Have you seen my mortgage?

Elgin, IL  – Where’s the mortgage?  When CNN’s article posted from January 2014,  http://money.cnn.com/2014/01/10/real_estate/mortgage-rules/index.html on the new mortgage rules ,I was wondering how it might impact local buyers.  Sure enough, the new restrictions have leveled the playing field this year.  I found the low inventory was less of an impact than buyers unable to secure financing this summer.

The two big points from last January were trotting out someone’s ability to pay and making qualified mortgages.

Foreknowledge of one’s ability to pay is a bit ridiculous.  Most people are not independently wealthy and work for a living.  If their job is downsized, so is their income, hence their ability to pay is removed.

No lender can possibly tell if a person will pay back a 30 year mortgage, starting on Day One.  So, of course, there is a lot of guesswork that goes into the process, starting off with debt-to-income ratios, which according to the article is “how much you owe divided by how much you earn per month, including the highest mortgage payments you would be required to make under the terms of the loan”.  This means that whatever your current bills are, the bank has to see it through their lens of “this will never change”.  Hence, if your ratios are not on par now, get them there fast.  Keep in mind that it is ok, in bank terms, to be seen as making steady payments on student loans and rent (good debt) instead of running up huge credit cards or other unsecured loans.  Pay Day loans are a no-no.

Mortgage lenders also are seeking to make qualified mortgages.  While I am sure businesses do not try to make bad loans on purpose, mortgage lenders seek to reduce the number of lemons by combing through more data on a person’s salary history, income levels, debts and rules like 43%.

As noted by Les Christie, CNN’s article:

• “To make sure you aren’t taking on more house than you can afford, your debt-to-income ratio generally must be below 43%. This rule is not absolute. Banks can still make loans to people with debt-to-income ratios that are greater than that if other factors, such as a high level of assets, justify the risk.
• Qualified mortgages cannot include risky features, such as terms longer than 30 years, interest-only payments or minimum payments that don’t keep up with interest so your mortgage balance grows.
• Upfront fees and charges cannot add up to more than 3% of the mortgage balance. That includes title insurance, origination fees and points paid to lower mortgage interest rates.”

Jumbo loans are run a bit differently, as noted by One Mortgage’s Steve Smither.  According to Steve, jumbo loans (those over $417K) afford an even higher debt to income ratio.  Different lenders have separate guidelines for jumbo loans because lenders normally don’t bundle and sell jumbo loans.  However, if the lender expects to sell the loan, they will look for at least 20% down payment.  Requirements for credit scores are typically much higher as are the requirements for reserves (6-12 months cash held in reserve).   Steve also notes that interest rates can be dependent on the individual bank, with variances as much as a quarter point or higher.  Also, he notes that jumbo loans can still qualify for Fannie and Freddie Mac low interest rates if your lender splits the loans into two.  A second mortgage can go up as high as $450K.

That being said, I am not a mortgage lender, nor can I quote rates off the top of my head.  But Steve can and he does it quite well.  Got questions on mortgages?  Call Steve,  847-963-1000.

Have questions on real estate?  Email me at Jennifer@ElginFoxValley.com or visit my website at http://www.elginfoxvalley.com for all things newly listed in Elgin, IL.

 

 

 

HARP your way to savings!

Elgin Fox Valley, IL – Don’t throw away free money!   Many of my clients have enjoyed much lower mortgage payments by simply obtaining a new lower interest rate via the HARP program.  If you are a homeowner who hasn’t refinanced their mortgage, there is still time to save.  The federally subsidized HARP program is still in effect and saving homeowners money now through December 31, 2015. Restrictions apply.   See the link below for details.

http://www.makinghomeaffordable.gov/programs/lower-rates/Pages/harp.aspx

Eligibility:

“You may be eligible for HARP if you meet all of the following criteria:

• The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.
• The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
• The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
• The current loan-to-value (LTV) ratio must be greater than 80%.
• The borrower must be current on the mortgage at the time of the refinance, with a good payment history in the past 12 months.

*Eligibility criteria are for guidance only. Contact your mortgage servicer to see if you are eligible for HARP.”

 

Check with your local mortgage provider for more details.  Freddie and Fannie Mae loans only.

 

Financially Distressed Homeowners Have Options

Elgin Fox Valley, IL – Homeowners face a stressful situation when they can’t make their mortgage payments.  Creditors, lenders, lien holders and the homeowner’s association can all come down fast and hard on a homeowner.  Deciding to stay in the home or simply walk away is a hard one to make, and everyone has their own unique situation.

Here is a useful article from Active Rain for the folks out there who are upside down on their mortgage, have lost income or a job, hit a bump in the road or just cannot afford a mortgage that has adjusted to a higher rate and what some of the options are.

http://activerain.trulia.com/blogsview/3406405/options-for-financially-distressed-home-owners

 

The Land of Lincoln Offers Free Money to Homebuyers

Elgin, IL – The Land of Lincoln, that lovely midwestern state also known as Illinois, home to Cubs, Bears, Sox, BlackHawks, Bulls and various creatures, has just rolled out a brand new program to help folks buy a home in Illinois.  Called the Welcome Home Illinois loan, this mortgage loan comes with built in down payment assistance and a below-market interest rate.

Sounds too good to be true, right?

In an effort to drum up more buyers in a sluggish housing market, the state of Illinois is giving cash assistance up to $7500 to cover the down payment on a home.  Removing a major roadblock to home ownership, the dreaded down payment, this program may increase the number of buyers this spring.  Renters-take note!  Illinois wants you to jump off the rental merry go round and dive into home ownership.

http://welcomehomeillinois.gov/

To be eligible:
Buyers must be a first time home buyer (someone who has not lived in a property they own in the past 3 years).

So, what’s the catch?
Buyers  must contribute a minimum of $1,000 or one percent of the purchase price, whichever is greater,
The purchased property must be a one or two unit property in the state of Illinois,
The buyers must live in the property as a primary residence (owner occupants only).

The program also supports a 30 year, fixed rate mortgage and can be FHA, Conventional, VA or USDA.

Contact your local mortgage lender for details on this new program for additional restrictions and deadlines.  Lenders have eased credit restrictions and other requirements, but each loan is different.

Jennifer@ElginFoxValley.com

Credit Unions Offer New Types of Mortgages

Elgin, IL – Fox Valley area home buyers have lots of options when it comes to finding a mortgage.  Here’s a great article from the NY Times on credit unions offering different mortgages with variable rates.

http://www.nytimes.com/2014/03/02/realestate/credit-unions-offer-creative-home-loans.html?rref=your-money&module=Ribbon&version=context&region=Header&action=click&contentCollection=Your%20Money&pgtype=article

Short sales skipping town

Elgin, IL – Regardless of where you may live, an abundance of foreclosures and short sales have impacted homeowners nationwide.  At the end of 2013, the 2007 Mortgage Forgiveness Debt Relief Act expired, everywhere except California. Congressional Senator Sherrod Brown and U.S. Rep. Bill Foster, D-Ill., introduced legislation recently to extend the Mortgage Relief Act for another two years.

http://dsnews.com/bill-introduced-to-extend-federal-tax-exemption-for-forgiven-mortgage-debt-2014-01-14/#.UwZIf_ldXEU

What does this mean for homeowners?
Without the Debt Relief Act, homeowners who still want to seek a short sale may have to pay taxes on the forgiven balance.  This means that if they owe $200,000, and they manage to find a buyer  to purchase it at $100,000 and their mortgage lender agrees to accept the reduced price, the home owner could still owe tax on the remaining $100,000.   Homeowners face difficult decisions ahead if no action is taken to reinstate the Debt Forgiveness Act in 2014.

http://www.nytimes.com/2014/02/05/business/economy/lenders-see-write-off-while-underwater-homeowners-face-stiff-taxes.html?_r=0

Home buyers and short sales
Home buyers, be sure to check with all the parties to a property including the listing agent, the homeowners, lien holders, mortgage companies, title companies and attorneys for the sale of the property.  Oftentimes, a secondary lien is on a property with a bank that will refuse to short the sale.  If they refuse the deal, the contract could fall apart.   The buyer is left with no deal and the home seller is no closer to moving on. Short sales can be excellent deals if buyers have enough time to sort through the difficulties.

Jennifer@ElginFoxValley.com

Lacing up the Training Wheels for the New Investor

Saint Charles, IL –
In some ways, jumping into property investing in the Fox Valley area is a lot like learning to rollerblade.  Both require a sense of adventure, both favor a narrow path on which to tread before landing in the tulips and both reward balance over speed.  If you don’t have balance, all the speed in the world won’t help you.  So, how does one prepare to buy property for investment?  Grab your roller skates (which are an oldfashioned, slower version of rollerblades), find your knee pads and helmets, and brace yourself, it may be a bumpy ride.

The first plunge is always too steep
With a plunger in one hand and a toolbox in the other, a new property investor can expect to roll through a lot of issues on their half pipe learning curve.   More often than they like to admit, whipping out their personal checkbook will solve matters but also drain profits.  Along the way, they’ll learn why a property is on the market and the ick factor associated mold, broken water pipes or defective septic systems.   Their  “To Do List” includes hiring a dumpster bigger than most garages to gut a home.  They will have a list of local handymen and various helpers, including electricians, locksmiths, window repairmen, plumbers, roofers, and 588-2300 in speed dial.  They also learn that no matter how good their first deal seems, experience will prove them wrong.  New investors hope they have a soft landing in the tulips when they go down, but too often end up in the thorn bushes.

Paved roads are smoother
A tip for all new investors is to leverage all your available resources and that means both on and offline.  Let someone else do the heavy work of breaking ground, remodeling an old dump or driving around endlessly searching for the best deals.  Buyer’s agents are already out in the field, culling the prospective houses on their own gas and time.  They are actively involved in the local market and they know something about investors:  even seasoned property investors need to get rid of a property every now and then.

Property investors occasionally need to liquidate or sell one property to free up cash to purchase another.  Oftentimes, this means selling a perfectly good rental property, fully rented and ready to go, and a new buyer can benefit from the built-in lease.  Owner financing can help even more, especially for new investors looking to make a deal work by skipping a conventional mortgage.  Does such a deal exist?  Actually, yes.

Saint Charles has such a deal this week:  at 905 Indiana Ave.

http://www.zillow.com/homedetails/905-Indiana-Ave-Saint-Charles-IL-60174/4659848_zpid/

Inside the Saint Charles market
Here is where a buyer’s agent has knowledge that the newbie can access.  The MLS database that agents use shows all the past home prices for the area (from yesterday to 7+ years ago, in fact).  The market history indicates that most properties under the $100K price point in Saint Charles are rare.  Usually the best ones that hit the market below $100K will be snapped up in all-cash deals, in record time, under multiple bids.  The remaining stragglers are typically properties with major defects and are ignored by the best trained investors as too much hassle.  New investors are too wobbly to handle foundation issues, expensive septic systems, running new underground lines or removing asbestos.

In the end, there are very few homes for sale in Saint Charles that are fully rented, on the market, with owner financing such as this one at 905 Indiana Ave.  A seasoned investor dismisses such properties because their profit margin is too low.  But, it can be the ideal property to purchase for a first time investor/house flipper to get your foot in the door.

Here’s why:
Better financing – An owner-financed deal will help the new buyer to purchase a property with different financing terms vs a typical bank loan.
Better knowledge – The current owner will have experience with the property and know the recent issues.  Many diligent property owners keep receipts of repairs and will know what to expect in up keep.
Turnkey rental – An tenanted property means the current owner has done the heavy lifting for you, saving you time and money to find, check and approve a new tenant.
Rental rates – There may be some wiggle room in the monthly rental rate from what is currently being charged.  Knowing the current rent range for the area is key to keeping pace.

Finally, seasoned investors are a storehouse of information and may even share some of their experiences with a fresh investor.  Having someone who has skimmed down the path before you can shave years of time off your learning curve and save thousands of dollars along the way.  Many investors work creative deals with the same end goal in mind: buy more property.  Now, a new investor can too.

Tricks on training wheels
Here’s a favorite tip for finding those “owner financed” hidden gems.  It won’t work on Zillow, Trulia or Realtor.com.  Ask your preferred buyer’s agent to run a search on the MLS for key words “owner financing, special financing, or owner assistance”.  Agents often put these key words into the listing sheets for “eyes only” fellow agents to find under agent comments/listing remarks.  Listing remarks rarely make it to the public eye for viewing on sites like Trulia or Zillow and they don’t have a search feature robust enough to sort for it.

When you’re ready to lace up those training wheels, and find a great investment in the beautiful Fox Valley, give me a call at 630-854-4360 or email me at Jennifer@ElginFoxValley.com

Jennifer Kinzle, e-Pro, Broker
Charles Rutenberg Realty

Interest rates outgrow their skinny jeans

Saint Charles, IL – Mortgage rates are still under the label of Hot Topic  in early 2014 and it is not too late to lock in a low rate.  According to the Huffington Post, http://www.huffingtonpost.com/realtorcom/how-rising-mortgage-rates_b_4719700.html, mortgage rates are expected to rise to 5-5.5% by the end of the year.  This is a modest increase, not exactly a fattening up of rates, but the skinny jeans are getting uncomfortable for interest rates this year.

Watching the rates tick slowly back up will be a popular tipping point for a lot of home buyers this year, across Elgin and the Fox Valley area as well as the rest of the nation.  Regardless of whether your home loan comes from Cherry Creek, Mortgage One or Chase, home buyers still need to be pre-approved before house hunting and should be comfortable with their lender and loan amount.

Get the mortgage loan process moving today!

• Check your credit rate and straighten out any inconsistencies.  Visit a website like Credit Karma.com https://www.creditkarma.com/credit-report-card to get a free report or do a Google search to get a list of credit report companies.
• Shop around for a mortgage lender in your area who is in experienced in residential mortgage loans.  The longer they’ve been in business, the more likely it is that your loan officer has seen it all and can help evaluate the best loan products for your individual needs.
• Lock in your interest rate as rates are very likely to climb as the Federal Reserve Bank is slated to reduce the economic stimulus program in 2014.  There is no better hedge against rising rates than to lock in a low one today.
• Make sure your loan application paperwork is in order, such as paycheck stubs, bank statements, tax returns and more.  Your lender will walk you through exactly what you need to attain a pre-approval, be aware that final documents may require additional proof of income or other information.
• Skip the exotic loans.  The 1 year ARMS,5 year ARMS or mortgages that pay interest only are not the best option for a long term mortgage.  The standard, plain vanilla conventional loan is still the most enduring, most boring loan available and for good reason.  A 30 year loan means your payments stay the same from year 1 to year 5 to year 12 and so on.  Meanwhile, taxes and your pay rate may change, making your locked in mortgage rate (and monthly payment) consistent and possibly easier to pay as you go forward.
• Remember the 90 day window.  Mortgage lenders like to see a steady income and no large chunks of cash inbound or vanishing from your accounts.  If you are going to be accepting a gift for a down payment from a family member, move it now and let it sit for 90 days’ in one account.  Also, do not open any new lines of credit once you’ve applied for your mortgage loan.  Adding additional credit cards will skew your ratios that the lender takes into consideration for the amount you can qualify for on a home loan.
• Don’t panic.  Protect yourself with a locked in rate.  This way, if rates creep upward while you’re in the middle of the home buying process, your locked in rate will offer shelter and not price you out of the housing market overnight.  A small rate increase won’t affect the monthly payment too much.  But waiting until rates rise a full percentage point from 4.5%  to 5.5% will impact your buying power.  Don’t wait any longer if you’re ready to make a move.  This is the time to do it.

If you need more information and don’t have a mortgage lender, contact a local licensed buyer’s agent and ask for their list of referrals.  There is no obligation and it can be a great place to start.

Let me help you find your next home in the beautiful Fox Valley area!  Call or email me today:
Jennifer@ElginFoxValley.com
630-854-4360

Builder’s model home at 611 Waterfall Lane, Elgin, IL

Elgin, IL-

Homes like this builder’s model at 611 Waterfall Lane in Elgin don’t come up too often on the MLS.  There are several wonderful custom features to this property, such as a fireplace, 2nd floor loft, updated kitchen and vaulted ceilings in the master bedroom, with walk in closets.  Put that together with the lovely location in the subdivision of Woodbridge, and 301 school district, and this home is a priced for a quick sale at $250K.  It offers 3 bedrooms and two baths plus one half bath, with over 2800 square feet of living space with an unfinished basement to finish to your heart’s content.

If you’re ready to buy and not sure where to start, talk to a mortgage loan officer to get details on getting a pre-approval.  Your Realtor won’t show homes without proof of a serious buyer and a pre-approval is a reliable document buyers can use to show they can afford to make a purchase.

Finding a local, qualified loan officer who makes education of the home buyer a top priority is easy.  Steve Smither at One Mortgage has the expertise to get you into your next home with an affordable mortgage, plus he’ll take the time to explain all your options, including the latest financial rates and programs available to suit FHA, VA, 203k as well as conventional buyers.  Don’t put off making that decision to buy this spring!  Contact Steve at Steve.Smither@OneMortgageInc.com.  Tell him Jennifer sent you.

I love real estate referrals.  Let me know how I can help you find your next home!

Jennifer@ElginFoxValley.com

Market Watch 2014 mortgage predictions

http://www.marketwatch.com/story/mortgage-rates-wont-derail-2014-housing-market-2013-12-27?siteid=yhoof2

The housing recovery will push forward into 2014 with an increase in inventory as many former fence sitters seek to unload their homes to finally move on up or out.  Many families were waiting for a bump up in the marketplace before listing their homes and now is an ideal time to check market values.  Lower inventory offers fewer options to buyers who seek to land a great deal before mortgage rates inflate further.  Lower inventory and more buyers will swing the sellers back into a leverage position, which in turn may raise prices.

The Fox Valley area is looking for new home owners in 2014.  What are you waiting for?  Find out today what the MLS has available by contacting a licensed Realtor for details.

Jennifer@ElginFoxValley.com