The Mortgage Man

Get more out of your mortgage experience!

Archive for Residential

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.

Advertisements

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.

Monday November 10, 2008

Stocks are higher this morning following a rally in the Chinese market after a government stimulus plan for $586 Billion was announced to help relieve their struggling economy.  As the stock market shows signs of life, it will continue to put pressure on bonds this week to hold their current levels above established resistance.

Also scheduled this week, the Treasury Department will be auctioning off $55 Billion in treasury notes which will no doubt put even greater pressure on the bond yield.  If the yield on mortgage bonds falls, mortgage rates will go up to meet the market demand.

Watch rates carefully this week.  If you have a loan in process, it would probably be prudent to lock ahead of potentially bad news in the financial markets.  If you are still looking for a house, or are not ready to lock, it may cost you on your mortgage rates later this week.

Friday October 24, 2008

Mortgage bonds move below 200 day average.

It is really amazing how much the global money markets are intertwined.  Overnight, Japan’s stock market plummeted after lower than expected earnings were reported for Samsung and Sony.  That ripple effect moved over to Britain’s markets where the economy shrank for the first time since 1992, signaling a confirmed recession.  The combination of the foreign markets having a really bad day led the Dow Futures to halt trading before the open this morning.  Halting trading on Dow Futures is extremely rare, and a sure sign of volitility.

In normal market conditions, a selloff in stocks would mean money was moving into bonds, and would typically signal a good day for mortgage rates.  Today, however, because of the continued liquidity issues with the market, the rush seems to be towards cash for safety.  Mortgage bonds moved below the 200 day moving average which is generally a sign of long term trends.  If you have an active mortgage file that has not yet been locked, it would be prudent to do so today ahead of uncertain volitility and worsening rates.

Some good news came out today.  Existing homes sales soared to a 13 month high signaling a boost in the real estate market.  And, Oil was trading as low at $64 per barrel.  This is due in large part to the strenghening dollar as compared to other global currencies.  But, when you are at the pump getting gas for $1 less than 3 months ago, few people care why, they are just glad to see it.