When embarking upon the mortgage loan journey, the typical borrower’s number one concern is how they can get the lowest interest rate possible. It’s inevitable that the rate question is asked early on, as it’s an essential part of judging if taking out a mortgage is a sound financial decision. Borrowers, whether they shop around or not, want to rest assured that they’re not being swindled, particularly at a time when “rock-bottom rates” are making headlines.
Consumers should be aware, however, that it’s very possible that the rates they see published won’t apply to their particular situations. Property type, down payment amount, amortization term, credit score, and rate-lock duration are all variables that factor into the equation, as do points paid or rebates credited against closing costs. As such, loan originators aren’t able to quote a rate (an accurate one, anyway) on command, as it takes a bit of time to obtain and analyze that information.
Given that they’re dictated by the whims of the market, rates are also subject to massive fluctuations over the course of a day, which makes pinning down the absolute lowest possible rate unlikely. Some lenders do offer the option to lock a loan a second time if rates fall, but “floating down” comes at a cost that is passed onto the borrower. Floating can also backfire if rates rise instead of fall.
Concisely stated, mortgage loan transactions are too complex for lenders to quote rates on a lark or simple supply and demand. Some borrowers contact multiple lenders and shop around for the best rate, which the federal government endorses—lenders are required to present borrowers with documentation that encourages consumers to make comparisons—but it’s tough, if not impossible, to outsmart the market. In the spirit of capitalism, compare Lender A with Lender B; however, it’s unlikely that one will quote a rate that’s life-changingly lower than the other.
If you want to start an argument, announce to a crowd that the economy is recovering: half will agree with you, half won’t. Certainly an economic downturn can impact many, leading to short sales, foreclosures, and bankruptcies. And plenty of people are asking about buying a property that was involved in a bankruptcy. To answer that, the key issue is what type of bankruptcy was filed, and how long will it take to close?
Since most such sales come with no representations, warranties or indemnifications, attorneys representing buyers should make due diligence their number one priority. Section 363 of the U.S. Bankruptcy Code allows parties involved in a Chapter 11 or Chapter 7 (most common for consumers) proceeding to dispose of real property in order to help pay off their debts through a highly structured process aimed at getting the most out of each asset while retaining the least liability.
As such, properties are sold "free and clear" from all liens and encumbrances, but it's not uncommon to later discover hidden issues, experts say, and the buying process itself can present various other hurdles. The buyer should conduct exhaustive due diligence. The trustee or debtor-in-possession rarely has access to all of the materials a buyer would typically need to see before making a decision to purchase property; sometimes a debtor has destroyed the documentation prior to the bankruptcy, or not kept it in good enough shape.
A buyer should take advantage of the property being “Free and Clear”. Although the transfer of the property comes with no representations or warranties, it also comes with no liens or encumbrances. A buyer should enlist a knowledgeable lender and real estate professional, and be prepared to move quickly in what could be a competitive bidding environment.
The main goal under any filing in bankruptcy is to give one, who is burdened with debt, a fresh start. A debtor files a petition with the court, along with a schedule of assets and creditors; a trustee is appointed to administer the sale of nonexempt property. The primary role of the trustee is to pay the secured and sometimes unsecured creditors, from the proceeds of the sale of property, and this may take up to 45-60 days to wind its way through courts – but could very well be worth it to the buyer!
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Kentucky Housing Corporation (KHC) has $3 million available in Mortgage Revenue Bond (MRB), special funding, for Active or non-active duty veterans at 2 percent interest rate, fixed for 30 years. This special Funding program is available on a first-come, first-served basis starting Wednesday, September 6, 2017, with new reservations.
This Homeownership program is targeted to:
- Households whose gross annual income does not exceed $40,000.
- An existing or new construction property (purchase price limit $130,000).
- 620 minimum credit score.
- FHA, VA, or RHS first mortgage options.
- Households that include active / non-active duty veterans or other persons receiving VA benefits.
Documentation may include but not limited to:
- Leave and Earnings Statement (LES)
- DD214 - Discharge from Active Duty
- VA Award Letter
- Must meet insuring agency guidelines.
- Available statewide.
- Both Regular and Affordable DAP are available.
Down payment Assistance Programs (DAP) available up to $6,000. Qualifications apply.
If you do not qualify for this MRB special funding, there are several other loan products available.
*APR 3.058% - based on $130,000 FHA loan at 2% interest rate.
New Bond Funds may be accessed by first-time home buyers and previous homeownerspurchasing homes in targeted counties. For all other counties, New Bond Funds may only beaccessed by first-time buyers (not having owned a home in the past three years).
Lenders everywhere are demanding record-high FICO credit scores, but for many of today’s borrowers it is a mystery about what makes the number go up or down. Fannie Mae and Freddie Mac are averaging around 760 on approved mortgages this year, so there is an increased importance of maintaining a high score.
Home buyers and mortgage applicants are affected by higher numbers of inquiries, as consumers looking for new credit accounts are considered riskier. FICO models place significance on this because bankruptcy is much more likely for people with more inquiries. However, for those looking for a home that are racking up the inquiries, the FICO models ignore all mortgage-related inquiries during the 30 days before computation of the score.
All mortgage inquiries during the 45 days preceding a loan application count only as a single inquiry. This safety net also applies to those shopping for auto and student loans. A single inquiry usually is not a big deal as a 5 point deduction is standard. But despite good intentions, there are hazards, especially for people with thin credit files, such as young, first-time home buyers and those without extensive credit histories. And unless loan officers properly code the purpose of the inquiry when they report it to the national credit bureaus — say the protected auto loan — credit files won't necessarily identify it that way.
On top of this, Fannie Mae and Freddie Mac have begun requiring lenders to pull a second set of credit reports immediately before closing to ensure that applicants' FICO scores haven't changed significantly. With this becoming more common, loan officers tell clients that it is advisable that they avoid all credit-related in the weeks before their closing. The good news for consumers is by buying them from Equifax, Experian or TransUnion or at www.annualcreditreport.com where reports are free once a year, the FICO score goes untouched.
There are a lot of companies, and people, involved in the home loan process. A borrower might work with a real estate agent, a loan broker, a lender, a title or escrow company, a loan servicer, investor, and so on – it can be somewhat confusing. But most borrowers know what those are – except for the “servicer.” What is a loan servicer, and is it needed?
When it comes to buying a home, the role of the mortgage servicer is an important one that bridges the gap between the borrower and the investor who owns the loan. The role of the mortgage servicer is to provide certain customer service tasks such as, collecting payments from the borrower on behalf of the investor, handling customer service after the loan closes, paying real estate taxes and insurance on escrowed loans, negotiate loan modifications on behalf of the investor, and work with the funds when a loan is paid off.
An issue that consumer groups have had with the mortgage servicing industry is that borrowers have not been able to pick their mortgage servicer (like they did with their lender). This, coupled with the servicer's insufficient resources, left them ill-equipped to handle the mortgage crises. This resulted in inefficiencies such as lack of employee continuity, "runaround" from their servicers, and inconsistency with paperwork. The Consumer Financial Protection Bureau ("CFPB") has now mandated that for any borrower who is two or more month's delinquent, policies need to be put into place by the servicer to provide these borrowers with easy, ongoing access to a servicer's employees.
The servicer's personnel will be responsible for making sure that the documents get sent to the proper person for handling of the issue. The person responsible for loss mitigation must have timely access to the borrower's records and provide the borrower with accurate information about the foreclosure process and loss mitigation options, procedures a borrower must follow to be eligible for loss mitigation, and the status of any loss mitigation application that the borrower has filed.
Dodd-Frank has demanded that mortgage servicers be more responsive and accountable to their customers. Effective January 10, 2014, a new set of servicing rules will go into effect providing borrowers with better tools and options for dealing with their mortgage servicers. If borrowers have questions before that time on these issues, they should contact their lender or servicer.
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