.

John Cannata    p# 214.545.5604  

www.TxMortgageConsultant.com