Monday, February 26, 2007

What does getting pre-approved mean to a first time home buyer? It means talking to (preferably sitting down) with a mortgage person. You want to bring your last two years tax returns or w-2's with you.
The mortgage person will ask you questions:

about how much you make a year?
where have you been living?,
are you paying rent?,
if so how by check?, by cash?,
how long you have on the job?,
how much savings you have?,
how many other bills do you have?,
how much do they add up to?,
the price range of house you would like to buy?,
how much do you want to put down?,
who is going to be on the loan?,
how big of a payment you want to have?.
They will take the time to pull your credit and look at it. The important things on your credit report is your 3 credit scores, the amount of debt you have, and your actual credit. How many lines of credit do you have, are you paying them on time, do you have any collections?
These are all things a mortgage person looks at.
But do not be scared. There are many people who think and have thought they would never qualify for a house and they own one now. Many people are approved to buy a home with little or no money down. You have to take the time to pre-approved and pre-qualified. Call me at (313) 310-9855 to get pre-approved for a mortgage or go to my website www.russravary.com

Wednesday, February 21, 2007

What does ARM mean? ARM stands for an adjustable rate mortgage. What is usually means that you have a fixed rate for a specific period then your mortgage interest rate will adjust up or down according to the index. An ARM can be fixed for 6 months, 1,2,3,5,7 or 10 years. Usually you can figure the longer the interest rate is fixed the higher the rate. For example a 1 year arm "usually" has a lower interest rate than a 10 year ARM.
Why would anybody in there right mind choose a mortgage that might go up in the future? The reasons clients choose an adjustable rate are:
1) They want a lower payment. An adjustable rate is usually lower than a fixed rate.
2) They can buy more of a house. If the interest rate is lower on an adjustable rate mortgage, then the payment will lower. For example a buyer may be able to buy a $270,000 home with an ARM at the same payment they could buy a $250,000 home with a fixed rate. Just because of the lower interest rate on the arm.
3) They are planning to move within the time period of the fixed rate. Say a person is going to move in 2 years. They could get into a 3 or 5 year arm at a reduced rate rather than getting a 30 year fixed loans.
Many people got into 4.75% 5 year arms back in 2003. They have saved themselves a lot of money in payments. It has allowed many buyers to get into homes they could not of otherwise have afforded. It has been a great ride for them and the interest rates are still low enough that they will do okay.
The downside of arms is that rates could be much higher at the end of the fixed period. Or like the market we are in now. They houses are not appraising what they were in 2003. So if you were close to having mortgage insurance back then you might have to refinance with mortgage insurance or take a chance and stay in the loan and hope it does not go up too much. For more information on ARMS go to my website www.russravary.com

Thursday, February 15, 2007

When you buy an investment home or a second home in Michigan it is not Homesteaded. When you live in a house you are able to file for a "homestead exemption". What that does for you is reduces the amount of taxes by approximately 35%. Quite a savings! But if you buy a home for $200,000 to live in, and buy a home to rent to somebody for $200,000. The rental house's taxes is going to be much more expensive. The interest rate is going to be more expensive.

This is one of the many factors that you have to consider when buying an investment property. You have to know the mileage rate for the town or city that you are buying in and figure out what the taxes are going to be. You know what the payment is, what the insurance is, so you need to know what the taxes will be. I am always surprised at some of the new investors that never take this into account.

I have had calls after a year telling me that they are losing money on the house. The amount of rent is not covering the taxes, insurance, and principal payment. The owner has no way of raising the rent because then nobody would rent the place. The owner can't afford to fix the place because he is losing money. It is a loss all the way around.

Before you become an investor with rental properties talk to other landlords. Talk to them about the problems they have, who they target to rent to, where they buy their properties at, whether they would get into the business again.

If you need more information on mileage rates go to my website at www.russravary.com

Friday, February 9, 2007

A Bad mortgage company

I recently had a real estate sale fall through because of another mortgage companies' poor business practices. They supposedly had pre-qualified this poor customer. The buyer was self employed and has had issues with getting turned down before. So the buyer was nervous whether they could even qualify. So this "supposed 10 year veteran" of this mortgage company gave a pre-approval to buy a home. The buyer knew this "veteran mortgage person". So they trusted them.
When I met with them, I told them a ballpark of how much closing costs should be. I said if you have problems give me a call and I would help them out with the mortgage if I could. Well they called me up and told me that the "veteran mortgage person" was going to charge them between $9,000 - $12,000 in closings costs. They were afraid to change because they were afraid they weren't going to get the loan. They were going to live with the costs. They wanted us to raise the price in order to pay for the closing costs.
Don't do this. This is one of the dumbest mistakes buyers make. You do not have to pay exorbitant closing costs. You are just raising your payments to line a mortgage guy's pockets. Shop the loan if you think you are being taken. There is no reason to pay excess points. You might as well go down and throw the money off a bridge. You have to pay this back for the next thirty years. They were going to add another $30 a month to the payment because of this "good friend."

Sometimes the closing costs look high because you have escrows or you have a FHA loan. The costs are usually higher because you are setting up an escrows. But that is like a savings account for taxes and insurance - you are not getting ripped off there. It is the first two lines of the good Faith and the closing statement that you have to look at.

If you have good to great credit you should never pay points. If you have average to bad credit you still should not pay more than 1 - 2% of the loan amount.

What I am seeing is people with good credit getting charged points and people with bad credit getting bent over. These people were getting bent over.

Unfortunately the "veteran Loan officer" continued to lie through the whole process. She told me that they were almost clear to close one Monday. Then Thursday she wasn't returning my calls. I knew they were not close to closing because they did not even have the title ordered. Then I talked to her boss on Friday. He said the same thing. They were close to closing and they had just ordered the title work that day.

Well this company was so full of lies and lack of professionalism that the following Friday they wouldn't take my call, still hadn't ordered the title work. And this was 26 days after the signing of the contract!!!! These are the type of mortgage people you don't want to work with.

This Sad excuse for a mortgage company wasted the sellers time by pulling a property off the market. They got the hopes up for a buyer that should of never been given a pre-approval letter. If they would have just done a proper job of qualifying the person they would have more satisfied customers. I added them to a list I have of companies that I won't accept a Pre-approval letter from.

They did not even have the courtesy of sending a mortgage denial letter out to the real estate company so the seller could get their deposit back. (as of this posting) I had to tell the buyer to call them and get it.

I hope you have a better day than I did with these clowns. Remember that the world does come around in full circle for clowns like them. I always believe somebody will take advantage of them too. My motto in business is treat somebody like you want to be treated. The saying that I have to feed my family is lame when you have to take advantage of people let alone family, and friends. Take care and have a weekend. See my website for more real estate info http://www.russravary.com

Sunday, February 4, 2007

Rates were still in the low 6's for a thirty year fixed last week. I work as a mortgage broker.

What is the difference between a mortgage broker and a bank? Banks as I say have this box of rules. They have certain criteria for job, length of employment, amount of assets, amount of money you make. Then then take you and see if you fit in their box. Sometimes they can cram you in to fit sometimes they can't. Most banks have their products and one set of rate sheets. Though some are starting to broker loans out.

With a mortgage broker it is different. A mortgage broker represents anywhere from 20 to 200 different banks and lenders from across the country. If they have 30 lenders then they have 30 different rates sheets and hundreds of rates to look at. They have the ability to shop your rate or shop your loan. Every bank has different criteria for time on the job, type of employment allowed, type of home, amount of assets required, amount required to put down, amount of income required. Every month we have loans that get turned down by one lender (or bank) only to be accepted at another lender because it "fit" their criteria. That is why I love being a broker. I do not rely on one bank or one bank's rate. My clients do not have to conform to one bank's conforming box, there may be another banks box that allows self employed people, no reserves, or no money to put down.

That is what is great about being a broker. We can usually do loans that regular banks don't do because there are lenders that have less stringent criteria. There usually is not a reason for a mortgage broker to lose a loan because of the rate. Every bank has a different rate. Though they do not vary hugely. We as mortgage brokers can usually meet or beat a bank's rate. It is like car shopping. There is a bottom line cost but there are some dealers or salespeople that are willing to make less per deal and make it up on volume.

But there are instances where a bank may be exceptionally low for the market and I may be unable to find any bank to match it. I will tell you that and tell you go go with them. For example, a friend's daughter was buying a condo in Ohio. The bank was giving a 1/2 lower rate than market because they had funded the whole condo project. That brings up a second point.

Compare the costs with the rate. Be sure of the loan officer you are dealing with. There are loan officers that pull the bait and switch all the time. At closing you have different rate or different costs. Take a look at my testimonials on my website http://www.russravary.com/ and call me to talk about what you need in a loan.