The Mortgage Man

Get more out of your mortgage experience!

Archive for Affordable Housing

The Three Primary Benefits of a Mortgage Refinance

You’ve heard that a mortgage refinance can be a beneficial step to take.  Maybe you’re considering such a step.  But what are the true benefits of a refinance?  Let’s go over the three primary ways that a mortgage refinance can improve your financial situation.

1.  Decrease your monthly payment. The amount of your monthly payment varies depending on your loan term length, the interest rate of the loan, the total loan amount, and other factors such as private mortgage insurance and expenses that have been rolled into the total loan amount.  A refinance allows you to adjust many of these variables.  If your interest rate is higher than the market’s current mortgage rates, you can refinance into a lower rate and decrease your monthly payment.  This is one of the most common motivating factors behind a refinance.

2.  Access home equity as cash. If you’ve built up equity in your home through consistent payments or through increased property values, a refinance allows you to withdraw some or all of this equity in the form of spendable cash.  The amount you withdraw will affect the total loan balance remaining, but if you need access to money to pay for medical bills, college tuition, or other expenses, a refinance is a far better option than a standard bank loan or consumer credit.

3.  Change the length of your loan term. Your original mortgage length may have been fifteen years, thirty years, or more.  Either way, a refinance allows you to alter this length, and this can have a significant impact on your financial situation.  Refinancing into a shorter term will increase your monthly payment amount but will save you money in the long run.  Refinancing into a longer term, which is much more common, will have the opposite effect.

These are the three primary benefits of a mortgage refinance.  Analyze your own financial needs and goals to determine the value that a refinance can offer you.

Mortgage Bonds Trading At Historic Highs

Today the jobless claims report came out for December with a total of 524,000 jobs lost.  This was worse than projections of 500,000, but far better than rumors of nearly 700,000.  So far this morning, bond traders are reacting to the rumor and not the projection by selling mortgage bonds.

As mortgage rates continue to be unbelieveably low, the stock market is struggling.  Wal-Mart reported that due to one of the worst holiday shopping seasons on record, they will not meet expectations for the 4th quarter.  This continues to fuel uncertainty in the greater economy, and economic uncertainty drives investors to sell stocks and buy bonds.  Long term, this is good for mortgage rates and the real estate market.

Also, the FED announced yesterday that through the first 3 days of this week, they bought $10.2 billion in Fannie Mae, Freddie Mac and Ginne Mae mortgage backed securities, part of their overall plan to buy up over $500 billion in MBS’s between now and June.

Pensacola Real Estate Featured In USA Today

For those unfamiliar with the Pensacola area, it is a hidden gem nestled on the Emerald Coast in the Panhandle of Florida.  Half way between Mobile, AL and Destin, FL, Pensacola is a relatively quiet little town with some of the best real estate deals available in the state.

As featured in a recent USA Today article, this little slice of paradise that I call home has seen trouble from hurricanes and the economy, but remains strong in the face of adversity.  As we continue to locate a bottom in the housing market nationwide, the deals here are already jaw dropping, and gaining the attention of investors all over the country.

One project in particular that I have gotten many calls on lately is the Purple Parrot Condominium project on Perdido Key.  Perdido Key is about 15 miles southwest of downtown Pensacola.  Being an island, only connected to the mainland by bridges on either side, this tropical oasis makes you feel as though you are in the laid back lifestyle of a caribean island.

The Purple Parrot is unique in many ways, but what really turns heads is the price.  For less than $100,000, you can buy a 1 bedroom bungalow, walking distance from the beach, that is reminisant of Key West.  (For those familiar with Key West, you can not buy a walk in closet there for that price)

For information and pictures of units available, visit www.SteveOnTheKey.com to check out available listings.  Or, call me at 850-221-8334 for your mortgage related questions and to get pre-approved to purchase.

Pensacola Mortgage

Friday November 14, 2008

This weeks financial news wrap up.

It is interesting the times that we live in right now.  The 500 point intraday swings in the stock market have become so commonplace that no one even gets excited about it anymore.  Even yesterday, there was an intraday low of -331 only to rally in the afternoon to +552, a nearly 900 point intraday swing.  What is even more curious is a buying rally after incredibly bad economic reports.

All of this leads to the conclusion that the markets are trading almost entirely on emotion.  Fundamentals appear to have no affect, and that uncertainty bleeds over to the bond market as well.

Mortgage bonds started the week on a downward slide, then recovered Wednesday and Thursday morning with a nice rally.  That rally began losing steam yesterday afternoon and continues to show weakness this morning.  Daily volatility aside, mortgage rates long term are better than they have been in about a month and continue to trade in a near sideways channel.

Conventional wisdom would lead us to believe that as poor economic data comes out, investors would pull money out of stocks, invest in bonds, driving up the yield and driving down mortgage rates.  But, as previously discuss, conventional wisdom does not appear to have a place in this market.

All in all, if you have a mortgage loan in process that you have not yet locked, my bias would be towards locking to protect against uncertainty.

For today’s mortgage rates, or to apply for a mortgage loan, go to SteveRussellOnline.com.  Or call 888-257-8383 for a free consultation.

Mortgage Rate Update

Due to the outstanding rally in stocks this afternoon, bonds sold off to their worst levels of the day.  So it is in fact a good time to lock your rate if you were floating to this point.  When rates are posted tomorrow they will likely be .125% to .25% higher than quotes this morning.  For more on the latest mortgage rates or to apply online, go to www.SteveRussellOnline.com.

Thursday November 13, 2008

Mortgage Bonds move higher.

After a sharp sell off earlier this week, mortgage bonds are making a comeback today and appear to be holding steady right at the 50 day and 200 day moving averages.  This has had a positive affect on rates this morning as I am quoting 30 year fixed conventional rates below 6% for the first time in over a week.

Initial jobless claims came out significantly worse than expected at 516,000 vs. the expected 479,000.  In addition, continuing jobless claims reached a 25 year high at 3.89 million.  This bad news for the economy is generally seen as a positive for the bond market as the likelihood of inflation lessens.

At the time of this post, the stock market is up slightly.

To keep up with the latest mortgage rates, go to www.SteveRussellOnline.com, or call 888-25-STEVE (78383)

Tax Savings Could Cost You Your Home

The expenses that you write off on your taxes could keep you from getting a mortgage.

The entrepreneurial spirit is one of the finer points of our society.  The fact that we live in a country with so many freedoms to carve your niche in the marketplace is a beautiful thing.  But that American dream of self employment can also cause you to loose another American dream, the dream of home ownership.

You may have heard the term “stated income” loans.  These are loan programs that were designed for self employed people that had difficult to document income, or they had significant write offs on their tax returns that prevented them from qualifying for a home.  With stated income loans, you were allowed to “state” your income without documenting or verifying where this income came from.  It was a simple solution for some people with good credit and good assets to qualify for a loan even if they could not prove their actual income stream.

With this loan program also came abuses of the system leading to desperate borrowers overstating their income to qualify for their dream home.  Or, unscrupulous loan officers that would do anything to get the deal done.  Regardless, many home owners bought homes that they could not afford, and you have seen the aftermath that was caused.

So, now that stated income loans have gone the way of the dinosour, self employed borrowers have to be more aware of their tax returns if they plan to buy a house.  Standard underwriting guidelines are that you take the last 2 years filed tax returns, use the Adjusted Gross Income (AGI) on the bottom right of the 1040 form, divide that by 24, and that is the number that will be used to qualify you for a loan.  Be aware that if you “made” $100k, but you wrote off $70k in expenses, your income is $30,000.  There are a few items that can be added back into your income such as depreciation since it is not an actual cash expense.

I am neither an accountant nor a lawyer, so I will not presume to give legal or accounting advice.  However, I am an expert in mortgage financing, and rest assured, an underwriter is not going to use your gross income for qualifying.

Example:

Say you own a landscape company with gross receipts of $120,000.  But, your cost of goods (gas, equipment, mileage, supplies) was $72,000.  This would mean that your adjusted gross income would be $48,000.  On a monthly basis, your income would average out to be $4000 per month.  You are generally allowed to have a debt ratio of 40% to 45% (depending on the loan program) for your total expenses.  In this example, 45% would be $1800.

If you have a car payment of $350/ month and other debt payments of $400/month (credit cards, student loans, child support, alimony, etc.), it would leave you with $1050 to use for mortgage financing.  Take away property taxes and home owners insurance in that payment, you are probably left with about $900 for the actual mortgage payment.  At 6% on a 30 year term, this means that you would qualify for a loan amount of $150,000.

This is a good example of exactly the calculations I use when pre-qualifying someone for a home loan.

As we near the end of the year, and tax season is coming up, this will be an important conversation to have with your accountant if you have any plans to buy a home in the next few years.  your decision to save a few thousand dollars on your tax bill could very well keep you from buying a home.

If you would like to discuss your personal situation, call me at 888-257-8383 or go to Pensacola Mortgage Solutions.