Advantages and Disadvantages of Mortgage Programs

Years you plan to stay in the house	Recommended program
1-3	3/1 ARM, 1 year ARM or 6 month ARM
3-5	5/1 ARM
5-7	7/1 ARM
7-10	10/1 ARM, 30 year fixed or 15 year fixed
10+	30 year fixed or 15 year fixed

 

Loan Programs	Advantages	Disadvantages
Fixed Rate Mortgages
40 year fixed 30 year fixed 20 year fixed 15 year fixed 10 year fixed	Monthly payments are fixed over the life of the loan. Interest rate does not change Protected if rates go up Can refinance if rates go down	Higher interest rate than ARM program*  Higher mortgage payments Rate does not drop if interest rates improve
Adjustable Rate Mortgages
10/1 ARM – 10y. fixed period 7/1 ARM – 7y. fixed period 5/1 ARM – 5y. fixed period 3/1 ARM – 3y. fixed period 1 year ARM 6 month ARM 1 month ARM	Lower initial monthly payment than fixed rate programs*  Lower payment over a shorter period of time Rates and payments may go down if rates improve May qualify for higher loan amounts	More risk Payments may change over time Potential for high payments if rates go up
Interest Only (I/O) Option Programs
30, 40 year fixed programs 3/1, 5/1, 7/1, 10/1 ARMs	Lower initial monthly payment during the I/O period  More flexibility Two payment options are available up to 15 years: fully amortized (principal and interest) or interest-only.	Payments will be  higher at the end of the initial I/O period Higher interest rate than the same program without I/O option
High Loan-to-Value (LTV) Programs
	Lower down payment LTV can be up to 97%	May be subject to income and property value limitations May be subject to PMI (private mortgage insurance) Higher rates Higher payments
Stated Income Programs
Not available on today’s market	Don’t need to verify income	Higher rates Higher payments  Higher down payment      Subject to Loan-to-Value limitations
No point, No fee Programs
	Hidden closing costs Less money required to close	Higher rates Higher payments
Imperfect Credit Programs
	Potential for reestablishing credit if you pay your mortgage on time. When used for debt consolidation, you may be able to reduce your monthly debt payment	Higher rates Terms may not be as favorable Harder to get long term fixed loans Loans may have prepayment penalties
Home Equity Line of Credit
1st position up to 75% LTV2nd position up to 80% CLTV	You only borrow what you need Pay interest only on what you borrow Flexible access to funds Interest may be tax deductible	Rates can change. The maximum interest rate is normally high. Payments can change Harder to refinance your first mortgage
Home Equity Fixed Loan
2nd position up to 80% CLTV	Fixed payments Interest may be tax deductible	Higher interest rates than on 1st mortgages Harder to refinance your first mortgage

House-Selling Tips

 1) Find the value of your home at current market. There is a free website www.zillow.com. You can check the home value on Realty Trac. You can order an appraisal of a house on US Search Property Reports for a small fee. Or you can ask the appraiser to make the verbal appraisal.

2) Find an experienced real estate agent. He also helps you determine the price of the house. As they say: “There is no homes that can be unsold, it is incorrect price, for which no one wants to buy.” If you want to make a short-sale, and if your bank allows it, it is best to find an agent who deals with short-sale and is in this experience.

 3) Prepare your home for sale. Make your house clean, organized, and attractive to potential buyers to submit themselves living in it.

А  few simple tips, how to sell the house faster:

-Old and neglected front door makes your house less attractive for potential buyers. Paint, refresh the main entrance. You can hang a new, more attractive fixtures.

-Fresh neutral paint creates a feeling of novelty home. Wash all interior doors or paint them. Dirty doors will not help you quickly sell the house. That doors do not discolor and look like new long-term, they can be protected by polycrylic. “A clear finish topcoat in a water-based formula that offers protection along with fast-drying times. Can be used over bare wood, oil- and water-based stains, paint and wallpaper.”

-Wash all windows and put the window blinds or curtains. If the windows are narrow , the rods with the curtains should be much wider than the window. This visually expand a window.

 -Remove all of your family photos. They make people feel like they’re invading your space.  And you need them to feel at home.

-Remove all toys, extra books, small items, large flowers, etc. This will create a feeling of bigger space. Leave just a vase of flowers and a couple of small sculptures on the coffee table and mantel.

-Make your space more warmer and inviting. Add some colored pillows, a picture (do not overdo main), lighting. Properly placed lighting creates a cozy home.

-Too much furniture, or vice versa, making the room is not appealing – too busy or too empty.

-Organize your closets. Piles of clothes make your closet visually smaller.

-Clear off countertops.  Messy coutertops and tables left no room for food preparation or eating.

-Get rid of moldy caulk in bathrooms. The entire room is sparkling-clean, bottles and jars are tucked away. A bathroom with everything in view made even a fairly clean bathroom look disorganized.

-Organize your basement. Even if the basement is unfinished, disorganized piles of junk are a huge turnoff to potential buyers.

Unique Mortgage Programs

1.  Jumbo fixed rate mortgages & ARMs (adjustable rate mortgages):
         –$900,000 to 80% LTV – interest only 3 & 5 year ARMS available
         –$1.2M to 70% LTV
2.  No mortgage insurance (PMI)
3.  Refinances: 1 Loan up to 90% LTV – $800,000 maximum loan amount, no PMI
4.  No adjustment to rate up to $1M
5.  First position HELOCs (home equity lines) to $350,000
6.  Stand-alone 2nds: HELOCs and convertible to fixed 15 and 20 year term products
7.  Cash out – up to $200,000 cash-in-hand
8.  3-4 unit owner occupied program up to 80% LTV – $900,000 maximum loan amount, no adjustment to rate
9.   Automatic 45 day lock
10.  Gift funds are allowed for down payment

Unique mortgage programs for foreign nationals:

1.  For foreign national max Loan-to-Value is 50%.
2.  Require copy of passport with a valid visa to enter the USA. Visa can be any including tourist (B, F, J, H, L type)
3.  Loan can be closed under power of attorney. Power of attorney has to be notarized by the US embassy.
4.  No need for US credit. No social security number is OK. No income or assets verifications.
5.  Do not require the borrower to have a bank account here.

Reduced Maximum Loan-to-Value (LTV / CLTV)

Many Banks have the following Maximum LTV’s / CLTV’s and Loan Limits*:  

 

 

LTV
The Loan-to-Value (LTV) is calculated by dividing the loan amount into the Sales Price or Appraised Value, whichever is lower. For refinance loans, it is calculated by dividing the loan amount into the appraised value. 

CLTV
The Combined Loan-to-Value (CLTV) is calculated by dividing the total of the Loan Amount and any additional subordinate financing into the Sales Price or Appraised Value, whichever is lower, or simply into the appraisal value for refinance loans 

 Standard Conforming – Full Documentation – Fully Amortized  

One – Four Unit Single Family (attached or detached) One Unit PUD and Condo (attached & detached) Occupancy Loan Amt Limits Purchase Max LTV/CLTV No Cash Out Max LTV/CLTV Cash Out Max LTV/CLTV Primary Residence 1 Unit $417,000 95% / 95% 95% / 95% 80% / 80% 2 Units $533,850 80% / 80% 80% / 80% 75% / 75% 3 Units $645,300 75% / 75% 75% / 75% 75% / 75% 4 Units $801,950 75% / 75% 75% / 75% 75% / 75% Second Home 1 Unit $417,000 80% / 85% 80% / 85% 75% / 75% Non-Owner 1 Unit $417,000 80% / 85% 75% / 75% 75% / 75% 2 Units $533,850 75% / 75% 75% / 75% 70% / 70% 3 Units $645,300 75% / 75% 75% / 75% 70% / 70% 4 Units $801,950 75% / 75% 75% / 75% 70% / 70%   General Notes: Minimum FICO credit score of 620 is required. Maximum Debt-to-Income (DTI) Ratio is 55% 1% of HELOC amount will be added to the DTI calculation   Loans with an LTV greater than 80% must meet the following requirements: Maximum Debt-to-Income Ratio of 41%. Minimum FICO credit score of 680 is required. Secondary financing (second mortgage) is not permitted. LTV greater than 90 %:  Minimum FICO of 740   Cash-Out Requirements: Cash-Out transactions require 12 month seasoning and ownership history. The maximum Cash-Out permitted is $200,000. This limit includes the balance of any non-rate and term items paid off with the subject loan.   Declining Market Notes: Soft Declining Market when the LTV is greater than 80%:  Maximum LTV of 90%. First-time buyers are permitted to 95% LTV on a purchase transaction. Minimum FICO of 700 Distressed Declining Market when the LTV is greater than 80%: Minimum FICO of 720. Maximum LTV of 90%.

Super Conforming (Jumbo) – Full Documentation – Fully Amortized   

One Unit Single Family (attached or detached) One Unit PUD (attached & detached) Occupancy Purchase Max LTV/CLTV No Cash Out Max LTV/CLTV Minimum FICO Purchase and No Cash Out Cash Out Max LTV/CLTV Minimum FICO Cash Out Primary Residence 1 Unit 90% / 90% 90% / 90% 720 75% / 75% 720 85% / 85% 85% / 85% 700 75% / 75% 75% / 75% 660 Second Home 1 Unit 60% / 60% 60% / 60% 660 – – Non-Owner 1 Unit 60% / 60% 60% / 60% 660 – – General Notes: Maximum Debt-to-Income Ratio: 45% No 30-day late housing payments in the last 12 months. Seasoning Requirements: Refinance transactions require a minimum of 6 months seasoning (i.e. six payments made) since the most recent refinance or date of purchase. Reserve Requirements (checking, savings, CD, 401K, IRA…): Primary Residence Transactions: 2 months PITI (principal, interest, tax, insurance) Second Home and Non-Owner Occupied Transactions: 6 months PITI. Reserves are required to be liquid reserves and are exclusive of closing costs and cash-out received. Maximum Cash-out: The maximum cash-out permitted is $200,000. This limit includes the balance of any non-rate and term items paid off with the subject loan. For loan amounts greater than $625,500: Purchase and “no cash-out” refinance: Maximum LTV/CLTV is 80%. Cash-out refinance: Maximum LTV/CLTV is 65%. Loans with an LTV greater than 80% must meet the following requirements: Maximum Debt-to-Income ratio is 41%. Secondary financing is not permitted. Attached PUDs are ineligible. Reserve Requirements: 6 months PITI reserves are required for each property owned including the subject property. Declining Market Notes: Minimum FICO credit score of 720 is required when the LTV is greater than 80%.

*Some Banks that don’t use Freddie Mac and Fannie Mae platform permit cash-out refinance up to 90% LTV for 1 unit primary residence with minimum 650 credit score without PMI and interest rate adjustment (up to 900K loan amount). HELOC (home equity line) – up to 350K, maximum 85% LTV

The $8,000 first-time homebuyer credit is close to extension

– Contracts to buy a home must be signed by April 30, 2010, and the deals must close by June 30 in order for a buyer to qualify for the credit.

– The credit would only apply to homes sold for $800,000 or less.

– Homebuyers must have adjusted gross income of less than $125,000 ($225,000 for married couples filing jointly).

– A credit worth up to $8,000 for first-time homebuyers and up to $6,500 for homeowners looking to trade up to a bigger primary residence and who have already lived in their current home for five years.

Read full article…

Home Appraisals

Reappraising Home Appraisers

James R. Haggerty
Thursday, August 20, 2009

After being blamed for helping to inflate home values during the housing boom, the appraisal business is again coming under fire.

Squeezed by a drop in fees, some appraisers are compensating by driving long distances to handle more assignments. Their wanderings are raising questions about whether they know enough about the neighborhoods to accurately assess the value of homes — which has implications for both home buyers and owners.

Read full article

Home Equity Line of Credit (HELOC)

A HELOC is a mortgage loan, which is usually in subordinate position (2^nd position) that allows borrowers to draw multiple advances of the loan proceeds at their own discretion. It is also called an open end mortgage, which means you can take money then return it then take it again as many times as you wish during a draw period.

Before the financial crisis there was a technique to split a high LTV (Loan-to-Value) loan over 80% into two loans: the 1^st mortgage up to 80% LTV; and the 2^nd mortgage or HELOC which covers a loan amount over 80% LTV not to pay PMI. On today’s market the 2^nd position HELOC is available up to 85% CLTV (Combined LTV which includes 1^st and 2^nd mortgages). For example: You purchase a house for $650K market price and you need a loan amount 520K (80% LTV) which is a jumbo (non conforming) loan. To get a better rate it is wise to split one mortgage into two mortgages: the 1^st mortgage up to $417K (64% LTV) for single family residence which gives you a lower rate (so called conforming loan) and the 2^nd position HELOC or 2^nd fixed mortgage for $103K (16% LTV).  64% LTV + 16% LTV = 80% CLTV.  The best option in this situation is HELOC which offers you a lower rate than 2^nd fixed mortgage.

You can even obtain HELOC as the 1^st position mortgage up to 75% of the property value and up to $350K limit amount. Current HELOC rate is lower than the 1^st fixed mortgage rates and it is based on the prime rate that is 3.25% (the lowest rate in 95-year history) plus adjustments. The Fed said it expected to keep its rate at “exceptionally low levels … for some time.” Using HELOC as a substitute for the first mortgage is risky because HELOC rate is always adjustable and some day it will go up. But with HELOC you can enjoy interest-only payments.

HELOC Par Rates = Prime Rate (3.25%) + Margin

HELOC has a draw period during which the borrower can use the line, and a repayment period during which it must be repaid. Draw periods are usually 10-15 years, during which the borrower is only required to pay interest. Repayment periods are usually 10-20 years, during which the borrower must make full payments (principal + interest) to pay off the loan.

New Regulations — Refinance up to 125% Loan-to-Value

Refinance Rules Expanding to 125% Loan-to-Value
By: Diana Olick, CNBC Real Estate Reporter / 01 Jul 2009

 “Homeowners refinancing their mortgages through loans backed by government agencies will be able to borrow up to 125 percent of their homes’ value under new regulations enacted Wednesday.

The rule changes, part of the government’s attempts to restore housing affordability and stem the foreclosure crisis, apply to loans backed up by Fannie Mae and Freddie Mac.

Previously, homeowners could borrow up to 105 percent of their home’s value. The new loan-to-value ratio is set up at 125 percent in a further effort to address those mortgage holders who owe more than their homes are worth.”

Read full article…

Refinance your 1st mortgage up to 105% Loan-to-Value

Home Affordable Refinance Program is a great option for borrowers looking for more stable payments in declining markets.

Who can be eligible for a program:

– Only Freddie Mac or Fannie Mae loans.

– Maximum Loan-to-Value (LTV) is 105%.

– There are CLTV limits (Freddie Mac) and 110% CLTV (Fannie Mae).

– Rate/Term Refinance only.

– 40, 30, 20, 15 year Fixed Rate and 5/1, 7/1, 10/1 ARM programs are allowed. If the existing loan is a fixed rate product, the new loan cannot be an adjustable rate mortgage product.

– Only 1^st mortgage is eligible.

– Second Mortgages are ineligible. Existing subordinate financing must be re-subordinated or paid off with borrower’s own funds.

– Sub-prime, FHA, VA, Alt-A, High Balance Conforming Loans (any loan above the conforming loan limits) are ineligible.

– The current occupancy (primary residence, second home or investment property) must be the same as when the original loan closed, except that the occupancy may have changed to primary residence.

– Property type is allowed:

1. For primary residence: SFR, 2-4 units, Coop, Condo, PUD
2. For second home:  SFR, Coop, Condo, PUD
3. For investment property: SFR, 2-4 units, Condo, PUD

– Fully amortizing only; the Interest-Only payment feature is not allowed.

– A borrower must have an acceptable payment history on their mortgage. The existing mortgage being paid off cannot have any 30-day late payments (Freddie Mac) and 60-day late payments (Fannie Mae) in the last 12 months.

– The program permits streamlined documentation flexibilities unless the lender chooses to obtain full documentation for the new mortgage loan.

– 620 minimum Credit Score for primary residence and 680 for Second Home and Investment Property.

– If the existing loan does not have MI (mortgage insurance) coverage, then no MI is required for the new loan. If the existing loan has mortgage insurance, the loan is currently not eligible to be refinanced under this program.

You can check on the Fannie Mae website or the Freddie Mac website if your loan qualifies for refinancing under the new program.

Short Sale

Short Sale –  where the home owner sells the property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender, sometimes in full satisfaction of the debt. The lender would have the right to approve or disapprove of a proposed sale. Many banks are willing to take a loss in a short sale avoiding an even bigger loss in a foreclosure. Some short sales leave a deficiency balance for which the seller is still liable. Short sales are rising sharply. Many homeowners are currently underwater, many of them are owners of the deluxe homes. The buyers can have a great deal on a short sale. But it is a complicated and time consuming process that can take between two and six months, in some cases up to one year.

What you should know as a short sale buyer:

– You will be dealing with three parties: the seller, his real estate agent and his lender.

– Find the experienced real estate agent who works on short sales. Don’t go without him. It will be a pain in the neck.

– Find a mortgage broker and obtain a pre-qualification letter.

– Avoid homes where the seller has other offers or/and more than one mortgage. It will increase the amount of time negotiation takes, and less chance for a short sale approval. 

– Find out the  rules of the seller’s lender. Many of them can ask you to sign a sales contract, to get a pre-approval for your mortgage, etc.

–  Ask your agent to search comparable sales in the area and determine the home’s fair market value. Make your offer lower than that. Your agent will help you to set the right price.

– The seller’s agent will submit a completed package along with your offer to the seller’s lender. This package can include the seller’s Hardship Letter, Employment / Income Verification, Bank Statements, Financial Evaluation Form , IRS Tax Returns, Settlement Statement or HUD 1, Broker’s Price Opinion, etc.

– Don’t do an appraisal or inspection of the property until the offer is approved. Try not to put down more than $1,000 before the approval unless the seller’s lender requires you to make a bigger deposit along with the contract.

– When the bank finally sends its counter offer, you have a chance to send yours if you can prove the declining market value.

– Once you have the lender’s approval, obtain your mortgage.

Making Home Affordable Program – eligibility details for Refinance and Modification

Refinance:

– Your loan must be owned or guaranteed by Fannie Mae and Freddie Mac.

– You must be current on your mortgages, have an acceptable mortgage payment history. You haven’t been more than 30-days late on your mortgage payment in the last 12 months.

– You have been unable to refinance because your home has decreased in value pushing your current loan-to-value ratio above 80%. Your first mortgage is about the same or slightly less than the current value of your house. In some cases an appraisal will not be necessary.

– Only for the owner occupant of a one to four unit home.

– Refinance only into a 30 or 15 year, fixed rate loan.

– Your current mortgage was originated with a loan-to-value ratio of 80% or less.

– Only the first mortgage is eligible for refinance. The new first mortgage (including any refinancing costs) will not exeed 105%  of the current  market value of the property

– Borrowers who have more than one mortgage (1^st and 2^nd) may be eligible. You must obtain an agreement by the lender that has your 2nd mortgage.

– The rate will be based on market rates at the time of the refinance.  Rates may vary across lenders and over time.

– Borrowers are responsible for paying lender fees, points and other closing costs.

– Refinancing will not reduce the loan amount.

– You can not get cash out to pay other debts.

– Only for full documentation loans. You must have a stable income sufficient to support the new mortgage payments.

– Loans will have no prepayment penalties or balloon notes.

– You should call your mortgage servicer or lender and ask about the Home Affordable Refinance application process.

– The Home Affordable Refinance program ends in June 2010.

 

Modification:

– Only for loans originated on or before January 1, 2009.

– You can be current or behind on your mortgage payments.

– You may be eligible if your income is not sufficient to continue to make your mortgage payments. Every borrower  must be screened for financial hardship.

– Only for primary residence properties with unpaid principal balance up to $729,750 for single family residence, $934,200 for a two-unit home, $1.129 million for a three-unit home, and $1.403 million for a four-unit home.

– Only the first mortgage is eligible for a modification

– There is no minimum or maximum loan-to-value ratio.

– Lender will reduce the monthly payment (principal, interest, R/E tax, insurance, condo fee) to no more than 31% of gross monthly income (DTI)

– The modification sequence requires first reducing the interest rate (as low as 2%), then if necessary extending the term of the loan up to 40 years.

– At your lender’s discretion modifications may include upfront reductions of loan principal.

– Borrowers who pay on time for five years can have up to $5,000 applied to reduce their debt. For every month you make a payment on time, Treasury will pay an incentive.

 

– Lenders will keep the modified payments in place for 5 years.

– After five years, the rate increases 1 percent per year up to a cap that is intended to reflect market rates at the time the loan was modified.

– There is no cost to borrowers for a modification. Borrowers should beware of any organization that attempts to charge a fee for housing counseling or modification of a delinquent loan, especially if they require a fee in advance. 

– Your lender is not required to modify your loan. Lenders participate in the program on a voluntary basis.

– Lenders will send letters to potentially eligible homeowners.

– If you think you qualify for a modification and do not receive a letter within several weeks, contact your mortgage servicer.

– Loans can be modified only once under the program.

– Modifications can start from now until December 31, 2012.

Source FinancialStability.gov 

First-Time Home Buyer Tax Credit – 2009

• The tax credit is available for first-time home buyers only. To be a First Time Home Buyer, you cannot have owned a home in the last three years.
• Tax credit =10 percent of the home’s purchase price
• The maximum credit amount is $8,000.
• The credit is available for homes purchased on or after January 1, 2009 and before
  December 1, 2009.
• Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.
• The tax credit does not have to be repaid.

Frequently Asked Questions

Major points of Obama’s new plan to fight the mortgage crisis.

President Barack Obama on Wednesday unveiled his plan to fight the home mortgage crisis and pledged up to $275 billion to help 9 million families suffering from falling home prices and unaffordable monthly payments.

“The plan I’m announcing focuses on rescuing families who have played by the rules and acted responsibly: by refinancing loans for millions of families in traditional mortgages who are underwater or close to it; by modifying loans for families stuck in sub-prime mortgages they can’t afford as a result of skyrocketing interest rates or personal misfortune; and by taking broader steps to keep mortgage rates low so that families can secure loans with affordable monthly payments.”

“Here is how my plan works:

“First, we will make it possible for an estimated four to five million currently ineligible homeowners who receive their mortgages through Fannie Mae or Freddie Mac to refinance their mortgages at lower rates.”
“Right now, Fannie Mae and Freddie Mac—the institutions that guarantee home loans for millions of middle-class families—are generally not permitted to guarantee refinancing for mortgages valued at more than 80 percent of the home’s worth. So families who are underwater—or close to being underwater—cannot turn to these lending institutions for help.”
“My plan changes that by removing this restriction on Fannie and Freddie so that they can refinance mortgages they already own or guarantee. This will allow millions of families stuck with loans at a higher rate to refinance. And the estimated cost to taxpayers would be roughly zero; while Fannie and Freddie would receive less money in payments, this would be balanced out by a reduction in defaults and foreclosures.”
“I also want to point out that millions of other households could benefit from historically low interest rates if they refinance, though many don’t know that this opportunity is available to them—an opportunity that could save families hundreds of dollars each month. And the efforts we are taking to stabilize mortgage markets will help these borrowers to secure more affordable terms, too.”

“Second, we will create new incentives so that lenders work with borrowers to modify the terms of sub-prime loans at risk of default and foreclosure.”
“Some sub-prime lenders are willing to renegotiate; many aren’t. Your ability to restructure your loan depends on where you live, the company that owns or manages your loan, or even the agent who happens to answer the phone on the day you call.”
“My plan establishes clear mortgage financing for the entire mortgage industry that will encourage lenders to modify mortgages on primary residences. Any institution that wishes to receive financial assistance from the government, and to modify home mortgages, will have to do so according to these guidelines—which will be in place two weeks from today.”
“And under this plan, lenders who participate will be required to reduce those payments to no more than 31 percent of a borrower’s income.”

“Third, we will take major steps to keep mortgage rates low for millions of middle-class families looking to secure new mortgages.”
“Today, most new home loans are backed by Fannie Mae and Freddie Mac, which guarantee loans and set standards to keep mortgage rates low and to keep mortgage financing available and predictable for middle-class families. This function is profoundly important, especially now as we grapple with a crisis that would only worsen if we were to allow further disruptions in our mortgage markets.”

“Fourth, we will pursue a wide range of reforms designed to help families stay in their homes and avoid foreclosure.”
“My administration will continue to support reforming our bankruptcy rules so that we allow judges to reduce home mortgages on primary residences to their fair market value—as long as borrowers pay their debts under a court-ordered plan. That’s the rule for investors who own two, three, and four homes. It should be the rule for ordinary homeowners too, as an alternative to foreclosure.”

Read the full text of President Barack Obama’s speech on home mortgage crisis posted by CNBC.com

New Changes by Fannie Mae and Freddie Mac

Mortgage rates are low, but expect to pay more fees for a mortgage today.

Fannie Mae and Freddie Mac are adjusting their pricing grids and fees will be increasing.  Mortgage lenders which are based on  Fannie Mae and Freddie Mac platform must also increase their price adjustments.   As a result your actual rate or closing costs could be higher.  For example:   Rates for refinancing condo will be higher than single family residence rates because lenders impose the condo adjustment. “It has created a different pricing scenario from one consumer to the next,” said Rick Allen, vice president of MortgageMarvel.com. “What you see in the Sunday paper could be perfectly close for one borrower. The guy next door could be 1% higher.”
Relationship between closing costs/points you pay and rate is also changed. Paying up-front closing costs/points gets borrowers a bigger discount these days. Historically, 1 point in fee (1% of the loan amount) gets borrower a rate that’s about 0.25% lower. Now 1 point gets the rate about 0.625% to 0.875% lower.

Please note the following important changes:

The credit score/LTV (Loan-to-Value) adjustment grid has changed. 

Certain cash-out refinance adjustment will increase. 

Two-unit property adjustment will increase.

Adjustment for loans with subordinate financing will increase.

Interest-only loan adjustment will increase.

Condominium adjustment will increase.

The adjustment summarized above will apply to all loans locked on or after February 17th, 2009. In addition, the new fees will apply to all loans that need a rate lock extension on or after this date.

Read New Rules and Guidelines  for conforming and super conforming (Jumbo up to $625,500) loans.

US May Start Subsidizing Some Mortgage Payments

“The Obama administration is said to be near a plan to lower costs for homeowners with problem loans, reports CNBC’s Diana Olick.”

Preventing further home collapses the US government is planning a new program to subsidize mortgages for troubled homeowners. They are talking about standardized loan modification eligibility test even before a homeowner becomes delinquent, before a foreclosure process. Currently, you must be at least 90 days behind on your mortgage payments to qualify for modification.

Treasury is going to put 50 billion dollars towards attacking the foreclosure problems. It can be some form of mortgage buy-down. For example: You can not afford to pay your current mortgage payment $2,000 due to a hardship. But you can afford to pay $1,400. Government will come and use 50 billion dollars to share with the bank the difference $600.  .

 CNBC News:
“I’ve talked to all the major servicers — both the big bank ones and the big independent ones — and they are all ready to go, they’re chomping at the bit,” Lockhart, the director of the Federal Housing Finance Agency, said. “The other thing they’re asking for standardization.”

Under the plan being mulled, homeowners would have to make a case of hardship to qualify for new loan terms.

Housing policymakers weighed but have for now shelved one plan that would have seen the government stand behind low-cost mortgages of between 4 and 4.5 percent, sources said.

Lockhart said that policymakers are eager to prevent a large drop in home values from their current, deflated levels.” Read more…

$550 Billion Disappeared in “Electronic Run On the Banks”

Rep. Paul Kanjorski of Pennsylvania, The Capital Markets Subcommittee Chair, explains C-Span how the world economy almost collapsed in a matter of hours.  “It would have been the end of our political system and our economic systems as we know it.”

On 09/15/08 the Federal Reserve told Congress members about a “tremendous draw-down of money market accounts in the United States, to the tune of $550 billion dollars.” According to Kanjorski, this electronic transfer occured over the period of an hour or two.

Rep. Paul Kanjorski said: “The Treasury opened its window to help. They pumped a hundred and five billion dollars into the system and quickly realized that they could not stem the tide. We were having an electronic run on the banks. They decided to close the operation, close down the money accounts, and announce a guarantee of $250,000 per account so there wouldn’t be further panic and there. And that’s what actually happened. If they had not done that their estimation was that by two o’clock that afternoon, five-and-a-half trillion dollars would have been drawn out of the money market system of the United States, would have collapsed the entire economy of the United States, and within 24 hours the world economy would have collapsed.”

Provided by RealHistoryChannel

The New Rules of Mortgage Lending

I found very helpful article on  Yahoo! Finance  about mortgage changes: 

• Paying Up-Front Points
• Making More Than the Minimum Down Payment
• Locking in the Mortgage Rate

 by Les Christie
Friday, February 6, 2009

Shopping for a home loan? Things have changed — here’s what you need to consider.

If you’re shopping for a mortgage these days, it’s a whole new world out there.

“There have been a huge number of changes over the past few years in mortgage borrowing,” said Gibran Nicholas, founder of the CMPS Institute, which trains and certifies mortgage advisors.

Of course, many of the subprime loans that helped fuel the housing boom — those that didn’t require borrowers to show any proof of income, or that let homeowners make minimum payments — are simply no longer available.

But even buyers looking for a traditional mortgage are now faced with different factors to consider.

Here is what you need to know:  Read full article 

 

Read Closing Costs vs. No Closing Costs and What Fees are Included in Closing Costs? Can You Avoid Them?

Senate approves $15,000 tax credit for homebuyers

Yahoo News

By DAVID ESPO, Ap Special Correspondent – Wed Feb 4, 6:48 pm ET

WASHINGTON – The Senate voted Wednesday night to give a tax break of up to $15,000 to homebuyers in hopes of revitalizing the housing industry, a victory for Republicans eager to leave their mark on a mammoth economic stimulus bill at the heart of President Barack Obama’s recovery plan.

The tax break was adopted without dissent, and came on a day in which Obama pushed back pointedly against Republican critics of the legislation even as he reached across party lines to consider scaling back spending.

“Let’s not make the perfect the enemy of the essential,” Obama said as Senate Republicans stepped up their criticism of the bill’s spending and pressed for additional tax cuts and relief for homeowners. He warned that failure to act quickly “will turn crisis into a catastrophe and guarantee a longer recession.”

Democratic leaders have pledged to have legislation ready for Obama’s signature by the end of next week, and they concede privately they will have to accept some spending reductions along the way.

Sen. Johnny Isakson, R-Ga., who advanced the homebuyers tax break, said it was intended to help revive the housing industry, which has virtually collapsed in the wake of a credit crisis that began last fall.

The proposal would allow a tax credit of 10 percent of the value of new or existing residences, up to a $15,000 limit. Current law provides for a $7,500 tax break for the purchase of new homes only.

Source:  AP News

Read more… 

Say goodbye to the April 15 tax deadline.

So many individual and small business tax filers struggle to meet the income tax deadline. You have the option of filing a tax extension today, and your tax return when you’re ready.  FileLater is an authorized, IRS e-file provider, and offers easy, online IRS income tax extensions for those who need more time to finish their income taxes. It takes about 5 minutes. You don’t need any complicated tax forms. You can get up to 6 more months to finish your taxes and the IRS doesn’t even ask why – it’s automatic! As long as your information is filled out and submitted properly and on time, the IRS will grant you the automatic extension. 15 million extensions are filed annually, and FileLater is the leader in providing both personal and business income tax extensions. Their application allows users to file multiple extensions for friends and family, or clients.

The IRS opens the e-file system from Jan 16 thru April 15, the deadline for income tax extensions.

The Biggest Housing Decline Since 1974

by Yahoo Finance
Thursday January 22, 2009, 2:21 pm EST
Article  “Jobless claims surge, housing starts tumble”

“…For the whole of 2008, housing starts plunged 33.3 percent, the biggest decline since 1974, while permits plummeted 36.2 percent, also the largest fall since 1974.

Analysts reckon that the economy might not emerge from its current slump unless the housing market, the source of the financial and economic turmoil, stabilizes.

The housing market crash has reduced household wealth, causing a sharp decline in consumer spending, which accounts for about two thirds of U.S. economic activity.

“These are awful numbers. The U.S. economy cannot emerge from recession unless home prices and sales stabilize and builders begin to break new ground,” said the Economic Outlook Group’s Baumohl.

U.S. mortgage applications dropped last week, as a jump in home loan rates sapped demand for refinancing, the Mortgage Bankers Association said on Thursday.

Average 30-year mortgage rates jumped 0.35 percentage point in the week ended January 16 to 5.24 percent, after touching the lowest level in the history of the trade group’s survey, which dates to 1990.

Separately, data from a U.S. housing regulator showed home prices accelerated their decline in November, falling 1.8 percent after dropping 1.1 percent in October.

The National Association of Home Builders said on Wednesday U.S. home builder sentiment sagged in January to its lowest since records started in 1985.”  Read more…

First-Time Home Buyer Tax Credit – 2008

HR3221 – Important Tax Credit Information

• The tax credit is available for first-time home buyers only. To be a First Time Home Buyer, you cannot have owned a home in the last three years.
• The maximum credit amount is $7,500.
• The credit is available for homes purchased on or after April 9, 2008 and before
  July 1, 2009.
• Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.
• The tax credit works like an interest-free loan and must be repaid over a 15-year period.

Frequently Asked Questions

News Release by Fannie Mae

News Release by Fannie Mae
December 15, 2008
Statement by Brian Faith, Managing Director
Communications on National Tenant Policy
 

“Fannie Mae is finalizing a new policy that will allow tenants in Fannie Mae-owned foreclosed properties to stay in their homes if they can make their rental payments. For tenants who would prefer not to enter into a lease, we will continue to offer monetary support for the transition to a new residence as an alternative option.
Fannie Mae currently has a tenant eviction and foreclosure sale suspension in place through January 9, 2009. The new tenant policy will go into effect prior to the end of the suspension period. The goal of the suspension is to ensure that no renters are put out of their homes during this period. We have notified our attorney and broker networks to cease all eviction-related communications and proceedings during the suspension period. We estimate that 7,000-10,000 families have been able to stay in their homes as a result of the foreclosure and tenant eviction suspension.
We’ve been using the suspension period to fully implement the recently announced Streamlined Modification Program and to review and revise many of our policies and procedures. We’ve announced a new Trust agreement effective January 1, 2009 and new guidelines for servicers to enable earlier intervention with delinquent and at-risk borrowers. In conjunction with our regulator, FHFA, we will continue working to fully support the market and undertake efforts aimed at keeping people in their homes.”

Fed Cuts Rate to a Range of Zero to 0.25 Percent

By Yahoo Finance

Fed reduces benchmark rate to as low as zero
Tuesday December 16, 6:41 pm ET

In strong step to fight worsening economy, Fed cuts key interest rate to zero for first time

 

WASHINGTON (AP) — The Federal Reserve, urgently rewriting its playbook to fight a deepening recession, cut its benchmark interest rate to as low as zero Tuesday, a surprisingly strong step that should make it cheaper for Americans to borrow on credit cards and pay their mortgages.Wells Fargo, Wachovia and U.S. Bancorp immediately lowered their prime lending rates from 4 percent to 3.25 percent, and other banks will probably follow suit. Economists cautioned, though, that people frightened by the economy and worried about their own jobs may not feel like taking on more debt.

The Fed’s action was unprecedented in the central bank’s 95-year history, and Wall Street embraced it. The Dow Jones industrials, which had been up about 120 points ahead of the Fed announcement, finished the day up nearly 360, a gain of more than 4 percent.

For the first time, the Fed created a target range for its funds rate, putting it at zero to 0.25 percent. That was a dramatic reduction from the previous rate, which was an already low 1 percent. The federal funds rate is the interest that banks charge each other for overnight loans.

The radical action underscores the breathtaking deterioration in the U.S. economy and the stability of the financial system this fall, and even since Fed policymakers last gathered in late October.

For years, cutting the funds rate had been the Fed’s most potent weapon for snapping an economy out of trouble. But the recession, which economists say began a year ago, seems to be worsening despite all the steps taken so far.

The move “will go down in the annals of Fed history,” declared Stephen Stanley, chief economist at RBS Greenwich Capital. “I nominate this one to be called the `Who Could Ask for Anything More?’ statement. The Fed is throwing everything in its arsenal.”

There was fresh evidence of the economic danger Tuesday before the Fed announcement. Housing starts for November plunged by almost 19 percent, the most in a quarter-century.

And consumer prices fell by a record 1.7 percent in November, the second straight monthly decline, raising fears the nation is in a dangerous bout of deflation — a widespread, prolonged decline in prices that would take a bite out of personal income and corporate profits and do further damage to the already pummeled housing market. The Fed’s lower rates could help prevent deflation from taking hold.

At the heart of the economic crisis are credit and financial problems that have made worried banks reluctant to lend to customers — regardless of how cheap money has become.

At the same time, fearful Americans, watching jobs evaporate and their investments crumble, have sharply cut back on spending, including on big-ticket purchases such as homes and cars that typically require financing.

The Fed hopes lower borrowing costs will entice people and businesses to spend more, helping the economy. Citing “weak economic conditions,” the Fed said it expected to keep its funds rate at “exceptionally low levels … for some time.”  Read more…

Initial Documentation Required for a Mortgage

When you apply for a mortgage, you should have the initial documentation readily available to your broker to analyze your situation, do math, understand your aims. A broker will run your scenario with different banks trying to find lenders that are willing to accept your application, especially on today’s market, choose the best lenders for you, and develop comprehensive mortgage plan that fits into your financial goals. Only then, he will discuss with you available mortgage options and provide the actual rate quote. 

You will need to provide the following documents:

1) Income Documentation – This represents your income and work experience. Banks want you to have 2 years  experience preferably without gaps.
-Explanation letter of job history/gaps/unemployment
-For Employees:
        –Past 2 years W-2 statements 
        –Most recent 30 day’s pay stubs
-For Self-Employed or Commissioned:
        -Most recent 2 years signed federal tax returns
        -Business Certificate/License
        -YTD profit and loss
-For Divorced People:
        -Complete Divorce Decree or Separation Agreement with stipulations regarding payment of child   support, alimony and separate maintenance
        -Verification of Alimony/Child support payments
-For Investment Property Owners:
        -Lease agreements (all rental properties)
        -Most recent 2 years signed federal tax returns

2) Assets Documentation – Available liquid assets for down payment, closing costs, and reserves need to be verified.  Any large deposits on the accounts may also need to be explained. You can present copies of paper statements mailed to you, or online printouts as long as your name and bank are clearly legible on the printout.
-Most recent 2 months statements for checking and savings accounts
-Latest statements for investment accounts (401K, IRA, Stocks, Bonds, etc.) – Will be used 70% of investment value

3) Liabilities Documentation – You will sign Borrower Signature Authorization form that allows a broker to run your credit history. He will calculate your total liabilities and Debt-to-Income (DTI) ratio, check your middle credit score and derogatory trades. Different lenders have different guidelines for DTI.

There might be other documents required for final approval, but the above is a good start.

What is the Difference Between Pre-Qualifying and Pre-Approval?

A pre-qualification is normally issued by a loan officer, who determines the dollar value of a loan you can be approved for, based on review of your credit report and presented employment, income and assets documentation.
However, loan officers do not make the final approval, so a pre-qualification is not a commitment to lend. After the loan officer determines that you are pre-qualified, he/she then issues you a pre-qualification letter. This pre-qualification letter is used when you are making an offer on a property. The pre-qualification letter indicates to the seller that you are qualified to purchase the house you are making an offer on. It is very important to get this letter before you start looking for a property. You should know your options on today’s market. It will save your time. 

 Pre-approval is a step above pre-qualification. Pre-approval involves verifying by a lender your credit, down payment, employment history, etc. Your loan application is submitted to an underwriter and a decision is made regarding your loan application. If your loan is pre-approved, you are then issued a pre-approval letter.

Why Refinance Today?

The most common reason for refinancing today is to save money.  Saving money through refinancing can be achieved in several ways:

-By obtaining a lower interest rate to reduce mortgage monthly payment. Mortgage interest rates are low today, especially on fixed rate programs. It means you have a chance to improve your financial situation during crisis. For example, $400K loan amount 30-year term at 6.5% – monthly payment is $2,525.27; and at 5.5% – monthly payment is $2,271.16. To reduce your rate by 1%, you can save $257.11 per month. If you are planning to move or even pay off your loan within the next few years, refinancing probably makes little sense because you won’t be paying monthly bills long enough for the savings to cover the up-front closing costs. “Generally, if you can earn the costs back within two to three years, and it’s a home you’re prepared to stay in for much longer than that, it’s usually a good thing,” wrote by Greg McBride, economist at Bankrate.com.  A payback period (mo.) = closing costs divided by monthly savings.

-By reducing the term of the loan to save money over the life of the loan. For example, refinancing from a 30-year loan to a 15-year loan might result in higher monthly payments, but the total interest paid during the life of the loan can be reduced significantly.

-By increasing the term of the loan from 15-year to 30-year term, if you need additional money in your pocket to pay bills. For example, $400K loan amount 15-year term at 5.5% – $3,268.33 monthly payment; 30-year term at 5.5 – $2,271.16 monthly payment. You can have additional $997.17 per month in your pocket.

-People also refinance to convert their adjustable loan to a fixed loan. The main reason here is to obtain the stability and the security of a fixed loan at a lower interest rate. “If you plan to stay in your home for years, and you are currently in an adjustable-rate mortgage, you should strongly consider a refi. ARMs are incredibly dangerous — the financial equivalent of Russian roulette, but with multiple bullets. Refinancing into a 30-year fixed-rate loan may not cut your current monthly payments by much, but it gets rid of the risk that those payments will suddenly skyrocket.” – wrote by The Wall Street Journal.

-Another reason why homeowners refinance is to consolidate debts (cash-out refinance) and replace high-interest loans with a low-rate mortgage. The loans being consolidated may include credit cards, student loans, auto loans, second mortgages, etc. In many cases, debt consolidation results in tax savings, since consumers loans are not tax deductible, while a mortgage loan is tax deductible. We still have banks that allow cash-out RIFI for high Loan-to-Value (LTV) mortgages up to 90% without PMI and cash-out adjustment to par rate.

Read Closing Costs vs. No Closing Costs and What Fees are Included in Closing Costs? Can You Avoid Them?

Closing Costs vs. No Closing Costs

Read Part 1 – What Fees Are Included In Closing Costs? Can You Avoid Them?

As we already discussed in the Part 1, closing costs can not be avoided, and customer always pays closing costs. There are no such programs as “No Closing Cost, No Points”. The correct name is the hidden closing costs. You should consider with your broker what is the best way to pay your closing costs when refinancing or purchasing a property.

You can choose the following options:

1)   Closing costs can be paid out of your pocket. Advantages: Lower interest rate and monthly payments; lower debt-to income ratio; as a result, it is easier to obtain financing. We recommend this option for customers who are planning to keep a property for a long run, and when interest rates are low. Disadvantages: This could not be attractive to borrowers who can earn high returns on their free cash, or those who don’t have enough free cash. Usually, full closing costs are around 3%-6% of your loan amount, besides down payment and reserves required by a lender. Owners who are planning to refinance or sell within a few years shouldn’t pay full closing costs, since they wouldn’t hold their original loans long enough to recoup their up-front costs.

2)  Closing costs can be added to your loan amount when refinancing a property. Advantages: You need less money for refinancing. Disadvantages:  Financing closing costs can be very costly. The larger loan increases the cost of the mortgage.  For example, suppose financing $9,000 in closing costs on a $300,000 (80% LTV) will increase Loan-to Value (>80% LTV). As the result: you will pay higher rate because of LTV adjustment, higher monthly payments because of higher rate, higher loan amount, and PMI (Private Mortgage Insurance). Also, your debt-to-income ratio will increase, and it can be a bad choice if you don’t have enough income.

3) Closing costs can be covered by seller’s concession when purchasing a property. When you negotiate the purchase price, you can ask a seller to cover your closing costs instead of lowering the price.  it is a good idea, especially if you are purchasing and only have a designated amount of money to put toward the down payment and other expenses.

4)  Closing costs can be covered by the higher interest rate – hidden costs – or as advertised “no closing costs”. Lender will increase your initial rate to cover your closing costs fully or partially.
Close to Par Rate + Markup (add on to the rate) = Final Rate resulting in credit which covers closing costs. 
Advantages: don’t need to bring free cash for closing; your balance will not be increased. This option can be the right choice if you are going to keep your property for a short period of time (1-3 years); or if interest rates go down, and you are planning to refinance again and again on the way down. When interest rates are high, paying full closing costs doesn’t make sense because borrowers are very likely to refinance after rates dropped. Disadvantages: your final rate can be much higher than your initial rate; your monthly payments will be higher, the overall interest paid for the life of mortgage will increase substantially.

5)  Combination of the above.

With a variety of different closing costs option, it is important to choose the one that will best suit your needs and save you money on a long run. Be careful with no closing costs option. Ask your broker to calculate different options for you.

How a Low Score Can Increase Your Cost of Living

We all know a low credit score will make everything in the world of finance more expensive because of higher interest rates from lenders due to being considered a greater credit risk (i.e. higher interest rates on cars, homes and credit cards). While this may be considered common knowledge by some, it’s truly devastating effects are understood by few. In addition to paying more for a car, home and credit cards, a low credit score will most likely have you paying more for the following as well:
1.) AUTO INSURANCE. As many as 92% of the 100 largest personal automobile insurers use credit information to underwrite new insurance premium, according to a study by Conning & Co., an insurance-research and asset-management firm.
2.) HOMEOWNERS INSURANCE. It’s thought many insurance companies see a correlation between low credit scores and increased property insurance claims. Therefore, a low score will result in the higher rates.
3.) LIFE and HEALTH INSURANCE. Customers who are unable to pay their monthly insurance premium will increase cost to the insurance company that stuck with the bill (resulting in a loss for the company). Since customers who pay without lapse are more profitable it is felt by many that a low credit score now even affects a monthly life and/or health insurance premium negatively.
4) EMPLOYMENT. One of the more shocking areas where a low credit score will cost you is in the area of employment. It’s estimated as many as 42% of employers now do credit checks on applicants before hiring them (according to a survey by the Society for Human Resource Management).
While many employers claim they only do it to verify information on your application (such as where you live and where you have worked etc.), we can both assume they are taking the liberty to have a peek at how you handle your financial affairs as well.

For more information you may visit the “CREDIT SECRETS BIBLE” that has been in print since 1994 and is published by Consumer Publishing Group. This e-book can help you to improve your credit history.

Introducing Super Conforming and Changes to Standard Conforming Loans with an LTV > 80%

I. Introduction of Super (Jumbo) Conforming

Banks are pleased to announce Phase I of the Super Conforming loan program utilizing the new 2009 loan limits established in accordance with the Housing and Economic Recovery Act. 

The new Super Conforming loan limit for 1-Unit properties in most areas is $625,500.

The Super Conforming products that are initially available are 30 Year Fixed, 15 Year Fixed, and 5/1 LIBOR ARM (5/2/5). 
Please ask your broker the Program Guidelines for complete information.  A future release with expanded eligibility is anticipated as more complete production information becomes available. 

II. Changes to Standard Conforming Loans with an LTV > 80%

Effective for loans locked on or after Monday, November 17, 2008, some banks will release the following changes for loans with an LTV (Loan-to-Value) greater than 80%:

-Eliminated the additional reserve requirements when the LTV is greater than 80%. Reserves are still required per loan program and transaction type – usually, 2 months PITI (principal, interest, tax, insurance).
-Maximum DTI (Debt-to-Income ratio) can be increased up to 55% on Interest Only products.
-Minimum FICO Score of 680 is required. Additional FICO requirements apply in Declining Markets.
-Maximum 31%-41% DTI on 2-Unit Primary Residence Purchase and No Cash Out transactions.
-Cash-out is restricted to 1-Unit Primary Residence, no longer available on 2-Unit Primary Residences or Second Homes.
-Construction-to-Perm financing is permitted only on 1-Unit Primary Residence Purchase and No Cash Out transactions, no longer available on Cash Out transactions and Second Homes.
These changes apply to Standard Conforming loans with an LTV greater than 80%. Please review with your broker Maximum LTV’s / CLTV’s and Loan Limits of the Program Guidelines for complete information.

We still have banks that have: a Conforming Jumbo up to $750K with no bump to rate, no bump for cash-out, up to 90% LTV, no reserve requirements, 1 day off MLS, minimum FICO of 650; or Jumbo up to $900K with low adjustment.

Read High LTV Mortgages On Today’s Market

What Fees Are Included In Closing Costs? Can You Avoid Them?

All closing costs are spelled out in the brokers/lenders Good Faith Estimate (GFE). GFE gives an estimate of any fees associated with your loan. Most fees are standard but amounts will fluctuate depending on the loan program, the value of your home, or lender used. Fees you will see on a Good Faith Estimate are:

Bank Fees:

Loan Origination/Discount Points – Paid to the bank to lower your interest rate. It is your option. Example:  $300K loan amount, 30 years fixed at 6% interest rate – your monthly payment is $1,798.65. Let’s assume, you are paying 1 point discount fee. 1 point = 1% of loan amount ($3,000). Your rate became lower approximately by 0.25%. $300K at 5.75% – monthly payment is $1,750.72. The difference is $47.93. Does it make any sense?

Appraisal fee – For single family residence usually $350 paid directly to the appraiser to determine the current market value of your property.

Credit Report – Joint credit report is approximately $16.

Mortgage Broker fee – Paid to the broker to find the best lender for your loan, to negotiate with the lender (especially on today’s market), to respond to underwriting conditions and stipulations, to contact and work on your behalf with bank attorney, insurance companies, title companies and other parties to this transaction.  The Mortgage Broker fee may vary, so it is important to discuss this fee with your broker. Usually, it is 2%-3% of your loan amount.

Processing fee – Paid to the broker (negotiable) to collect and process all required info and docs (employment, income, assets, debt). It is approximately $250.

Underwriting fee – Paid to the lender for underwriting your loan application – not negotiable, and usually $600-$700.

Application fee – Paid to the broker to process your application. Negotiable, approximately $350.

Other Lender’s fees (Flood Certification, Wire Transfer, Tax Service Fee…) – Paid to the lender and not negotiable

Title Fees:

Closing/Escrow fee – Departmental searches and closing of the loan (≈$250)

Attorney fee – Paid to the lender’s attorney to review your final docs and to close your deal (≈$500)

Title Insurance– Indemnity insurance against financial loss from defects in title to real property and from the invalidity or unenforceability of mortgage liens. You pay approximately $2.75 per each $1,000 of your loan amount.

Miscellaneous Fees:

Recording fees – To record your deed and mortgage in  the municipality (≈450).

Prepaid interest – Mortgage interest from closing date till the 1st day of the next month.

Insurance/Tax reserves for escrow– Items such as real estate tax, hazard insurance, PMI – if required- that are paid in advance.

 
Bank Fees are determined by the lender. The title and miscellaneous fees are fees determined by third party title and escrow companies. These are set fees that won’t vary much from lender to lender. Other fees may be incurred depending on the state of residence or if the transaction is a new purchase or a refinance. Property inspections and appraisals are other out of pocket costs paid by borrowers that should be figured in, though they are usually paid prior to closing the loan.
Closing costs must be considered when refinancing or purchasing a new home, especially if you are purchasing and only have a designated amount of money to put toward the down payment and other closing costs.
I believe, now you understand that closing costs can not be avoided, and customer always pays closing costs no matter that they are paid out of your pocket,  added to your loan amount or covered by the higher interest rate. In NY State, for example, brokers can not advertise “No Closing Cost Programs” because no such programs exist.

Read our post Closing Cost vs. No Closing Cost