Of borrowers who refinanced during the first quarter of 2012, 31 percent reduced their loan term by paying off a 30-year loan and replacing it with a 20-year, 15-year, or other shorter-term loan. In addition, 66 percent of borrowers kept the same term as the loan that they had paid off.

Sixty-eight percent of borrowers who had a hybrid ARM chose a fixed-rate loan during the first quarter, the highest share since the first quarter of last year, while the remaining 32 percent chose to refinance into the same type of product.

If you have any questions about this or any other mortgage related issues, please call or text Scott Groves at (818) 679-5188

It is such a great idea I wish I would have thought about it a few years back. If you want to check it out follow the link below:

www.LAForeclosureTour.com

Buying a home is most likely one of the biggest purchases you will ever make, not to mention one of the most stressful and emotional. To add to the pressure, the lingering tight credit market has banks beefing up their borrowing standards—and one misstep can cause a hard-earned deal to crumble.

With interest rates staying near 4%, more individuals are looking to get a mortgage or refinance, but experts warn that even though the low rate is enticing, you have to be prepared for a long, paperworked-filled process.

Knowing your credit score and studying your credit history should be done before starting the mortgage journey. If you find errors, fix them before applying. The next step should be determining how much you can afford to borrow, and then start the house hunt.  

The road to sealing a mortgage transaction is a long road, and to keep you on track and avoid any potential potholes, here are nine mortgage mistakes to avoid.

Making major purchases before closing. Mortgage preapproval is only the beginning of the home-buying deal. The bank will run your credit score before sending a commitment letter and before closing, so avoid making big purchases that change your debt-to-income ratio.

Not knowing how much the house is worth. Many deals fall apart because applicants offer a higher purchase price than the home’s appraised value. In this situation,   applicants must pay the difference and wind up with negative equity, or back out of the deal.

Not vetting lenders thoroughly.  Far too much business come from referrals who spent weeks or months trying and failing to get a loan closed with another lender. In a few cases, it is obvious there was no way they could qualify yet they spent $2,000 on appraisals and inspections with other lenders.

Closing under pressure. While it may cost money to wait, closing with a mistake can cost far more. Get answers, make things right and only close your loan once you are satisfied.

Withholding Information. Withholding detrimental credit and/or personal information from your lender could jeopardize the transaction and your ability to secure a mortgage. Always be open and honest about your financial situation.

Taking too long to supply documentation. Some borrowers take days to get back to their lenders when asked for additional documentation. That’s a waste of time and can end up costing you thousands of dollars if the rate you locked in expires and rates rise. Whether you’re refinancing or getting a new mortgage, you must be on top of your game until the mortgage closes.

Failing to review loan documents. Read everything thoroughly and ask your lender as many questions as necessary for you to understand the entire document prior to signing. You will not have much time during the closing to absorb all the information in front of you.

Waiting too long to lock in a rate. Borrowers should lock the rate in when it gives them a payment they can live with instead of trying to time the bottom. Also know a lender’s relock policy. With current market volatility, you can often lower your rate by choosing the right lender and knowing the rules in advance.

Failing to explore all financing options. If you don’t consult with a qualified lender about all your financing options, you could be leaving money on the table. For example, you may be eligible for federally-backed programs with the Federal Housing Administration, U.S. Department of Agriculture and Veteran’s Affairs with low interest rates and little to no down payment requirements.

If you have any question call or text Scott Groves at (818) 679-5188

Tuition expense has risen about three times as fast as wages since 2001 before accounting for inflation, according to data from the Labor Department. Tuition climbed 57 percent on an inflation-adjusted basis during the period. At the same time, the average wage for American workers between the ages of 25 and 34 dropped 7 percent. Borrowing to pay for college exceeded $1 trillion within the past few months.

Many former students won’t be able to obtain mortgages at affordable rates because of their debt burdens. It is estimated that interest payments on student debt amount to $1,165 a year, based on an average balance of $23,300 in last year’s third quarter and a 5 percent interest rate.

If you have any questions please call or text Scott Groves at (818) 679-5188

Fannie and Freddie have been at the center of a tug-of-war over fixing the housing market. They have long resisted calls to write downn the balances on the loans in their portfolio, saying it would be too costly for taxpayers.

In the wake of the $26 billion mortgage settlement that will reduce principal for 1 million borrowers whose loans aren’t backed by Fannie and Freddie.

The agency, which regulates the government-controlled companies, had decided against allowing principal reduction after internal studies showed that alternatives such as adjusting monthly payments or forbearing principal were more cost effective.

Since then, however, the Obama administration has sweetened the pot. It tripled the incentives it will pay to Fannie and Freddie for reducing principal under the Home Affordable Mortgage Program, or HAMP. This has prompted the agency and the companies to redo their analysis.

Together, Fannie and Freddie have about 3 million loans that are seriously underwater, according to company filings. But three-quarters of these homeowners are current on their payments and may not qualify.

In the end, the number of eligible underwater Fannie and Freddie loans could range from a few hundred thousand up to 750,000, according to estimates. That’s not that much considering there are 11 million underwater borrowers in the U.S., just over a quarter of whom are behind in their payments.

If you have any questions please call or text Scott Groves at (818) 679-5188

Loans closed by banks and mortgage lenders in February had borrowers with a credit score of 750, up from 740 six months earlier, and an average loan-to-value ratio of 76%. The average denied loan had a credit score of 699 and a loan-to-value ratio of 83%.

Most mortgages today are being backed by federal agencies such as the Federal Housing Administration or through mortgage-finance giants Fannie Mae and Freddie Mac. While lenders will still underwrite FHA-backed loans with credit scores of 620 and down payments as low as 3.5%, they have sharply tightened up their lending standards for Fannie- and Freddie-backed mortgages out of concern they’ll have to buy back the loan if it defaults.

For refinancing, the Ellie Mae report shows that the average borrower going through Fannie and Freddie had a credit score of 770, considered extremely high. (The highest score is 850, but not many borrowers are above 800.)

To get a different idea of how hard it’s become for some borrowers, consider this: the average credit score for a ”conforming” refinance mortgage through Fannie and Freddie that was denied in February stood at 720, which had traditionally been considered good credit.

Conforming loans approved to purchase new homes had an average credit score of 764 and an average down payment of 22%. Applications that were denied had an average credit score of 732 and an average down payment of 19%.

Moreover, Fannie and Freddie are charging higher fees to borrowers who have less-than-perfect credit or down payments of less than 25%. FHA borrowers tend to have less pristine credit profiles, though even that has changed. The agency has often served first-time buyers.

The average credit score for a refinance applicant who received an FHA loan in February stood at 722, up from 706 in August. Purchase loans backed by the FHA that were approved had an average credit score of 701 with an average down payment of 5%.

FHA loans could be harder for some borrowers to come by beginning this week, when a new rule took effect barring FHA loans to borrowers with outstanding credit disputes of at least $1,000. Previously, the restriction didn’t automatically bar someone from getting an FHA loan, though it did require court-ordered judgments to be paid off.

If you have any questions about credit scores or loan qualifications please call or text Scott Groves at (818) 679-5188 or email trustyourlender@gmail.com

The federal regulator for mortgage-finance giants Fannie Mae and Freddie Mac said creating such a “moral hazard” is one of his top concerns now that the Treasury Department has offered to subsidize the costs of debt forgiveness for loans backed by the firms.

Right now, about three-quarters of homeowners who are deeply underwater on mortgages backed by Fannie and Freddie are still making payments. (“Underwater” borrowers owe more than their homes are worth.)

There’s been little research on the subject, in part because the speed and depth of the housing price-crash of the past five years has little national precedent.

One study suggests such concerns aren’t without reason. In 2008, Bank of America agreed to modify mortgages in a settlement related to allegedly predatory lending practices at Countrywide Financial Corp. A study published in January 2011 by economists at Columbia University concluded that Countrywide’s relative delinquency rate “increased substantially…during the months immediately after the public announcement of settlement.”

Moreover, the borrowers most likely to default after that announcement “were the borrowers least likely to default otherwise.”

Most modifications today reduce monthly payments by lowering the interest rate, extending the loan term, and offering forbearance, where payments aren’t required on a portion of the loan balance. So far, Mr. DeMarco says the performance of modified mortgages depends most heavily on how much a borrower’s monthly payment has been reduced—not the extent to which a borrower is upside-down on the mortgage. But advocates of write-downs say banks can design programs that help limit their appeal to only the most desperate homeowners.

One potential “friction,” for example, could limit the program only to borrowers who were delinquent at the time the program was announced. Others have suggested a debt-for-equity swap that would allow Fannie and Freddie to share in any future appreciation.

The program under consideration by Fannie and Freddie would only modify loans for homeowners who are already behind on their payments or highly at risk of default—and not all of those borrowers would receive write-downs under complex formulas that haven’t been made public. In other words, borrowers who default in order to receive help could end up getting nothing.

Some advocates of principal write-downs say that lenders may actually be creating a moral hazard today by failing to craft adequate solutions for deeply underwater homeowners

The average rate for a 15-year loan also climbed, to 3.30% from 3.16% last week. The 30-year rate has occupied a very narrow range for months, varying only between 3.87% and 3.98% all this year. Historically low mortgage rates have been a bright spot for buyers in a troubled housing market. Even after the rise, mortgages are still cheap. The increases add less than $10 to the monthly mortgage payment for every $100,000 borrowed.

If you have any questions please text or call Scott Groves (818) 679-5188

It is now being reported that a little over 70 percent of borrowers who are considering refinancing into a reverse mortgage are not so senior after all. They are rather baby boomers who are about to enter retirement age. The majority are considering reverse mortgages to reduce their monthly household debt, and they are confident that their properties will continue to appreciate and gain equity.

It is not too far-fetched to see why the younger baby boomers are considering reverse mortgages. After all, most of them have grown up and lived their lives managing financial debt. If anything, reverse mortgages give them a chance to take a break from at least one monthly payment.

Cheaper Reverse Mortgages

The interest rates and fees associated with reverse mortgages back in 1999 made them prohibitive to most borrowers. Since then, the Department of Housing and Urban Development (HUD) has stepped in to make reverse mortgages fair and more affordable. HUD’s Home Equity Conversion Mortgage (HECM) Saver is the ideal product for those looking for a reasonable and compliant reverse mortgage.

Even HUD’s HECM Saver has some caveats for younger borrowers. This is a case in which younger age is not advantageous, for younger borrowers can expect to receive less cash or lower monthly payments than their older counterparts. There’s also the issue of risk; since baby boomers do not generally expect to have their children and relatives take care of them in these difficult economic times, missing a property tax payment or insurance could give lenders a reason to foreclose.

One in four baby boomers who seek reverse mortgages do so while carrying significant amounts of debt. These borrowers with higher debt obligations could see their home equity depleted sooner than they expect.

If you have any questions please either call or text Scott Groves at (818) 679-5188