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Patricia Lavigne, a trusted mortgage loan officer, offers financing options for individuals looking to pursue continuing education. Contact her at (845) 234-5472.
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All About Financing Continuing Education With Patricia Lavigne Mortgage Loan Officer Cell (845) 234-5472
February 2012 In 2012 there was an expected shift from owning to renting to persist for the next few years as a result of three factors. First, foreclosures would naturally transition many homeowners to renters. Second, it would be challenging for current renters to become homeowners given the drop in net worth and income. Third, that credit conditions to remain tight for some time, with a homeownership rate is likely to drop to 64%,with a risk of briefly undershooting.
January 2012 What is the biggest obstacle for the housing market? This is a simple answer: foreclosures. There have been about 6 million homes liquidated since 2007. Another 8 million homes will be liquidated over the next four years. All together, 14 million homeowners will lose their home, which is a quarter of all homeowners with a mortgage.
Q4 2013Existing-home sales continued to rise in October and are now up year-over-year for the first time in 2014, NAR Chief Economist Lawrence Yun says during a Nov. 20 press conference in Washington. National home prices had declined 33% from the peak in 1Q06 through 3Q11, returning to mid-2002 levels. Sales transactions increased.
From January 2015 According to CoreLogicreporting: In January 2015, the foreclosure inventory was down 2.7% from December 2014, Representing 39 months of consecutive year-over-year declines. And…….
From January 2015 The current foreclosure rate of 1.4 percent (of All Homes with a Mortgage) is the lowest inventory level since March 2008. National Foreclosure Inventory 33.2% Compared to January 2014
Shopping For a Home Mortgage affordability estimate As soon as you think about buying a home, you should first get an estimate of the mortgage amount you can afford based on your income and debt. Rule of thumb You can usually borrow 4 to 5 times your annual income, depending on your monthly debt, including Real Estate Taxes / Insurance / Common Charges or Maintenance on the subject unit. * Results of the mortgage affordability estimate/prequalification are guidelines; the estimate is not an application for credit and results do not guarantee loan approval or denial.
PreQualification • Allows you to choose a mortgage program and determine whether you will qualify for a mortgage, without any obligation while you shop for a home. • You can receive a conditional approval letter within 24 to 48 hours ~ A Conditional Approval makes your offer more attractive to the seller. • You’re serious about an offer since you have initiated your financing. • Your offer is credible since a bank has approved you. 22
Applying for the Loan • Documents typically needed: • Pay stubs for the last month • W-2 forms for the past two years to match the filed returns submitted • Full Federal tax returns for the last 2 years -in most cases. • Bank statements for the most recent 2 months (ALL pages) with any large deposits sourced with a paper trail • Signed Contract of Sale for the property you are purchasing • Evidence of down payment being made (cancelled check & bank stmnt.) • Letters of Explanation (credit derogatory / employment gaps , etc. ) • Building-specific documents if you are purchasing a co-op or condominium
Qualifying for a Loan • Employment • Verification of employment – MAY BE DONE SEVERAL TIMES THROUGHOUT THE PROCESS • Income • Full-time, part-time, overtime • Commissions, interest • Self-employment • Salaried employment • Seasonal employment • Other (Social Security, Social Security benefits, disability income, annuities, pensions, retirement benefits, interest, dividends, public assistance, alimony*, child support*, separate maintenance*) *You do not have to disclose alimony, child support, separate maintenance or its sources unless you want the lender to consider it as a basis for repaying the loan.
Qualifying for a Loan (continued) • Credit • Bankruptcies • Judgments, collections • Slow credit or late payments • Amount of debt outstanding • Financial Obligations • Loans (auto, personal, student) • Credit cards • Payroll deductions • Advance pay • Child care
Qualifying for a Loan (continued) • Assets • Checking /savings accounts • Investment accounts • 401(k) plans • Insurance policies (cash value) • Gifts • Sale of assets • Loans • Grants/public assistance* • *You do not have to disclose alimony, child support, separate maintenance or its sources unless you want the lender to consider it as a basis for repaying the loan.
Qualifying for a Loan (continued) • General Closing Costs* • Bank Fees – applies to all property types (1 of 6) *Fees vary by state. Example shown is for a NY co-op purchase, with loan of $500,000 (higher loans have higher application fees)
Qualifying for a Loan (continued) General Closing Costs* Title Insurance Fees – DOES NOT APPLY TO CO-OPS (2 of 6) *approximately 0.75% of 1st mortgage loan amount NY Mortgage Tax – DOES NOT APPLY TO CO-OPS (3 of 6) *approximately 1.8% of 1st mortgage loan amount Mansion Tax – applies to all property types (4 of 6) *1%of PURCHASE PRICE, if greater than $1 million Transfer Tax – usually new constr. or conv. condos/co-ops (5 of 6) *1.8%of PURCHASE PRICE in NYC Mortgage Broker Fee – typically 1% of mortgage amount (6 of 6)*DOES NOT APPLY IF YOU GO DIRECTLY TO A LENDER *Fees vary by state. Example shown is for a NY purchase.
Qualifying for a Loan (continued) Othercosts associated with the purchase** **Fees vary by state
TILA RESPA INTEGRATED DISCLOSURES (TRID) New Definition of an Application Why is the definition of an application changing? •The change is to create a uniform standard for all lenders (today lenders can define for themselves what is needed for an application) and to ensure that consumers receive the Loan Estimate (LE) as soon as possible when shopping for a mortgage loan.
TRID New Definition of an Application beginning 10/1/2015 The receipt of 6 specific data points will define a regulatory application, triggering the requirement to issue Loan Estimate (LE) 1.Name 2.Property Address 3.Estimated Property Value 4.Mortgage Loan Amount 5.Social Security Number 6.Income
TRID • New Term = • “Lender Application” • 17 and above date points • Loan Officer has the same conversation they would today with the cutosmer to obtain application information • If all 17 date points are provided, a full 3 day disclosure package is generated, similar to today’s process • Loan Estimate (LE) expires after 10 business days
New Term = “Regulatory Application” • 6-16 data points • (It is assumed that the Loan Originator has obtained the defined 6 regulatory data points) • If borrower provides less than 17 data points, the initial Loan Estimate (LE) will be sent based on the information initially provided by customer. Additional information that has not been obtained will be entered as assumed data to ensure that consumers receive the LE as soon as possible when shopping for a loan. • TheLEmust be re-disclosed as additional information is received (as applicable) • •The Regulatory Disclosure Package is generated based on “assumptions” • •LEexpires after 10business days • •The LEcan be re-disclosed however, the 10 business day expiration period remains based on the initial LE date • •Under TRID regulations the Originator may only request, not require the borrower to provide documentation in order to accept an application
Appraisal • The appraisal establishes a value for the property based on recent sales of similar houses within the area. • Includes a description of the house and the neighborhood. • Maximum loan amount is determined by the lesser of the appraised value or sale price. • NOW GOES THROUGH SEPARATE APPRAISAL MANAGEMENT COMPANY VENDOR – Loan originators have NO communication with appraisers
What Kind of Mortgage is Right for You? • Fixed-Rate Mortgage • Adjustable-Rate Mortgage (ARM) • Short Term vs. Long Term • Interest-Only Mortgage (ARM) • FHA or SONYMA Mortgage (government insured) • Reverse Mortgage • Home Equity Loan/Line • NO LONGER AVAILABLE • Reduced or NO Documentation • Subprime or Alt-A Mortgage • Balloon Mortgage • Option ARM
The Mechanics of a Payment – 30 Year Term Rate Differential
The Mechanics of a Payment – 30 Year Term Additional Payment
The Mechanics of a Payment – 30 Year Term Principal Sensitivity
The Mechanics of a Payment – 30 Year Term Rate Sensitivity
The Mechanics of a Payment Sensitivity? How is it practical to you? At 6%, a mortgage of $700,000 calculates a payment of: $4,196 per month If rates go to 6.5%, mortgage must come down to $664,000 If rates go to 7%, mortgage must come down to $631,000 If rates go to 8%, mortgage must come down to $572,000
Fixed-Rate Mortgages • Consistent fixed payments of principal and interest throughout the term of the loan • Protects against rising rates • Ideal if buyer plans to remain in the home indefinitely • Ideal if borrower has stable predictable salary
Adjustable Rate Loans • Adjustable-rate mortgage (ARM) • Lower initial rate vs. fixed-rate mortgage • Initial fixed period – 1/3/5/7/10 • Index/Margin • Caps (adjustment and lifetime) • Adjusts annually after fixed • Ideal if buyer plans to sell before end of fixed period
Interest Only Loans • Interest Only Mortgage (I/O) • Similar to regular ARM • Interest for 10 years • Much lower initial payment • Caps (adjustment and lifetime) • Payment tied to principal balance • Ideal if buyer plans to aggressively pay down principal (annual bonus, etc.)
Adjustable Rate Loans (continued) ARM vs. fixed-rate mortgage • How long are you going to keep this home? • Do you need more house than a fixed-rate affords? • Will your cash-flow accommodate potential rate increases? • Would you use money saved in interest to prepay or otherwise invest for a higher return?
Interest Only Loans Interest Only vs. ARM mortgage • Do you plan to pay down mortgage aggressively? If not… • In the adjustment period…payment shock • Higher interest rate possible • Full or near full balance still outstanding • Less time to amortize (27, 25, 23, 20 years) depending on product selected
Creative Financing_______________________________________ Alternatives to traditional mortgages… Saleable Loans Loans that must conform to the secondary market requirements in order to be sold after closing. Examples: • Conventional Loan amounts up to Conforming or Super Conforming limits • Some Government Loans such as FHA, SONYMA
