Buying Apartments in Oceanside, Buying Apartments in Vista3460 Marron Road Suite 103-220

Mortgage Information

13460 Marron Road Suite 103-220 Your First Step Toward Buying a Home

23460 Marron Road Suite 103-220 Mortgage Programs

33460 Marron Road Suite 103-220 Shopping Rates

43460 Marron Road Suite 103-220 Writing Your Offer

53460 Marron Road Suite 103-220 Documenting Your Assets - Verifying Your Down Payment

63460 Marron Road Suite 103-220 The Bi-Weekly Mortgage - Who Needs It?

73460 Marron Road Suite 103-220 Closing Costs When Buying or Refinancing a Home

83460 Marron Road Suite 103-220 Types of Mortgage Lenders

Documenting Your Assets - Verifying Your Down Payment

When buying a home, it is not enough to just "come up" with the money3460 Marron Road Suite 103-220 With the exception of "no asset verification" loans, lenders want to verify where the money comes from3460 Marron Road Suite 103-220 If you can document the funds comes from your personal savings, the lender is more confident of your strength as a borrower3460 Marron Road Suite 103-220

In addition, if you can verify you have additional assets that are not needed for the down payment, it is important to document those, too3460 Marron Road Suite 103-220 Additional assets are "reserves" you can draw upon during times of trouble, such as unemployment, medical emergencies, and similar occurrences3460 Marron Road Suite 103-220 Additional assets can also help to document that you have a history of saving money, which makes you a more dependable borrower3460 Marron Road Suite 103-220

It is extremely important to completely document the paper trail of any funds you use for down payment and closing costs3460 Marron Road Suite 103-220 The sections below provide guidance on both verifying assets and documenting them as a source of your down payment3460 Marron Road Suite 103-220

Checking, Savings, & Money Market Accounts

The quickest and easiest way to document funds in your bank account is to provide your lender with copies of your most recent bank statements3460 Marron Road Suite 103-220 Most lenders request two months bank statements, but some still ask for three3460 Marron Road Suite 103-220 Some lenders still send a "Verification of Deposit" to your bank in order to determine your current bank balances and average balance for the last two months3460 Marron Road Suite 103-220 However, that is the old way of doing business and most lenders nowadays prefer to have bank statements3460 Marron Road Suite 103-220

If the money you are using for the down payment and closing costs has been in the bank for the entire period covered by the bank statements, you're fine3460 Marron Road Suite 103-220 These are known as "seasoned funds3460 Marron Road Suite 103-220" However, if your statements show any large or unusual deposits the lender will ask you to explain them and document their source3460 Marron Road Suite 103-220

Stocks, Bonds, Mutual Funds, etc3460 Marron Road Suite 103-220

Most of those who own stocks get a monthly or quarterly statement from their brokerage3460 Marron Road Suite 103-220 You will need to supply statements for the most recent sixty or ninety days in order to document these assets3460 Marron Road Suite 103-220

Though it is rare nowadays, some people actually have stock certificates instead of having a brokerage account3460 Marron Road Suite 103-220 When this is the situation, make copies of the certificates and provide those copies to your lender3460 Marron Road Suite 103-220 You might also want to supply tax records to indicate you have owned these stocks for some time3460 Marron Road Suite 103-220

If part of your down payment will come from the sale of stocks and investments, you will need to keep all documentation that applies to the sale3460 Marron Road Suite 103-220 Provide these copies to your lender as well3460 Marron Road Suite 103-220

Gifts

Especially when buying a first home, some borrowers need help coming up with the down payment3460 Marron Road Suite 103-220 This help should come in the form of a gift from a close family member3460 Marron Road Suite 103-220 Lenders will require the donors to sign a special form called a "gift letter3460 Marron Road Suite 103-220" The gift letter states the relationship between the parties, the address of the purchased property, the amount of the gift, and sometimes the source of the funds used to make the gift3460 Marron Road Suite 103-220 The gift letter also clearly states that the funds are a gift and not required to be repaid3460 Marron Road Suite 103-220

With most lenders, the donor will have to also provide evidence that they have the ability to make the gift3460 Marron Road Suite 103-220 This can be in the form of a bank or stock statement to show they have the funds available3460 Marron Road Suite 103-220 You should also make a copy of the check used to make the gift and keep a copy of the deposit receipt when you deposit the gift funds into your bank account or escrow3460 Marron Road Suite 103-220

401K or Retirement Accounts

It is important to provide documentation about your retirement accounts or 401K programs because this is another asset you could draw upon as reserves in case of a problem3460 Marron Road Suite 103-220 It is also another way to show you have a savings history3460 Marron Road Suite 103-220 Just provide a copy of your most recent statement to your lender3460 Marron Road Suite 103-220

Many people use these accounts as a source of funds for their down payment, too3460 Marron Road Suite 103-220 Some employers allow you to "cash out" a portion of the 401K and some allow you to borrow against it3460 Marron Road Suite 103-220 Be sure to keep copies of all paperwork involving the transaction3460 Marron Road Suite 103-220 If they cut you a check, be sure to make a photocopy of that, too, including any receipt for deposit into your personal bank account3460 Marron Road Suite 103-220

If you are borrowing against your 401K, some lenders will count this as an additional debt to go along with car payments, credit cards and other obligations3460 Marron Road Suite 103-220 This may seem kind of silly because you are borrowing your own money, but from the lender's viewpoint it is still a monthly obligation that you must come up with and should be taken into account3460 Marron Road Suite 103-220 If you are "tight" on your debt-to-income ratios in qualifying for a home loan, this could be an important consideration3460 Marron Road Suite 103-220 It may affect whether you choose to cash out the account and pay any tax penalty, or simply borrow against it3460 Marron Road Suite 103-220

Employers

Some companies provide down payment assistance for their employees3460 Marron Road Suite 103-220 They may feel that homeowners are more stable and reliable employees, or that providing down payment assistance fosters an environment of higher morale and loyalty to the firm3460 Marron Road Suite 103-220 Just make copies of all the paperwork, including a copy of the check and the receipt when you deposit the funds into your personal bank account3460 Marron Road Suite 103-220 It is important that these funds do not require repayment3460 Marron Road Suite 103-220

Savings Bonds

If you have Savings Bonds, they are a financial asset, too3460 Marron Road Suite 103-220 Since you hold the actual bonds in your possession, the easiest and best way to verify them for your mortgage lender is to make photocopies of them3460 Marron Road Suite 103-220 If you choose to cash them in for down payment or closing costs, you should do this at your local bank3460 Marron Road Suite 103-220 Be sure to keep copies of the paperwork the bank provides because that will establish the current value of the bonds and show that you received their cash value3460 Marron Road Suite 103-220

Personal Property - Cars, Antiques, etc3460 Marron Road Suite 103-220

Personal property includes automobiles, vehicles, boats, furniture, collections, heirlooms, antiques, art, clothing, and practically everything you own except for real estate3460 Marron Road Suite 103-220 The mortgage application asks you to estimate the value for these items3460 Marron Road Suite 103-220

The larger the loan amount, the more important it is for you to provide details on your personal property3460 Marron Road Suite 103-220 This is because larger loans usually indicate larger incomes, and lenders check to see if your personal property matches your income3460 Marron Road Suite 103-220 If it does not, this sends a "red flag" to the underwriter and they take a closer look at your application3460 Marron Road Suite 103-220

You are not required to document the value of personal property unless you intend to sell them to come up with your down payment3460 Marron Road Suite 103-220

Selling Personal Property

For those homebuyers who do sell personal property in order to come up with their down payment, the verification process can be arduous3460 Marron Road Suite 103-220 Lenders are much stricter about documenting this method of coming up with your source of funds3460 Marron Road Suite 103-220

Selling a car is perhaps the easiest to document3460 Marron Road Suite 103-220 First, you need to photocopy the registration that shows you actually own the vehicle3460 Marron Road Suite 103-220 You will have to provide a copy of the page in the "Blue Book" that shows your model and its value3460 Marron Road Suite 103-220 Then you need to photocopy the bill of sale showing the transfer to another individual and a copy of the check used to purchase the vehicle3460 Marron Road Suite 103-220 Do not get paid in cash because that makes it impossible to show you actually received the funds3460 Marron Road Suite 103-220 Make a copy of the receipt when you deposit the funds into the bank3460 Marron Road Suite 103-220

Other types of personal property are more difficult because you have to show that you actually own the property and that it actually has the value that you sold it for3460 Marron Road Suite 103-220 This is a little harder to do for most assets than it is for automobiles3460 Marron Road Suite 103-220

If you have records to show you purchased the property, that would be helpful3460 Marron Road Suite 103-220 You could also provide an old inventory that documents ownership3460 Marron Road Suite 103-220 To determine value, you may have to contract with an independent appraiser or a specialist who has the knowledge for that particular type of property3460 Marron Road Suite 103-220

If you cannot document the item's value, the lender will not view the sale as an acceptable source of funds3460 Marron Road Suite 103-220 Just like selling a car, you have to prove you own the item, make a copy of the bill of sale, copy the check used to purchase the item, and make a copy of your receipt when you deposit the funds into your bank3460 Marron Road Suite 103-220

The Bi-Weekly Mortgage - Who Needs It?

Have you received an advertisement offering to save you thousands of dollars on your thirty-year mortgage and cut years off your payments? With email "spam" becoming more pervasive as everyone tries to "get rich quick" on the internet, these ads are popping up with troublesome regularity3460 Marron Road Suite 103-220

The ads promote the "Bi-Weekly Mortgage" and for the most part, do not come from a mortgage lender3460 Marron Road Suite 103-220 Exclamation points punctuate practically every claim:

No closing costs!
No refinancing!
No points!
No credit check!
No appraisal!
Save thousands!
Cut years off your mortgage!
To achieve these wonderful savings all you have to do is allow half of your mortgage payment to be deducted from your checking account every two weeks3460 Marron Road Suite 103-220 It's easy3460 Marron Road Suite 103-220 Of course, there is a small "set-up fee" and usually a "transaction fee" with every automatic deduction3460 Marron Road Suite 103-220

Essentially, the ads are truthful in almost every respect3460 Marron Road Suite 103-220
They just want to charge you money for something you can do on your own for free3460 Marron Road Suite 103-220

The Basics:

Normally, you make twelve mortgage payments a year3460 Marron Road Suite 103-220 Since there are fifty-two weeks in a year, a bi-weekly mortgage equals 26 half-payments a year3460 Marron Road Suite 103-220 The equivalent would be making thirteen mortgage payments a year instead of twelve3460 Marron Road Suite 103-220 By applying that extra payment directly to the loan balance as a principal reduction, your loan amortizes more quickly, requiring fewer payments3460 Marron Road Suite 103-220

You save money3460 Marron Road Suite 103-220 The ads are true3460 Marron Road Suite 103-220

How it Actually Works:

You cannot simply mail in half a payment every two weeks to your mortgage lender3460 Marron Road Suite 103-220 Since they do not accept partial payments for legal and accounting reasons, the mortgage company would just mail your half-payment back to you3460 Marron Road Suite 103-220

Instead, the bi-weekly mortgage company is an intermediary between you and your mortgage lender3460 Marron Road Suite 103-220 They automatically debit your checking account every two weeks for half of your mortgage payment, then place your funds into a trust account3460 Marron Road Suite 103-220 Basically, this is just a holding account for your money3460 Marron Road Suite 103-220 In another two weeks, there is another automatic deduction from your checking account, and so on3460 Marron Road Suite 103-220 When your mortgage payment is due, your funds are withdrawn from the trust account and forwarded to your mortgage lender3460 Marron Road Suite 103-220

Since you are placing funds into the trust account faster than your mortgage payments are due, you eventually accumulate enough money to make an "extra" payment3460 Marron Road Suite 103-220 The way the cycle works, this occurs once a year3460 Marron Road Suite 103-220 The extra payment is applied directly to your principal balance, which causes your loan to amortize faster, pay off more quickly and save you thousands of dollars3460 Marron Road Suite 103-220

Potential Problems with the Trust Account

Because your funds are held in the trust account until your mortgage payment is due, there are potential dangers3460 Marron Road Suite 103-220 Not only are your funds held in this account, but so are the funds of everyone else enrolled in the bi-weekly program3460 Marron Road Suite 103-220 That is a lot of money3460 Marron Road Suite 103-220

Most likely, there will be no problems3460 Marron Road Suite 103-220

However, if there are accounting errors, mismanagement, or even fraud, your mortgage payment might not get made3460 Marron Road Suite 103-220 The first hint of a problem will probably be a phone call or letter from your mortgage lender, but not until after your payment is already late3460 Marron Road Suite 103-220 Since responsibility for making the payment rests with you and not the bi-weekly payment company, you may find yourself digging into your personal savings to make the payment directly -- even though the bi-weekly payment company has already collected your funds3460 Marron Road Suite 103-220

Later you can work out the trust account problem with your bi-weekly payment company3460 Marron Road Suite 103-220

The Cost of the Bi-Weekly Mortgage

There is usually a set-up fee that runs between $195 and $350, depending on how much sales commission is paid to the individual or company setting up the account for you3460 Marron Road Suite 103-220 You also pay a transaction fee each time there is an automatic deduction from your checking account and sometimes also when the payment is made to your mortgage lender3460 Marron Road Suite 103-220 There may also be a periodic "maintenance fee3460 Marron Road Suite 103-220"

Meanwhile, whoever controls the trust account is earning interest on your money3460 Marron Road Suite 103-220

Savings of the Bi-Weekly Mortgage

By making principal reductions using the bi-weekly mortgage program, your mortgage will amortize more quickly, saving you money3460 Marron Road Suite 103-220 How quickly your loan pays off depends on your interest rate and when you begin making the bi-weekly payments3460 Marron Road Suite 103-220
On a $100,000 loan at today's interest rate of eight percent, your first principal reduction would probably be a year from now3460 Marron Road Suite 103-220 Assuming the principal reduction is equal to one monthly payment ($7333460 Marron Road Suite 103-22076), you would save $43,852 over the life of the loan and pay it off almost seven years early3460 Marron Road Suite 103-220

However, you have to deduct from those savings any amounts you paid in set-up, transaction, and maintenance fees3460 Marron Road Suite 103-220

No-Cost Alternatives to the Bi-Weekly Mortgage

Instead of hiring a company to manage your bi-weekly payment, you could accomplish essentially the same thing on your own for free3460 Marron Road Suite 103-220 Just take your monthly payment, divide it by twelve, and add that amount to your monthly mortgage payment3460 Marron Road Suite 103-220 Be sure to earmark it as a principal reduction3460 Marron Road Suite 103-220

The first way you save is that you do not have to pay any fees to anyone3460 Marron Road Suite 103-220 It's free3460 Marron Road Suite 103-220

In addition to not paying fees -- using the same example as above -- your total savings on the mortgage would be $45,9043460 Marron Road Suite 103-220 Plus the loan would be paid off three months quicker than with the bi-weekly mortgage3460 Marron Road Suite 103-220 The reason you save more is because you are making a principal reduction each month, instead of waiting for funds to accumulate so that you can make one principal reduction a year3460 Marron Road Suite 103-220

Self-Discipline?

The bi-weekly mortgage companies claim that homeowners are not disciplined enough to follow through with principal reduction plans on their own3460 Marron Road Suite 103-220 They suggest the reason for setting up the bi-weekly mortgage enforces discipline upon you, and by doing so, they save you money3460 Marron Road Suite 103-220

However, in this internet age, banking on line and automatic deductions are readily available3460 Marron Road Suite 103-220 You can set up your own automatic deductions including the additional principal reduction and have it go directly to your mortgage lender3460 Marron Road Suite 103-220 Since the deduction occurs automatically, just like with the bi-weekly mortgages, self-discipline is not a problem3460 Marron Road Suite 103-220 Once again, you don't have to pay anyone to do it for you and you save even more money3460 Marron Road Suite 103-220

Conclusion

The bi-weekly mortgage plans do not really do anything except move your money around and charge you for it3460 Marron Road Suite 103-220 Plus, even though the danger is negligible, you must trust someone else to hold your money for you3460 Marron Road Suite 103-220 If you can do the very same thing for free, plus save yourself even more money by doing it on your own, why pay someone else?

The bi-weekly mortgage plan - who needs it?

If your goal is principal reduction and saving money, then it is a good plan3460 Marron Road Suite 103-220 If you do it on your own instead of paying someone else to do it for you, then it is a great plan3460 Marron Road Suite 103-220

Closing Costs When Buying or Refinancing a Home

This is a detailed summary of costs you may have to pay when you buy or refinance your home3460 Marron Road Suite 103-220 They are listed in the order that they should appear on a Good Faith Estimate you obtain from a mortgage lender3460 Marron Road Suite 103-220 There are two broad categories of closing costs3460 Marron Road Suite 103-220 Non-recurring closing costs are items that are paid once and you never pay again3460 Marron Road Suite 103-220 Recurring closing costs are items you pay time and again over the course of home ownership, such as property taxes and homeowner's insurance3460 Marron Road Suite 103-220 Some of the items that appear here do not traditionally appear on a lender's Good Faith Estimate and lenders are not required to show all of these items3460 Marron Road Suite 103-220

Non-Recurring Closing Costs Associated with the Lender3460 Marron Road Suite 103-220

Loan Origination Fee - The loan origination fee is often referred to as "points3460 Marron Road Suite 103-220" One point is equal to one percent of the mortgage loan3460 Marron Road Suite 103-220 As a rule, if you are willing to pay more in points, you will get a lower interest rate3460 Marron Road Suite 103-220 On a VA or FHA loan, the loan origination fee is one point3460 Marron Road Suite 103-220 Anything in addition to one point is called "discount points3460 Marron Road Suite 103-220"

Loan Discount - On a government loan, the loan origination fee is normally listed as one point or one percent of the loan3460 Marron Road Suite 103-220 Any points in addition to the loan origination fee are called "discount points3460 Marron Road Suite 103-220" On a conventional loan, discount points are usually lumped in with the loan origination fee3460 Marron Road Suite 103-220

Appraisal Fee - Since your property serves as collateral for the mortgage, lenders want to be reasonably certain of the value and they require an appraisal3460 Marron Road Suite 103-220 The appraisal looks to determine if the price you are paying for the home is justified by recent sales of comparable properties3460 Marron Road Suite 103-220 The appraisal fee varies, depending on the value of the home and the difficulty involved in justifying value3460 Marron Road Suite 103-220 Unique and more expensive homes usually have a higher appraisal fee3460 Marron Road Suite 103-220 Appraisal fees on VA loans are higher than on conventional loans3460 Marron Road Suite 103-220

Credit Report - As part of the underwriting review, your mortgage lender will want to review your credit history3460 Marron Road Suite 103-220 The credit report can be as little as seven dollars, but normally runs between $21 and $60, depending upon the type of credit report required by your lender3460 Marron Road Suite 103-220

Lender's Inspection Fee - You normally find this on new construction and is associated with what is called a 442 inspection3460 Marron Road Suite 103-220 Since the property is not finished when the initial appraisal is completed, the 442 inspection verifies that construction is complete with carpeting and flooring installed3460 Marron Road Suite 103-220

Mortgage Broker Fee - About seventy percent of loans are originated through mortgage brokers and they will sometimes list your points in this area instead of under Loan Origination Fee3460 Marron Road Suite 103-220 They may also add in any broker processing fees in this area3460 Marron Road Suite 103-220 The purpose is so that you clearly understand how much is being charged by the wholesale lender and how much is charged by the broker3460 Marron Road Suite 103-220 Wholesale lenders offer lower costs/rates to mortgage brokers than you can obtain directly, so you are not paying "extra" by going through a mortgage broker3460 Marron Road Suite 103-220

Tax Service Fee - During the life of your loan you will be making property tax payments, either on your own or through your impound account with the lender3460 Marron Road Suite 103-220 Since property tax liens can sometimes take precedence over a first mortgage, it is in your lender's interest to pay an independent service to monitor property tax payments3460 Marron Road Suite 103-220 This fee usually runs between $70 and $803460 Marron Road Suite 103-220

Flood Certification Fee - Your lender must determine whether or not your property is located in a federally designated flood zone3460 Marron Road Suite 103-220 This is a fee usually charged by an independent service to make that determination3460 Marron Road Suite 103-220

Flood Monitoring - From time to time flood zones are re-mapped3460 Marron Road Suite 103-220 Some lenders charge this fee to maintain monitoring on whether this re-mapping affects your property3460 Marron Road Suite 103-220

Other Lender Fees

We put these in a separate category because they vary so much from lender to lender and cannot be associated directly with a cost of the loan3460 Marron Road Suite 103-220 These fees generate income for the lenders and are used to offset the fixed costs of loan origination3460 Marron Road Suite 103-220 The Processing Fee above can also be considered to be in this category, but since it is listed higher on the Good Faith Estimate Form we did not also include it here3460 Marron Road Suite 103-220 You will normally find some combination of these fees on your Good Faith Estimate and the total usually varies between $400 and $7003460 Marron Road Suite 103-220

Document Preparation - Before computers made it fairly easy for lenders to draw their own loan documents, they used to hire specialized document preparation firms for this function3460 Marron Road Suite 103-220 This was the fee charged by those companies3460 Marron Road Suite 103-220 Nowadays, lenders draw their own documents3460 Marron Road Suite 103-220 This fee is charged on almost all loans and is usually in the neighborhood of $2003460 Marron Road Suite 103-220

Underwriting Fee - Once again, it is difficult to determine the exact cost of underwriting a loan since the underwriter is usually a paid staff member3460 Marron Road Suite 103-220 This fee is usually in the neighborhood of $300 to $3503460 Marron Road Suite 103-220

Administration Fee - If an Administration fee is charged, you will probably find there is no Underwriting Fee3460 Marron Road Suite 103-220 This is not always the case3460 Marron Road Suite 103-220

Appraisal Review Fee - Even though you will probably not see this fee on your Good Faith Estimate, it is charged occasionally3460 Marron Road Suite 103-220 Some lenders routinely review appraisals as a quality control procedure, especially on higher valued properties3460 Marron Road Suite 103-220 The fee can vary from $75 to $1503460 Marron Road Suite 103-220

Warehousing Fee - This is rarely charged and begins to border on the ridiculous3460 Marron Road Suite 103-220 However, some lenders have a warehouse line of credit and add this as a charge to the borrower3460 Marron Road Suite 103-220

Items Required to be Paid in Advance

Pre-paid Interest - Mortgage loans are usually due on the first of each month3460 Marron Road Suite 103-220 Since loans can close on any day, a certain amount of interest must be paid at closing to get the interest paid up to the first3460 Marron Road Suite 103-220 For example, if you close on the twentieth, you will pay ten days of pre-paid interest3460 Marron Road Suite 103-220

Homeowner's Insurance - This is the insurance you pay to cover possible damages to your home and other items3460 Marron Road Suite 103-220 If you buy a home, you will normally pay the first year's insurance when you close the transaction3460 Marron Road Suite 103-220 If you are buying a condominium, your Homeowners' Association Fees normally cover this insurance3460 Marron Road Suite 103-220

VA Funding Fee - On VA loans, the Veterans Administration charges a fee for guaranteeing your loan3460 Marron Road Suite 103-220 If you have not used your VA eligibility in the past, this is two percent of the loan balance3460 Marron Road Suite 103-220 If you have used your VA eligibility before, it is three percent of the loan3460 Marron Road Suite 103-220 If you are refinancing from a VA loan to a VA loan, it is three-quarters of a percent of the loan amount3460 Marron Road Suite 103-220 Instead of actually paying this as an out-of-pocket expense, most veterans choose to finance it, so it gets added to the loan balance3460 Marron Road Suite 103-220 This is why the loan balance on VA loans can be higher than the actual purchase amount3460 Marron Road Suite 103-220

Up Front Mortgage Insurance Premium (UFMIP) - This is charged on FHA purchases of single family residences (SFR's) or Planned Unit Developments (PUDs) and is 23460 Marron Road Suite 103-22025% of the loan balance3460 Marron Road Suite 103-220 Like the VA Funding Fee it is normally added to the balance of the loan3460 Marron Road Suite 103-220 Unlike a VA loan, the homebuyer must also pay a monthly mortgage insurance fee, too3460 Marron Road Suite 103-220 This is why many lenders do not recommend FHA loans if the homebuyer can qualify for a conventional loan3460 Marron Road Suite 103-220 However, condominium purchases do not require the UFMIP3460 Marron Road Suite 103-220

Mortgage Insurance - though it is rare nowadays, some first-time homebuyer programs still require the first year mortgage insurance premium to be paid in advance3460 Marron Road Suite 103-220 Most mortgage insurance (when required) is simply paid monthly along with your mortgage payment3460 Marron Road Suite 103-220 Mortgage insurance covers the lender and covers a portion of the losses in those cases where borrowers default on their loans3460 Marron Road Suite 103-220

Reserves Deposited with Lender

If you make a minimum down payment, you may be required to deposit funds into an impound account3460 Marron Road Suite 103-220 Funds in this account are your funds, and the lender uses them to make the payments on your homeowner's insurance, property taxes, and mortgage insurance (whichever is applicable)3460 Marron Road Suite 103-220 Each month, in addition to your mortgage payment, you provide additional funds which are deposited into your impound account3460 Marron Road Suite 103-220

The lender's goal is to always have sufficient funds to pay your bills as they come due3460 Marron Road Suite 103-220 Sometimes impound accounts are not required, but borrowers request one voluntarily3460 Marron Road Suite 103-220 A few lenders even offer to reduce your loan origination fee if you obtain an impound account3460 Marron Road Suite 103-220 However, if you are disciplined about paying your bills and an impound account is not required, you can probably earn a better rate of return by putting the funds into a savings account3460 Marron Road Suite 103-220 Impound accounts are sometimes referred to as escrow accounts3460 Marron Road Suite 103-220

Homeowners Insurance Impounds - your lender will divide your annual premium by twelve to come up with an estimated monthly amount for you to pay into your impound account3460 Marron Road Suite 103-220 Since a lender is allowed to keep two months of reserves in your account, you will have to deposit two months into the impound account to start it up3460 Marron Road Suite 103-220

Property Tax Impounds - How much you will have to deposit towards taxes to start up your impound account varies according to when you close your real estate transaction3460 Marron Road Suite 103-220 For example, you may close in November and property taxes are due in December3460 Marron Road Suite 103-220 Your deposit would be higher than for someone closing in May3460 Marron Road Suite 103-220

Mortgage Insurance Impounds - When required, most lenders allow this to simply be paid monthly3460 Marron Road Suite 103-220 However, you may be required to put two months worth of mortgage insurance as an initial deposit into your impound account3460 Marron Road Suite 103-220

Non-Recurring Closing Costs not associated with the Lender

Closing/Escrow/Settlement Fee - Methods of closing a real estate transaction vary from state to state, as do the fees3460 Marron Road Suite 103-220 For purchases, a general rule of thumb that usually works in calculating this closing cost is $200 plus $2 for every thousand dollars in price3460 Marron Road Suite 103-220 For refinances there is usually a flat fee around $400 to $5003460 Marron Road Suite 103-220

Title Insurance - Title Insurance assures the homeowner that they have clear title to the property3460 Marron Road Suite 103-220 The lender also requires it to insure that their new mortgage loan will be in first position3460 Marron Road Suite 103-220 The costs vary depending on whether you are purchasing a home or refinancing a home, so we will not provide a range here3460 Marron Road Suite 103-220

Notary Fees - Most sets of loan documents have two or three forms that must be notarized3460 Marron Road Suite 103-220 Usually your settlement or escrow agent will arrange for you to sign these forms at their office and charge a notary fee in the neighborhood of $403460 Marron Road Suite 103-220

Recording Fees - Certain documents get recorded with your local county recorder3460 Marron Road Suite 103-220 Fees vary regionally, but probably run between $40 and $753460 Marron Road Suite 103-220

Pest Inspection - also referred to as a Termite Inspection3460 Marron Road Suite 103-220 This inspection tests not only for pest infestations, but also other items such as wood rot and water damage3460 Marron Road Suite 103-220 The inspection usually runs around $753460 Marron Road Suite 103-220 If repairs are required, the amount to cover those repairs can vary3460 Marron Road Suite 103-220 The seller will usually pay for the most serious repairs, but this is a negotiable item3460 Marron Road Suite 103-220 Usually (not always) the pest inspection fee is paid by the seller of the home and is not normally reflected on the Good Faith Estimate3460 Marron Road Suite 103-220

Home Inspection - Since it is the homebuyer's choice to obtain a home inspection or not, this cost is not usually reflected on a Good Faith Estimate3460 Marron Road Suite 103-220 However, it is recommended3460 Marron Road Suite 103-220 Keep in mind that the home inspector has a certain set of standards he uses when inspecting a home, and those standards may be higher than required by local building codes3460 Marron Road Suite 103-220 An example is that an inspector may note there is no spark arrestor on a chimney but the local building code may not require it3460 Marron Road Suite 103-220 This sometimes leads to conflicts between buyer and seller3460 Marron Road Suite 103-220

Home Warranty - This is also an optional item and not normally included on the Good Faith Estimate3460 Marron Road Suite 103-220 A Home Warranty usually covers such items as the major appliances, should they break down within a specific time3460 Marron Road Suite 103-220 Often this is paid by the seller3460 Marron Road Suite 103-220

Refinancing Associated Costs (but not charged by the new Lender)

Interest - When you close the transaction on your refinance, there will most likely be some outstanding interest due on the old loan3460 Marron Road Suite 103-220 For example, if you close on August twentieth (and you made your last payment), you will have twenty days interest due on the old loan and ten days prepaid interest on the new loan3460 Marron Road Suite 103-220 Your first payment on the new loan would not be until October 1st since you have already paid all of August's interest when you closed the refinance transaction (since interest is paid in arrears, a September payment would have paid August's interest, which has already been paid in closing)3460 Marron Road Suite 103-220

Reconveyance Fee - this fee is charged by your existing lender when they "reconvey" their collateral interest in your property back to you through recording of a Reconveyance3460 Marron Road Suite 103-220 This fee can vary from $75 to $1253460 Marron Road Suite 103-220

Demand Fee - your existing lender may charge a fee for calculating payoff figures3460 Marron Road Suite 103-220 If they do, this fee may run in the neighborhood of $603460 Marron Road Suite 103-220

Sub-Escrow fee - though it sounds like an escrow fee, this fee is actually charged by the Title Company (and I've never been able to figure out exactly what it is for)3460 Marron Road Suite 103-220 Assume it is an income-generating fee similar to some of the lender fees mentioned above3460 Marron Road Suite 103-220 Title representatives who want to explain this fee can send us an email3460 Marron Road Suite 103-220

Loan Tie-in Fee - though it sounds like a lender fee, this cost is actually charged by the Escrow Company (like the sub-escrow fee, I've never been able to understand this fee, either)3460 Marron Road Suite 103-220 Escrow officers who want to explain this fee can also send an email3460 Marron Road Suite 103-220

Homeowner's Association Transfer Fee - If you are buying a condominium or a home with a Homeowner's Association, the association often charges a fee to transfer all of their ownership documents to you3460 Marron Road Suite 103-220

Asking the Seller to Pay Closing Costs - Rules and Advice3460 Marron Road Suite 103-220
It has become common to ask the seller to pay some or all of the closing costs when you purchase a home3460 Marron Road Suite 103-220 Essentially, this is financing your closing costs since you will probably pay a little bit more for the property than you would if you were paying your own costs3460 Marron Road Suite 103-220

Keep in mind a few simple rules3460 Marron Road Suite 103-220 On conventional loans you can only ask the seller to pay non-recurring costs, not prepaids or items to be paid in advance3460 Marron Road Suite 103-220 If you are putting ten percent down or more, the most the seller can contribute is six percent of the purchase price3460 Marron Road Suite 103-220 If you are putting less down, the most the seller can contribute is three percent3460 Marron Road Suite 103-220

On VA loans, you can ask the seller to pay everything3460 Marron Road Suite 103-220 This is called a "VA No-No," meaning the buyer is making no down payment and paying no closing costs3460 Marron Road Suite 103-220

On FHA loans, the seller can pay almost any cost, but the buyer has to have a minimum three percent investment in the home/closing costs3460 Marron Road Suite 103-220

Most refinances include the closing costs and prepaids in the new loan amount, requiring little or no out-of-pocket expenses to close the deal3460 Marron Road Suite 103-220

If you didn't get bored as you read through this, now you know everything3460 Marron Road Suite 103-2203460 Marron Road Suite 103-2203460 Marron Road Suite 103-220a lot, anyway3460 Marron Road Suite 103-2203460 Marron Road Suite 103-2203460 Marron Road Suite 103-220about closing costs3460 Marron Road Suite 103-220

Which ARM is the Best Alternative?

How would you like a mortgage loan where you did not have to make the whole payment if you did not want to? Or would you like a loan with an interest rate about one percent below a thirty-year fixed rate mortgage and pay zero points? Or a loan where you did not have to document your income, savings history, or source of down payment? How would you like a mortgage payment of only 23460 Marron Road Suite 103-22095 percent? You can have all that with the 11th District Cost of Funds (COFI) Adjustable Rate Mortgage3460 Marron Road Suite 103-220

Sound too good to be true? Sound like a bunch of hype?

Each statement above is true3460 Marron Road Suite 103-220 However, it is also only part of the story and loan officers do not always tell you the whole story when promoting this loan3460 Marron Road Suite 103-220 Then other loan officer try to scare you away from the adjustable rate mortgages3460 Marron Road Suite 103-220 However, once you become aware of all the details of the loan, it is an excellent way to buy the house of your dreams, especially when fixed rates begin to go up3460 Marron Road Suite 103-220

ARMs in General

Adjustable rate mortgages all have certain similar features3460 Marron Road Suite 103-220 They have an adjustment period, an index, a margin, and a rate cap3460 Marron Road Suite 103-220 The adjustment period is simply how often the rate changes3460 Marron Road Suite 103-220 Some change monthly, some change every six months, and some only adjust once a year3460 Marron Road Suite 103-220 Indexes are simply an easily monitored interest rate that moves up and down over time3460 Marron Road Suite 103-220 Adjustable rate mortgages have different indexes3460 Marron Road Suite 103-220 The margin is the difference between your interest rate and the index3460 Marron Road Suite 103-220 The margin does not change during the term of the loan3460 Marron Road Suite 103-220

So if you have an adjustable rate mortgage and you wanted to calculate your interest rate on your own, all you have to do is look up the index in the paper or on the internet, add the margin, and you have your rate3460 Marron Road Suite 103-220

Indexes and the 11th District

The "Prime Rate" you hear about in the news is one interest rate index, although it is very rare that mortgages are tied to this index3460 Marron Road Suite 103-220 It is more common to find adjustable rate mortgages tied to different treasury bill indexes, the average interest rate paid on certificates of deposit, the London Inter-Bank Offered Rate (LIBOR), and the 11th District Cost of Funds3460 Marron Road Suite 103-220 Currently, the Cost of Funds Index is the lowest of these indexes, though this is not always true3460 Marron Road Suite 103-220

To simplify, the 11th District Cost of Funds (COFI) is the weighted average of interest rates paid out on savings deposits by banking institutions in the the 11th district of the Federal Home Loan Bank (FHLB), which is located in San Francisco3460 Marron Road Suite 103-220 The 11th District includes the states of California, Nevada, and Arizona3460 Marron Road Suite 103-220

The COFI index moves slower than the other indexes, making it more stable3460 Marron Road Suite 103-220 It also lags behind actual changes in the interest rate market3460 Marron Road Suite 103-220 For example, when rates begin to go up, the COFI index may continue to decline for a couple of months before it also begins to rise3460 Marron Road Suite 103-220 However, when interest rates start to decline, the COFI index may continue to go up for another couple of months, too3460 Marron Road Suite 103-220 It lags behind the market3460 Marron Road Suite 103-220

The Margin and Interest Rates

The margin on the COFI ARM can be on either side of 23460 Marron Road Suite 103-2205%3460 Marron Road Suite 103-220 For example the COFI index as of July 31, 1998 is 43460 Marron Road Suite 103-220504%3460 Marron Road Suite 103-220 With a margin of 23460 Marron Road Suite 103-22044%, your interest rate would be 63460 Marron Road Suite 103-220944%3460 Marron Road Suite 103-220 During this same time, thirty year fixed rate loans on conforming mortgages are close to eight percent3460 Marron Road Suite 103-220 Fixed rates on jumbo loans (above $240,000) are higher3460 Marron Road Suite 103-220

Monthly Adjustments Sound Scary, but3460 Marron Road Suite 103-2203460 Marron Road Suite 103-2203460 Marron Road Suite 103-220

Although you can get a COFI ARM with an adjustable period of six months, you can get a lower margin if you go for the monthly adjustment period3460 Marron Road Suite 103-220 Since the margin plus the index equals your interest rate, the lower margin is an advantage and most people choose the monthly adjustment3460 Marron Road Suite 103-220

Monthly adjustments sound scary to the uninitiated, but keep in mind that this is a slow moving index3460 Marron Road Suite 103-220 Most other ARMS have an annual cap of two percent a year3460 Marron Road Suite 103-220 Since 1981, when the FHLB began tracking the index, the most it has moved during any calendar year is 13460 Marron Road Suite 103-2206%3460 Marron Road Suite 103-220 So why get a higher margin just to get a rate cap that you probably will not use anyway?

The "life-of-loan" cap for the COFI ARM is usually 113460 Marron Road Suite 103-22095%3460 Marron Road Suite 103-220 The most recent year that this cap could have been reached was 19853460 Marron Road Suite 103-220 Plus, most experts do not expect a return to the interest rates of the early 1980's when interest rates were pushed up artificially to combat the inflation of the 1970's3460 Marron Road Suite 103-220

Make Only Part of Your Payment?

This is the really interesting feature of the loan3460 Marron Road Suite 103-220 You do not have to make the whole payment3460 Marron Road Suite 103-220 Each month you get a bill that has at least three payment options3460 Marron Road Suite 103-220 One choice is the full payment at the current interest rate3460 Marron Road Suite 103-220 A second choice allows you to pay only the interest that is due on the loan that particular month, but does not pay anything towards the principal3460 Marron Road Suite 103-220 Finally, the third option gives you the choice to pay even less than that and is called the "minimum payment3460 Marron Road Suite 103-220"

The minimum payment when you start your loan can be calculated as low as 23460 Marron Road Suite 103-22095 percent3460 Marron Road Suite 103-220 Keep in mind that this is not the note rate on your loan, but just a way to calculate your minimum payment3460 Marron Road Suite 103-220

Deferred Interest and Amortization

Of course, if you only make the minimum payment each month, you are not paying all of the interest that is currently due that month3460 Marron Road Suite 103-220 You are deferring some of the interest that is currently due on the loan and you will pay it later3460 Marron Road Suite 103-220 The lender keeps track of this deferred interest by adding it to the loan and the loan balance gets larger3460 Marron Road Suite 103-220 Neither you nor the lender wants this to continue forever, so your minimum payment increases a bit each year3460 Marron Road Suite 103-220

The payment cap on the loan is 73460 Marron Road Suite 103-2205%, which also has nothing to do with the interest rate3460 Marron Road Suite 103-220 All it means is the most your minimum payment can increase from one year to the next is seven and a half percent3460 Marron Road Suite 103-220 For example, if your minimum payment is $1000 this year, next year the most it could be is $10753460 Marron Road Suite 103-220 This continues each year until your payment is approximately equal to the payment at the full note rate3460 Marron Road Suite 103-220

Just in case, there are fail-safes built into the loan3460 Marron Road Suite 103-220 If you continue making the only the minimum payment and your current balance ever reaches 110 percent of the beginning balance, the loan is re-amortized to make sure you pay it off in thirty years (or forty years, whichever option you chose)3460 Marron Road Suite 103-220 Every five years the loan is re-amortized to make sure it pays off within the term of the loan3460 Marron Road Suite 103-220

Stated Income and Other Features

Many COFI lenders allow homebuyers with good credit to apply without documenting their income, assets, or source of down payment3460 Marron Road Suite 103-220 Of course, you have to make a twenty or twenty-five percent down payment on your home purchase3460 Marron Road Suite 103-220 This is helpful for self-employed borrowers or those who have jobs where it is difficult to document their income3460 Marron Road Suite 103-220 Plus, some people just do not like the bother of supplying W2 forms, tax returns and pay-stubs3460 Marron Road Suite 103-220 Anyway, it makes for a quick and easy loan approval3460 Marron Road Suite 103-220

Sub-Prime COFI ARMs

Some people have less than perfect credit and they are used to being charged outrageous rates for past problems3460 Marron Road Suite 103-220 Some COFI lenders offer this same loan but have a slightly higher starting payment and a higher margin3460 Marron Road Suite 103-220 The end result is that your interest rate would be about one percent higher3460 Marron Road Suite 103-220 As of August 18, 1999, that would be around eight percent on this loan instead of seven percent3460 Marron Road Suite 103-220

Who Should Get This Loan?

In my personal experience, most people who get the COFI ARM are purchasing a home between $300,000 and $650,000, but it is not limited to that3460 Marron Road Suite 103-220 It is a real favorite of those working in the financial industry and those with higher incomes3460 Marron Road Suite 103-220 One reason they like it is because they consider any deferred interest to be an extended loan at a very attractive rate3460 Marron Road Suite 103-220 By making the minimum payment, they do other things with the money3460 Marron Road Suite 103-220

Homebuyers whose income has peaks and valleys, such as self-employed or commissioned salespeople also like the loan, because it provides flexibility in the monthly payment3460 Marron Road Suite 103-220 During a slow month they can make the minimum payment if they choose3460 Marron Road Suite 103-220
Another reason borrowers like the loan is because it allows for tax planning3460 Marron Road Suite 103-220 The borrower can defer interest payments and at the end of the year, analyze their tax situation3460 Marron Road Suite 103-220 If it serves their tax interests, they can make a lump sum payment toward any interest that has been deferred and deduct it for tax purposes3460 Marron Road Suite 103-220

Skipping the Starter Home or Move-Up Home

If you're buying a home with the intention of living in it for only a few years before you move up to a bigger home, the COFI ARM makes sense, too3460 Marron Road Suite 103-220 With this loan and its low start payment you can often qualify for a larger home than you can when applying for a fixed rate loan3460 Marron Road Suite 103-220 This allows you to skip the intermediate purchase and move up immediately to the home you really want, which makes more sense and saves you money3460 Marron Road Suite 103-220

If you buy a home, then sell it to move up to a bigger home, you are going to have to pay Realtor's commissions and closing costs3460 Marron Road Suite 103-220 On a $300,000 house, this would be around $25,0003460 Marron Road Suite 103-220 If you skip buying that home and buy the home you really want, you save that money3460 Marron Road Suite 103-220 Plus, you save money in another way3460 Marron Road Suite 103-220 Say you live in your intermediate purchase for five years, then move up and buy another home with another thirty year mortgage3460 Marron Road Suite 103-220 That is thirty-five years of home loans3460 Marron Road Suite 103-220 If you buy your ideal home now, you save five years of mortgage payments3460 Marron Road Suite 103-220 Depending on your loan amount, that can be a lot of cash3460 Marron Road Suite 103-220

Conclusion

So, when rates start going up this is an attractive alternative to fixed rates3460 Marron Road Suite 103-220 It even makes sense for some borrowers when rates are low3460 Marron Road Suite 103-220 Something we also did not mention is that most COFI lenders also give you a fourth option on your monthly mortgage statement which allows you to pay it off quicker3460 Marron Road Suite 103-220

FICO Score - a Brief Explanation

When you apply for a mortgage loan, you expect your lender to pull a credit report and look at whether you've made your payments on time3460 Marron Road Suite 103-220 What you may not expect is that they seem to be more interested in your "FICO" score3460 Marron Road Suite 103-220

"What's a FICO score?" is a common reaction3460 Marron Road Suite 103-220

Each time your credit report is pulled, it is run through a computer program with a built-in scorecard3460 Marron Road Suite 103-220 Points are awarded or deducted based on certain items such as how long you have had credit cards, whether you make your payments on time, if your credit balances are near maximum, and assorted other variables3460 Marron Road Suite 103-220 When the credit report prints in your lender's office, the total score is displayed3460 Marron Road Suite 103-220 Your score can be anywhere between the high 300's and the low 800's3460 Marron Road Suite 103-220

Lenders wanted to determine if there was any relationship between these credit scores and whether borrowers made their payments on time, so they did a study3460 Marron Road Suite 103-220 The study showed that borrowers with scores above 680 almost always made their payments on time3460 Marron Road Suite 103-220 Borrowers with scores below 600 seemed fairly certain to develop problems3460 Marron Road Suite 103-220

As a result, credit scoring became a more important factor in approving mortgage loans3460 Marron Road Suite 103-220 Credit scores also made it easier to develop artificial intelligence computer programs that could make a "yes" decision for loans that should obviously be approved3460 Marron Road Suite 103-220 Nowadays, a computer and not a person may have actually approved your mortgage3460 Marron Road Suite 103-220

In short, lower credit scores require a more thorough review than higher scores3460 Marron Road Suite 103-220 Often, mortgage lenders will not even consider a score below 6003460 Marron Road Suite 103-220

Some of the things that affect your FICO score are:

Delinquencies
Too many accounts opened within the last twelve months
Short credit history
Balances on revolving credit are near the maximum limits
Public records, such as tax liens, judgments, or bankruptcies
No recent credit card balances
Too many recent credit inquiries
Too few revolving accounts
Too many revolving accounts

FICO actually stands for Fair Isaac and Company, which is the company used by the Experian (formerly TRW) credit bureau to calculate credit scores3460 Marron Road Suite 103-220 Trans-Union and Equifax are two other credit bureaus who also provide credit scores3460 Marron Road Suite 103-220

Items You Need for When Applying For a Loan

Have These Items Ready When You Apply For a Loan

It used to be that lenders mailed out verifications to employers, banks, mortgage companies, and so on, in order to verify the data supplied by borrowers3460 Marron Road Suite 103-220 Nowadays, the interest is often in speed and getting answers quickly, so "alternate documentation" has become more widely used3460 Marron Road Suite 103-220 Alternate documentation means that underwriting answers can be obtained with information supplied directly from the borrower instead of waiting around for verifications to come back in the mail3460 Marron Road Suite 103-220

The following is required for most standardized loans as part of alternate documentation processing3460 Marron Road Suite 103-220 Items may differ according to whether your loan is a conforming (Fannie Mae or Freddie Mac), non-conforming (jumbo) loan, government loan, or a portfolio loan3460 Marron Road Suite 103-220

Verifications are still mailed out, but usually as part of quality control procedures3460 Marron Road Suite 103-220

These are the things you need to supply to your lender to get a quick approval using alternate documentation

Income Items

W2 forms for the last two years
Pay stubs covering a 30 day period
Federal tax returns (1040's) for the last two years, if:

you are self-employed
earn more than 25% of your income from commissions or bonuses
own rental property
or are in a career where you are likely to take non-reimbursed business expenses

Year-to-Date Profit and Loss Statement (for self employed)
Corporate or partnership tax returns (if applicable)
Pension Award letter (for retired individuals)
Social Security Award letters (for those on Social Security)

Asset Items

Bank statements for previous two months (sometimes three) on all accounts3460 Marron Road Suite 103-220 All pages3460 Marron Road Suite 103-220
Statements for two months on all stocks, mutual funds, bonds, etc, etc3460 Marron Road Suite 103-220
Copy of latest 401K statement (or other retirement assets)
Explanations for any large deposits and source of those funds
Copy of HUD1 Settlement Statement on recent sales of homes
Copy of Estimated HUD1 Settlement Statement if a previous home is for sale, but not yet closed
Gift letter (if some of the funds come as a gift from a family member)
Gifts can also require:

Verification of donor's ability to make the gift (bank statement)
Copy of the check used to make the gift
Copy of the deposit receipt showing the funds deposited into bank account or escrow

Credit Items

Landlord's name, address, and phone number (for verification of rental)
Explanations for any of the following items which may appear on your credit report:

Late payments
Credit inquiries in the last 90 days
Charge-offs
Collections
Judgments
Liens

Copy of bankruptcy papers if you have filed bankruptcy within the last seven years

Other

Copy of purchase agreement (if you have already made an offer)
To document receipt of child support (if you desire to show it as income)

Copy of Divorce Settlement (to show the amount)
Copies of twelve months canceled checks to document actual receipt of fund

FHA Loans

Copy of Social Security Card (or other documentation of social security number)
Copy of Driver's license

VA Loans

Copy of DD214

Refinances

Copy of Note on existing loan
Copy of HUD1 Settlement Statement on existing loan
Name, address, phone number, loan number of existing loan/lender

Where Does the Money Come From for Mortgage Loans?

In the "olden" days, when someone wanted a home loan they walked downtown to the neighborhood bank or savings & loan3460 Marron Road Suite 103-220 If the bank had extra funds laying around and considered you a good credit risk, they would lend you the money from their own funds3460 Marron Road Suite 103-220

It doesn't generally work like that anymore3460 Marron Road Suite 103-220 Most of the money for home loans comes from three major institutions:

Fannie Mae (FNMA - Federal National Mortgage Association)
Freddie Mac (FHLMC - Federal Home Loan Mortgage Corporation)
Ginnie Mae (GNMA - Government National Mortgage Association)

This is how it works:

You talk to practically any lender and apply for a loan3460 Marron Road Suite 103-220 They do all the processing and verifications and finally, you own the house and now you have a home loan and you make mortgage payments3460 Marron Road Suite 103-220 You might be making payments to the company who originated your loan, or your loan might have been transferred to another institution3460 Marron Road Suite 103-220 The institution where you mail your payments is called the "servicer," but most likely they do not own your loan3460 Marron Road Suite 103-220 They are simply "servicing" your loan for the institution that does own it3460 Marron Road Suite 103-220

You see, what happens behind the scenes is that your loan got packaged into a "pool" with a lot of other loans and sold off to one of the three institutions listed above3460 Marron Road Suite 103-220 The servicer of your loan gets a monthly fee from the investor for servicing your loan3460 Marron Road Suite 103-220 This fee is usually only 3/8ths of a percent or so, but the amount adds up3460 Marron Road Suite 103-220 There are companies that service over a billion dollars of home loans and it is a tidy income3460 Marron Road Suite 103-220

At the same time, whichever institution packaged your loan into the pool for Fannie Mae, Freddie Mac, or Ginnie Mae, has received additional funds with which to make more loans to other borrowers3460 Marron Road Suite 103-220 This is the cycle that allows institutions to lend you money3460 Marron Road Suite 103-220

What Freddie Mac, Ginnie Mae, and Fannie may do after they purchase the pools, is break them down into smaller increments of $1000 or so, called "mortgage backed securities3460 Marron Road Suite 103-220" They sell these mortgage backed securities to individuals or institutions on Wall Street3460 Marron Road Suite 103-220 If you have a 401K or mutual fund, you may even own some3460 Marron Road Suite 103-220 Perhaps you have heard of Ginnie Mae bonds? Those are securities backed by the mortgages on FHA and VA loans3460 Marron Road Suite 103-220

These bonds are not ownership in your loan specifically, but a piece of ownership in the entire pool of loans, of which your loan is only one among many3460 Marron Road Suite 103-220 By selling the bonds, Ginnie Mae, Freddie Mac, and Fannie Mae obtain new funds to buy new pools so lenders can get more money to lend to new borrowers3460 Marron Road Suite 103-220

And that is how the cycle works3460 Marron Road Suite 103-220

So when you make your payment, the servicer gets to keep their tiny part, and the majority is passed on to the investor3460 Marron Road Suite 103-220 Then the investor passes on the majority of it to the individual or institutional investor in the mortgage backed securities3460 Marron Road Suite 103-220

From time to time your loan may be transferred from the company where you have been making your payment to another company3460 Marron Road Suite 103-220 They aren't selling your loan again, just the right to service your loan3460 Marron Road Suite 103-220

There are exceptions3460 Marron Road Suite 103-220

Loans above $227,150 do not conform to Fannie Mae and Freddie Mac guidelines, which is why they are called "non-conforming" loans, or "jumbo" loans3460 Marron Road Suite 103-220 These loans are packaged into different pools and sold to different investors, not Freddie Mac or Fannie Mae3460 Marron Road Suite 103-220 Then they are securitized and for the most part, sold as mortgage backed securities as well3460 Marron Road Suite 103-220

This buying and selling of mortgages and mortgage backed securities is called "mortgage banking," and it is the backbone of the mortgage business3460 Marron Road Suite 103-220

Types of Mortgage Lenders

Mortgage Bankers

Mortgage Bankers are lenders that are large enough to originate loans and create pools of loans which they sell directly to Fannie Mae, Freddie Mac, Ginnie Mae, jumbo loan investors, and others3460 Marron Road Suite 103-220 Any company that does this is considered to be a mortgage banker3460 Marron Road Suite 103-220

Some companies don't sell directly to those major investors, but sell their loans to the mortgage bankers3460 Marron Road Suite 103-220 They often refer to themselves as mortgage bankers as well3460 Marron Road Suite 103-220 Since they are actually engaging in the selling of loans, there is some justification for using this label3460 Marron Road Suite 103-220 The point is that you cannot reliably determine the size or strength of a particular lender based on whether or not they identify themselves as a mortgage banker3460 Marron Road Suite 103-220

Portfolio lenders

An institution which is lending their own money and originating loans for itself is called a "portfolio lender3460 Marron Road Suite 103-220" This is because they are lending for their own portfolio of loans and not worried about being able to immediately sell them on the secondary market3460 Marron Road Suite 103-220 Because of this, they don't have to obey Fannie/Freddie guidelines and can create their own rules for determining credit worthiness3460 Marron Road Suite 103-220 3460 Marron Road Suite 103-220 Usually these institutions are larger banks and savings & loans3460 Marron Road Suite 103-220

Quite often only a portion of their loan programs are "portfolio" product3460 Marron Road Suite 103-220 If they are offering fixed rate loans or government loans, they are certainly engaging in mortgage banking as well as portfolio lending3460 Marron Road Suite 103-220

Once a borrower has made the payments on a portfolio loan for over a year without any late payments, the loan is considered to be "seasoned3460 Marron Road Suite 103-220" Once a loan has a track history of timely payments it becomes marketable, even if it does not meet Freddie/Fannie guidelines3460 Marron Road Suite 103-220

Selling these "seasoned" loans frees up more money for the "portfolio" lender to make more loans3460 Marron Road Suite 103-220 If they are sold, they are packaged into pools and sold on the secondary market3460 Marron Road Suite 103-220 You will probably not even realize your loan is sold because, quite likely, you will still make your loan payments to the same lender, which has now become your "servicer3460 Marron Road Suite 103-220"

Direct Lenders

Lenders are considered to be direct lenders if they fund their own loans3460 Marron Road Suite 103-220 A "direct lender" can range anywhere from the biggest lender to a very tiny one3460 Marron Road Suite 103-220 Banks and savings & loans obviously have deposits they can use to fund loans with, but they usually use "warehouse lines of credit" from which they draw the money to fund the loans3460 Marron Road Suite 103-220 Smaller institutions also have warehouse lines of credit from which they draw money to fund loans3460 Marron Road Suite 103-220

Direct lenders usually fit into the category of mortgage bankers or portfolio lenders, but not always3460 Marron Road Suite 103-220

One way you used to be able to distinguish a direct lender was from the fact that the loan documents were drawn up in their name, but this is no longer the case3460 Marron Road Suite 103-220 Even the tiniest mortgage broker can make arrangements to fund loans in their own name nowadays3460 Marron Road Suite 103-220

Correspondents

Correspondent is usually a term that refers to a company which originates and closes home loans in their own name, then sells them individually to a larger lender, called a sponsor3460 Marron Road Suite 103-220 The sponsor acts as the mortgage banker, re-selling the loan to Ginnie Mae, Fannie Mae, or Freddie Mac as part of a pool3460 Marron Road Suite 103-220
The correspondent may fund the loans themselves or funding may take place from the larger company3460 Marron Road Suite 103-220 Either way, the loan is usually underwritten by the sponsor3460 Marron Road Suite 103-220

It is almost like being a mortgage broker, except that there is usually a very strong relationship between the correspondent and their sponsor3460 Marron Road Suite 103-220

Mortgage Brokers

Mortgage Brokers are companies that originate loans with the intention of brokering them to lending institutions3460 Marron Road Suite 103-220 A broker has established relationships with these companies3460 Marron Road Suite 103-220 Underwriting and funding takes place at the larger institutions3460 Marron Road Suite 103-220 Many mortgage brokers are also correspondents3460 Marron Road Suite 103-220

Mortgage brokers deal with lending institutions that have a wholesale loan department3460 Marron Road Suite 103-220

Wholesale Lenders

Most mortgage bankers and portfolio lenders also act as wholesale lenders, catering to mortgage brokers for loan origination3460 Marron Road Suite 103-220 Some wholesale lenders do not even have their own retail branches, relying solely on mortgage brokers for their loans3460 Marron Road Suite 103-220
These wholesale divisions offer loans to mortgage brokers at a lower cost than their retail branches offer them to the general public3460 Marron Road Suite 103-220 The mortgage broker then adds on his fee3460 Marron Road Suite 103-220 The result for the borrower is that the loan costs about the same as if he obtained a loan directly from a retail branch of the wholesale lender3460 Marron Road Suite 103-220

Banks and Savings & Loans - Banks and savings & loans usually operate as portfolio lenders, mortgage bankers, or some combination of both3460 Marron Road Suite 103-220

Credit Unions - Credit Unions usually seem to operate as correspondents, although a large one could act as a portfolio lender or a mortgage banker3460 Marron Road Suite 103-220

The Advantages of Different Types of Mortgage Lenders

What kind of lender is "best?"

If you ask a loan officer, "What kind of lender is best?" it is going to be whatever kind of company he works for and he will give you a list of reasons why3460 Marron Road Suite 103-220 If you meet the same loan officer years later, and he works for a different kind of lender, he will give you a list of reasons why that type of lender is better3460 Marron Road Suite 103-220

Realtors will also have differing opinions, and their opinions have changed over time3460 Marron Road Suite 103-220 In the past, it seemed like most would often recommend portfolio lenders3460 Marron Road Suite 103-220 Now they usually recommend mortgage bankers and mortgage brokers3460 Marron Road Suite 103-220 Most often they direct you to a specific loan officer who has demonstrated a track record of service and reliability3460 Marron Road Suite 103-220

This article discusses the advantages and disadvantage of different types of institutions, not the individual loan officers3460 Marron Road Suite 103-220 However, it is often more important to choose the correct loan officer, not the institution3460 Marron Road Suite 103-220 The loan officer has many responsibilities, one of which is to act as your representative and advocate to the lender he works for or the institutions he brokers loans to3460 Marron Road Suite 103-220 You want someone who has proven dependable and ethical in the past3460 Marron Road Suite 103-220

Regarding the institutions, the truth of the matter is that each type of lender has strengths and weaknesses3460 Marron Road Suite 103-220 This does not even take into account the variety of other factors that influence whether a lender is "good" or "bad3460 Marron Road Suite 103-220" Quality can vary, depending on the loan officer, the support staff, which branch or office you are obtaining your loan from, and a variety of other factors3460 Marron Road Suite 103-220

PORTFOLIO LENDERS

Savings & Loans are quite often portfolio lenders, as are some banks3460 Marron Road Suite 103-220 Portfolio lenders generally promote their own portfolio loans, which are usually adjustable rate loans3460 Marron Road Suite 103-220 They will often pay more compensation to their loan officers for originating a portfolio product than for originating a fixed rate loan3460 Marron Road Suite 103-220 You may also find that they are not as competitive as mortgage bankers and brokers in the fixed rate loan market3460 Marron Road Suite 103-220

However, it is often easier to qualify for a portfolio loan, so borrowers who may not qualify for a fixed rate loan may be able to obtain a loan from a portfolio lender3460 Marron Road Suite 103-220 A borrower may be able to qualify for a larger loan from a portfolio lender than he could obtain from a fixed rate lender3460 Marron Road Suite 103-220

Portfolio lenders also can serve as "niche" lenders because certain things are more important to them than meeting the more standardized underwriting guidelines of a mortgage banker3460 Marron Road Suite 103-220 An example would be a savings & loan which is more concerned with an individual's savings history than being able to fully document income, among others things3460 Marron Road Suite 103-220

If you apply for a loan with a portfolio lender and you are declined, you usually have to start the process over with a new company3460 Marron Road Suite 103-220

MORTGAGE BANKERS

If we are talking about the larger mortgage bankers, you can count on them having several strengths3460 Marron Road Suite 103-220 For the biggest ones, you will recognize the "brand name3460 Marron Road Suite 103-220"

Usually, they are much better at promoting special first time buyer programs offered by states and local governments, that have lower interest rates and costs than the current market rate3460 Marron Road Suite 103-220 These programs are often available to buyers who have not owned a home in the last three years and fall within certain income guidelines3460 Marron Road Suite 103-220

Mortgage bankers may have problems just because they are "too big" or they may operate like well oiled machines3460 Marron Road Suite 103-220
If you are buying a home and you need a VA or FHA loan and the development you are buying in has not yet been approved, they will be better at getting it approved than other lenders3460 Marron Road Suite 103-220

If your home loan is declined for some reason, many mortgage bankers allow their loan officers to broker the loan to another institution3460 Marron Road Suite 103-220 However, because your loan officer is so used to promoting the company's product, he may not be familiar with which institution may be the best one to submit your loan to3460 Marron Road Suite 103-220 Another reason is because wholesale lenders do not expect to get many loans from direct mortgage bankers, so they do not expend much marketing effort on them3460 Marron Road Suite 103-220

BANKS and SAVINGS & LOANS

Their major strength is that you will recognize their name3460 Marron Road Suite 103-220 In addition, they will usually be operating as a mortgage banker3460 Marron Road Suite 103-220 a portfolio lender, or both, and have the same weaknesses and strengths3460 Marron Road Suite 103-220

MORTGAGE BROKERS

The major strength of mortgage brokers is that they can shop the wholesale lenders for which lender has the best rate much easier than a borrower can on his own3460 Marron Road Suite 103-220 They also learn the "hot points" of certain wholesale lenders and can hand-pick the lender for a borrower which may be unique in some way3460 Marron Road Suite 103-220 He will be able to advise you whether your loan should be submitted to a portfolio lender or a mortgage banker3460 Marron Road Suite 103-220 Another advantage is that, if a loan gets declined for some reason, they can simply repackage the loan and submit it to another wholesale lender3460 Marron Road Suite 103-220

One additional advantage is that mortgage brokers tend to attract a high number of the most qualified loan officers3460 Marron Road Suite 103-220 This is not universal3460 Marron Road Suite 103-220 Mortgage brokers also serve as the training ground for those just entering the business3460 Marron Road Suite 103-220 If you have a new loan officer and there is something unique about you or the property you are buying, there could be a problem on the horizon that an experienced loan officer would have anticipated3460 Marron Road Suite 103-220

A disadvantage is that mortgage brokers sometimes attract the greediest loan officers, too3460 Marron Road Suite 103-220 They may charge you more on your loan which would then nullify the ability of the mortgage broker being able to "shop" for the lowest rate3460 Marron Road Suite 103-220

WHOLESALE LENDERS

Borrowers cannot get access to the wholesale divisions of mortgage bankers and portfolio lenders without going through a broker3460 Marron Road Suite 103-220

When Realtors or Builders Recommend a Lender

If your Realtor or builder make a suggestion for a lender, be sure to talk to that lender3460 Marron Road Suite 103-220 One reason Realtors and builders make suggestions has to do with the fact that they have regular dealings with this lender and have come to expect a certain amount of reliability3460 Marron Road Suite 103-220 Reliability is extremely important to all parties involved in a real estate transaction3460 Marron Road Suite 103-220

On the other hand, a recent trend in mortgage lending has been for real estate companies and builders to own their own mortgage companies or create "controlled business arrangements" (CBA's) in order to increase their profitability3460 Marron Road Suite 103-220 These mortgage brokers sometimes become used to having what is essentially a "captured market" and may not necessarily offer you the lowest rates or costs3460 Marron Road Suite 103-220

Some real estate companies also offer different types of incentives to their Realtors to recommend their company-owned mortgage and escrow companies or lenders with whom they have CBA's3460 Marron Road Suite 103-220 Dealing with one of these lenders is not necessarily a bad thing, though3460 Marron Road Suite 103-220 The builder or real estate company often feel they have more ability to expedite matters when they own the company or have a controlled business relationship3460 Marron Road Suite 103-220 They cannot usually influence the underwriting decision, but they can sometimes cut through "red tape" to handle problems or speed up the process3460 Marron Road Suite 103-220 Builders are especially forceful on having you use their lender3460 Marron Road Suite 103-220 One reason is that there are certain intricacies in dealing with new homes3460 Marron Road Suite 103-220 If you use a loan officer who usually deals with refinances or resale home loans, he may not even be aware of how different it is to close a mortgage on a new home and this can lead to problems or delays3460 Marron Road Suite 103-220

It is in your interest to know if there is any kind of ownership relationship or controlled business arrangement between the real estate or builder and the lender, so be sure to ask3460 Marron Road Suite 103-220 Do not automatically disqualify such a lender, but be sure to be more vigilant on getting the best interest rate and the lowest costs3460 Marron Road Suite 103-220

CONCLUSION

Make sure to do a little shopping for yourself3460 Marron Road Suite 103-220 By knowing the interest rates of the market and making sure your loan officer knows you are looking at rates from other institutions, you can use that as leverage to make sure you are obtaining the best combination of service and lowest rates3460 Marron Road Suite 103-220

The No-Cost Thirty Year Fixed Rate Mortgage

There really is no such thing as a "no-cost" mortgage loan3460 Marron Road Suite 103-220 There are always costs, such as appraisal fees, escrow fees, title insurance fees, document fees, processing fees, flood certification fees, recording fees, notary fees, tax service fees, wire fees, and so on, depending on whether the loan is a purchase or a refinance3460 Marron Road Suite 103-220 The term "no-cost" actually means that your lender is paying the costs of the loan3460 Marron Road Suite 103-220 All a "no cost" loan means is that there is no cost to you, the borrower3460 Marron Road Suite 103-220

Except that you pay a higher interest rate3460 Marron Road Suite 103-220

Understand How Loans Are Priced

A variation of the no-cost loan is the "no points" loan, or even the "no points, no lender fees" loan3460 Marron Road Suite 103-220 On these loans you pay all the costs associated with buying a house or refinancing, but you do not have to pay the lender associated fees or points3460 Marron Road Suite 103-220 However, since lenders and loan officers do not do anything for free, the profit has to come from somewhere3460 Marron Road Suite 103-220

So where does it come from?

First, you have to understand how loans are priced and how mortgage lenders and loan officers earn income3460 Marron Road Suite 103-220 Each morning mortgage companies create rate sheets for loan officers3460 Marron Road Suite 103-220 The rates usually change slightly from day to day3460 Marron Road Suite 103-220 In volatile markets they change several times a day3460 Marron Road Suite 103-220 On the rate sheet, there are many different programs, including the thirty year fixed rate3460 Marron Road Suite 103-220

There will be one column which will lists several different interest rates and another column that lists the "cost" for that particular rate3460 Marron Road Suite 103-220 For example:



          Rate          Cost(points)



          ======       =============



          63460 Marron Road Suite 103-220250%           23460 Marron Road Suite 103-220000



          63460 Marron Road Suite 103-220375%           13460 Marron Road Suite 103-220500



          63460 Marron Road Suite 103-220500%           13460 Marron Road Suite 103-220000



          63460 Marron Road Suite 103-220625%           03460 Marron Road Suite 103-220500



          63460 Marron Road Suite 103-220750%           03460 Marron Road Suite 103-220000



          63460 Marron Road Suite 103-220875%          (03460 Marron Road Suite 103-220500)



          73460 Marron Road Suite 103-220000%          (13460 Marron Road Suite 103-220000)



          73460 Marron Road Suite 103-220125%          (13460 Marron Road Suite 103-220500)



          73460 Marron Road Suite 103-220250%          (23460 Marron Road Suite 103-220000)

In the above example, 63460 Marron Road Suite 103-22075% has a "par" price, which means it has a zero cost3460 Marron Road Suite 103-220 The lower in rate you go, the higher the cost, or "points3460 Marron Road Suite 103-220" A point is equal to one percent of the loan amount3460 Marron Road Suite 103-220 The parentheses in the cost column for the higher interest rates indicates a negative number3460 Marron Road Suite 103-220 For example, (13460 Marron Road Suite 103-220500) equals -13460 Marron Road Suite 103-220500, which means instead of having a cost associated with the loan, the lender is willing to pay out money for those interest rates3460 Marron Road Suite 103-220 This is called "premium" or "rebate" pricing3460 Marron Road Suite 103-220

-- Zero Cost Loans --

How Mortgage Companies and Loan Officers Make Money

The above rate sheet is not a rate sheet designed for public review3460 Marron Road Suite 103-220 In fact, most lenders have a policy that the public cannot see their internal rate sheet3460 Marron Road Suite 103-220 This rate sheet is designed for loan officers and the cost column is the loan officer's cost, not the cost to the borrower3460 Marron Road Suite 103-220 When the loan officer quotes you an interest rate, he will add on a certain amount, usually one to one and a half points3460 Marron Road Suite 103-220 Most companies leave it up to the loan officer's discretion how much to add on to the base cost3460 Marron Road Suite 103-220 However, they usually require at least a minimum add-on, which is usually one point3460 Marron Road Suite 103-220

The loan officer's commission depends on his "split" with the company and can vary3460 Marron Road Suite 103-220 He receives a portion of the add-on and the rest goes to the company3460 Marron Road Suite 103-220

If we assume the loan officer is adding on one point, and you were willing to pay one point for your loan, then your rate would be (according to this rate sheet) 63460 Marron Road Suite 103-22075%3460 Marron Road Suite 103-220 You would pay one percentage point and receive an interest rate of six and three-quarters3460 Marron Road Suite 103-220 If you wanted a lower rate and were willing to pay two points, you could get six and a half percent3460 Marron Road Suite 103-220 If you wanted a "no points" loan, then your rate would be seven percent3460 Marron Road Suite 103-220
The loan officer and the mortgage company would split the one point rebate, listed as (13460 Marron Road Suite 103-220000) on the rate sheet3460 Marron Road Suite 103-220

See how it works?

In addition to the cost noted on the rate sheet above, lenders have certain other fees they like to collect, too3460 Marron Road Suite 103-220 These can include document fees, processing fees, underwriting fees, warehouse fees, flood certification fees, wire transfer fees, tax service fees, and so on3460 Marron Road Suite 103-220 Usually, you will not be charged all of these fees, it is just that different lenders call them different things3460 Marron Road Suite 103-220 Some of them are legitimate costs to the lender and some of them are simply fees designed to generate additional income to the mortgage company3460 Marron Road Suite 103-220 They are customary in today's mortgage market and can vary from around $600 to $13003460 Marron Road Suite 103-220 In addition, there will usually be an appraisal fee and a credit report fee3460 Marron Road Suite 103-220 Appraisals and credit reports are usually contracted out to independent companies even though these are considered to be lender fees3460 Marron Road Suite 103-220

Note that it is common for companies who charge higher fees to have a slightly lower interest rate and companies that charge lower fees will usually have a slightly higher interest rate3460 Marron Road Suite 103-220 So if you shop entirely based on fees, you may actually spend more money in the long run because your interest rate may be higher3460 Marron Road Suite 103-220

The point is that if you want a "no points - no lender fees" loan, then on our rate sheet above, you may get an interest rate of 73460 Marron Road Suite 103-220125%3460 Marron Road Suite 103-220 That is because the loan officer has to bump the interest rate even further than on a "no points" loan in order to cover his own company's fees3460 Marron Road Suite 103-220

If you want a "no cost" loan, then the loan officer has to bump your interest rate even further3460 Marron Road Suite 103-220 That is because all of the costs on your purchase or refinance do not come from the lender3460 Marron Road Suite 103-220 The escrow or settlement company involved in your transaction will charge a fee which must be paid3460 Marron Road Suite 103-220 The lender will require title insurance and the title insurance company charges a fee for providing this insurance3460 Marron Road Suite 103-220 If your new lender requires information from your homeowner's association (if you have one) then the homeowner's association will most likely charge a fee for providing those documents3460 Marron Road Suite 103-220 If you are refinancing, your current lender will usually charge at least two fees: a "demand" fee, and a "reconveyance" fee3460 Marron Road Suite 103-220 The demand fee is charged simply for providing payoff information3460 Marron Road Suite 103-220 The reconveyance fee is charged because your current lender prepares a document which releases your property as collateral for their outstanding loan3460 Marron Road Suite 103-220 This document is called a reconveyance3460 Marron Road Suite 103-220

These charges will add about another point to how much the loan officer must collect in premium pricing in order to cover the costs associated with your refinance or purchase3460 Marron Road Suite 103-220 For a zero cost loan, he will normally need to collect somewhere in the neighborhood of two and a half points3460 Marron Road Suite 103-220 Because points are a percentage of your loan amount and most of the costs are fixed, it takes fewer points to provide zero costs on higher loan amounts3460 Marron Road Suite 103-220 On smaller loan amounts it takes more3460 Marron Road Suite 103-220 One percent of $200,000 is two thousand dollars and one percent of $100,000 is only $1000, so you can see how it is easier to cover costs on larger loans3460 Marron Road Suite 103-220

Does it makes sense to do a zero cost loan?

On a $200,000 thirty year fixed rate loan, the difference in monthly mortgage payments will be about $87, using the example rate sheet on the first page3460 Marron Road Suite 103-220 Over thirty years, it works out that you will pay more than $30,000 extra for getting a zero cost loan3460 Marron Road Suite 103-220 So if you intend to remain in the home for a long period of time it just doesn't make sense3460 Marron Road Suite 103-220

Suppose you intend to stay for only five years? On a purchase, using the $200,000 example, if you stayed longer than fifty-five months, it would make more sense to pay your own costs and get the lower interest rate3460 Marron Road Suite 103-220 If you kept the loan for a shorter time, then it makes more sense to pay zero costs and get a higher interest rate3460 Marron Road Suite 103-220

Except for one thing3460 Marron Road Suite 103-220

If you knew you were only going to be staying in the home for five years you would probably not want a thirty year fixed rate, anyway3460 Marron Road Suite 103-220 You would get a loan which has a fixed payment for the first five years, then convert to an adjustable or whatever fixed rates are five years from now3460 Marron Road Suite 103-220 These loans have an interest rate almost a half percent lower than thirty year fixed rate loans3460 Marron Road Suite 103-220 Since it is practically impossible to do a zero cost loan on this type of loan, you would have to compare a zero cost thirty year fixed rate loan to paying points on a loan with a fixed payment for five years3460 Marron Road Suite 103-220

The difference in payments would be about $1503460 Marron Road Suite 103-220 The two and a half point rebate equals $50003460 Marron Road Suite 103-220 Working out the math, if you stayed in the home longer than thirty-three months, it would make more sense to pay the points and get the loan with the five year fixed rate3460 Marron Road Suite 103-220

Finally, carry the discussion one step further3460 Marron Road Suite 103-220 Suppose you know you are going to be in the new loan for less than three years? Doesn't it make sense to get a "zero cost" loan then?

No3460 Marron Road Suite 103-220

Then you get an adjustable rate loan3460 Marron Road Suite 103-220 As long as the start rate is two percent lower than the current fixed rate, you cannot lose3460 Marron Road Suite 103-220 The first year you will save a lot of money3460 Marron Road Suite 103-220 The second year you will probably break even3460 Marron Road Suite 103-220 The third year, you will probably give up some of the savings from the first year, but not all of them3460 Marron Road Suite 103-220

"Zero cost" loans just don't make sense for homebuyers3460 Marron Road Suite 103-220
But they sound really good in an advertisement3460 Marron Road Suite 103-220

Exceptions:

On a FHA Streamline Refinance Without an Appraisal (not a purchase - which is what the article talks about), it makes sense to do a zero cost loan3460 Marron Road Suite 103-220 This is mostly because the new loan has to be exactly the same amount as the existing balance of the current loan3460 Marron Road Suite 103-220
If the homebuyer only has enough money for down payment and none to cover closing costs, PLUS no arrangement can be made for the seller to pay closing costs, then zero costs may make sense (however, I would still recommend negotiating terms with the homeseller - be willing to pay a higher price in exchange for the seller paying your costs)

Land Contract

An alternative to a non-conforming loan is the use of a land contract, which is allowed in some states3460 Marron Road Suite 103-220 A land contract is an agreement between a buyer and a seller, where the buyer agrees to make periodic payments to the seller3460 Marron Road Suite 103-220 The title to the property only transfers to the land contract buyer on fulfillment of the land contract obligations3460 Marron Road Suite 103-220
A land contract can be helpful for those who need time to establish or improve their credit rating3460 Marron Road Suite 103-220 There are only small closing costs, and payment can help establish a good mortgage payment record3460 Marron Road Suite 103-220 This can help establish an overall good credit rating, and it is possible for the buyer to later refinance the land contract with a conforming loan3460 Marron Road Suite 103-220
On the other hand, there are risks associated with land contracts3460 Marron Road Suite 103-220 Land contract purchases are not necessarily recorded in the public record, and there are no guarantees that the seller will be able to transfer a clear title to the buyer upon fulfillment of the land contract3460 Marron Road Suite 103-220 There also is no lender assuring that the purchase price for the property is justified, and no inspection of the property's condition3460 Marron Road Suite 103-220
Another alternative to a non-conforming loan is assuming the seller's mortgage3460 Marron Road Suite 103-220 By assuming a mortgage, if the mortgage is assumable, it is possible to save on closing costs, and may allow you to obtain a favorable interest rate3460 Marron Road Suite 103-220

Grover Realty Inc - Find information on Buying Apartments in Oceanside and Buying Apartments in Vista3460 Marron Road Suite 103-220 View the listing for Buying Apartments in Vista and Buying Apartments in Oceanside from www3460 Marron Road Suite 103-220groverrealty3460 Marron Road Suite 103-220com3460 Marron Road Suite 103-220