What is the Home Affordable Refinance Program? (HARP)

Announced in March 2009, HARP is a federal government program designed to help 5 million underwater or near-underwater homeowners refinance into a fixed loan with a lower monthly payment. However, as of Aug. 31, only 894,000 borrowers have refinanced through HARP.  On Oct. 24, 2011, President Obama announced an overhaul to the HARP program with the intent of reaching more underwater homeowners.  The expanded HARP program—also referred to as HARP 2.0—will take effect on December 1, 2011 for borrowers with a loan‑to‑value ratio of less than 125 percent and in the first quarter of 2012 for borrowers with a loan‑to‑value ratio of greater than 125 percent.

Why didn’t the original version of the HARP program work?

The original version of HARP had many roadblocks that made it difficult for homeowners to refinance. For example, the program only assisted those with mortgages with a loan-to-value ratio between 80 percent and 125 percent, but in many hard-hit housing markets across the country, homes have lost more than 50 percent in value making those homeowners ineligible for the program.  Some of the major changes to the HARP program include:

• No underwater limits
• Borrowers will now be able to refinance regardless of how far their homes have fallen in value. Previous loan-to-value limits were set at 125 percent.
• Most homeowners will not have to get an appraisal or have their loan underwritten, making their refinance process smoother and faster.
• Modified fees
• Certain risk-based fees for borrowers who refinance into shorter-term loans will either be eliminated or modified.
• Extended deadline
• The end date to get a HARP refinance has been extended to Dec. 31, 2013.

Answer 5 simple questions to see if you qualify for the new HARP 2.0 refinance program.

I have complied 5 simple questions to help you know if you will qualify for the new HARP 2.0 refinance program.  If you can answer yes to all these questions, you mostly likely qualify for the new HARP 2.0 refinance program.  Contact me to get started with your mortgage refinance.

Question 1:

Do you have a loan owned or guaranteed by Fannie Mae or Freddie Mac?  To look up your mortgage, check Fannie Mae.  If you can’t find your mortgage there, check Freddie Mac.

Question 2:

Did you close your current loan on or before May 31, 2009?

Question 3:

Have you completed a HARP refinance since June 1, 2009?

Question 4:

When you plan to refinance, will BOTH of the following statements be true?

• I will not have made a 30 day late payment in the past 6 months.
• I will not have made more than one 30 day late payment in the past 12 months.

Question 5:

Is your loan amount under the current conforming limit of $417,000?

If you can answer yes to all these questions, you mostly likely qualify for the new HARP 2.0 refinance program.  Contact me to get started with your mortgage refinance or if you have additional questions.

I’ve learned that most people prefer to learn by looking at something, versus just reading about it.  It makes it easier for us to understand the more complicated things.  Because of this, I created a visual graph to compare renting vs owning a home.

I tend to show my clients the long term benefits of owning vs renting, because most renters think short term.  I know I did when I was younger and renting.

Below is a link to a graph were you can visually compare renting vs owning, but you need to know the specifics of what I’m comparing.  Keep in mind, I used more conservative numbers, mostly because most of my clients are in Wisconsin, but in other parts of the country I know rent is much higher than what I’m using below.

Here are the specifics of what I’m using:

• I’m using a current rent payment of $1000.  On a conservative approach, I didn’t assume any future rent increases.
• I used a savings account balance of $10,000 that the renter has and the percent they are receiving in this account is 5%.
• The purchase price of the home is $200,000 and a 5% down payment with a conventional mortgage is $10,000.  Exactly what the renter has saved.
• I used the example of a FHA mortgage, because it has a lower down payment of 3.5%.

I want you to look at my most important tip that most renters don’t know when it comes to the long term benefits of owning vs renting.

Tip:  The rent graph (red) under “Net Worth In 15 Years” shows your what your current investment would be if you didn’t add anymore to the 10k savings, earning a 5% return.  I also set the property appreciation at 0%.  Most investors would agree to move your money to the one that pays you a higher return, even if it takes a bit longer.

Here is the link to the graphs.  http://mcedge.tv/16azqh

Also, the graphs under “Rent vs Principal Paid In 2 Years” is a realistic situation, because many renters will continue renting over the next couple of years.

I hope this helps bring light to renting vs owning, because I do receive lots of positive feedback that looking at graphs help renters understand the rent vs own answer in the long run.

PMI (Private Mortgage Insurance) is typically setup as an additional payment to your mortgage if you don’t have a 20% down payment or a 20% equity position when refinancing.  This additional payment does not go towards the principal balance or the interest paid on the mortgage.  It’s collected by the lender, because of the risk of equity position.

The only positive thing about mortgage insurance is that it’s tax deductible, but even that comes with limitations.  See here for more details about this.

How Single Premium Works

Single premium mortgage insurance is a percentage of your loan amount.  Your situation will determine what that percentage will be, because many factors are involved.

Example:

Your are buying a home for a sales price of $200,000.  The down payment is 10%, so your loan amount will be $190,000.  It’s a single family home, term of 30 years, fixed rate, and a 740 credit score.  The single premium percentage will be 2.7%.  Multiple that by your loan amount and the single premium amount is $5130.  (190,000 x 0.027)

This single premium amount is a one time cost, in exchange for no monthly PMI.

The Trick Most Buyers Are Not Aware Of

A conventional mortgage through Fannie Mae allows the seller to pay up to 3% of the purchase price in closing cost credits to the buyer.  Using the example above, 3% of a purchase price of 200k is $6000.  The single premium mortgage insurance is considered a cost of the mortgage loan.  If you are able to get the seller to give you a 3% closing costs credit, (which is easy right now in a buyers market) you have just avoided monthly PMI through single premium.

Avoid PMI When Refinancing

The single premium option is also available when refinancing your mortgage.  Using the same example above, instead it’s a refinance, your single premium is $5130.  This is considered a cost for the refinance, so you can include this into the new loan amount.  One advantage, since you are essentially financing the mortgage insurance, you can deduct the mortgage interest you are already paying, especially if you don’t qualify for the tax deduction on the mortgage insurance.

Remember, there are ways to avoid PMI even if you don’t have a 20% down payment or 20% equity position in your home.  These programs are out there, you just have to work with an experienced mortgage broker to help with all of this.

More Advice:

Fannie Mae HomePath Program Will Pay 3% Of Your Closing Costs 
How To Figure Out The Value Of A Home

Guest post by Melissa Rodgers. She is a financial writer. You can follow her on twitter @rogersmelissa42

When you need to sell house quick it is always advisable to work with cash buyers. And to make things faster you have to work with local cash buyers who are very much active in your locality. They can handle all the legal matters very easily as they have already purchased some properties in your area. And the entire thing can be quickened.

It is true that finding a buyer is difficult; if you try to sell the house in the open market through an agent, things can turn up to be very tough. Even if you hire an agent, it may take long for you to find a buyer. And when you are in hurry, waiting for 3 or 4 months does not make any sense. Many agents would make high promises but end up disappointing you.

As UK property market is stagnant, no one is buying homes. First time home buyers have fled from the scene; therefore agents cannot help you out find a buyer. And traditional home selling techniques such as listing the property with many agents, renovating the house etc. are not working as well.

Recent credit crunch has damaged the balance; there are more sellers in the market than buyers. As a result property price has slipped and sellers are unable to sell or get satisfactory price for their properties.

Sell your house quick to local cash buyers

The best solution is to work with the cash buyers in your neighborhood. Cash buyers are property investors; they purchase properties of any type and condition for quick cash. You can sell your house quick to them and get good price as well.

Reputed cash buyers would offer you a smooth property selling experience; they would tackle all the legal and financial issues and pay you close to market value for the property. No need to renovate the house, no need to pay any commission – you can simply sell off your house without any hassles and hitches.

Professional buyers usually send you proposal within few hours of contacting them; you can even quicken the process by working with local cash buyers. The cash home buyers who are very much active in your locality can offer you a faster service. So look for local cash buyers to sell property fast anywhere in UK.

These are great mortgage programs available for home buyers this year.  I keep up on the latest programs available and find things most bankers don’t realize are available.  These programs are available for all buyers, not just first time buyers.  If you have family, friends, or co-workers thinking about buying a home this year, it truly is a great time to buy.  Two main reasons:

1. Loads of cheap inventory that banks need to sell.  You have many homes to choose from.
2. Interest rates are still at historic lows.  We plan on seeing them this low through most of summer, because of the government actions to keep the rates low.

On top of that, here are the most popular programs lately, since most buyers are not looking to do a big down payment.

2011 Mortgage Programs For Buyers

• USDA Rural Housing - This program is one of only two true no down payment programs still available.  On top of no down payment, the buyer can roll the closing costs into the mortgage loan if the value of the home is a bit more than the accepted purchase price.
• Fannie Mae HomePath - This program just announced that Fannie Mae will pay 3.5% of the closing costs for the buyer if they buy a HomePath eligible home.  These are homes that Fannie Mae bought back and is looking to resell.  This credit offer is only good through June 30th, so don’t hesitate with this one.  You can find homes are HomePath eligible here.
• Single Premium MI (mortgage insurance) - This is a way to avoid the MI payment without having to put a 20% down payment.  A single premium MI is considered a closing cost, which can be paid by the seller in the offer to purchase contract.  By paying the MI as a single premium you will not have monthly MI as part of your mortgage payment.  Even if the seller doesn’t agree to pay for closing costs, you can pay this as a one time cost to avoid monthly MI.

There are many other programs available, but the ones above are very beneficial to most buyers.

Today, Fannie Mae announced they will pay a buyer’s closings costs if they buy a Home Path property.  A Home Path property is Fannie Mae’s inventory of homes for sale across the nation.

Here are the details of the closing cost credit:

• Buyers and/or selling agents (the agent representing the buyer) must request the incentive upon submission of initial offer in order to be eligible.
• The initial offer must be submitted on or after April 11, 2011 and close by June 30, 2011. If an initial offer was made prior to the effective date, the offer is not eligible for the incentive.
• The sale must close on or before June 30, 2011. No exceptions will be made to this deadline.
• Only buyers purchasing a HomePath property as their primary residence may receive up to 3.5% in closing cost assistance. Second homes and investment properties are excluded from the incentive.
• Buyer must sign the Owner Occupant Certification Rider to the Real Estate Purchase Addendum.
• If a buyer’s total closing costs are under 3.5%, the difference will not be available as a credit to the buyer.

Take a look at Home Path homes for sale.   Take advantage of this offer while it lasts!

Credit cards, their payment history, balances, and credit limits are all part of a major factor that goes into determining your credit score.  We all know that your credit scores have everything to do with getting a mortgage and the type of terms you will qualify for.

One of the biggest factors in determining your credit scores is the total credit card balances over the total available limits.

Example:

You have 3 credit cards:

Card 1 has a balance of $500 and a limit of $2000

Card 2 has a balance of $500 and a limit of $2000

Card 3 has a balance of $500 and a limit of $2000

The total in balances of all cards is $1500 and the total available in limits of all cards is $6000.  Divide the total in balances over the total in limits.  In this example, it will give you 0.25 or 25%.  You always want to keep this percentage below 30%, because once it gets higher, it will start to affect your scores negatively.

Take this same example and say you wanted to cancel a credit card, because you didn’t want the temptation to use it anymore.  Well, if you took card 3, transferred the $500 balance to card 2 and cancelled the card, you would have a new percentage.  You still have a combine balance total of $1500, but now only 2 cards are open and a total limit of $4000.  1500 over 4000 is now 37%.  So, figure this percentage out before cancelling a card that you have, because it may be better off paying the card off and just not using it.

Other credit advice reading:

Credit Advice About Choosing A Credit Card

Understand The Simple Steps To Build Credit Scores

UK property market is down; if you catch the signals you would realize that the market will remain slow for next few months, if not years. Here are some facts that forecast the quake is not over.

1] Number of approved mortgages is at historic low; this will surely have an effect on the property market. The market is likely to face stagnation.

2] Buyers are confused on whether they should go with fixed or tracker mortgage; tracker seems to be profitable for the time being but there is no guarantee how long it will remain low.

3] Unemployment problem is not 100% solved. This is a factor directly related to the rise and fall of the property market.

4] Repossession rate is still significantly high; many homes are vacant, many homeowners are struggling to find a buyer even when they are ready to sell it for a price way below the market value. Many homeowners are finding it beneficial to work with quick home buyers under such circumstances.

5] First time buyers have taken a step back and not much active.

6] Though average wage of females looks good, it will take few more months, if not years, for average wage of males to come to the level where it was before the credit crunch.

7] Interest rate is stable but the base rate is about to rise in order to check inflation.

8] The economists at Halifax and Nationwide have anticipated a further 2% fall of house prices all over the country. Source: remortgage.com

9] Tenant demand is rising but BTL investors are still dormant except few.

10] Fuel price is again on the rising side of the graph which means price of all essential commodities will go high.

All these are stopping the property market to get out of the stagnation. Troubled homeowners who are trying to sell houses fast to stop repossession are finding it difficult to get a buyer. This is like an end-less loop – the market itself is hindering its progress! It is really difficult to forecast when the things will start to look up.

——-

This is a guest post by Melissa Rogers.

Author Bio:

Melissa Rogers is a financial writer. She writes articles for Compare Home Buyers blog and many other portals. You can follow her on twitter @rogersmelissa42

Mortgage rates continue to hover around historic lows.  The question is…how long are they going to continue to stay this low?

It’s a difficult answer, because anything could happen tomorrow.  To give you an example, the events in Japan scared the investors and moved their money out of stocks and into something safer like bonds.  That immediate change dropped the mortgage rates for a few days.  Obviously, something as devastating as what happened in Japan cannot be predicted.

I believe that one major, predictable, thing will happen that could increase mortgage rates.  The FED’s purchase of MBS (mortgage backed securities) come to an end.

The majority of the reason why the rates have continued to stay low, is because of the FED involvement in purchasing these securities.  Once they stop this, the mortgage rates will increase.  The FED did announce, at one time, they plan on ending this the summer of 2011.

The problem: The result of higher mortgage rates will just slow the growth of home purchases.  Home purchases are necessary in this current environment of foreclosures.  Without purchases, you will not stabilize home values.

I understand that the mortgage rate isn’t the ultimate deciding factor whether or not a person buys a home, but if the difference in rate increases the payment enough, it may not allow that person to buy a big enough home, or make buying a home completely unaffordable and out of the question.

Please speak your mind, whether you agree or disagree.

Whether you are a first time home buyer or a repeat buyer, 2011 is a great year to buy a home. With so many foreclosures and short sales out there, it’s hard not to find a home priced less than it’s current market value.

Here are 3 important tips of advice for buying in 2011:

Get Pre-Approved First

All to often I receive a phone call from a customer that’s looking to get pre-approved for a mortgage, because they already put an offer into a home. Seriously? Even if you know you have great credit, tons of assets, etc. the lending world has basically turned upside down in the recent years. With changes happening almost monthly, mortgage guidelines are much different than the last time you bought a home or think that your good credit and lots of money will get you approved. Yes, those are great, but you will be surprised what changes have been made.

For example, if you are looking to buy a condo, many lenders require a 10% down payment. Even though with conventional mortgage loans you only have to put 5% down, the lenders set their own overlays on top of Fannie Mae guidelines. This is something most buyers don’t even know until they talk to their loan officer.

A pre-approval letter is expected by your realtor and the seller of the home.  They both know how much more difficult it is to get approved for a mortgage, so they expect this letter when you put an offer into a home.  Some realtors even require this before showing you homes.

Know Your Mortgage Options

There are tons of mortgage programs out their for bad credit, no down payment, small down payments, etc. Working with an experienced loan officer will put you in a great position in understanding what options are out there. There are even programs that don’t require PMI (private mortgage insurance) as part of your mortgage payment with less than 20% down. Typically, this can only be avoided if you put have a 20% down payment.

Take the time to ask about these programs and don’t be afraid to ask more questions if you don’t fully understand. Buying a home comes with lots of things to know and understand, especially if you need a mortgage loan.

Foreclosed Homes

There are so many foreclosed homes out there, it’s hard not to find a good deal.  What you need to be prepared for is the condition of the home.  Many foreclosed homes sell “as is”, which means the lender that is selling it will not repair anything, even if you ask.  You may find something small like old 70′s carpet with wall paper only your grandmother would pick out, but you may also find holes in walls, old roofs, basement problems, etc.  You need to be prepared when choosing a home that needs major repairs, because you will be limited on mortgage loans.  There are mortgage programs specifically for homes like this, so make sure your loan officer offers these types of programs, because lenders will not approved a mortgage with a home “as is” if there are major structural problems.

You can take a look at foreclosed homes for free for 7 days at www.RealtyTrac.com

Here are some other posts that will help you with buying a home:

How To Figure Out The Value Of A Home
How To Get A Good Price On A Home