Benefits and Drawbacks of a Boise Idaho Short Sale

Posted on August 11, 2010August 17, 2015 by Rick & Jane May

There are many benefits to an Boise Idaho Short Sale versus a Boise Idaho Foreclosure, but there also many drawbacks to a short sale that need to be considered before deciding on the best course of action. A short sale is a great option for home owners who need to sell their home and owe more than their property is worth, but a short sale is not for everybody.

Benefits of a Short Sale

A short sale will not drop the FICO score as much as a foreclosure. It is estimated a foreclosure will decrease a FICO score by as much as 250 points. The estimated decreased for a short sale is 150 points.
The seller will be able to more quickly turn around and purchase another home after a short sale. Fannie Mae announced that effective July 1, 2010, short sellers can purchase a home with a Fannie Mae loan at 80% loan to value only two years after the short sale, and at 90% only four years after the short sale. With extenuating circumstances, Fannie Mae will allow a purchase at 90% loan to value only 2 years after the short sale. FHA requires a three year wait after a short sale, but will lender to 96.5% loan to value
A short sale preserves some dignity for the seller. The seller will not have a “Notice of Trustee Sale” posted on their home while they still live in the neighborhood.
Working out a short sale may allow the seller to avoid bankruptcy. It is important to work with someone with experience with short sales who knows how to negotiate with the lender (or lenders if there is subordinate debt as well) for Full Satisfaction of all debts.

Drawbacks of a Short Sale

Short sales are not exactly “quick”, although this can vary depending on the lender or lenders being paid off. Waiting for the banks to respond can be a very frustrating process.
There is no guaranty the bank will accept an offer. Last second maneuvers by the bank are not out of the norm. More frustration.
The bank will want to see income and asset documentation from the seller to verify there is a true reason for the short sale. If the seller has significant assets, the bank may go after those assets or prevent the short sale from going through.

Figuring our whether a short sale is the best solution will take research. When a home owner finds themselves in a difficult situation, whether it be because of a job less, decrease in pay, or illness, combined with a drop in property value and even worse, an increase in mortgage payments, it is important to gather as much knowledge as possible. Talk to local real estate experts who offer guidance in how to deal with the many options. The home owner should consult with their trusted attorney, accountant, real estate agent, and loan officer. Consider all options carefully, but most importantly, don’t “do nothing”.

For more information regarding short sales and foreclosures feel free to contact me.

Rick & Jane May
Mann Mortgage
Branch Manager/Owners
Direct: 208-861-0000
mannmortgagemeridian@gmail.com
ID MBL-2550 / NMLS # 173614/12870
www.idahohomegroup.com

Top 10 Boise Idaho Refinancing Mortgage Links/Articles/Questions

1. Making Home Affordable Program
2. FHA Streamline Refinance in Boise, Idaho
3. Idaho FHA Reverse Mortgage
4. Boise Idaho Home Mortgage Refinance Loan For Home Owners Facing Declining House Prices
5. Applying For A Boise Idaho Mortgage – Required Documents
6. Jumbo Mortgage Financing for Boise, Idaho Properties
7. Conventional Home Loans For Boise Idaho Borrowers
8. VA Mortgage Loans in Boise Idaho
9. Boise Idaho Reverse Mortgage Senior Loans
10. FHA Mortgage Loans in Boise Idaho

article is a syndicated column from Tim Storm

Seven Things Your Boise Idaho Real Estate Agent Should Know About Your Mortgage Approval

Posted on April 1, 2010May 17, 2016 by Rick & Jane May

While many experienced Boise Idaho real estate agents have a general understanding of the mortgage approval process, there are a few important details that frequently get overlooked which may cause a purchase to be delayed or denied.

New regulation, updated disclosures, appraisal guidelines, mortgage rate pricing premiums, credit score, secondary approval layering, rescission deadlines, property type, HOA insurance requirements, title and property flip rules are just a few of the daily changes that can have a serious impact on a borrower’s home loan financing.

With today’s volatile lending environment, it’s obviously important for home buyers to get a full loan approval which clearly defines all contingencies that pertain to each unique home buyer’s scenario prior to spending any time looking at new homes with an agent.

Either way, we’ve listed a few of the top things your Idaho real estate agent should keep in mind while showing you new properties:

Caution – Agents Beware of the items below:

Property Type –

High-Rise, Condo, Town House, Single Family Residence, Dome Home or Shoe House… all have specific lending guidelines that can influence down payment, credit score and mortgage insurance requirements.

Residence Type –

Need to sell one home before moving into another? Is a property considered a second home if it’s in the same city? What if I’m buying a home for my children to live in, it is still considered an investment property?

These are just a few of several possible residence related questions that should be addressed by your real estate agent and Boise Idaho mortgage consultant at the initial loan application.

Rates / Locks –

Mortgage Rates are typically locked for a 30 day period. Rates also have certain adjustments for property type, credit score and down payment which could have a big impact on monthly payments and therefore approvals.

A 1% increase in rate could literally mean the difference between an approval or denial.

Headline News / Employment –

Underwriters watch the news as well. Borrowers who work in a volatile industry during hard economic times may have to jump through a few extra hoops to prove that their employment and income is secure.

Job changes, periods of unemployment or property location in relation to the subject property are other things to consider that may cause a speed bump in the approval process.

Title / Property Flip –

A Flip is considered a property that has been purchased by an investor and quickly sold to a new buyer within a 30-90 day period. Generally, an investor will do a little rehab work, fresh paint, landscaping…. and try to re-sell the property for a significant profit margin.

While it seems like a perfectly fair transaction, many lenders have strict guidelines in place that prevent borrowers from obtaining financing on properties that have a previous owner with less than 90 days of documented ownership.

These rules change frequently, and are specific to particular property types, so make sure your agent is aware of all the boundaries associated with your approval letter.

Homeowner’s Association Insurance –

Some lenders require Condos and Town House communities to have sufficient insurance and reserves coverage pertaining to specific ratios on units that are owner occupied vs rented.

It may also take a few weeks and cost up to $300 to receive an HOA Certification, so make sure your Due-Diligence period is set accordingly in the purchase contract.

Appraisal Ordering Procedures –

Appraisal ordering guidelines are changing quite frequently as regulators implement many new consumer protection laws created to prevent future foreclosure epidemics.

Unfortunately, some of the new appraisal regulations have proven to slow the home buying process down, as well as confuse lenders about the true estimate of neighborhood values.

VA, FHA and Conventional loan programs all have separate appraisal ordering policies, so make sure your agent is aware of which loan you’re approved for so that they document any anticipated delays in the purchase contract.

For example, if an appraisal takes three weeks and the average time for an approval is two weeks, then it probably isn’t smart to write a purchase contract with a four week close of escrow.

If you or anyone you know have any questions about the information above feel free to call or email me.

Rick & Jane May
Mann Mortgage
Branch Manager/Owners
Direct: 208-861-0000
mannmortgagemeridian@gmail.com
ID MBL-2550 / NMLS # 173614/12870
www.idahohomegroup.com

_________________________________

Related Articles – Home Buying Process:

Home Buying Process

First-Time Home Buyer Credit Checklist

Assembling Your Home Buying Team – Knowing The Players

Important Factors To Consider When Getting Financing On A Foreclosure, Short Sale or New Construction

Where Does My Earnest Money Go?

HOA Hurdles to be Aware of When Looking at New Properties

What You Need To Know About The Home Inspection Process

3 Great Idaho First Time Home Buyer Loan Programs

Top 10 Boise Idaho First Time Home Buyer Mortgage Links/Articles/Questions

1. 3 Great Idaho First-Time Home Buyer Loans
2. Idaho Housing and Finance Association Zero Down 100% Financing for First-Time Home Buyers
3. Idaho USDA Rural Development (RD) Zero Down 100% Financing First Time Home Buyer Loan
4. Idaho VA 100% Home Financing Loans
5. Idaho First-Time Home Buyer Frequently Asked Questions
6. Jumbo Mortgage Financing for Boise, Idaho Properties
7. Conventional Home Loans For Boise Idaho Borrowers
8. VA Mortgage Loans in Boise Idaho
9. Boise Idaho Reverse Mortgage Senior Loans
10. FHA Mortgage Loans in Boise Idaho

Boise Idaho Home Buyers : Ten Credit Do’s and Don’ts To Bear In Mind Prior To Getting Your Mortgage Loan

Posted on April 1, 2010August 17, 2015 by Rick & Jane May

How can a fully approved Idaho home loan mortgage get denied for funding after the borrower has signed loan docs?

Simple, the underwriter pulls an updated credit report to verify that there hasn’t been any new activity since original approval was issued, and the new findings kill the loan.

This generally won’t happen in a 30 day time-frame, but borrowers should anticipate a new credit report being pulled if the time from an original credit report to funding is more than 60 days.

Purchase transactions involving short sales or foreclosures tend to drag on for several months, so this approval / denial scenario is common.

It’s An Ugly Cycle:

Idaho First-Time Home Buyer receives an approval
Thinks everything is OK
Makes a credit impacting decision (new car, furniture, run up credit card balance)
Funder pulls new credit report and denies the loan

In the hopes of stemming the senseless slaughter of perfectly acceptable approvals, we’ve developed a “Ten credit do’s and don’ts” list to help ensure a smoother loan process.

These tips don’t encompass everything a borrower can do prior to and after the Pre-Approval process, however they’re a good representation of the things most likely to help and hurt an approval.

Ten Credit Do’s and Don’ts:

DO continue making your mortgage or rent payments

Remember, you’re trying to buy or refinance your home – one of the first things a lender looks for is responsible payment patterns on your current housing situation.

Even if you plan on closing in the middle of the month, or if you’ve already given notice, continue paying that rent until you’ve signed your final loan documents.

It’s always better to be safe than sorry.

DO stay current on all accounts

Much like the first item, the same goes for your other types of accounts (student loans, credit cards, etc).

Nothing can derail a loan approval faster than a late payment coming in the middle of the loan process.

DON’T make a major purchase (car, boat, big-screen TV, etc…)

This one gets borrowers in trouble more than any other item.

A simple tip: wait until the loan is closed before buying that new car, boat, or TV.

DON’T buy any furniture

This is similar to the previous, but deserves it’s own category as it gets many borrowers in trouble (especially First-Time Home Buyers).

Remember, you’ll have plenty of time to decorate your new home (or spend on your line of credit) AFTER the loan closes.

DON’T open a new credit card

Opening a new credit card dings your credit by adding an additional inquiry to your score, and it may change the mix of credit types within your report (i.e. credit cards, student loans, etc).

Both of these can have a negative impact on your score, and could result in a denial if things are already tight.

DON’T close any credit card accounts

The reverse of the previous item is also true. Closing accounts can have a negative impact on your score (for one – it decreases your capacity which accounts for 30% of your score).

DON’T open a new cell phone account

Cell phone companies pull your credit when you open a new account. If you’re on the border credit-wise, that inquiry could drop your score enough to impact your rate or cause a denial.

DON’T consolidate your debt onto 1 or 2 cards

We’ve already established that additional credit inquiries will hurt your score, but consolidating your credit will also diminish your capacity (the amount of credit you have available), resulting in another hit to your credit.

DON’T pay off collections

Sometimes a lender will require you to pay of a collection prior to closing your loan; other times they will not.

The best rule of thumb is to only pay off collections if absolutely necessary to ensure a loan approval. Otherwise, needlessly paying off collections could have a negative impact on your score.

Consult your loan professional prior to paying off any accounts.

DON’T take out a new loan

This goes for car loans, student loans, additional credit cards, lines of credit, and any other type of loan.

Taking out a new loan can have a negative impact on your credit, but also looks bad to underwriters and investors alike.

…..

Follow these Do’s and Don’ts for a smoother mortgage approval and funding process.

Just remember the simple tip: wait until AFTER the loan closes for any major purchases, loans, consolidations, and new accounts.

If you have any questions about the information above feel free to call or email me.

Rick & Jane May
Mann Mortgage
Branch Manager/Owners
Direct: 208-861-0000
mannmortgagemeridian@gmail.com
ID MBL-2550 / NMLS # 173614/12870
www.idahohomegroup.com

_________________________________

Related Credit / Identity Articles:

Top 10 Boise Idaho First Time Home Buyer Mortgage Links/Articles/Questions

1. 3 Great Idaho First-Time Home Buyer Loans
2. Idaho Housing and Finance Association Zero Down 100% Financing for First-Time Home Buyers
3. Idaho USDA Rural Development (RD) Zero Down 100% Financing First Time Home Buyer Loan
4. Idaho VA 100% Home Financing Loans
5. Idaho First-Time Home Buyer Frequently Asked Questions
6. Jumbo Mortgage Financing for Boise, Idaho Properties
7. Conventional Home Loans For Boise Idaho Borrowers
8. VA Mortgage Loans in Boise Idaho
9. Boise Idaho Reverse Mortgage Senior Loans
10. FHA Mortgage Loans in Boise Idaho

What Do Idaho Appraisers Look For When Determining A Property’s Value?

Posted on March 29, 2010August 17, 2015 by Rick & Jane May

Most people are surprised to learn what Idaho appraisers actually look at when determining the value of a real estate property.

A common misconception Boise Idaho homeowners generally have is that the value of their home is determined after the appraiser has completed their physical property inspection.

However, the appraiser actually already has a good idea of the property’s value by the time they have scheduled an appointment to stop by the property.

The good news is that you don’t have to worry so much about pushing back an appointment a few days just to “clean things up” in order to help influence the value of your property.

While a clean house will certainly make it easier for the appraiser to notice improvements, the only time you should be concerned about “clutter” is if it is damaging to the dwelling.

The Key Components Addressed In An Appraisal

The Site:

Location, view, topography, lot size, utilities, zoning, external factors, highest and best use, landscaping features…

Design:

Quality of construction, finish work, fixed appliances and any defining features

Condition:

Age, deterioration, renovations, upgrades, added features

Health & Safety:

Structural integrity, code compliance

Size:

Above grade and below grade improvements

Neighborhood:

Is the property conforming to the neighborhood?

Functional Utility:

Is the property functional as built – style and use?

Parking:

Garages, Carports, Shops, etc..

Other:

Curb appeal, lot size, & conforming to the neighborhood are obvious to the appraiser when they drive down into the neighborhood pull up in front of your home.

When entering your home, they are going to look at the overall design, condition, finish work, upgrades, any defining features, functional utility, square footage, number of rooms and health and safety items.

Be sure to have all carbon monoxide and smoke detectors in working condition.

Since the appraisal provides half the weight in any credit decision involving the security of real estate, the appraisal should be done by a qualified, licensed appraiser whom is familiar with your neighborhood, and the type of home you are buying, selling or refinancing.

If you’re interested in what specifically appraisers are looking for, here is a copy of the blank 1040 URAR form that is used by every appraiser in the country.

Related Update on HVCC:

Appraisers hired for a mortgage transaction on a conforming loan are chosen from a pool of qualified appraisers at random. Neither you nor your lender has the flexibility of deciding which appraiser will inspect your home.

This recent change was brought on with the Home Valuation Code of Conduct HVCC, and is effective with conventional loans originated on or after May 1, 2009.

If you have any questions about the article above please feel free to contact us.

Rick & Jane May
Mann Mortgage
Branch Manager/Owners
Direct: 208-861-0000
mannmortgagemeridian@gmail.com
ID MBL-2550 / NMLS # 173614/12870
www.idahohomegroup.com

_________________________________

Where Does My Earnest Money Go When Purchasing Boise Idaho Real Estate?

Posted on March 28, 2010May 17, 2016 by Rick & Jane May

Hey, I gave my Boise Idaho real estate agent a $5000 Earnest Money Deposit check… Where does that money go?

A basic and very obvious question that most Idaho First-Time home Buyers ask once their purchase contract gets accepted.

According to Wikipedia:

Earnest Money – an earnest payment (sometimes called earnest money or simply earnest, or alternatively a good-faith deposit) is a deposit towards the purchase of real estate or publicly tendered government contract made by a buyer or registered contractor to demonstrate that he/she is serious (earnest) about wanting to complete the purchase.

When a buyer makes an offer to buy residential real estate, he/she generally signs a contract and pays a sum acceptable to the seller by way of earnest money. The amount varies enormously, depending upon local custom and the state of the local market at the time of contract negotiations.

An Earnest Money Deposit (EMD) is simply held by a third-party escrow company according to the terms of the executed purchase contract.

For example, there may be a contingency period for appraisal, loan approval, property inspection or approval of HOA documents.

In most cases, the Earnest Money held by the escrow company is credited towards the home buyer’s down payment and/or closing costs.

*It’s important to keep in mind that the EMD may actually be cashed at the time escrow is opened, so make sure your funds are from the proper sources.

The Process:

Earnest Money is submitted to an escrow company with the accepted purchase contract
At the close of escrow, the EMD is credited towards the down payment and / or closing costs
If there are no closing costs or down payment, the EMD is refunded back to the buyer

Who Doesn’t Get Your Earnest Money:

Selling Real Estate Agent – A conflict of interest
Sellers – Too risky
Buying Agent – They shouldn’t have your money in their account

If you have any questions about the above article please feel free to contact us.

Rick & Jane May
Mann Mortgage
Branch Manager/Owners
Direct: 208-861-0000
mannmortgagemeridian@gmail.com
ID MBL-2550 / NMLS # 173614/12870
www.idahohomegroup.com

_________________________________

Renting vs Buying A Home In Boise Idaho

Posted on March 28, 2010March 17, 2016 by Rick & Jane May

Buying a home in Boise Idaho versus renting is a big decision that takes careful consideration.

While there are several biased sources that can make arguments for or against owning a home, we’ve found that most home buyers base their ultimate decision on emotion.

Yes, there are some tax advantages of owning real estate, as well as the potential to earn equity or pay a mortgage note off after several years.

However, let’s address some of the more obvious topics of discussion first.

Benefits Of Renting:

Lower Acquisition Cost –

Unless you’re able to qualify for a mortgage loan with zero down and have your closing costs paid for by the seller, a typical investment to purchase a home is around 3.5% – 7% of the purchase price for down payment and closing costs on an FHA mortgage, and an average of 13% – 23% for a home secured by conventional financing.

Compared to the cost of about 1-3 month’s rent payment, it’s obvious that renting a home makes financial sense in the short-term.

Lower Qualifying Standards –

While the FHA and other government insured mortgage programs have more flexible credit / qualifying guidelines than most traditional home loan programs, there is certainly a lot less paperwork and personally invasive probing required by most landlords and property management companies.

Generally proof of employment / income and a decent credit history (or a good explanation) is needed to rent a home.

Freedom To Move –

It’s easy to find a home through a reputable property management company, move in that weekend and then leave a year later when the rental contract expires. Not being tied down by a long-term mortgage liability is ideal for people new to a community, in a career that keeps them on the go or for parents with children that prefer a certain school district.

Plus, if you’re planning on moving in the next 3-5 years, then it may become cost-prohibitive due to the amount of equity you’ll have to gain in the short-run just to cover the cost of paying an agent, buyer closing costs, transfer taxes…. so that you can at least break even at closing.

Less Maintenance and Cost –

If something breaks, a simple call to the property management company will generally solve the issue in 48 hours or less. Plus, renters don’t have to carry expensive homeowners insurance, pay property taxes or worry about interest rates adjusting.

Benefits of Owning:

Pets Are Allowed –

Well, according to the rules and regulations of your county or neighborhood HOA, you can pretty much have as many domestic and exotic pets without having to pay extra deposits.

It may seem like a funny benefit to mention first, but the millions of dog and cat lovers would definitely rank this towards the top of their list.

Pink and Purple Walls –

Yep, you can paint the inside of your house any color you choose. Depending on whether or not there is an HOA in place, you could probably do the same thing on the home’s exterior. Landscaping, flooring, built-in shelving… it’s your property to renovate and rehab to your liking.

Peace-of-Mind and Security –

The only way you would be forced to move is if the bank forecloses on your property due to a default in mortgage payments.

So basically, you don’t have to worry about a landlord’s financial ability to make mortgage payments on time. Plus, you can stay in your own property as long as you wish.

Tax Benefits –

The US government has created certain tax incentives making it possible for many homeowners to exceed the standard yearly deduction.

*Disclosure – Check with your CPA or Tax Attorney to verify your own unique filing scenario*

The following three components of your home mortgage may be tax deductible:

a) Interest on your home mortgage
b) Property Taxes
c) Origination / Discount Points

Stability –

Remaining in one neighborhood for several years lets you and your family establish lasting friendships, as well as offers your children the benefit of educational continuity.

Appreciation of Property –

Historically, even with other periods of declining value, home prices have exceeded consumer inflation. From 1972 through 2005, home prices increased on average 6.5%, according to the National Association of Realtors®.

Forced Saving –

The monthly payment helps in repayment of the principal amount. Also when you sell you can generally take up to $250,000 ($500,000 for married couple) as gain without owing any federal income tax.

*Disclosure – Check with your CPA or Tax Attorney to verify your own unique filing scenario*

Increased Net Worth

Few things have a greater impact on net worth than owning a home. In a comparison of renters versus homeowners, the Federal Reserve Board of Consumer Finance found that the average net worth of renters was just $4,000 compared to homeowners at $184,400.

While the available tax advantages and potential for earned equity are generally highlighted by most industry professionals as the top reasons to own real estate, it’s important to remember that markets go through cycles.

However, owning real estate that appreciates more than the rate of inflation may help contribute towards your overall investment portfolio, provided your maintenance and mortgage costs are kept low.

Rick & Jane May
Mann Mortgage
Branch Manager/Owners
Direct: 208-861-0000
mannmortgagemeridian@gmail.com
ID MBL-2550 / NMLS # 173614/12870
www.idahohomegroup.com

_________________________________

What Does My Idaho Title Insurance Protect Me From?

Posted on March 28, 2010August 17, 2015 by Rick & Jane May

By including Idaho title insurance when purchasing property, your title insurer takes on accountability for legal expenses to defend your property title, should it ever be challenged.

Many different occurrences can come into play to warrant the need for title insurance.

The title company responsible will then take on the legal expenses to defend the property for as long as you are in possession of an interest in the property under the title.

If the defense is not successful, you will be reimbursed for any loss of value of the property.

Common Things Title Insurance Covers:

1. UNDISCLOSED HEIRS, FORGED DEEDS, MORTGAGE, WILLS, RELEASES AND OTHER DOCUMENTS

2. FALSE IMPRISONMENT OF THE TRUE LAND OWNER

3. DEEDS BY MINORS

4. DOCUMENTS EXECUTED BY A REVOKED OR EXPIRED POWER OF ATTORNEY

5. PROBATE MATTERS

6. FRAUD

7. DEEDS AND WILLS BY PERSON OF UNSOUND MIND

8. CONVEYANCES BY UNDISCLOSED DIVORCED SPOUSES

9. RIGHTS OF DIVORCED PARTIES

10. ADVERSE POSSESSION

11. DEFECTIVE ACKNOWLEDGEMENTS DUE TO IMPROPER OR EXPIRED NOTARIZATION

12. FORFEITURES OF REAL PROPERTY DUE TO CRIMINAL ACTS

13. MISTAKES AND OMISSIONS RESULTING IN IMPROPER ABSTRACTING

14. ERRORS IN TAX RECORDS

If you have any questions about this article please feel free to contact us.

Rick & Jane May
Mann Mortgage
Branch Manager/Owners
Direct: 208-861-0000
mannmortgagemeridian@gmail.com
ID MBL-2550 / NMLS # 173614/12870
www.idahohomegroup.com

_________________________________

How Much Of A Home Can I Afford In Boise Idaho?

Posted on January 1, 2010May 17, 2016 by Rick & Jane May

How much Boise Idaho mortgage money can I qualify to borrow?

This is typically the number one question mortgage professionals are asked by new clients.

Of critical importance when considering mortgage financing: There is sometimes a difference between what a client ***can*** borrow and what they ***should*** borrow.

In other words, what makes for a comfortable long-term mortgage payment?

The Quick Answer:

If we’re simply considering the financial math, lenders will calculate your Debt-to-Income Ratio and generally allow for 28-31% of your gross income to be used for the new house payment with up to 43% of your gross income to be used for all consumer related debts combined.

Sample Mortgage Scenario:

Let’s use a gross monthly income of $3000 and a qualifying factor of 30% Debt-to-Income Ratio:

$3000 multiplied by .3 (30%) = $900 max monthly mortgage payment

This means that your mortgage payment (Principal, Interest, Taxes, Hazard Insurance) cannot exceed $900 a month.

“Ballparking” a Qualifying Loan Amount:

Simple step: We use a safe average of $7 per month in payment for every $1000 in purchase price so…

Step 1) $900 a month divided by $7 = $128.50

Step 2) $128.50 multiplied by 1000 = $128,500 loan amount.

Remember, these are average ratios and guidelines set by most lenders for common mortgage programs.

Keep in mind, while most consumer debts are listed on a credit report, there are some additional monthly liabilities that may contribute to the overall qualifying percentages as well.

Regardless of how your personal income and credit scenarios factor in, it is important to consider your overall budget when trying to determine how much of a mortgage you should qualify for.

Other items to consider in your monthly budget:

1. Confirm all debts are taken into account
2. Any private notes or family loans
3. Short-term expenses – medical, auto repairs, travel, emergencies
4. Plan on additional expenses for the home such as water, electric, maintenance, etc…
5. Keep a cushion for savings and financial planning

If you have any questions regarding how much of a home you can afford feel free to contact us.

Rick & Jane May
Mann Mortgage
Branch Manager/Owners
Direct: 208-861-0000
mannmortgagemeridian@gmail.com
ID MBL-2550 / NMLS # 173614/12870
www.idahohomegroup.com____

_____________________________

8 Questions Your Boise Idaho Lender Should Answer About Mortgage Rates

Posted on January 1, 2010August 17, 2015 by Rick & Jane May

Boise Idaho home buyers, simply checking online for today’s posted interest rate may not lead to your expected outcome due to the many factors that can cause each individual rate and closing cost scenario to fluctuate.

We can preach communication, service and education all day long, but it’s our ultimate goal to earn your trust so that you can be confident in our ability to successfully lead you through this complex mortgage process.

Since mortgage rates can change several times a day, the following questions will help determine whether or not your lender truly knows what to look for so that they can provide you with the best interest rate once you’re in a position to lock in your loan:

Who determines mortgage rates, and what are they tied to?

Mortgage interest rates are determined by the pricing of Mortgage Backed Securities or Mortgage Bonds. The media often implies mortgage rates are based off the 10-year Treasury Note, which is incorrect.

While the 10-year Treasury Note has been known to trend in the same direction as Mortgage Bonds, it is not unusual to see them move in completely opposite directions.

How often do mortgage rates change?

Mortgage rates may change throughout the day, however they only change on days when the Bond markets are trading securities since mortgage rates are based on Mortgage Bond prices.

Think of a Mortgage Bond’s sales price similar to that of a Stock that trades up and down during the course of a day.

For example – let’s assume the FNMA 30-Year 4.50% coupon is selling for $100.50. The price is 50 basis points lower from the previous day’s closing price of $101.00.

In simple terms, the borrower would have to pay an additional .50% of their loan amount to have the same rate today that they could have locked in the previous day.

What causes mortgage rates to change?

Mortgage Bonds are largely affected by various market forces that influence the changing demand for bonds within the market. Some of the key economic factors that have the greatest impact are unemployment percentages, inflationary fears, economic strength and the overall movement of money in and out of the markets.

Like stocks, most fluctuation is caused by consumer and investor emotions.

When the Fed changes rates, why do mortgage rates move in the opposite direction?

It is a common misconception that when the Federal Reserve implements a rate cut it is immediately correlated to a reduction in mortgage rates.

The Federal Reserve policy influences short term rates known as the Fed Funds Rate (“FFR”). Lowering the FFR helps to stimulate the economy and increasing the FFR helps to slow the economy down. Effectively, cutting interest rates (FFR specifically) will cause the stock market to rally, driving money out of bonds and creating potential for inflation.

Mortgage Bond holders need to obtain a higher rate of return on their money if inflation is increasing, thus driving up mortgage rates. With the Federal Reserve Board meeting every six weeks, this is an important question to ask. If your lender does not have a firm understanding of this relationship, they may leave your rate unprotected costing you thousands of dollars over the life of your mortgage.

Do different programs have different interest rates?

Conventional, FHA and VA loans can all carry different rates on a 30-Year fixed mortgage. FHA and VA loans are insured by the Federal Government in the event of defaults. Conventional mortgages are insured by private mortgage insurance companies, if insurance is required.

Typically, FHA and VA loans carry a lower rate because the investor views the government backing as less of a risk. While rates are usually different for each program, it may be more important to compare the monthly and overall cost during the life of the loan to determine which program best suits your needs.

Why is an Adjustable Rate Mortgage (ARM) rate lower than a fixed rate mortgage?

An Adjustable Rate Mortgage (ARM) is usually fixed for a specific period of time. The period is typically 6 months, 1 year, 3 years, 5 years or 7 years. The shorter time period the rate is fixed, the lower the interest rate tends to be initially.

This is due to the borrower taking the future risk of increasing interest rates. The only instance where this would not be true is when there is an inverted yield curve where short-term rates are higher than long-term rates.

Why are rates higher for different property residence types?

Mortgage interest rates are based on risk-based pricing. Risk-based pricing allows adjustments to par pricing for risk factors such as; FICO scores, Loan-to-Value percentages, property type (SFR, Condo, 2-4 Units), occupancy (Primary, Vacation or Investment) and mortgage type (Interest Only, Adjustable Rate etc).

This allows the investors who lend their money for mortgages to receive additional compensation for taking additional risk.

If the borrower encounters a financial hardship, are they more likely to make the payment on the home they live in or the one they rent out?

If you have any questions about any information in this article please feel free to contact us.

Rick & Jane May
Mann Mortgage
Branch Manager/Owners
Direct: 208-861-0000
mannmortgagemeridian@gmail.com
ID MBL-2550 / NMLS # 173614/12870
www.idahohomegroup.com

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