Steves Blog Spot

Over the last several weeks I have had the pleasure of helping many individuals lower their monthly mortgage payment. Several payments have been reduced as much $300.00 a month. The historically low rates we have experienced are still present, however could change at a moment notice. Which means it is highly recommend that you at least obtain a mortgage check up. During your mortgage check, it is very important to keep in mind the following elements to ensure you are actually saving money. A lower monthly mortgage payment does not mean you automatically save money. Below are several questions you must ask yourself before embarking on the refinance journey.

1. How long do you plan on staying in your current home?

2. How much are the closing costs?

3. What is my current interest rate compared to my new interest rate?

4. What is the difference between my current monthly payment and my new monthly payment?

5. Do I want a longer or shorter mortgage term?

If you plan on staying in your current home for five or more years, then a refinance may be in your best interest, especially if you can reduce your monthly payment by at least $100. The closing costs are another very important item to keep in mind when refinancing a loan. The best way to figure out if a refinance will save you money is to take your monthly mortgage savings amount and divide that number by your total closing costs. The number in which you calculate will be the number of months it will take to pay off your closing costs with the savings you will obtain from your lower mortgage payment. Only you can determine whether or not your new mortgage will be a savings for you personally. The lower the number the quicker you will be able to pay off the closing cost’s you were charged. However, a longer period to pay off your closing cost is not bad if you are saving several hundred dollars a month. The savings in which you feel is important to you is what you need to base the refinance transaction on.

Your interest rate in which you are obtaining can help your monthly savings, but it could also hurt your savings. How could it hurt your savings? A small reduction in the rate versus what you currently have. You may ask yourself well that is obvious. Let’s say your total closing costs were $2,500, which is very reasonable depending on how much you borrow. If your monthly payment is only reduced by 50 dollars then it would take you 50 months to pay off the closing costs. If you were able to reduce your monthly payment by $100 would cut your closing cost payoff by half. Be sure to check your monthly payment savings and interest rate.

Loan term is also important to keep in mind when refinancing. Each refinance transaction must show a net tangible benefit for the borrower. Loan terms can be as less as 10 years and max out at 40 year terms. The longer your mortgage term is, the more interest you will pay over the life of your loan. If you can afford the payment on a shorter loan term, you could save thousands of dollars in interest.

Please take the time to investigate your personal financial situation before you decide to refinance your home. The loan officer you choose to work with should give you a breakdown of the numbers and discuss with you your options. Be sure you check several loan officers before choosing if a refinance transaction is right for you. Below are several questions to keep in mind before choosing a loan officer:

1. Does my loan officer give me options or just tell me that this is best way without explanation

2. Does my loan officer answer my questions quickly and efficiently?

3. Does my loan officer explain loans detail in such a way that I understand

4. How long has my loan officer been in business? Experience is key to obtaining loan options

5. Do I have a competitive rate? Every lenders rate’s vary.

6. Are my closing costs competitive? Every lender charges different closing costs.

7. Is my loan officer friendly and accessible? A good loan officer will allow you to contact them anytime. If they don’t then I would consider finding another, because they don’t need the business.

Rates have been reduced to record lows over the past few weeks. Why do you ask? The introduction of the stimulus plan and the reduction of the interest rates by the federal government is an effort to increase the purchase of existing homes and jump start the economy for the new year. If you have been interested in purchasing a new home or refinancing your current home, now is the perfect time. Mortgage programs are still available even for borrowers with average credit histories. If you need to take some extra cash from your home to pay off bills, credit cards, student loans or buy gifts for the holidays, now is your chance.

If you have been in your home for at least 5 years, you might consider refinancing into a 10 or 15 year fixed mortgage. You will pay off your home quicker and save thousands of dollars in interest over the life of your loan. A shorter loan term will raise your payments. However, in a few short years you will own your home free and clear of any financing.

Please call me today for a FREE mortgage analysis to determine what refinance or purchase option would work best for you.

I look forward to severing you soon.

Thank You,

Steve Shockley

FHA Loan Or Conventional Loan…That is the question…

Anyone can choose a government sponsored FHA loan. FHA loans are no longer just for first time homebuyers. As the economy continues to drop, more Americans are becoming less willing to depart from saved cash they would ordinarily use for a down payment. As home prices continue to drop, current homeowners are losing equity that would be contributed towards a down payment on a new home. Since 100% programs are a thing of the past, and conventional loans now require at least a 5% down payment, the FHA 3% down payment sounds very appealing. But, you better secure an FHA loan before January 1, because the FHA down payment will be increasing to 3.5%.

The increase of the FHA down payment is another way of FHA and HUD telling the American public we are not going to be the next subprime mortgage. FHA will approve a borrower with as low as a 580 credit score, but you better have assets to back up a low Fico score. Otherwise, FHA will send you packing.

Another appealing item an FHA loan has over a regular conventional loan, is lower mortgage insurance. FHA mortgage insurance is usually several dollars less than a regular conventional loan, especially, if you have a FICO score, less than 620.

A small sore spot in the overall beast we call FHA, is the upfront mortgage insurance premium. The percentage, in which you pay, depends on your loan purpose and your credit score. The old amount was a flat 1.5%. Now, you could pay as much 2.25%, depending on your credit history and the loan purpose. Be sure to be aware of how much your up front mortgage insurance premium may be.

FHA down payment assistance virtually dried up after the House passed a law that prohibited borrowers from obtaining their down payment from a third party. This large blow to the mortgage financing business has helped decrease home sales and place many homeowners back into their old apartments. FHA will still allow you to receive a gift for the down payment from family, friends and non-profit organizations such as a church, but that is all. If you have a family member who is willing to donate your FHA down payment, take it. If you opt to use a friend’s money, be prepared for an extensive background check on your relationship. Be sure to provide as much information as you can. Your down payment gift cannot be required to be paid back.

Conventional loans will allow a gift for a down payment, however you will have to prove the donors ability to give the gift. Your donor must provide a bank statement showing where the gift has come from. No part of the gift can be borrowed by the donor. Conventional loans also can contain large rate additions for borrowers with less then perfect credit. This increase could equate to hundreds of dollars in additional interest payments.

Whether you are a first time home buyer or a seasoned veteran, it is good idea to contact a mortgage professional before you decide to buy. This will give you a chance to review different loan programs that fit your need as well as find out how much home you can afford. Obtaining a loan is easier than you think. Whether you choose an FHA or Conventional loan the more upfront work you begin should ensure a smooth home buying experience.

How to Evaluate Your Credit

Have you ever received a copy of your credit report and felt overwhelmed with all the information? Have you ever been shocked to see an account that you paid still showing a balance? These situations are not uncommon. The three credit reporting agencies Transunion, Equifax, and Experian do not update each change a consumer makes to their credit file. This process would be expensive and time consuming. Which means you as the consumer must always keep track of your credit history. A good rule of thumb is to check your credit report twice a year. You can visit www.annualcreditreport.com to receive your free credit report. Federal law states you can check your credit report up to two times a year without any penalty or charge. The credit report you receive from annual credit report will not contain your credit score, just the accounts you have opened and your payment history. Review your report for errors, accounts that were not opened by you and your payment history. If you feel that an error has occurred, then follow the steps below:

1. Make note of the account name and account number. Be sure to write the date in which the account was opened and the date in which the account was last reported
2. Draft a dispute letter. If you are not sure how to write such a letter, you can download a generic letter from my website, www.LoansMadeBySteve.com
3. The dispute letter must contain the following items
1. Account name
2. Account number
3. Date the account was opened
4. Date of last account update
5. The amount in which you are disputing
6. An explanation why you are disputing the account
7. Include any information that proves you have paid or did not open this account

A dispute letter must be written for each credit reporting agency in which the account you are disputing is being reported. The completed letters must be sent by certified mail. This will give you confirmation that each of the credit reporting agency have received your request for an account update. It will also give you away to track how long it takes for the information to be updated.

The process of updating incorrect information on your credit will take 30 days or more. Each credit reporting agency has 30 days from the receipt of your dispute letter to investigate the account you are disputing. After 30 days has passed, be sure to call each of the credit reporting agencies to make sure your account has been updated. If it has not been updated, then you will be notified of the reasons in which the account was not able to be updated. If the account was updated, you will receive an updated credit report reflecting the change. This process must be completed for every account you are disputing.