Author Archive
THIN ICE – WHY WE NEEDED HASP (In a Nutshell)
May 7th, 2009 categories: Mortgage & Finance
More than ever, I have been taking calls from people desperate for refinances, eager to get out of adjustable rate high interest loans that are draining their pocket books. For many borrowers out there, there is either one complication or another. Today, two problems create the biggest roadblocks. First, there is not enough equity in the borrower’s property, and second, the borrower does not have enough documentable income to support qualification on a new loan. These barriers to entry to the world of refinancing can turn out to be some very thin ice between borrower and the world of foreclosure below.
Years ago, sufficient equity was not a big issue. During the “refi boom” experienced in the earlier part of this decade, housing prices were on the rise. The higher the home value, the lower the loan-to-value (LTV) and the lower the LTV, the easier it is to refinance, particularly into lower rates. Banks take on less risk if the borrower owns a larger percentage of his or her home, so they are willing to offer lower rates and qualify people more easily. Today, that is not the case. With houses having been on the decline, many people today owe more than their house is worth, so there is very little incentive for banks to grant a refinance in this dim situation.
Regarding the second problem, some who may have the equity to refinance face a totally different issue. As credit 
has tightened up, so too have lending practices. Years ago, one could basically get a loan if they knew how to sign their name. Not that I encouraged it, but “stated income/stated asset” (SISA) loans were a very viable option. This type of loan was very popular with self-employed borrowers who had a difficult time proving their income on paper. For these people, all that was needed was a dollar amount for what they said they made and a signature to go with it. Unfortunately, adjustable rate mortgages, a very popular loan type over the past ten years, do begin adjusting at some point. As interest rates have started to rise, the self employed have found themselves up against a wall. SISA loans no longer exist. If you were making your payments on time, but needed (or wanted) to refinance, you didn’t have much of a choice, until now.
To counter both of these issues, the Obama administration has passed the Home Affordability and Stability Plan (HASP). This plan seeks to keep people in their homes by counteracting the two big issues above. If you can demonstrate that you have made your payments on time (and passed a few other tests), you may be eligible to refinance under the HASP program. The program allows for refinancing up to 105% of the current value of the home without adding mortgage insurance, if you weren’t already paying it. Secondly, if you stay with the same lender, you may refinance without any income or asset documentation. This is a lifesaver for the self employed. Rates are competitive and the process is pretty simple.
There are many critics of the HASP program who say that people should not have gotten themselves into this situation in the first place and we should not use government to create the cure. If I may offer my two cents: This program is targeting those who have made every honest effort to pay on time and have succeeded in doing so. To not allow them the opportunity to refinance now when rates are low is certainly to cast them toward one inevitable end. In five years I have not had a foreclosure and I take pride in the fact that I can now help many more avoid it. I sleep better knowing it.
Note: There is a secondary portion of the HASP program not addressed in this entry.
[Robert A, Martinson is a Loan Officer at Bank of America. Rob is like all of our Contributors: easy to talk to, and always happy to hear from our blog visitors! You can contact him at Robert.a.martinson@bankofamerica.com]
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ALL ABOARD – LOW RATES MAY MAKE THIS THE TIME TO BUY
April 21st, 2009 categories: Buyer Strategies, Mortgage & Finance
Many people have been calling to ask if this is a good time to buy a home. Like a person working a ticket booth at a train station, I don’t really know the best destination for you. Of course, having been around the mortgage industry for a while, I’m happy to point out some things on the way, but in the end, I’ll rely on you to decide where 
you want to go. For some people, inevitably the answer is yes, buy a house, even in the worst of markets. For some people, the answer is no, even in the best of markets. It all comes down to your goals in both the short term and the long.
Compared to any other time in the last five years and arguably much longer, this is probably one of the best times to buy. Rates are at historical lows, allowing you as the buyer to buy a lot more house while maintaining a low monthly payment. Couple this with the fact that the high number of foreclosures have driven the market to all time lows, you have a fantastic opportunity for long term gains. But let’s start with the short term and why you may want to buy from a lending standpoint.
Having a mortgage is a good thing. The benefits of buying today can be reaped immediately as you begin to pay tax deductible interest for the roof over your head rather than dumping money down the proverbial hole they call rent. Next, having a mortgage will immediately begin to help your credit score. As long as the payments are made on time, I have seen clients boost their credit by 40-50 points in a six month time frame. Besides paying off large sums of credit card debt, making mortgage payments on time is the single greatest thing you can do to build your score.
Looking at the long term, buying today is probably one of the most financially savvy decisions you can make. Rates will probably not be anywhere near their current levels come 5 years, so buying a home may cost you a lot more if you keep pushing it off. Sometimes it makes more sense to cut down on spending in the short term to be able to afford the payments that will save you far more money down the road. i.e., if you think you cannot afford a mortgage payment now, wait until the market is inflated and prices and rates are up. I can tell you it is far easier to qualify buyers at today’s rates than it will be when they go to seven percent or beyond.
Lastly, Federal Housing Authority (FHA) mortgages today are assumable loans. If you buy your house today and get an FHA loan (about 40%+ of my loans are FHA today), you may be able to demand a larger price for your home. If you have a loan at five percent today and rates go to eight percent, assuming your buyer can qualify, they can take over your loan at the lower rate rather than securing a new loan with a higher rate. Hopefully the savings they realize can demand even more money in your pocket.
It is always important to gauge yourself and make sure you don’t bite off more than you can chew. But it is also important that you start thinking about getting in line to buy that ticket. You don’t want to kick around the station all day with no plan in mind. Get on or stay off, but either way, the train is going to pull away eventually. You don’t want to have any doubt about whether you were supposed to be on it.
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CLEANING UP THE MESS: HOW PICKING UP THE PIECES CAN MAKE YOU MONEY
February 11th, 2009 categories: Buyer Strategies, Mortgage & Finance
Investing can be a tricky thing if you’ve never tried it before.
With so many options out there, it’s hard to know whether stocks, bonds, or mutual funds may be the best bet for your hard earned money. Because of the uncertainty out there, many have chosen a much more tangible product to help their money grow: real estate. Foreclosures are a hot commodity right now, so if you have some extra cash lying around, and you are thinking about an investment property in the Northern Virginia area, it may be time to invest in one.
I know what many of you are probably saying right now. “This guy is nuts.” Sure, with the market being the way it is today, it is easy to shy away (or even run) from real estate. People have lost their money and homes in record numbers over the past few years. The mess created in the wake of the storm makes us all want to yell, “Clean up, aisle America!” Only time will tell, but those willing to clean up the mess will most likely end up positioned very well when the next wave of buyers comes through.
Buying an investment property is not as hard as it looks. The first thing to point out is that with all the foreclosures out there, the inventory is almost overwhelming. You will certainly have your pick of the litter. Your real estate agent will help you narrow down your search to find exactly what you need. Either way, do not expect everything to be perfect. If you are looking at bank owned properties, remember that the people who lived there previously probably did not leave because they wanted to, so you have to keep this in mind and be careful about the property condition.
This segue’s us to the first pitfall. If you finance an investment property, make sure you have a financing contingency. If the house does not appraise as a “safe and livable” property, you most likely will not be able to finance it, so give yourself room to back out if the owning bank is not willing to make the necessary repairs. If the home has been winterized, make sure the water is back on, there are no leaks in the property, and that there is no existence of mold. If any of the above exist, chances are the new bank won’t give you the loan.
Next, expect to put 20% down at least. Investment properties are inherently risky for banks. It is much easier for a person to walk away from a home they don’t live in than one that shelters their family, so the bank wants to make sure you, as the investor, have a big stake in the property. The same is true of the rate. The added risk makes the loan harder to sell on the secondary market. To compensate, you will more than likely be charged a much higher interest rate, making your loan look more attractive to entities who are buying loans.
Lastly, though today is a 30 year fixed market, consider looking at adjustable rate mortgages (ARM’s). If you are only planning on holding the property a short while, a cheaper interest rate may be worth a bit of added risk if you can put extra money in your pocket in the end. Remember, this is an investment, so the whole point is to make money, and anywhere you can save, you come closer to achieving that goal.
The most important thing to remember is this: if you’re buying an investment property, don’t overextend yourself. There’s a reason there are so many foreclosures out there and you don’t want to join that party. You want your property to bring you money and fortune, not headaches and stress.
[Robert A, Martinson is a Loan Officer at Bank of America. Rob is like all of our Contributors: easy to talk to, and always happy to hear from our blog visitors! You can contact him at Robert.a.martinson@bankofamerica.com]
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THINKING OF REFINANCING? IT’S A GOOD TIME TO TAKE A CLOSER LOOK!
January 17th, 2009 categories: Mortgage & Finance
[NOTE: Here is Rob Martinson talking Mortgage & Finance. You can read Rob's previous musings here.]
So you say you want a refi?
With all the buzz in the media, if you own your home, you have to be thinking about a refinance. It’s time to Read the rest of this entry »
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STEP 5 – CROSSING YOUR OWN GOLDEN GATE BRIDGE
November 19th, 2008 categories: Buyer Strategies, Mortgage & Finance
[NOTE: Rob Martinson continues his series on getting the home mortgage process right for home buyers in Northern Virginia. His previous installments are in our Mortgage & Finance archive.]
For many of you, particularly the first-time homebuyers out there, this will be one of the biggest steps of your life. The days of dumping money down the proverbial hole that is rent are about to be over (at least for the foreseeable future). You will now be able to enjoy the main fruits of home-ownership. You want to paint the walls green? Paint them green! Have a picture to hang? Put a hole in whatever wall you please! And did somebody say tax benefits!? When I saw my tax return this year, I know I did. OK, I think you are ready. Now let’s cross your own Golder Gate Bridge and get you into that house. Read the rest of this entry »
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STEP 4 – A WALK IN THE PARK
November 13th, 2008 categories: Buyer Strategies, Mortgage & Finance
[NOTE: Rob Martinson continues his series on getting the home mortgage process right for home buyers in Northern Virginia. His previous installments are in our Mortgage & Finance archive.]
For you, the buyer, this is a pretty easy step. Read the rest of this entry »
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STEP 3 – IT’S ALL DOWNHILL FROM HERE!
October 23rd, 2008 categories: Buyer Strategies, Mortgage & Finance
[NOTE: Rob Martinson continues his series on getting the home mortgage process right for home buyers in Northern Virginia. His previous installments are in our Mortgage & Finance archive.]
I likened this step to a rollercoaster in my synopsis. By this point you will feel like things have been dragging along without too much happening – sort of like that long slow ascent up the first hill. But now it is time for the ride. Your loan officer should already have your loan on the system and approved through underwriting. All you need to do at this point is hand him a contract of sale to push the car over the hill.
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STEP 2 – FINDING THE RIGHT PLACE: IS IT REALLY LIKE DOING THE LAUNDRY?
August 15th, 2008 categories: Buyer Strategies, Mortgage & Finance
[NOTE: Rob Martinson continues his series on getting the home mortgage process right for home buyers in Northern Virginia. His previous installments are in our Mortgage & Finance archive.]
Now it is time for you to get some real work done on the streets. You know how much you can afford; now you need to find a home in that price range. Stick with it, sportsfans, it can be a pretty crazy ride. Read the rest of this entry »
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STEP 1 – DON’T GET PRE-QUALIFIED FOR YOUR LOAN! LET ME EXPLAIN…
July 29th, 2008 categories: Buyer Strategies, Mortgage & Finance
[NOTE: Rob Martinson continues his series on getting the home mortgage process right. His first and second installments are in our Mortgage & Finance archive.]
So you want to buy a house in Northern Virginia do you?
For years I have been getting phone calls from borrowers telling me they are looking to get pre-qualified for a loan. My response? “No you don’t.” (Confused silence usually ensues). Read the rest of this entry »
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UNDERSTANDING THE MORTGAGE PROCESS – FIVE STEPS AND YOU ARE HOME
July 20th, 2008 categories: Buyer Strategies, Mortgage & Finance
Let’s get into it then. I promised in my initial posting that by the time I was through, you would understand the mortgage loan process (whether you are a home buyer or a seller) from beginning to end. I think I also mentioned something about an exciting ride. I will do my best to attempt a perfect two for two, but sometimes batting .500 is not so bad. I’ll let you be the judge.
So, first things first. Read the rest of this entry »
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