Home >> California Current >> Archive for the 'Refinance' CategoryThree Ways To Protect Your Credit When Mortgage Shopping

Archive for the 'Refinance' Category

Three Ways To Protect Your Credit When Mortgage Shopping

Published

Heindrick

on December 25, 2008

in Refinance

. 0 Comments

As mortgage rates continue to fall in California, mortgage application activity has soared through the roof. According to the Mortgage Bankers Association, the number of applications shot up 48 percent. Refinance applications saw an increase of 62.6 percent, while purchase applications rose 17.7%. But, as 30 year fixed mortgages near the 5 percent marker, consumers ought to be careful when they go mortgage hunting.

Here are three ways you can protect your credit [FICO score] while trying to take advantage of these historically low mortgage rates.

Limit the Amount of Mortgage Credit Inquiries

Although it’s smart to shop around for your mortgage, it’s best not to pass around your social security number as freely. Aside from identity theft issues, providing your social security number to too many people could result in having your credit history pulled more than you like. Unfortunately, the credit bureaus take notice of these multiple inquiries and often ding consumer’s credit scores by a few points.

Shop Around in a Timely Fashion

Different mortgage lenders and different mortgage brokers operate in their own ways, but one common practice is that they’ll ask to pull your credit history. Aside from your social security number, you’ll want to keep your eye on the calendar and keep track of your mortgage timeline. Credit bureaus are likely to excuse multiple inquiries if they are within a reasonable time period (2 to 4 weeks). As an example, having four credit inquires in one month is preferable to having one credit inquiry each month for four months.

Get a Copy of Your Credit Report

To avoid the hassles of sharing your social security number and multiple inquires; get a hold of your credit report as soon as you can. Most lenders and brokers are interested in seeing your recent credit score on paper. With your own credit report on hand, you can provide them this information without having to deal with another credit inquiry. Keep in mind that when you finally choose your mortgage lender, they’ll likely have to pull their own credit report for authentication purposes.

While mortgage rates are certainly attractive, keep these tips in mind because keeping your credit in tact is more important than ever.

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Three Things to Consider Before Refinancing

Published

Heindrick

on December 22, 2008

in Refinance

. 1 Comment

As mortgage rates reach all time lows here in California, many homeowners are considering a refinance of their existing home loans. While dropping mortgage rates may be music to the ears, there are a few things to consider before refinancing.

1. How Long To Recoup The Costs of Refinancing
Closing costs and fees are a part of any refinance transaction, so it’s important you factor these costs into your savings strategy. In most cases, your mortgage broker or lender should detail your estimated monthly savings as well as the estimated closing costs and fees. A simple calculation will let you know how many months, or years, it will take to recoup the costs of refinancing. Think about your short term and long term plans for your home, and determine if the costs of refinancing makes sense. Ideally, your refinance should pay for itself within a few years, and even less if you are planning to sell or move.

2. Do You Have Enough Time To Refinance?
Refinancing could just be the best Christmas present you give yourself this year, but keep in mind the refinancing process could put a damper on your holiday season. In general, for single family owner occupied homes, the refinancing process lasts anywhere from three to six weeks. If you foresee any extenuating circumstances such as poor credit, insufficient documented income, or sliding home equity, don’t be surprised if the process takes even longer. The credit market in California is still quite fragile, and it’s not uncommon for many homeowners these days to face trouble when refinancing. But, if these mortgage rates are just too good for you to pass up, just be sure to set enough time during this holiday season.

3. Evaluate Your Home’s Equity And Then Consider Your Options
In California, the most troubling obstacle for homeowners has been the widespread freefall of home values. During the refinance process, lenders require an appraisal of your home and then evaluate your home’s loan to value ratio. Before considering all your mortgage options, make sure your home has enough value to qualify for a refinance. Although select lenders may make special exceptions, most will like to see at least twenty percent equity in your home. If refinancing to a cheaper mortgage is your top priority, pay special attention as a lower risked home will qualify for better mortgage rates.

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California Mortgage Rate Weekly News Roundup

Published

Heindrick

on December 19, 2008

in Refinance

. 0 Comments

Mortgage Interest Rates Drop To Record Levels
Interest rates on 30 year fixed home loans finally sunk below the five percent barrier; with some lenders offering rates as competitive near 4.5 percent. Even at such levels, analysts and brokers still expect slight improvements in the near future. As the Fed aims to restore confidence in mortgage backed securities, homeowners around the nation have been seeing record declines as 30 year fixed mortgages were close to 6 percent only a few months ago.

Rates Draw In Surge of Homeowners Looking to Refinance
As homeowners continue to hear of the recent decline in mortgage rates, a sector that has taken the backseat during this housing crisis has begun to emerge. While purchase activity and short sales have been prevalent, homeowners looking to refinance have not had much incentive given the stricter loan requirements. But as rates improve considerably, homeowners around the nation and in California have been lighting up the phones of mortgage brokers and lenders. As rates continue to improve, many homeowners have been seeing this as a great opportunity for monthly savings.

Find More Tips About Refinancing Your Mortgage in This Market

Troubled Homeowners in California Still Struggling
Recent findings have shown that troubled homeowners in California who have managed to avoid defaulting still remain at risk. Although laws were passed in California to properly notify those in default, and programs were setup to modify troubled home loans, the findings show that many homeowners only stall the default process. While they manage to avoid foreclosure for a short period, many of these homeowners end up in the same position down the road.

Now, for home values and market confidence, this is certainly disappointing news. But, from a logical standpoint, many of the troubled homeowners have been the folks who took advantage of loose lending and toxic mortgages. If we can agree that lending in the past few years was too lose, it’s almost expected to see a portion of these “homeowners” getting filtered out.

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Latest California Mortgage Statistics: Fraud and Delinquencies Increase as Home Prices Decrease

Published

Heindrick

on December 5, 2008

in Refinance

. 0 Comments

Mortgage Fraud Increases as Lending Standards Tighten
According to the latest report from the Mortgage Asset Research Institute, California trailed right behind Florida when it came to mortgage fraud. As mortgage lenders tighten up qualifications, many individuals have resorted to fraudulent acts and other methods to get by. Compared to last year, the number of mortgage fraud related incidents has increased by about 42 percent according to the report. The most common cases of fraud involved the misrepresentation of the borrower’s name, income, employment history, and assets.

A Few Tips to Help You Avoid Mortgage Fraud

- Be wary of lenders or mortgage brokers who promise results which sound too good to be true. These individuals could either be over promising you results to simply draw in your business, or may resort to fraudulent methods to deliver on these promises.
- Ask your mortgage lender what the qualifications are needed for the specific loan scenario; compare these requirements to your loan application and see if they match up.
- Don’t get talked into committing mortgage fraud. Don’t let your mortgage broker convince you it’s OK-more importantly, don’t let yourself convince you it’s OK.

Late Payments and Delinquencies Rise Throughout the Nation
According to the Transunion credit reporting agency, the amount of individuals late on their mortgage by at least 60 days shot up considerably in this third quarter compared to last year. Meanwhile, the statistics for California showed a 5.8 percent delinquency rate-the third highest in the nation (Florida and Nevada hold the top two spots respectively).

California Home to Some of Biggest Price Declines in Nation
Here is an excerpt of the top 10 areas with the steepest price declines (4 out of 10 spots belong to California):

#1) Oakland-Fremont-Hayward, CA -29.07%
#2) Riverside-San Bernardino-Ontario, CA -28.56%
#3) Los Angeles-Long Beach-Glendale, CA -28.46%
#7) San Diego-Carlsbad-San Marcos, CA -24.90%
The full list can be seen here.

Although California is home to some of the largest price declines, we can’t forget that it also held some of the most inflated “bubble” prices seen in years. In the same manner, the delinquencies that we’re seeing are the combination of loose lending and anxious buyers who couldn’t really afford a home in the first place. As for the mortgage fraud, mortgage lenders and banks have tightened up their guidelines so much that individuals are more desperate than ever-but still certainly no excuse.

I know it must seem like all bad news, but something to consider is that all of this was expected in one way or another. On a positive note, the shift we’ve taken towards tighter lending guidelines may make it harder to refinance or purchase a home, but in the end, it will preserve homeownership to those who can actually afford it. As for the steep price declines in California, it’s unfortunate for current homeowners who have borrowed within their means, but it’s been a necessary move if we expect to return back to the realistic home prices of before.

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Yes It’s True, You Can Still Qualify for Mortgages In California

Published

Heindrick

on December 1, 2008

in Refinance

. 2 Comments

Last week, mortgage rates took a dip with 30 year fixed rates falling back to the mid 5 percent levels. The rate drop was spurred by news from the Federal Reserve that it would spend hundreds of billions to buy issued debt in hopes of stimulating the housing markets. Although the recent rate drops have sparked consumer interest, many consumers are still shy to enter this housing market due to fears of this recent credit crunch.

Unfortunately, many potential homebuyers and homeowners are taking this news too generally, and incorrectly assuming they can’t possibly qualify for a mortgage these days. You certainly won’t find the same loans being offered in the past, but if you can actually afford a home and can prove it–you’ve still got a decent shot even in this market.

Rule #1 - Down Payment
The more, the better. Traditionally speaking, down payment requirements of 20% were the norm and if you can manage to save up that kind of cash, great. Fortunately, you don’t necessarily need 20% down even in this tightened credit market. Fannie and Freddie still offer conventional loans with down payments as little as 10%, while the ever popular FHA still offers down payment requirements as low as 3.5%. Having a larger down payment will help lower your risk factor in the eyes of the lenders, as you are less likely to foreclose on a property which you hold equity in.

Step 2 - “Good” Credit
Your credit history is a record of your past payment history, and a strong indicator of your future credit reliability. Although excellent credit is preferred in today’s market, those with good or satisfactory credit can still find ways to get qualified. Each lender will have their own credit criteria, but many FHA lenders can still go as low to 580 credit scores. Lenders will investigate further into your credit these days, so it’s best to make sure you avoid defaulting on any housing related accounts, as those carry more relevance. If you’re credit history isn’t in the best shape, you can check out these 3 tips to help improve your credit.

Step 3 - Prove Your “Qualifications”
Mortgage lenders have learned their lesson and realized that they need you to prove your qualifications, instead of just stating them. Even if you meet the lender’s criteria for income and assets for example, you’ll need the appropriate documents as proof of these statements. In most cases, lenders will be looking for your tax returns, pay stubs, and most recent bank statements. If you’re actually qualified, this shouldn’t be a problem–lenders are just taking a closer look to weed out folks guilty of misrepresentation.

The game is still the same, but the rules have changed a bit. Actually, if you disregard the past few years of mortgage lending, the rules might still be the same for you. I mean, let’s face it, the days of “no credit, no down payment, and no documentation” are long gone and we’ve all seen the consequence of this type of lending. If you’ve been thinking of buying a home or finding a mortgage, talk to a mortgage broker in your area to find out how you can qualify in today’s market by using our Mortgage Broker Directory.

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Know The Rules Before You Try And Play The Mortgage Modification Game

Published

Heindrick

on November 21, 2008

in Refinance

. 0 Comments

Mortgage modifications have grown quite popular in recent months, and the latest headlines have gotten many homeowners thinking. A column published by the local San Francisco Chronicle recently caught my attention and has also infuriated many individuals. The title of the article was, “Are you an idiot to keep paying your mortgage?” Pretty strange right? Well, interestingly, some homeowners have purposely stopped paying their mortgage in hopes of becoming eligible for a loan modification.

First of all, a typical mortgage modification involves lowering the mortgage’s interest rate, term, or principal balance to help reduce the monthly mortgage payment. Between rising unemployment and freefalling home prices, homeowners are looking for any and all ways to save money; and in many cases, simply save their homes. Recently, some homeowners have been looking to take advantage and essentially game the system to save on their monthly mortgage payments. If you’re considering this highly controversial “solution”, or know someone who is, it would be in your best interest to know the rules of the game ahead of time.

Before I go any further, if a mortgage modification is truly warranted, there’s no need to hesitate. If you are facing some financial hardship like a job loss, there’s no doubt that you should immediately contact your lender. But, for folks who are current on their payments and have the funds to continue paying their mortgage–here are some of the rules you should be aware of.

Rule #1 The 90 Day Delinquency
In order to qualify, many lenders will require that you have defaulted on your mortgage. Typically, the default will need to be at least a 90 day delinquency on your mortgage. For troubled homeowners, this 90 day delinquency usually can’t be avoided and is just part of the situation. Unfortunately, this 90 day mark has also become a target date for homeowners looking to take advantage.
Rule #2 Proof of Hardship and Certified Evidence
To prevent fraud and abuse, lenders will require proof of the hardship or some supporting evidence. Proof and evidence will vary with each lender, but the ultimate goal of this certification is to ensure homeowners don’t purposely miss their mortgage payments; an act which seems to occur more and more.
Rule #3 Credit Impacts
A Fair Isaac spokesman commented and said “risking your credit score for a lower mortgage rate is like playing chicken on the lending highway”. For those in need, a 90 day late is much more favorable compared to a foreclosure on your credit report. However, a 90 day late becomes a serious gamble for those simply looking to lower their monthly mortgage payments. Risking your credit score during an economy with tightened credit could end up costing you even more money in the future.

So, should you stop paying your mortgage temporarily because of these mortgage modifications? Judging by the numbers alone, a move like this could make financial sense. But based on the rules and regulations, morality, illegal activity, and fraud quickly become a serious concern. Depending on your specific area and lender, the situation is likely to be different - but one thing is for sure, if you plan on playing this “game”, it definitely pays to know the rules ahead of time.

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What Californians Can Expect From Governors Housing Proposal Plan

Published

Heindrick

on November 8, 2008

in Refinance

. 3 Comments

90 Day Protection Stay
The most notable aspect of California Governor Schwarzenegger’s proposal is the 90 day freeze for pending home foreclosures in California. In California, mortgages reached a high of 80,000 foreclosures during the third quarter according to data prepared by DQNews. In an effort to “help Californians stay in their homes”, the 90 day protection would give struggling borrowers more opportunity to seek out mortgage alternatives.

Increased Loan Modification Participation
As loan modifications increase in popularity, the proposal would address loan servicers’ fear of potential lawsuits. Since loan modifications essentially alter the original contract with mortgage investors, many shy away for fears of getting sued by these investors. By stimulating the amount of participation in loan modifications, the proposal hopes to address these fears by basically reassuring the lenders that they are not the only ones taking such drastic measures.

In the proposal, modifications may reduce monthly mortgage payments by as much as 25 to 30 percent through reduced interest rates, extended amortization periods, or deferred principal balances. One of the key issues is that struggling borrowers must still meet qualifying debt to income ratios (typically 38 percent).

Increased Lending Responsibility and Mortgage Reform
In addition, to avoid future mortgage problems, lending practices and loan servicers will face numerous changes and stronger oversight. Many have demanded mortgage reform in California, and Gov. Schwarzenegger has responded with stronger licensing requirements and expanded fiduciary responsibilities for mortgage brokers and loan originators in California. In addition, if borrowers were to consider obtaining “risky” mortgages, proper counseling would be made available to explain the full details of such loans.

What Do You Think?
Foreclosure avoidance and loan modifications have gained popularity in California, but some argue that such “solutions” will only slow the much needed economic recovery. Now that people have finally agreed that past home prices were inflated, the natural response would be to allow these values return to “normal” levels. However, with fears of plunging home values and increased foreclosures, these attempts to avoid foreclosures and modify mortgages seem to do just the opposite. I guess the question comes down to whether you see the recent decline in home values as a natural correction in prices, or a simple downward spiral that must be intervened?

(15 votes, average: 4.93 out of 5)

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How California’s Mortgages Can Affect Your Life Outside of Home

Published

Heindrick

on October 29, 2008

in Refinance

. 0 Comments

Things have been quite tough lately, but unfortunately, the domino effect is not quite over. Recently, Governor Schwarzenegger addressed California’s increasing deficit and called for a special session to take place next week. The session would address California’s budget issues as deficits are expected to grow pass the initial $3 billion dollar prediction. Much of the deficit is attributed to lower than expected state revenues, problems which can all be traced to the mortgage and housing crisis in California.

California’s income interestingly relies heavily on the income taxes of the wealthy, and as troubled mortgages suffer, so do these individuals. In short, as mortgages suffered, banks suffered, and so did the stocks which many of these wealthy individuals invested in. As a result, capital gains tax and state income decreased dramatically.

In addition, as available credit such as home equity loans dried up, so did consumer spending. For California, this meant a further reduction in state revenue as sales tax income declined as well. With the combination of declining sales tax and income revenue, California has suffered severely and we may begin seeing the effects well outside of our homes.

Your Kids and Their Education - Last months budget managed to avoid severe cuts for schools, but the current outlook doesn’t seem too positive. While numbers haven’t been set or even mentioned yet, the Sacramento Bee reported estimated figures in the range of $2 to $4 billion dollars. The numbers themselves are quite devastating, but the fact that schools are already in the middle of their academic year raises even more concern

Spending May Get More Expensive - In addition to these cuts, Gov. Schwarzenegger stated that he would have to push for a sales tax increase to help bridge the gap. In late August, the idea of a temporary sales tax increase was dropped because it lacked Republican support. Although in times like these, it will be tough to predict what California will have do to make ends meet.

You can expect these changes to meet their fair share of opposition; especially regarding the cuts planned for schools and education. Regardless, one thing most will agree on is the fact that this mortgage crisis is going to take its toll on even more people. While some individuals may have been able to dodge the effects of the housing and stock market, it is likely that almost everyone will be affected by these changes made to resolve California’s budgeting issues.

(14 votes, average: 4.93 out of 5)

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Assembly Urges Schwarzenegger to Address Mortgage Reform In California

Published

Heindrick

on October 27, 2008

in Refinance

. 5 Comments

Residents of California have suffered a one-two punch from the financial crisis in Wall Street as well as the housing crisis on Main Street. In order to address these issues and prevent such problems in the future, the Assembly Democrats have written a letter of urgency directed at Governor Schwarzenegger. The letter demands mortgage reform in California to address the serious problem of foreclosures. During a special legislative session, Gov. Schwarzenegger was supposed to address the state budget; but the assembly is asking the governor to also stronlgy reconsider the issues of mortgage reform in California.

In September, Governor Schwarzenegger vetoed mortgage reform bill AB1830 which would have addressed many key mortgage industry related issues. If you missed the details, you can find my summary of the mortgage reform veto here. Among the issues were the prohibition of negative amortization loans, limitation of prepayment penalties, and prevention of steering borrowers towards more expensive and riskier loans. Gov. Schwarzenegger argued that such reform would only apply to state regulated brokers and lenders and would create greater consumer confusion. But, the assembly just isn’t satisfied. The letter thanked Schwarzenegger for passing certain bills that had “positive effects”, but they end with a request to “fix the broken mortgage system, help people stay in their homes, and begin California’s economic recovery.”

For you curious folks, you can view the full letter in PDF format thanks to the Sacramento Bee.

Meanwhile, there are growing concerns over California’s budget as revenues have unexpectedly dropped $3 billion dollars this year. The special legislative session is scheduled to meet this Monday, so it will be interesting to see how Schwarzenegger responds these requests this coming week.

(65 votes, average: 4.98 out of 5)

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California Homeowners Benefit From Changes in New Loan Modification Laws

Published

Heindrick

on October 15, 2008

in Refinance

. 2 Comments

California NODs drop by 61.8% in September compared to August data

According to statistics by ForeclosureRadar, a Bay Area company, it seems the new California loan modification law has made some recent progress. According to their statistics, the number of notices of defaults fell by 61.8% and the number of homes put up for sale by auction fell by 47.3% in September. These percentages were derived from the fact that “only” 16,352 notices of default were filed in September, compared to the 42,790 filed in August.

As a reminder, this new law required lenders to contact homeowners before immediately filing any foreclosure notices. In these series of attempts, the lender may discuss the option of loan modifications which can involve rate reductions or principal reductions. The new law states they must contact homeowners, but provides no guarantee that loan modifications will be made.

Last month, I mentioned that loan modifications were a great way to save money on your monthly payments. For many here in California, negative equity and adjusting interest rates are just making mortgages unbearable. Now that so many banks have experienced the costs of the foreclosure process, lenders are more willing to explore the routes of loan modifications.

Is this an indication of reaching “the bottom”?
Even with the decline in NODs throughout California, there are really are no solid conclusions to be made based on this recent piece of news. While the news is something homeowners can look forward to, it is still no prediction of the future. As mentioned, the law states that lenders must contact homeowners; the law does not enforce loan modifications to be made.

September was a financial roller coaster for all of us on board. Between flip flopping bailout legislations, capital injection headlines, and massive bank takeovers, we’re just at a point where predictions are almost meaningless. On the flipside, given this recent piece of news, there are already some analysts commenting that this law may just be “delaying the inevitable”. So what’s a person to do? Sit around and wait? Hardly.

Here’s a few tips I’d share with you regarding loan modifications:

Speak to your lender as soon as possible. Loan modifications involve negotiations and can take plenty of time of to process
Be wary of “professionals” or “specialists” that charge significant fees for their loan modification services
Do NOT try to trick the system. Yes, many lenders only consider defaulting homeowners eligible for loan modifications, but don’t intentionally miss your payments. If you do, you may end up in a trivial lawsuit like this couple.

This law is great because it brings awareness to homeowners. It doesn’t guarantee anything, but it does give individuals that forewarning to actually do something. If you are having troubles with your current mortgage, be sure to also visit the California Housing Finance Agency website on foreclosure avoidance.

(6 votes, average: 4.83 out of 5)

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Heindrick So

About the Author:

Heindrick So is a mortgage consultant at a local Bay Area Real Estate Brokerage - specializing in residential wholesale lending.

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California Current

Archive for the 'Refinance' Category

Three Ways To Protect Your Credit When Mortgage Shopping

Three Things to Consider Before Refinancing

California Mortgage Rate Weekly News Roundup

Latest California Mortgage Statistics: Fraud and Delinquencies Increase as Home Prices Decrease

Yes It’s True, You Can Still Qualify for Mortgages In California

Know The Rules Before You Try And Play The Mortgage Modification Game

What Californians Can Expect From Governors Housing Proposal Plan

How California’s Mortgages Can Affect Your Life Outside of Home

Assembly Urges Schwarzenegger to Address Mortgage Reform In California

California Homeowners Benefit From Changes in New Loan Modification Laws

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