You may not be able to use disability income to qualify for a mortgage

On a loan that I was working on for someone, I ran into a bit of a snag when it came time to verify the disability income with Social Security. To be able to count an income stream for conventional financing, you must be able to demonstrate payments for 3 consecutive years. That's fine, but the social security administration will not provide a letter stating that they plan on making these payments out to the beneficiaries. I asked someone there why and I was told that their position is that everyone is rehab able. From this standpoint anyone can get better, therefore no 3 year letter.

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National City cancelled my home equity line

Be on the look out for a letter in your mailbox alerting you to the fact that your home equity line has been reduced or canceled. This is my second one that I have received in the last 30 days. The line on my rental property from Washington Mutual was reduced $20,000 and now my line on my home of $60,000 was completely taken away by National City. They may not honor any checks that were written so you need check on that. To answer the question, a bank can do this on a second mortgage? It is definitely in the provisions of their notes to reduce or suspend any credit line.

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Mortgage Paradigm Shifts on Capital Hill

There is a new movement on Capital Hill regarding help for distressed homeowners. What is happening is that Republican efforts to block homeowners with mortgage assistance is coming to an end. The worry over helping people who made poor buying choices went out the back door with the $30 billion push to prevent a Bear Stearns BK. It has also been clear that for months the FHASecure program has not produced the relief for home owners.

The final legislation is not finished yet, but it appears that thee will be ten billion dollars for states to make loans to homeowners. The states will be able to use several billion to convert at risk mortgages into fixed rate loan programs with better than market rates. This can only happen if the lenders are willing to take a loss. The lender loss will be 15 percent of the mortgage balance. This may be a better deal than what the banks would get if they were to go it alone.

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The Dollar Menu a sign of a recession?

If you are hungry and don't have any money you are in luck. Fast food companies like McDonalds and Burger King are looking for ways to attract consumers in a sluggish economy. With rising commodity prices and lowering prices, the margins on foods sales are shrinking. I'm sure that it will give somewhere. If the fast food restaurants don't see a large volume of traffic this strategy will fail.

One thing I can count on is Americas appetite for fast food.

My Home Equity Line from Chase was just closed

I just wanted to report on a client of mine that just had their home equity line of credit closed. If you took out a high LTV or loan to value credit line or second mortgage you may be getting a letter shortly telling you that your line has been frozen or taken away. Banks that issued second mortgages are starting to get gun shy about leaving their credit lines open with declining property values and rising foreclosures. Do not assume that your line will always be there. If you are tapping into your equity every month to survive you may want to look for alternatives to get the cash that you need.

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Bush is ready to start Mortgage Aid Plan

The Bush administration is finishing the details of the plan to save thousands of homeowners who are at risk of foreclosure by helping them refi into more affordable mortgage programs. These mortgages will be backed by public funding. The program is aimed at helping homeowners who owe more than their home is worth due to decreasing home prices. The Federal Housing Administration is encouraging lenders to forgive a portion of those loans and issue smaller ones. This plan is similar to the legislation proposed about two weeks ago by Barney Frank who is the chair for the House Financial Services Committee.

Nearly 9 million homeowners currently have negative equity in their property. This is a serious problem. If a homeowner did have equity they could refinance. Current mortgage guidelines are prohibitive to finance a home that has negative equity.

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Why Federal Reserve Rate Cuts wont help you

The Federal Reserve cut their discount rate to lenders by 75bps this week. Notice that I said to lenders and not consumers. Rates did not drop by .75% for mortgages. They went down about .25%. The only group that really benefits from this type of activity are the financial institutions. The move really allows lending institutions to make more money to try and sure up any liquidity issues.

Don't be lured by sneaky advertising trying to make you think that mortgage interest rates have dropped like a rock. The truth is that they haven't. All that I am saying is Caveat Emptor.

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Fed Drops the fed funds rate by an quarter of a point

The Federal Reserve Chairman Ben Bernanke announced today on a Sunday meeting that the central bank rate will be lowered a quarter of a point to 3.25% from 3.5%. The action was meant to provide additional liquidity to banks and lending institutions. The JPMorgan merger with Bear Stearns was also announced as well.

Should we just let the market handle the mortgage meltdown or should the government continue to act?

Hold on to your hats, this may not have any impact on mortgage interest rates at the consumer level. If you look at what this years fed cuts have done for mortgage interest rates, you will see that there really hasn't been any significant lowering of rates at all. Don't get lured into any fancy advertising that alot of the banks and lending institutions will be running.

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Does pulling your credit report hurt your credit score?

I have been in the mortgage business for nearly 7 years. One of the biggest misconceptions that I run into is that pulling your credit report numerous times will hurt a credit score. I find that sometimes new borrowers are reluctant to have their scores pulled because of this belief. They believe that their scores will drop considerably if everyone is pulling it. The reality is that you can pull your mortgage credit report unlimited times in a 14 day period from the first pull and it will count as one pull.

It is a known fact that borrowers will talk to a couple of different lenders prior to selecting a company to go with. It is just part of the research and fact finding process. It is a ploy by some lenders to tell their clients not to have other brokers pull their report. To a broker that has already pulled credit, this improves their chance of securing the loan instead of another broker. They scare the potential borrower into believing that their credit will be ruined if they have other people obtain reports, thus potentially risking the homebuyer’s ability to obtain a loan that serves the consumer versus one that serves the mortgage originator.

The problem with this is that a borrower may miss out on better loan terms and lower closing costs. If a lender tells you not to have anyone else pull your credit for these reasons, you may want to talk to someone else. They are not being honest with you. The end result is that it could cost you thousands of dollars over the term of your loan. An honest lender will give you this information. They are confident in their services and don’t have to rely of sleezy scare tactics to earn your business.

If you want to know what your score is, you can pull it yourself. If you pull it on your own it does not count as a pull. Be sure that you pull a mortgage credit report. This will be more accurate for assessing your ability to get a loan and the types of rates that you will be able to get. Most of the free credit reports online are consumer credit reports. They are similar but are not accepted as a valid report in the mortgage industry. You can go to Getprequalified.com to order a free credit report. You will also find other useful services to get started on the home buying process.

Dave Mason
Mortgage Broker

Buying a home with a Bankruptcy

Consumers Beware: If you have collection accounts that are over a year old and you are told by a mortgage loan officer to pay them off in order to get yourself ready for a mortgage hang up on them. For more information call Dale Stouffer at 480-226-3020 to get the scoop.

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Ing Direct to the rescure on Jumbo Loans, the orange mortgage

When the subprime meltdown got going, Jumbo mortgage rates got hammered. Rates shot up from the high 6’s to the low 8’s. We can now do a stated income loan up to 1.5 million for the low 6’s again. I know that the high end market has been sitting a bit. Hopefully this will come as a shot in the arm to help stimulate the higher end of the real estate market.

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Don't put your home on the market if you think you may want to Refinance

If you have just taken your home off the market and are trying to refinance, you will probably find out that you can’t. Most lenders have changed their lending guidelines since the subprime meltdown. Most wont refinance you for at least 3 months from when the house had been removed from the MLS. This is a new change and something to be aware of.

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The VA loan limit is not going to be raised in 2008

For months there has been speculation that the loan limit for VA financing which currently is at $417,000 would be raised in 08. The projection was that it would be over $500,000. The news now is that it is not going to happen. From a real estate market standpoint, I think the market would benefit from an increase. With increasing home prices, the low end luxury market is really suffering. I think that it would be a good boost to the overall health of the real estate market. Do you think this is a good or bad idea to leave them where they are at.

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Suze Orman visits Larry King, Credit Card Information

I just saw Suze Orman on the Larry King Show talking about credit cards. One of the questions from a caller was about canceling a credit card that was 10 years old and had a zero balance on it. The kicker on this is that the credit card company was charging the client $39 dollars a year on a credit card that they were not using anymore. You need to realize that 10% of your credit score comes from your credit history, so canceling the card will cancel the history with it. She recommended getting a new card and canceling the old one, making sure the new one was a no fee card. You would also want to make sure that the new credit limit was the same or higher than the old card. Doing this should have little or no effect on the credit score.

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