Increase in Upfront Premiums for FHA Mortgage Insurance for Minnesota Home Loans

This is a letter copy and pasted from HUD.

w.hud.gov espanol.hud.gov

How do I do a short refinance on my home or condo in Minnesota?

Short refinances occur when the existing lien holder agrees to accept less than the loan balance as payoff on an existing mortgage. FHA allows short refinance transactions, provided all of the following requirements are met:

New FHA loan must be a rate and term refinance transaction (Streamlines and cash-out refinance transactions are ineligible)  

Borrower must be current on the existing mortgage  

Borrower must have “insufficient equity in the property” to refinance the total loan payoff “and/or have experienced a reduction in income and no longer have the capacity to repay the existing debt” 

While FHA will permit the existing servicer to execute a subordinate lien for the amount by which the payoff is short, Banks will not allow subordinate or unsecured liens to satisfy any short refinance debt  

Banks also requires copies of the three most recent canceled checks indicating the mortgage payment on the existing loan was made within the month due  

Banks also requires a copy of the written principal reduction agreement. The agreement must reference the borrower and the loan being paid off

Banks will not approve short refinance loans for borrowers having a previous bankruptcy and/or foreclosure

Got questions?  Give me a call at 651.210.9593 or an email to Jay@JayDacey.com

When does it make sense to pay points on a mortgage?

When it comes to mortgage points, I get confused.  The term “points” has multiple meanings in the mortgage world and each client who asks me about “paying points” has a different definition.
 
Mortgage points can refer to loan origination fees (fees charged by the bank/broker) or discount points (also known as loan discounts). By paying a discount point, you can lower your interest rate. Consider it prepaid interest.

In general, you can knock off about 1/4 to 1/8 of a percent off your interest rate for each point you pay. Because these points are interest payments, they’re usually tax-deductible. A notable exception to that rule, however, is refinanced mortgages. In this case, only a few states allow you to deduct discount points and even then, it’s restricted to certain circumstances. You may also be able to deduct a portion of your points if you refinance your mortgage to raise money for home improvements — regardless of which state you call home.
 
Generally speaking, it takes about five to seven years to recoup the cost of paying a point upfront. Here’s the math. Let’s say you take out a $100,000 30-year fixed mortgage, and you have the option of either paying 6% with no points or 5 3/4% with one point. With the 6% mortgage, your monthly payment will be $600. And with the 5 3/4% loan, it would be $584, a savings of $16 per month. After about 62 months, or a little over five years, you would have recouped the $1,000 point you paid upfront. And then you would start to benefit from the lower monthly payments.
 
But you must also consider how you might otherwise invest that $1,000. If you can beat the taxable equivalent of your mortgage rate (about 8% in the example above for those in the 25% tax bracket) then don’t bother paying points. Invest the money instead.

In fact, over half of my refinances are for “no points and no fees” where the bank pays me a yield spread premium and I can cover the closing costs and still earn a fee.  It’s a win-win and if you think you may qualify try me at 651.210.9593 right now and we can see what your options are.

How to get a good deal on a refinance on your home in Minnesota

As mortgage rates dip to multiyear lows, many homeowners wonder if a new loan could save them money.  Others fear the rate on their adjustable-rate mortgages might move up significantly and crave the certainty of a fixed-rate loan.  Whatever the reasons, mortgage refinance activity has exploded. Perhaps you are among the millions planning to swap your old mortgage for something better.

Here are five crucial steps you need to follow to guarantee a successful refinance:
 
Step 1: Weigh the pros and cons – In some cases, it makes financial sense to refinance. Your costs typically are lower after refinancing and a new mortgage with a rate that’s just a half-percent lower can save you hundreds of dollars each month. 

It’s often said that if you can recoup the cost of a refinance in a year, it’s worth doing.  Since a lot of my refinances are “no cost” options, then you don’t even have to wait to save!

Step 2: Gather important documents – You’ll need to prove — through bank statements and pay stubs — exactly how much money you have coming in and how much you have in reserves. Save recent pay stubs, as well as the last few income tax statements and W2 forms from your employer. Bank and brokerage statements for at least the past couple of months often are required. As soon as you think you’re going to refinance, get copies of your credit reports and make sure there aren’t any errors that will drag your score down. Errors can be corrected, but it takes time to inform the credit bureaus of mistakes. So the sooner you check your credit, the better. You can get a free copy of your credit report at AnnualCreditReports.com. If you also want your credit score, you’ll need to pay a fee. Lenders approve borrowers based on credit scores derived from information found in credit reports.

Step 3: Shop several lenders – Everybody wants a new loan that matches their needs at the best terms and is offered at a reasonable cost. That means finding the right lender.  Since I am a mortgage broker, I can shop for you and get wholesale pricing from the best lender that day.  They switch every day and it’s a lot easier for me to do this than for you.  Also, 9 times out of 10 the bank will pay me a fee for sending them your loan so my service doesn’t cost you an origination fee.

Step 4: Ask about all fees – When you take out a mortgage, you incur a host of small fees known as closing costs. These can easily tally $3,000-4,000 or more.  In about 50% of my transactions there are no closing costs for the clients.  Ask me how.

Step 5: Watch the little details – It’s important to keep an eye on the small details that can make a big difference to your bottom line. Because mortgage rates move up and down — sometimes significantly — from day to day and week to week, it’s important to lock your rate when you find a good deal.  It’s also impossible to time the market when you are “shopping around” 3 or 4 (or more) different banks.  They all react to the same market (mortgage backed securities) and that is something I monitor closely. 

Hope this helps you refinance your home in Minnesota and I’d be happy to answer any questions at 651.210.9593 or email me at jay@jaydacey.com

When is a good time to refinance my loan in Minnesota?

I am getting a lot of refinancing questions right now and there is no “clear cut” answer when it comes down to refinancing and when is the best time.

Each of your situations is unique and should be treated as such because your goals and dreams may be different than mine.  Some people want to get out of debt and pay off their mortgage as soon as possible.  Other people like the tax advantages of a higher interest expense and are investing the extra cash flow into more liquid investments like stocks or bonds.

So, the quick answer is this.  Right now may be the best time to refinance.  FHA streamlines are fast and easy with low rates and both fixed and ARM rates are very low, even on Jumbo refinances.  So what are you waiting for?  Give me a call at 651.210.9593 and invest 15 minutes in your financial security and see if you are currently in the best possible financial position or if we can improve that together.

Who qualifies for a Freddie Mac Refi Plus Program or “Making Homes Affordable Refinance Program” HARP

Here are some criteria that one of our investors published.  If you think you qualify or want to find out for sure, just let me know.

Features of the Freddie Mac Relief Open Access Program include:

Loans must be Full Doc

Up to 125% LTV. (5/1 LIBOR ARMs capped at 105% LTV)

No maximum CLTV.

All existing subordinate financing must be re-subordinated. New subordinate financing

not allowed.

No minimum credit score requirement.

Standard conforming, and high balance loan limits are eligible.

All existing loan types are eligible, as long as it was sold to Freddie Mac

Loan must be seasoned for three (3) months. Loan is not eligible until 3 monthly

payments have been paid. Payments cannot be prepaid.

Existing mortgage must be current. 0×30 in the most recent 12 payments prior to new

loan.

Full standard appraisal is required with an interior and exterior inspection.

If the existing Freddie Mac loan is a fixed-rate product, the new loan cannot be an ARM.

A copy of the existing note will be required on all Open Access 5/1 LIBOR ARM loans.

Streamline Refinancing of your FHA Home Loan Mortgage

One of the advantages of FHA financing is your ability to streamline refinance them without needing an appraisal.  Here are some quick FAQ’s on FHA streamlines.

Q:  How long do I need to be in the loan before I can streamline?

A:  There is NO time limit on how soon you can streamline.  If it has only been a month or two  you will need to either bring cash to closing OR have a new appraisal done with a higher appraised value to bump up the loan size.

Q:  Can I use a new appraised value or do I need to go off of purchase price?

A:  You can use the new appraised value immediately after closing.  If you get a great deal on a property this will help.  Although appraisal standards are MUCH tighter right now so if there is a big difference between your purchase price and appraised value a good explanation is required.

Q:  Do I need a full credit report to streamline my FHA mortgage ?

A:  No.  A “mortgage only” credit report is all that is required although we can use a full report.  The higher your score the better.  Many banks require a minimum 620 score.

Q:  Does my payment have to go down a certain amount?

A:  There is no minimum amount for your payment to go down.  Some people think it needs to be 50 dollars but that is not the case.

Q:  Do we need to provide income and asset information?

A:  No.  As long as your mortgage payments were made on time and your score is above 620 that is all you need to do.

Q:  Can I lower the term on my streamline and go from a 30 year to a 15 year?

A:  That depends.  If your payment increases by 20% or less then yes.  If it’s more you will likely need to verify income to show you are able to handle the payments.

Q:  I hear Adjustable Rates are really low right now, should I take one out?

A:  That, like many things in life, depends.  One of the benefits of an ARM is in addition to the lower monthly payments your principal balance actually gets paid off faster than with a 30 year fixed rate home loan so you build equity faster.  Because you can streamline FHA loans you can switch from an ARM back to a fixed if that is more comfortable.

If you have any other questions on FHA streamlines, Home Equity Lines of Credit or even a regular conventional fannie mae or freddie mac loan, just let me know and I will be happy to post the q/a on here.  If you’d like to appy for a streamline just give me a call at 651.210.9593.  Thanks much.  Jay Dacey.

Mistakes home owners make when refinancing their home

Quick list here…did you do one of these things? Let me know and I’ll see if I can help out.

1. Overestimating the value of your home. In today’s market this doesn’t work.
2. Ignoring foreclosures in your market. If half the homes are foreclosed this WILL affect your value and not for the better.
3. Trying to shop around yourself. Don’t do it. You will waste your time, confuse yourself and tick off any professional mortgage broker.
4. Not getting docs in a timely manner. Rate locks are expensive to extend and if your mortgage broker asks for documents, get them, NOW. And be prepared, banks are asking for more documentation now than ever before and a lot of times it is for stuff NEVER requested before. THat’s another blog post in itself.

Can I refinance my investment property in MN right now?

The answer is, “it depends”.  As you know banks are VERY tight right now.  Especially when it comes to financing investment properties wether they are single family homes, condos, townhomes, duplexes, triplexes or the grand daddy of them all, a four plex.

So here are some basics aside from the OBVIOUS of “have great credit, show profit (or at least cash flow) so you can debt to income and have a ton of reserves.

Ok, so if you meet these criteria, here are some basic guidelines for the LTV limits on non-owner occupied investment properties.

Purchases and Rate/Term Refinances are typically limited to 75% loan to value and remember, HVCC requires a 3rd party ordered appraisal so if your best comps are foreclosures, they WILL be used regardless of their value.

For a cash out transaction you will be able to go up to 70% loan to valu (ltv) on a 3-4 unit and 75% cash out on a 1-2 unit investment property.

Not everyone is financing these properties right now and what that means is competition isn’t as strong as it could be.  If you can get financing for an investment property, right now may be a good time to invest.  To find out what your options are and if I can help, just give me a call at 651 210 9593 or an email to jaydacey at gmail dot com.

Are you paying too much interest right now on your home loan in Minnesota?

That’s a great question from a friend who sent me a note, “can i lower my interest rate right now with rates being so low”.

The best part is the person took action and reached out to me and we are currently evaluating the appropriate new mortgage for this client.  There are no black and whites on this one because the client is considering either refinancing into a 30 year fixed rate mortgage and keeping it as a rental property down the road OR they may just refinance into another ARM and lower their payment for the short term.

Either option is a good one and without calling and asking this client would never know if they could save money on a new adjustable rate mortgage (ARM) or convert their current ARM to a Fixed rate mortgage loan.  It pays to ask so give me a call at 651.210.9593 or an email to jaydacey at gmail dot com.