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What to do During the Mortgage Loan Process?

What to do during the Mortgage Loan Process?

Putting Our Heads TogetherMy friend Randi Wright gave this to me the first week I worked with her, and she has shared a million gems every since.  She is truly one of the great collaborators, at the least, I have ever met.  During the mortgage process, she always confronts a problem by saying, “let’s put our heads together”.  She is one of the great ones, and here are Randi’s top tips for what to do during the mortgage process:

Check Box for completion to the mortgage loan process.During the Mortgage Loan process

Please read!

BE SURE of where your funds for down payment and closing are coming from as early in the process as you can and share with me as soon as possible.  If you are lacking or short on funds that cannot be verified, this can cause delays.

DO NOT apply for auto loans, credit cards, or other accounts which may pull your credit report.  Multiple pulls will most likely lower your FICO score which can change the mortgage rates and programs you qualify for.

DO NOT make excessive purchases on your credit cards. New purchases can cause your debt to income ratio to increase.  Your debt to income ratio is very important for the type of loan you are qualifying for.  Please wait until after closing to buy any new furniture or appliances for your new home.

 

AVOID any NSF or insufficient funds on your bank statements. The whole point of your bank statements is to verify that you have the ability to cover the funds needed for closing and that you have the ability to make your monthly mortgage payments. NSF’s or overdraft fees will kill your loan.

 

DO NOT make deposits other than payroll into your bank accounts that cannot be sourced and verified. What this means:  we will require a copy of the check(s) and deposit slips that match up to your deposits on your bank statements if they do not match up to your paystubs. Transfers from other accounts will also require a copy of a transfer slip, as well as a copy of the statement that the transfer originated from.  People become very upset about having to document their deposits if they are not expecting this, so please be aware of it.

Why do people have to source and verify all their deposits?

 Cash and House during the mortgage process Because we have to insure that:

  1. Another loan is not being used for this transaction
  2. No part of the transaction is from the seller
  3. All gift funds are documented
  4. There are no cash deposits.  Cash will contaminate the account.  Therefore,

    Cash deposits should be avoided; they cannot be verified as coming from a legal source. So do not sell personal items or have a garage sale and deposit the money into your account, it can kill your transaction. Use cash to pay bills, buy gas or groceries and let your payroll deposits add up in your account.

IF LIQUIDATING ASSETS, a complete paper trail will be required.  If you have stocks, mutual funds, retirement accounts, or other investment accounts that will be liquidated and used for the purchase of your home, we will need statements showing the current value, proof of sale or cash out, copy of transaction receipt or deposit slip, and then a new 30 day print out from the account where the money has been placed.  All funds must match up throughout the transaction.  Avoid the addition or subtraction of funds for other purposes during this process.  If taking funds from a 401k, please provide proof that your plan allows this.

Your our credit report can be pulled again anytime during the process.  Your scores and debts cannot change.  If they do change, please let me know immediately so that I can confirm that your loan is still viable.

REMEMBER During the mortgage process you may be asked for additional items.  The requests may seem redundant or excessive and your patience is appreciated.  Securing a home loan can be a smooth process as long as we have all the items needed and receive them in a timely manner.

You can contact me by text, email or phone anytime you have a question during the mortgage loan process!

Copyright 2014 John Regur All Rights Reserved – Originally Posted at: Tulsa Oklahoma Mortgages – John Regur

John Regur, Midtown Mortgage
2627 E. 21st Street TulsaOK74114 USA 
 • 918-949-7248

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How to Avoid Mortgage Insurance

How to Avoid Mortgage Insurance

The only absolute answer for how to avoid mortgage insurance is to put 20% down.  But there are some tricks to at least reduce the premiums.  You can shop for mortgage insurance, you can compare quotes, and you can control the rate your are charged.  All accomplished by how you structure your mortgage.

Now, If you do not put at least 20% down on a real estate mortgage, you will pay some form of mortgage insurance.  Mortgage insurance is insurance you buy for your lender so they will accept less than a 20% down payment.  They are two types of mortgage insurance: up front, which is paid at closing; and the annual premium, which is paid in monthly installments and included into your mortgage payment.

But, you can reduce your mortgage insurance, far below what most people pay.

OK, back to the two types of mortgage insurance:

Up Front Mortgage Insurance

Paid to the mortgage insurer “up front”, or at closing.  The funds for this payment are paid by the lender for all non conventional loans, and become “rolled” into the loan.

Conventional loans do not require Upfront mortgage insurance.  A borrower can choose to pay their annual mortgage insurance in a single premium “up front”, but it cannot be rolled into the loan.

Annual Mortgage Insurance

Quoted as a percentage – to translate it into a dollar amount, multiply your loan amount by the percentage quoted and you will have your annual mortgage insurance premium.  Divide this by 12 and you will have the monthly premium that is added to  your mortgage payment.

You may be required to just pay for it up front, or you may be required to pay both upfront and monthly – it all depends on how your mortgage is structured.  But knowing how the program works and where the options become available is your key to the ultimate question:

What is the fastest and least expensive way to get a loan?

So, let’s get there.  The thing to do next is to look at the mortgage insurance program for each loan type.  Within those programs are the opportunities to reduce mortgage insurance.

Conventional Mortgage Insurance

To give you an exact quote on your mortgage insurance premium for a conventional mortgage I would need your credit score, your loan to value, and your debt to income ratio.  They are banded, and an A+ credit borrower will pay less than an A-rated borrower, and so on.

But here is the kicker.  The difference in an A+ borrower and an A-rated borrower is 1 credit score point.  What if I could improve your credit score by 1 point, let’s say by paying your debt down a few hundred dollars, and it would save you for the life of your mortgage, wouldn’t you want to do it?

That is one of 100 reasons why you want to pre-qualify your mortgage application as soon as possible.  If you need a week or two to save thousands of dollars, you should take it.  Find out your credit score and start getting pre-qualified by clicking here.  Or call me at 918-949-7248.

The next step would be a free analysis report.  How much would you save if you paid all of the mortgage insurance in a single premium?  Would it be better to put 15% down or to put 5% down and use the remaining cash to pay down the mortgage insurance?  What could the tax benefits be?  To initiate your fee mortgage analysis, customized for your personal situation, click for an application here.  Or call me at 918-949-7248.

FHA Mortgage Insurance

  • Upfront Fee of 1.75%
  • Annual/Monthly Fee of 1.35%
  • You pay both.  It never drops off unless you put 10% down at time of purchase, and even then it is required for 11 years.

You can save 5 basis points on your mortgage insurance if you put 10% down, but I don’t know that this is a good use of cash.

Another way to avoid mortgage insurance in an FHA loan program is to amortize over 15 years.  The 15 year mortgage insurance rate is .45% with 10% down and .70% with less than 10% down.

The best way to avoid mortgage insurance in an FHA loan is with the HAWK program.

FHA has recently published a federal register notice announcing a new counseling program.  It’s called The HAWK (Homeowners Armed With Knowledge) Program (click here to read the HUD report), and the program is counseling for first time home buyers.

Benefits of the HAWK program are:

  • upfront fee of 1.25% (a reduction of 50 basis points)
  • Annual/Monthly Premium of 1.25% (a reduction of 10 basis points)
  • After 2 year’s history of timely payments – a reduction to 1.1%

I know the drag is going to be that class, and the whole “counseling” concept, but the program is intended to teach quality budgeting techniques; and financial literacy is a continued education.  Program Counseling must be completed 10 days prior to contracting in order to avoid mortgage insurance by reducing premiums.

Section 184 – aka The Indian Loan

  • Funding fee of 1.5%
  • Annual/Monthly Fee of 0%

For a loan program that requires a down payment of 2.25% and no monthly mortgage insurance, paying an 1.5% funding fee is a bargain.

VA Loans – 100% Financing

  • Funding Fee of 2.15% for first time use
  • Funding Fee of 3.3% for next use
  • Can be waived if borrower has a service related disability
  • Annual/Monthly Fee of 0%

If you increase your down payment to 5%, your Funding Fee goes down to 1.5%, and if you put 10% down it reduces to 1.25%.  These rules apply for first, second or third time use.

Funding fees for National Guard/Reserves are .25% higher across the board.

USDA Rural Development Guaranty 100% Loan Program

  • Upfront Fee of 2%
  • Annual/Monthly fee of .4%

For a 100% loan at 640 credit score, this is inexpensive mortgage insurance.

Copyright 2014 John Regur All Rights Reserved – Originally Posted at: Tulsa Oklahoma Mortgages – John Regur

Posted in: For Buyers

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Build Credit With a Secured Credit Card

Build Credit With a Secured Credit Card

Build Credit with a Secured Credit Card

Many of us have trouble with the idea of using a credit card to build credit.  Credit Cards are dangerous to some people, and many of us have experienced trouble with them.  But if managed correctly, using a Secured Credit Card will build credit scores fast – at the least faster than most other opportunities to do so – and for that reason using a secured credit card is the most common method used to build credit.

Secured Credit Cards work just like a Traditional Credit Card, except they require a cash deposit that serves as collateral if the card’s monthly payment is not made on time.  Most of the time, the initial deposit amount is also the introductory credit limit.  The credit limit can be raised over time without adding additional funds, and eventually the entire deposit may be allowed to be refunded.

Bending Over Backwards Using a Secured Credit Card to Build CreditNow, there are moments in life when we are willing to bend over backwards to build good credit, but using a secured credit card to build credit is a pretty straightforward proposition. The most important element to building credit through any type of credit card is to manage it correctly.  There are 3 major “To Do’s” you must adhere to if your goal is to add points to your score:

  1. Always maintain a balance on your credit report that is less than 30% of the credit limit.
  2. Never “flat-line” the card, or let it report a zero balance month over month.  This will indicate non-usage, and you will not be rewarded for not using the credit card.  Although credit reporting agencies are beginning to consider the amount of payment you make every month, which will give credit scoring opportunities for full payments, the FICO scoring model does not currently account for this (as of May 23, 2014 – we expect it soon will, but as for advice relevant to today: keep a small balance).
  3. Never, never pay late.

Before consumers apply for any Credit Card, especially a Secured Credit Card, shop around – and be aware of the opportunities in the marketplace for the best deal.  It pays to read the fine print, and if you know the complete rules for how your credit card company works then you will pretty much know the rules for how you are going to increase your scores.  Always compare the terms.

Here is what to consider:

  • Compare the Annual Fees – There is no typical annual fee.  Although the industry says the average annual fee is $75, you can find many with much lower annual fees, but you may have monthly fees too.  APR (annual percentage rate) can help you identify the impact of fees.  APR is a calculation that adds the required fee(s) to the interest rate.  Look for cards with a small variance between interest rate and APR.
  • Compare the Deposit – Generally speaking, the deposit amount is up to the consumer, but most Secured Credit Cards have a minimum deposit of  $200 or so.  Remember:  the deposit will be your initial credit limit, and you only want to use 30% of it.
  • Ask for the Refund Terms – Most secured credit cards are converted to unsecured credit cards after a period of good standing.  But when and how that occurs is another variable.  Also note that when the refund of your deposit is triggered, your credit card company will often apply it first towards paying down your current credit card balance.
  • Reporting to Credit Agencies – When using a secured credit card to build credit scores you must ensure the credit card company reports to all three of the credit bureaus (many will only report to one).  Read the terms of the agreement of call the credit card issuer if you have any question(s) about this.
  •  Pre-paid Credit Cards are not the same as Secured Credit Cards -  Pre-paid Credit Cards will not build credit scores.  Pre-paid Credit Cards apply money in advance to all charges occurred, while secured credit cards work more like Traditional Credit Cards.

What Credit Card Fees to be aware of ?

  • Some cards charge an Activation Fee the 1st time you use the card.  A Bankrate 2014 Prepaid Debit Card Survey showed that 53 percent of Secured Credit Cards charge an activation fee, with ranges from $2.95 to $9.95; but often the activation fee can be avoided if you activate the card online.
  • Failure to use the card may result in an Inactivity Fee.  Although most don’t have this fee, know the rules to the card you are choosing.
  • Customer Service Fees are sometimes charged if you dispute or need an item researched.  Although the Bankrate 2014 Prepaid Debit Card Survey indicated 73% of cards don’t charge this fee, you must research the full fee schedule.

Using a Secured Credit Card will build credit.  It works.

We all know multiple stories of friends and loved ones who have ruined their credit and racked up too much debt with their usage of credit cards.  Credit cards can be dangerous.  But, for that very reason, if you properly maintain a Secured Credit Card, you will receive high consideration for your ability to manage credit.

 

Copyright 2014 John Regur All Rights Reserved – Originally Posted at: Tulsa Oklahoma Mortgages – John Regur

Posted in: Credit

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How to Use a Goodwill Letter for Credit Enhancement

goodwill letterHow to Use a Goodwill Letter for Credit Enhancement

If you are told your credit score is too low, you have to quickly make a choice:  is this OK with you, or do you want to fix it.  I mean to say, you have  to take action, with absolute decisiveness; you have to stand up and make it the time to do something.  And sometimes you have to ask for forgiveness.

In certain situations, we may be able to fix credit with a goodwill letter.  Take this for example: let’s say you have been a Lowe’s or Home Depot  customer for years, and a few years back you took out a credit card to take advantage of 6 months of no interest or 20% off purchase or whatever.  Imagine you paid your  bill timely for several years and then you had some health or family problem that really got you off track.  Let’s say two months went by without you making a payment, but since then you have been on time – however, with one or more 30 or 60 day late items hurting your credit report.

SquirrelThis could be a big problem to you if you were applying for a mortgage.  Now mortgages can be qualified for with scores as low as 560 (for FHA to 560 click here), but let’s continue our example by saying your credit score is 717.  A 717 is a fine score, but actually 2 pricing bands behind a 740 credit score.  This could mean up to a .25% price increase to the interest rate you qualify for.  On a $300,000 home loan in today’s market, the cost would be around $50 per month.  That’s for 30 year mortgages.  But 23 points to your credit score could solve this problem for you.

If you need a free copy of your credit report, click here, or contact me with any questions regarding credit scores and credit reports.

This is the kind of situation where a goodwill letter would work effectively.  The basic idea is about asking for forgiveness from the creditor.  You can try a goodwill letter for anything, but it will work best in the cases where you have 3 to 12 months of good payment history following the report of late payment.  It is important that the creditor wants to maintain a good relationship with you.

You are dealing with real people at the other end, so a humble approach with a polite request serves the purpose.  There is no guarantee for success, but a goodwill letter is so easy to write and fast to mail out.  And they do work very often.  But it takes time.

Now if you contact me, I have three sample goodwill letters I can send you to create your own personalized letters.  Or if you are in an extreme hurry, you can use them as your own.

  • It will be best if you can  write a genuine request about your own unique situation.
  • Give a good reason why it happened last time, how the situation has changed and why it won’t happen again
  • Give a good reason why you are writing right now.  Let them know you are buying a home and improving your situation.
  • It’s helpful you have been a loyal customer and wish to continue to be so for years to come
  • Take responsibility for the Late Payment.  Mention you should have been more careful and don’t apply entire blame on the situation

Now, let’s go back and I’ll give the number one rule:

Don’t write a goodwill letter for a payment you know is late but is not on your credit report.  Sometimes a creditor may not report a late payment at all.

If you need a free copy of your credit report, click here, or contact me with any questions regarding credit scores and credit reports.

Best Practice: Start the process early and invest in yourself the time necessary to maximize your scores.

Copyright 2014 John Regur All Rights Reserved – Originally Posted at: Tulsa Oklahoma Mortgages – John Regur

Posted in: Credit

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Tulsa Oklahoma Bond Money

Tulsa Oklahoma Bond Money

Tulsa, OK, has a new down payment assistance program called the TuBond Money in a breifcaselsa County Home Finance Authority Turnkey Mortgage Origination Program.  Paired with an FHA, VA or Rural Development Loan, this program may assist more borrowers in qualifying for 100% Financing.  That’s right; own your home, 0% down payment.  Tulsa Oklahoma Bond Money is back.

In fact, low down payment loans are coming back entirely (click here to see the latest update).

100% Financing – 0% Down Payment

Housing Agencies provide Down Payment Assistance in the form of grants, zero or low interest loans, or assisted rates.  Some cities even have their own home buyer assistance and homeowner rehabilitation programs (click here to see those available in Tulsa, Oklahoma).

The new Tulsa Oklahoma Bond Money Program is a County-wide program and can be used anywhere in Tulsa County limits.  The Tulsa County Home Finance Authority sets the interest rate and terms and table funds the down payment assistance.  You can only use the Tulsa County Home Finance Authority Turnkey Mortgage Origination Program once, and funds are made available on a first-come, first-served basis from a continuously funded revolving pool.

Reserve your funds as soon as possible.  Click here to begin your 100% financing application.

What are the income requirements and how much do you get?

Tulsa Oklahoma HomeThe maximum debt to income ratio allowed is 45%, but a co-signor is allowed.  The co-signor cannot reside in the home and they cannot have an ownership interest.

The maximum household income you can make is $82,880, but we only have to count the income of whoever is on the application.  There is no minimum income required, but you have to qualify with a house payment that fits your budget.  Now here is a cool benefit: if you are hampered with current debt, say student loans, and you need a co-signor, the co-signor’s income doesn’t add to your household income limit.

$214,925.00 is the maximum acquisition amount this particular Tulsa Oklahoma bond money program allows for.  And another bonus:  there is no requirement that you be a first down home buyer.

What properties are eligible?

  • New (never previously occupied), existing, 1-4 unit, condominiums (if HUD approved) and town homes
  • Manufactured homes are eligible but with overlays
  • Land cannot exceed size required to maintain basic livability
  • Residential only – No more than 15% of square footage can be used for business (including child care)

What are the highlights?

  • No federal tax transcripts
  • No recapture tax
  • No first time buyer class required, although it is recommended
  • Gift/Grant Letter is the only additional form to closing
  • Borrower pays zero Origination Charges, zero Discount Points

How do you pay it back?

The assistance provided is a 3.5% grant and is calculated on the Note amount.  The grant can be used for the down payment and closing cost assistance.  There is no second mortgage note.  And here is the best part:

You never have to pay it back!

What is the fine print?

  • The minimum FICO score is 640, 660 on manufactured housing
  • Buyer must use as primary residence
  • Buyer must occupy within 60 days
  • Conventional Loans do not participate
  • Construction to Permanent loans not permitted
  • Government Paperwork Timelines – Extension fees are costly – only use a mortgage professional with bond money experience

Tulsa, OK Bond Money Update:

Increase in the Funding Fee 

Effective with all loans registered on or after June 9, 2014 under the HFA programs, the Funding Fee will be increased to $300.

The response to this mortgage program has been tremendous, and the high volume of applications for underwriting increases every day.

In an effort to decrease turn times, U.S. Bank must increase their staff accordingly. They have reviewed the options and have determined that an increase in the funding fee is the best option at this time to accommodate the related expense.

Check back for further updates!

How to get down payment assistance?Certificate Of Bond Money Training

Reserve your funds as soon as possible.  Click here to begin your 100% financing application.  Your first mortgage funds are locked for you when the reservation is submitted and accepted by the system and a loan number is obtained.  Grant funds are automatically reserved with the first mortgage reservation.

Copyright 2014 John Regur All Rights Reserved – Originally Posted at: Tulsa Oklahoma Mortgages – John Regur

Posted in: For Buyers

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What is A Condo Association?

Tulsa, OK, HUD Approved Condo

Largest HUD approved condo complex in Tulsa

What is A Condo Association?

This is a question often under-looked by Tulsa, OK, condo buyers.  Condos may provide great bang for the buck, inexpensive amenities and low-maintenance, but this is accomplished through all of the homeowners in the building working as a cooperative.  Often, condominium buyers do not give enough consideration to the quality of the Condominium Homeowners Association.

My first piece of advice, find out if the association has completed HUD approval.  Click here to read more about HUD Approved Condos.

Not All Tulsa, OK, Condo Associations are Equal.

Many Tulsa, OK, neighborhoods have a Homeowners Association, or HOA for short.  They are designed to maintain “standards” for the development and keep the neighborhood in good repair.  The developer of the neighborhood typically funds the HOA, establishes the association with the rule and regulations it will uphold, and then hands it over to the homeowners as properties are purchased.  Some neighborhood associations are strong and highly involved in the maintenance of the neighborhood, and some are more social, used to promote the community.  And all the while, many other Tulsa, OK, neighborhoods maintain themselves beautifully without the help from an association.

Condominium Owners Need Associations.

A condominium will always have any association, and it always needs to be strong.  Condominiums share significant amounts of commonly owned property, such as the roof, parking, landscaping and many other common areas.  Each owner exclusively owns their individual unit, but the elevator, swimming pool, and other building amenities required shared maintenance. When you buy a condo, you are entering into an agreement with all other owners in the Condo Association.  All association members agree to upkeep their individual unit and to additionally contribute to upkeep of the shared property.  This provides an economy of scale, and shared costs can provide for very inexpensive benefits.  But if you condo association is weak, you can find your condo association difficult.

How Do You Know if a Condo Association is a Good One?

Well, you have to ask questions:

  • Meeting of the Board

    What I see at Board Meetings where I live.

    What are the condo association rules?  Your parking spaces, swimming pools and patios will all be governed under the condo association rules.  If having pool parties is important to you, ask for the rules.

  • How much are the condo association fees?  Fees vary by community and may cover vastly different items.  Ideally, fees help all association members acquire benefits less expensively then what they would get them for individually.  Possible considerations may include maintenance of the building, insurance of common areas, utilities, amenities, etc.  The point here is to ask and to understand what the cost is and what it includes.
  • Is the condominium complex professionally managed?  You will want to ask for the contact information for whoever runs the property.  It is important to identify who fixes what.  Contact the property management staff or the HOA for all of the information you will need.
  • How much money is in the reserve fund?  Generally, you will want to see 15% – 30% of annual expenses in a reserve fund.  The older the building, the more the maintenance, and the more you will want in the reserve fund.
  • What is the Condo Association’s history regarding special assessments?  These are a one time fee used to cover an unexpected or large expenditure.  If it cannot be covered by the budget or the reserve, a special assessment is required.
  • Rental-agreement-e1347797065418

    Best Practices: Obtain & Read all paperwork

    Is there any pending legislation against the condo?  I know of at least on Tulsa, OK, condominium association that is currently encumbered with a lawsuit.  A lawsuit may impact all homeowners.

  • What is the Condo Association’s rental policy?  A high number of renters can have a negative impact, and many lenders are more reluctant to to give loans on these types of complexes.  Most lenders look for at least two thirds owner occupancy.

Tulsa, OK, condominiums have appreciated at a higher rate than single family homes over the last 2 years.  But this is mostly due to the fact that during difficult economic times (2008-2011), they depreciated faster as HOAs scrambled to absorb foreclosure losses.  If too many units stop paying association dues, the association’s budget falls apart quickly.  They may offer advantages to home buyers such as affordability, the need to downsize or possibly not wanting to have the maintenance issues of single family homes.  But before buying  a condo, make sure you know who you will be partnering with and what the rules are.

Copyright 2014 John Regur All Rights Reserved – Originally posted at: Tulsa Oklahoma Midtown Mortgages – John Regur

Posted in: Condos

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When Do Interest Rates Go Up in Tulsa, OK?

When Do Interest Rates Go Up in Tulsa, OK?

When do interest rates go up in Tulsa, OK?

Everybody is talking about interest rates, particularly about how they will move and when to lock your rate in.  So, how do interest rates move?

It all starts with securitization.  That is when a bunch of individual mortgages are put together into a giant pool of loans.  That pool of loans is further segmented down into mortgage bonds, which themselves are classified based on their risk profile – from AAA rated bonds (the lowest risk class) to unrated bonds (or “junk bonds”,the highest rated risk).

Every day, Mortgage Backed Securities are traded, just like stocks – and like stocks, Mortgage Backed Securities are very volatile.  Today they moved up and down all day, as they do every day.  Now the price of these bonds, and the mortgage rates that are tied to them, move a lot like a teeter totter.  When price goes up, rate goes down, and vice-versa.  To monitor these price movements, charts are used like this one:

candle

This chart is called a Japanese Candle, and we use these charts to identify and forecast patterns in the bond price movements.  These patterns have all kinds of  cool “industry” terms, like “downward breakout”, “triple-bottom” and the “double top”.  Some prefer to see an “inverted hammer”, especially if it is a lead toward a “heads and shoulder pattern”, which can be an indicator for a Stochastic Crossover.  But here is the juxtaposition of it:

Green is Good and Red is Bad.

Anytime you see green on this chart, bond prices are going up and rates are going down.

The point here is that bond prices change constantly and mortgage rates simply follow those prices.

So what can we monitor to stay in front of these price changes?

Well that leads to a big debate in the lending industry:  The Ten Year Treasury vs. Mortgage Backed Securities.

Depending on what your read and depending upon who you talk to, many Tulsa, OK, mortgage companies may tell you that the 10yr Treasury is the preferred index for monitoring the direction that mortgage rates are headed towards in the coming weeks.  But since most rate locks are in regard to a short term consideration, say 30 to 45 days lock periods, I find this method flawed.

There is a huge difference between the 10 Year Treasury and Mortgage Back Securities.  Primarily, there are three:

  1. Maturity – such as 10 year vs. 30 year, or variable factors
  2. Risk – such as default or prepayment
  3. Correlation – short and long term relationships between factors

This is boring stuff, but the point is 10Yr Treasuries and Mortgage Back Securities often diverge, meaning while one is going up the other is going down.  If you want to know the value of Apple Stock, you cannot just look at technology indexes or, let’s say, Microsoft stock.  If you want to know the value of a specific stock, you have to watch that specific stock.  The same principles should hold true to the 10Yr Treasury and Mortgage Backed Securities.

Now, that is not to say that we don’t need to understand 10Yr Treasuries, because Mortgage Backed Securities are competing for the same investment dollar.  And by that I mean that the economy as a whole has an impact on the prices of mortgage bonds.  Depending on what employment is doing, or gas prices or the stock market – all of these have an impact on the pricing of Mortgage Bonds.

The one thing we should really try to avoid is the media.  The mortgage related news is several days behind, at best.  When mortgage rates are improving I often will see negative headlines.

So how do you lock into the lowest rate possible in Tulsa, OK?

Contact me, and let’s get ready to be ready.  The more we can do to get your credit score over 740, the better the rate.  The more we can do to complete document your loan, the shorter lock period we will need.  Remember, we can’t lock until we are ready, so quickly we must get ready.

Copyright 2014 John Regur All Rights Reserved – Originally posted at: Tulsa Oklahoma Midtown Mortgages – John Regur

Posted in: For Buyers

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Principles of Negotiation for a Pawn Star Broker

Principles of Negotiation for a Pawn Star Broker

Yesterday, while in Vegas for the Sales Leadership Roundtable, I attended a breakfast with Rick Harrison, owner of a $60 million franchise that includes a pawn broker business in Las Vegas and a reality TV show on the history channel.  His show is broadcast in 38 countries, and he showed me a video on his iPhone of his arrival in Singapore.  20,000 screaming fans treating him like one of the Beatles. 2014-03-06 19.22.39-3

So how do you build a $60,000,000.00 business and become world famous?  Well, the first thing you could do is persistently tell yourself you are.  Rick painted “The World famous” on the side of his business 20 years ago, and his vision board has come true.

But to deserve that title you have to work hard and negotiate like a champion.  And Rick is a world class negotiator.  Whether it is negotiating to obtain the only pawn broker license being offered in Las Vegas, or putting his business on Nightline, and a major TV show, to publishing royalties for his book, a New York Times best seller – Rick is his own manager.

And it goes right beside the point that negotiated at his pawn shop all day, every day, without a vacation for the first 10 years of opening his business.

So over the airplane ride home I read the book, and it is an awesome five hour read.  And here is what I took out of it:

WORLD FAMOUS GOLD & SILVER TIPS FOR NEGOTIATION

1 ~ YOU HAVE GOT TO BE ABLE TO WALK AWAY

Identifying a potential deal is exciting, but you have to put in the time to consider all potential roadblocks to your desired position.  The Old Man, Rick’s father, taught him “Your sentimentality isn’t mine.”  Sentimentality cannot be reliably transferred, so it is considered a vanished collateral, and therefore present value doesn’t exist. In the process of negotiation, you always have to consider the time it will it take to arrive at the completed objective.

2 ~ IT’S JUST STUFF

Rick has gone through 10 wedding rings in his marital career, and 1 was so he could get another ring re-sized immediately.  He need some scrap platinum to enlarge a ring so he could satisfy the customer’s urgency, and to make himself some big cash.  It’s just stuff.  You can live without it.  And you will get more.  It’s disposable, superficial stuff.

3 ~ DON’T TIP YOUR HAND

This is where you act out the mastery of the other four principles for negotiation.  And the pawn broker recommends this to the buyer and the seller.  Once you know the other side will capitulate, negotiations are over.  You have to focus on this philosophy to embrace it, because it must show in your body language, tone of voice and attitude.  “If the seller shows he is not willing to walk away, if he indicates through body language or words that he absolutely has to get this done, he’s yours.  He’s also lost money.

4 ~ NEVER GIVE THE FIRST NUMBER

Now in a lot of the business I do, this is impossible.  But his point that all information is power still applies.  And everything said gives further indication toward perceived position in the negotiation process. So play your hand close to your chest.  Another point made is that it’s not your job to educate the other side on their value.  They know where it comes from, what their future needs are.  All that is trying to be done at this point is to see if there can be an agreement.

5 ~ NEVER HAVE A HARSH NEGOTIATION

Rick is a big believer in Karma.  Keep things fair.  Laugh, joke and have fun.  Engage, ask for stories, and tell some.  Again, all information is power.  And personal information tells more about where the other side is coming from.  Allow for people to become more comfortable.  If you have ever watched his show, you have seen the pawn star often tell the story about his side of negotiation.  You can win the negotiation and still ask for referrals.

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Can I Buy Furniture While Applying For A Mortgage?

Image 61Almost every home buyer wants to buy new furniture to put in their new home. Commonly asked is whether or not it’s okay to buy furniture while applying for a mortgage. See Joe’s question below.

Dear John,

Question:

We paid off two credit cards. We owe $1,500 ($7,500 limit) on one we have left and $400 ($6,000 limit) which this one is paid off every month. Would it be okay to buy furniture that costs $1700 (on a card that has $4,700 limit)? We just don’t want to screw anything up. Let me know your thoughts.

 

Dear Joe,

I understand wanting to buy new furniture before you close on your new home, but you’re applying for a mortgage and still under scrutiny by Underwriting. I can’t recommend adding any additional debt.  The variable is how the monthly payments will report.  Even though you pay a card down, the minimum payment will not be reduced proportionately.  And even if you pay it off, the credit report will still show a minimum payment to be counted into the debt to income ratio.

As for the new credit: just applying for it will lower your score, and I am not sure how they will report their minimum payment.  Remember, merchant credit cards always damage your credit scores and you should always avoid merchant accounts.  It is the only type of credit that the balance is always assumed to go up every month, until several months are reported and a conservative debt pattern on your part is established.

While you are applying for a mortgage, you want to maintain the lowest amount of debt possible paired with the highest credit score possible.  Neither of these can happen if you buy furniture while applying for a mortgage.  I don’t know that buying furniture would be a deal breaker but it would definitely worsen your credit profile.  If you have to have it let me know and I will spend some time figuring how we might pull it off. I don’t want to be the bad guy but most likely it will hurt us.
You’re getting an awesome home, Joe. Buy your new furniture the day AFTER closing. You can sit on milk crates like you did in college until Mathis Brothers delivers.  -John

Posted in: First Time Home Buyers

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Piggyback Mortgages

Piggyback Mortgages

Piggyback Mortgages are making a comeback

For home mortgage loans over $417,000, piggyback mortgages are making a huge comeback.

According to the 2013 Annual Real Estate Survey of the American Bankers Association:

Piggyback mortgages accounted for 3.8 percent of all loans originated by bankers surveyed in 2012, compared to 1.7 percent of the loans for 2010.  To read more reports click here.

A Piggyback Mortgage loan means a home mortgage borrower is being underwritten for two mortgages simultaneously.  The second mortgage can be structured as a home equity loan or a home equity line of credit.

Piggyback mortgages lost their popularity in the housing downturn, but now they are returning.  They are used to avoid paying for mortgage insurance when a borrower does not have 20% down.

When the lender has more than an 80% loan to value on a property, they require mortgage insurance from the borrower.  Getting around paying for this mortgage insurance is the purpose of the piggyback loan.

 How to Avoid mortgage insurance with a Piggyback Mortgage

  • Down payment:  10 percent of the purchase price or appraisal value, whichever is lower.
  • 1st Mortgage:  80 percent of the purchase price or appraisal value, whichever is lower.
  • 2nd Mortgage:  10 percent of the purchase price or appraisal value, whichever is lower.

But there is still another great reason to use a piggyback mortgage:  to avoid going over the conforming loan limit.  The conforming loan limit is $417,000, and when you borrower more than $417,000 the mortgage is called a jumbo loan, and they tend to have higher interest rates.  Sometimes it can be advantageous to get a mortgage for the full amount, and sometimes it costs less to use a piggyback mortgage.

It is really a game of mortgage comparisons.  To get a free mortgage options analysis for your particular situation, click here.

 Disadvantages of a Piggyback Mortgage

  • When it comes time to refinance, the mortgage company that holds the 2nd mortgage has to agree to remain in 2nd lien position on title.  This is called a subordinate lien position, behind the primary mortgage company.  The agreement we will need is called a re-subordination, and they are usually pretty simple to apply for.
  • It is not easy to tap into the home equity, as 3rd mortgages are not usually allowed.
  • The inconvenience of making two separate payments instead of one.
  • Requires a good FICO score.
  • Requires at least 10% down.

Have a question?  Ask it here.

Posted in: Conforming, For Buyers, Jumbo, Mortgage Types

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