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Three Mortgage Mistakes You Can Avoid

by Tara-Nicholle Nelson, Inman News



The mortgage market is in a state of tumult these days. Rates are bizarrely low, but many homes are worth much less than the mortgage balances they secure. People are still losing their homes left and right, but millions of mortgage applications of creditworthy borrowers are being rejected every year.

Against this backdrop, it's really no wonder that would-be buyers and homeowners alike are in a state of confusion about which end is up in the mortgage marketplace.

To shed some light into this darkness, here are three very common mortgage mistakes that you might be making as we speak -- and some strategies for avoiding or correcting them.

1. Failing to try to refinance because you're upside-down. At last count, nearly 11 million Americans were upside-down on their homes -- meaning they owe more in mortgage(s) than the home is worth -- and that's about 23 percent of all American homes. With interest rates having dropped to historic low after historic low, more than 10 million Americans have refinanced their mortgages since 2009.

But most homeowners with negative equity feel like they are trapped in their 6, 7 or even 8 percent interest mortgages, unable to save the hundreds of dollars every month of a mortgage at today's sub-4 percent rates, because no lender will refinance them.

The fact is, multiple options abound for lowering your interest rate and monthly payment if you're upside down on your home loan. Banks are increasingly amenable to simply modify existing mortgages to render them less prone to default and foreclosure -- especially when the homeowner is trying to recover from a financial hardship like interrupted income due to job loss or illness, and especially with upside-down loans (which are particularly liable to strategic default, without modification).

Also, many banks offer refis on mortgages as much as 25 percent underwater (so long as no payments have been missed) through the Obama administration's Home Affordable Refinance Program and the less widely adopted Federal Housing Administration Short Refinance Program.

Contact your own mortgage bank's loss mitigation division about a loan modification or a refi under HARP, or reach out to any mortgage broker that offers FHA loans to apply for the Short Refi Program.


2. Walking into the bank branch to get a mortgage. Not to jump on the anti-bank bandwagon, but unless your bank happens to be a neighborhood credit union or one of the few large banks that ranks highly in customer satisfaction (e.g., USAA), you'll likely not be satisfied with the speed, customer service or assertiveness of a mortgage banker you meet just walking into the branch.
If you work with a mortgage broker or a private mortgage banker you meet by referrals from your circle of friends and relatives, chances are good you'll get someone who understands that the long-term health of their business depends on you and clients like you getting a deal closed in a timely manner.

Specifically, you should request referrals from folks you know who have bought or refinanced homes relatively recently, as the mortgage pros who are still in business and closing deals successfully these days are necessarily skilled at navigating a very tricky and restrictive mortgage market.

Also, if you work with a mortgage broker whose company also has its own bank, you get the best of both worlds: a professional who will shop lots of banks' offerings to find the best options for you, and someone who can coordinate your transaction via a small pool of local, experienced appraisers. Many large banks select appraisers who don't know the area, which can kill your deal in the long run.

3. Thinking you're stuck with it for 30 years. I've heard people say they didn't want to buy a home because they were depressed by the thought of a debt that would last 30 years. I've heard others regret that they couldn't afford the payment on a 15-year mortgage and instead were stuck with a 30-year loan.

The fact is, you control when you pay your mortgage off, and it doesn't take a lottery or inheritance windfall to pay yours off sooner than later.

Some people pay half their mortgage payment every two weeks, which results in a full extra payment every year and can pay your mortgage off as much as five years early. Others just pay an extra $100 or so as often as they can, and ask their loan servicer to apply the overage to principal.

Some do much more, applying paycheck raises over the years or amounts they once paid to extinguish credit card debt toward their mortgage balances in an effort to pay them off early.
The theme is that, as a borrower, you may have much more power than you thought, from exploring little-known options for getting your upside-down mortgage's payment lowered to being aggressive about paying your home off sooner rather than later. So get clear on your personal goals for your mortgage, get educated about your options and get assertive about making them happen -- now.

Secrets to getting a mortgage with so-so credit

by Les Christie

Getting a mortgage can be tough these days -- even people with near-perfect credit have been rejected for loans. But for some lucky borrowers, things aren't as bad as the doom-and-gloom crowd says.

At a recent press conference, Federal Reserve Chairman Ben Bernanke said lending standards for mortgages have tightened so considerably that "the bottom third of people who might have qualified for a prime mortgage in terms of, say, FICO scores a few years ago -- cannot qualify today."

Indeed, roughly one-in-four mortgage applicants was denied in 2010, up from about 18% in 2003, according to data from the Federal Financial Institutions Examination Council. And those are just the ones that apply -- many discouraged potential borrowers don't even bother to apply anymore.

Yet, there is money to lend. Bob Ryan, the acting commissioner for the U.S. Department of Housing and Urban Development, or HUD, recently said that mortgage money "is flowing, it's stable, it's tightened from the boom years, but it's there."

And many of those potential home buyers sitting on the sidelines may just have a shot at it -- as long as they take a few crucial steps.

"The belief is that you can't get a mortgage at all -- but you can," Keith Gumbinger, of the mortgage information provider HSH Associates.

What you need for traditional mortgages:
Most of the major mortgage underwriters have only returned to the more prudent standards of the days before the housing bubble. Now, according to Tuck Bradford, a branch manager with lender Mortgage Master, borrowers usually must meet four criteria in order to get a mortgage backed by Fannie Mae or Freddie Mac, the two government-run mortgage giants:

• The ability to make a 20% down payment, plus closing costs.
• A good credit score. Borrowers usually need a minimum credit score of 620.
• Enough income to afford payments. The general rule of thumb: no more than 28% of your gross income should go toward housing costs.

• A loan-to-value ratio of 80%. Lenders want the home value to far exceed the mortgage balance because if a borrower defaults, the bank sells the home to recoup the loss.
In today's market, however, even having all four of these factors in place doesn't always guarantee that you will get a loan.

Steve Habetz, a loan officer in Westport, Conn. had a client who was seeking to refinance but he had a single blemish scarring an otherwise spotless credit report. The client had a couple million dollars in assets, high income, ample home equity -- and a strong credit score of 700.
"This guy was a Boy Scout when it came to paying debts," said Habetz. "He had never been late."

Yet, Habetz couldn't get him a mortgage. The problem: an investment property the client had owned and tried to unload but couldn't (thanks to the housing bust). He eventually resorted to a short sale -- a deal in which the proceeds of the sale are insufficient to pay the amount owed on the mortgage and the bank agrees to forgive the losses.

Not only did the short sale lop 100 points or so off his credit score, but it also resulted in an automatic rejection of his refinance application.

"It's maddening," said Habetz. "Other than that one detail, he's very low risk. Because he had the short sale, he's out of the box for two years."

But, for every client like Habertz's who gets rejected, there are those who have been much luckier at landing mortgage loans. And typically, they have turned to the Federal Housing Administration for help.

"The FHA is just about as free and easy as it was in the go-go days," said Gumbinger.

Standards for these loans, insured by the FHA and issued by regular mortgage lenders, are flexible and aimed at making mortgage borrowing easier, especially for working-class Americans.

For years, the FHA had no minimum credit score requirement at all. Now though, it requires a minimum of 580 to qualify for a 3.5%-down loan and 500 for a 10%-down mortgage.

In practice, however, some banks will impose higher standards, according to Scott Sheldon, a loan officer with First California Mortgage in Sonoma County, Calif.

"We FHA lenders have to protect ourselves and we've been going with a 640 minimum for a 3.5% mortgage," he said.

How one high-risk borrower got lucky:
Sheldon had one client who seemed like an impossible case. The client was buying a home in Healdsburg, California, the heart of Sonoma's wine country. His credit score was just over 600, he was paying alimony and child support and he only had enough money for a small down payment. And there was one additional tiny problem: He had just emerged from bankruptcy in April 2009.

In other ways, he was low-risk borrower. He grossed $10,000 a month, ample enough to satisfy debt-to-income guidelines on the $315,000 home he was buying, and he was able to document a stable work history.

The client knew he had to raise his credit score above the 600 level in order to improve his chances. So he paid a credit repair service, Lexington Law, about $500 to find and correct errors in his records. That helped boost his score above 640.

The client got the loan and closed on a home a couple weeks ago. The bankruptcy made it tough -- but not impossible.

As Melanie Roussell, a spokeswoman for the FHA explained, the agency is willing to overlook a blemish on a credit report -- even a big one -- if other factors are favorable.
In today's unforgiving housing market, that's music to a borrower's ears.

 

After falling sharply in the second half of 2010, mortgage rates climbed in the 1st quarter of 2011. Strength from a variety of economic indicators including consumer spending, confidence and even housing led the 10-year Treasury higher. This pattern dragged the rate on the average 30-year fixed upward with the Treasury. As a result the spread between the 10-year and the 30-year FRM shrank. This pattern is likely to reverse course in the 2nd quarter as fighting in Libya and uncertainty in Egypt have caused oil prices to spike. In addition, the tsunami and subsequent nuclear disaster in Japan impacted supply chains necessary for production by U.S. firms. The combined effect was a reduction in economic growth in the 1st quarter. This unexpected shock drew down expectation for economic growth and the 10-year Treasury. Mortgage rates have followed suit and were well below 5% as of May. Rates are likely to remain low in the near term, but are expected to reach 5.6% by the 4th quarter of 2011.

FHA Mortgages are an Affordable Alternative for Home Buyers

by Greg Eckert, Ulster Savings

 

The Federal Housing Administration‘s (FHA) mission is to insure affordable mortgage loans to home buyers looking to purchase a 1-4 family home as a primary residence. They have been invaluable in helping plug the hole created when private insurance companies and conventional mortgages guidelines tightened after the housing crisis. While attractive to the first time buyer, being a first time buyer is not a requirement to obtain an FHA insured mortgage. The home must be the borrower’s primary residence, and there are maximum loan limits, which are set depending on the County in which the home is located. For example, the maximum mortgage limit for a single family home in Ulster County is currently $406,250.

An FHA loan is a popular mortgage option due to flexible guidelines that allow for down payments as low as 3.5%. The down payment can be a gift from a family member or a grant from a not-for-profit housing agency. FHA also allows borrowers to negotiate up to a 6% seller concession toward a purchaser’s closing costs and prepaid items. The net result is that FHA loans allow a borrower to buy a home with less money “out of pocket” – very important to today’s buyers!

The FHA has had a reputation for having very stringent appraisal guidelines. While the FHA certainly wants the house to be in good condition, they have relaxed some of the appraisal requirements to fall more in line with conventional loan standards. The FHA still does have some hot-button items. For example, wells and septic fields

should be at least 100 feet apart, although some exceptions apply. They also require certain safety issues to be corrected prior to closing. For example, hand rails near steps that are missing may need to be installed, and any peeling paint that might contain lead will need to be scraped and repainted.

Low down payments, generous loan limits, and flexible credit underwriting has made FHA mortgages an affordable alternative for many of today’s home buyers.

The key to a smooth FHA mortgage process is to work with a loan officer who is experienced in all aspects of the program. A knowledgeable loan officer will walk prospective home buyers through the FHA mortgage process and help determine if they qualify for this popular mortgage program.

Improve Your Credit Score Before Searching for a Home

by Paige Tepping

Many prospective homeowners find out the hard way the importance of a good credit score when they apply for a home mortgage, especially after the subprime loan crisis. If you are considering buying a home in the near future, it is a good idea to give your credit score a check-up and then take positive steps to improve your credit score if you find problems. Ideally, it is best to begin working on improving your credit score at least six months before you plan to start shopping for a home.

According to the experts at Buy-and-Sell-House-Fast.com, the following tips will help you improve your credit and should be taken before you begin your home search.

The first critical step in taking care of your credit is to check your credit report. Unfortunately, many people fail to take this all important first step. Instead, they wait until they have applied for a mortgage loan to find out from the lender that there are problems with their credit scores.

By checking your credit score before you apply for a mortgage loan, you gain the opportunity to find out if there are problems which you can correct and discrepancies that need to be removed. When you check your credit report, make sure you check all three of the national credit reporting agencies: Experian, Trans-Union and EquiFax.

Review your credit report carefully for items that may be erroneous. If you believe that an item on your credit report is reported in error, you have the right to contest it. To do so, you will need to contact the credit reporting agency and explain why you believe the item is inaccurate. Supporting documentation such as receipts and cancelled checks can help your claim. Alternatively, you can engage a credit report repair services firm to fix your credit report.

If there are derogatory items on your credit report that are accurate but which could cause problems in your loan application, you cannot have them removed; however, you can take positive steps to counteract them. In the event that you have missed payments in the past, take steps now to get your bills current. Even if it means tapping into money that you might be planning to use for a down payment, it is essential that you get your accounts current and keep them that way. Begin by immediately making your payments on time. There is nothing which can lower your credit score more quickly than late payments. Ideally, make an attempt to begin sending in your payments a few days ahead of time to make sure they arrive on time and you do not have any more late payments on your record. If necessary, begin taking advantage of electronic payments in order to make sure your payments are made on time. Over time, this can make significant difference.

Keep in mind that eradicating all of your credit balances is really not the solution. In fact, credit can be your friend when you are looking to make a big purchase such as a home. The key is to make sure your credit is positive, not negative. Toward that end, avoid actually closing out your accounts. Instead, make an effort to pay down your balances and keep them paid down well below the minimum or completely paid off, but do not close the account. When your lender runs your credit to make a decision on your mortgage application, he or she will want to see that you have had a long credit management history.

After reviewing your credit history, if you see that most, if not all of your credit cards are maxed out or nearly maxed out, it is time to sit down and plan an aggressive strategy for paying some of them down. One of the critical factors that often determine your ability to be approved for a mortgage loan is your debt to income ratio. In addition, high credit card balances can drag down your credit score. Therefore, it is important to look at paying off some of your balances.

It is generally better to begin with your highest-rate balances first. Many consumers are tempted to move around balances when they receive an offer from another bank that is good; however, before you do this, remember that the worst thing you can do when you are trying to make a major purchase is to open new accounts.

By following these guidelines, you can improve your credit score and improve your chances of being approved for your home mortgage loan.

Fixer-Upper Financing: 203k Program Provides Buyers with Renovation Funds

by Eve Mitchell, Contra Costa Times

The word “as-is” can indeed be one scary phrase. Especially when buying a home in today’s market where foreclosures and short sales that need fix-up work are plentiful.

But a little-known Federal Housing Administration (FHA) loan program that’s been around since 1978 can help take the sting out of “as-is.” Only 219 borrowers took advantage of the FHA’s 203k program in 2009. Not that many lending and real estate professionals are aware of the program, say observers.

Last year, Tom Meyer found a classic Oakland, Calif., home built in 1925 near Mills College he liked a lot. As a short sale it was priced right and about half the original asking price. Trouble was, the place needed some fix-up work—foundation improvements, dry rot work, a new roof over the garage and other improvements.

With the help of the FHA’s 203k renovation financing loan program, Meyer folded about $100,000 worth of repairs and improvements into his $422,000 mortgage. He had bought the home for $320,000. “I would not be able to pay a contractor $100,000 and buy a house at the same time,” said Meyer, who works in corporate media at Shaklee’s Pleasanton headquarters. “It had been essentially allowed to start falling apart over the last 20 years.”

He had rented in San Francisco for 25 years before moving into his new digs last September with his girlfriend, Cathy Keating. “We like old houses, and a great benefit of this program is that it helped us keep a beautiful but deteriorating house from deteriorating further. With the work we did, we expect it to still be standing and beautiful 80 years from now,” he said.

Renovation financing through the 203k program allows the costs of needed repairs and improvements to be included in the FHA federally-insured loan amount instead of having the buyer come up with cash or a separate loan to do the work.

“This is a perfect loan for an as-is situation,” said Kristine Marr, a loan officer with Prospect Mortgage in Lafayette, Calif. “It’s not a new loan program, although I think it’s going to have a lot more use today because we have so many foreclosures and bank-owned properties. You go into lots of homes and see people have yanked out stoves and ovens and fixtures and sinks.”

The work has to be done within six months after escrow closes. Borrowers have the option of putting up to six months of mortgage payments on the end of the loan if they don’t want to live in the house while the work is being done.

“Renovation financing is a program that allows you to not only finance the purchase of a home but finance any repairs and/or improvements. It provides buyers with a responsible way to purchase a fixer-upper property,” said Luis C. Munoz, who helped Meyer with the loan and is a renovation loan specialist with the Oakland branch of Mason-McDuffie Mortgage Corp. Munoz also gives presentations about the program at monthly home ownership workshops sponsored by the Unity Council, an Oakland-based nonprofit.

At a time when equity loans are hard to get, the program can also be used as a refinancing vehicle for borrowers who want to do repairs and improvements, provided the value of the home is greater than the value of the loan. “At the same time as you refinance, you pop in the extra dollars you need for whatever you want to do,” Marr said.

FHA home loans require certain health and safety standards be met and that needed repairs identified during the inspection process be completed before escrow closes. However, minor repairs and improvements costing between $5,000 and $15,000 can be done after escrow closes for borrowers who opt for a streamlined repair program.

A 203k loan can help buyers finance both minor and major repairs and improvements. It can also help buyers compete with investors when bidding for short sales and foreclosures, said Sheri Powers, director of the Homeownership Center at Unity Council.

The loans can also be used to pay for improvements such as new appliances, second-story additions, remodeled kitchens and bathrooms, and skylights, just to name a few examples. “Property repairs cost money and they want to make sure people using their loan program are going to be in the home in long run and not just the short run,” Powers said.

The loans have become more popular since home prices started falling and FHA lending limits were raised a couple years ago but are still a tiny sliver of overall FHA loan volume. Last year, 203k loans accounted for 219 mortgages in the Bay Area, compared to 35 in 2008, one in 2007 and none in 2005 and 2006, according to Department of Housing and Urban Development statistics. “It’s making a comeback,” said Powers.

Marr said that 203k financing is not for everyone. A buyer will have to work with contractors and may have to wait several months before moving in, she said. And there is no guarantee they won’t be outbid by an investor for the property. “A lot of listing agents are preferring the investors, because the investors tend to be all cash or 50% cash. That’s always hard to compete with,” she said.

Keep Close Tabs on Your Credit Score

by McClatchy-Tribune Information Services

With banks tightening their grip on loans, getting one is requiring more work and vigilance on the borrower's part. Even people with excellent credit are jumping through hoops to verify everything and avoiding nicks that could give the appearance of being a risky borrower. There are a few strategies to employ that could improve the chances of not only getting a loan but getting a better rate.

One of the obvious ones, beyond paying bills on time, is to not be overextended on credit. Lenders look at how credit is managed, so someone with $10,000 credit limit but owes $9,000 won't appear as good a borrower as someone who owes only $1,000 of the $10,000 limit. Therefore, it is important to pay down credit before applying for a loan. This can help raise your credit score and get a better rate.

When you do pay down the debt, such as on a credit card, keep the account open to show lenders you have a long credit history and you are responsible by not maxing out every loan you get. Be wary, however, of some creditors who have started reducing credit limits as amounts are paid off. You may need to ask for the limit to be raised, or switch to a new credit card.

Next, verify your credit score every year, or right before you apply for a large loan such as a mortgage, to make sure there is nothing on the report that is inaccurate. While other credit report requests could harm your score, because it indicates you are looking for help often, requesting your own report does no damage to your record. There are three credit bureaus that maintain reports. Request them all through www.annualcreditreport.com. Reports are free once a year. Nearly eight in 10 reports have an error, according to the U.S. Public Interest Research Groups. Be wary of firms that offer free credit reports only after you sign up for another service with a monthly fee.

If you do see a mistake, follow the instructions to dispute the charge. If the mistake was caused by a certain circumstance you feel was not common, also dispute it.

The importance of good credit in our changing economy cannot be overemphasized. Those neglecting their credit are positioning themselves to be shut out of the economy, and at risk of not having a lifeline when times are tough. In addition, those with poor credit also face higher expenses as interest rates, insurance premiums, and rental rates can be higher for those without excellent credit, not to mention employers may shun applicants that do not demonstrate responsible money management.

Make it a point to audit your credit at least once a year and make managing it a priority in your life. Doing so will eliminate chances of financial disasters.

Actions to Take Before Buying a Home Today

by Fannie Mae

As the housing downturn has shown, homeownership is about more than buying a home – you have to make sure you can keep the home over the long term. If you’re thinking about buying a home, these five steps can help ensure you get the right house for you, and the affordable financing that helps make homeownership a long-term success:

Get Educated. A little mortgage know-how goes a long way toward ensuring you get an affordable mortgage

Before you hire an agent or find a lender, get educated on the loan process and key factors that make a loan affordable. You’ll want to know about loan types – fixed-rate mortgages, adjustable-rate mortgages, FHA and VA loans – and the full range of line items that contribute to the total cost of securing the loan, including discount points, appraisals, and real estate agent commissions.

If you would like more in-depth information, the Department of Housing and Urban Development (HUD) can put you in touch with the nearest housing counseling professional in your area. Visit the HUD Website for more information. You can also check with local government, neighborhood associations and neighborhood bank branch offices for information sessions on home buying as well as homebuyer- education programs.

Get Your Finances in Order. Given today’s stronger lending guidelines, it’s more important than ever to get your finances in order<

First, get a copy of your credit report, which usually includes your credit score. If your credit score is low (anything below 620), take the time to improve it. If you find errors on the report, take the time to correct them. This may put your home buying plans on hold (creditors typically look for a two-year history of consistent, on-time bill payment to establish good credit), but it could result in a better loan and more affordable rates.


Establish a Budget. Before you start searching for your home, make sure you know how much home you can afford

Lenders will evaluate all your debts and take into account your full financial situation in qualifying you for a mortgage. A key factor is how much income you bring in vs. how much you will pay out each month. Here’s a good guideline to check where you are: Your housing expense (the mortgage payments on the house you are buying) should generally not exceed 28 to 33 percent of your total monthly gross income – and all revolving debt (including car payments, credit cards payments, and your mortgage payment) should not exceed 36 to 40 percent of your total monthly gross income.

It’s always helpful to create a monthly budget, itemizing all your recurring expenses, including estimated maintenance costs, taxes, utility bills, and condo or homeowners’ association dues. Then, test your budget. If you can pay all these debts and continue to add to savings, you may be ready to buy a home. If not, you may have to revise your plans.

Start Saving. Having savings in reserve helps ensure you can afford the upfront costs of homeownership

These include:

• Down Payment – Five to twenty percent of the purchase price. (Keep in mind, a lower down payment means you’ll have to qualify for a higher loan amount and pay for mortgage insurance – adding to your monthly mortgage payment).

• Deposit – Two percent of the purchase price, typically. Sometimes called earnest money, a deposit shows the seller you’re serious about buying the home. If your offer is accepted, the deposit or earnest money will be applied towards the down payment. If your offer is rejected, the down payment will be returned to you.

• Closing Costs – Three to five percent of the purchase price, on average. These costs include all fees required to execute the sale, including attorney fees, title insurance, appraisals, and points.

Get Pre-Approved. In today’s competitive market, home buyers should get pre-approved for a mortgage before they begin their house hunt.

To be pre-approved for a loan, your lender will gather information about your job, assets, income, and debts and then determine how much financing you’re qualified to receive, backed by a pre-approval letter. When you’re ready to make an offer, this letter will tell the seller you’re a serious and qualified buyer. It will also give you an edge over competing buyers who are not pre-approved.

Keep in mind, pre-qualification doesn’t mean you have an approved loan. You’ll still need to apply for a loan if your offer is accepted.

Protect Yourself from Mortgage Modification Scams

by Fannie Mae

Mortgage modification scams can occur when unscrupulous people prey on borrowers who are struggling to keep their homes. While they promise to help, the people who perpetuate mortgage scams do little to no work, charge excessive fees, and use tactics that often put the homeowner at greater risk of losing their home. If you’re modifying your mortgage or facing foreclosure, here are five keys ways to protect yourself from mortgage rescue scams.

 

Do your homework and know your options

Ask questions and get explanations so that you have a complete understanding of any modification or refinance. Always be sure to read and understand all paperwork before signing. Don't sign papers in exchange for a promise that someone else will pay off your mortgage.

 

Don’t pay for counseling. Free, legitimate help is available

Beware of high-pressure sales tactics, including pressure to act quickly, and deals that appear to be too good to be true – they are. A legitimate housing counselor will never ask you to sign paperwork before you understand it. You don’t need to pay for counseling – call 888-995-HOPE or go to www.HUD.gov to find a free HUD-Approved housing counselor.

 

Know the person you’re working with. Make sure your housing counselor is HUD-approved

Before responding to any person or organization offering to "save" you from foreclosure, find out if the organization is HUD-approved. Find a housing counselor on the HUD.gov website. Your lender or a HUD-approved housing counselor is the safest source of information and help. No one should guarantee you they can stop foreclosure.

 

Don’t submit your mortgage payments to anyone other than your mortgage company. Beware of people who ask you to send your payment to them

Scammers might ask you to make your payments to them; however, they pocket your payments instead of sending them to the lender. You should only send your mortgage payment to your mortgage company.

 

Ask for Help. Again, free, legitimate help is available

Contact the HOPE Hotline (1-888-995-HOPE) or Fannie Mae at 1-800-7FANNIE (732-6643) or your servicer for help. To report a scam, visit www.preventloanscams.org. To learn more about avoiding scams, visit www.loanscamalert.org.

Fannie Mae recently announced new standards for the purchase and securitization of adjustable-rate mortgage (ARM) products. The company is changing eligibility criteria to protect consumers from potentially dramatic payment increases and to help ensure that borrowers who hold these types of mortgages can sustain them beyond the initial interest rate period.

“Our goal is to make sure consumers can sustain their mortgages and remain in their homes over the long term, while helping our lender partners offer a range of mortgage products for qualified borrowers,” said Marianne Sullivan, Senior Vice President of Single Family Credit Policy and Risk Management at Fannie Mae. “These policy changes reflect our intention to continue providing liquidity to different market segments by ensuring that support for ARM products remains in appropriate circumstances.”

For ARMs with initial periods of 5 years or less, Fannie Mae will require that borrowers be qualified at the greater of the note rate plus 2% or the fully indexed rate (index plus margin).  The company also said it will continue to make available an interest-only loan product, but will change its qualification criteria. The maximum loan-to-value ratio cannot exceed 70%, the borrower’s credit score must be 720 or higher and the borrower must have a minimum of 24 months of liquid asset reserves remaining after loan closing. Balloon mortgages, which typically offer lower initial interest rates but leave a significant balance due at maturity, will no longer be eligible, except with special approval.

All loans not meeting the new guidelines must be purchased as whole loans on or before August 31, 2010, or delivered into MBS pools with issue dates on or before August 1, 2010.  Fannie Mae exists to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market. Fannie Mae has a federal charter and operates in America’s secondary mortgage market to enhance the liquidity of the mortgage market by providing funds to mortgage bankers and other lenders so that they may lend to home buyers. Our job is to help those who house America.

For more information, visit www.fanniemae.com.

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Contact Information

Photo of Laurel Sweeney Real Estate
Laurel Sweeney
Berkshire Hathaway HomeServices Nutshell Realty
1209 State Route 213, PO Box 452
High Falls NY 12440
Office: 845-687-2200
Toll Free 877-468-5783
Fax: 845-687-4162

© 2016 BHH Affiliates, LLC. An independently owned and operated franchisee of BHH Affiliates, LLC. Berkshire Hathaway HomeServices and the Berkshire Hathaway HomeServices symbol are registered service marks of HomeServices of America, Inc.®.  Equal Housing Opportunity.