Government to step in with new refinance options?

Minneapolis, MN: Many reports have surfaced recently that the government is seriously considering a wide range of ideas to assist consumers in refinancing their homes loans owned by Fannie Mae and Freddie Mac to take advantage of today’s amazing low interest rates. For a variety of reason, mostly to due to negative equity or current tighter credit underwriting guidelines, large numbers of these homeowners have been left to the sidelines.

As a Loan Officer, I have never fully understood some of the silliness in some underwriting guidelines, and have a few suggestions.

If Fannie Mae or Freddie Mac (you and I since the government took the over during the peek of the credit crunch) already “own your loan”, you are current with your payments, and your basic financial position is OK, what does it matter if your home is underwater? They already own the the loan, and have all the risk. Wouldn’t lowering their payment reduce the risk and simply make sense?

While allowing these people to refinance, I would add one rule…  That being that you couldn’t “go backwards”. In other words, if the homeowner currently has a 30-yr fixed mortgage with 26-year remaining, they would not be allowed to have a new loan longer than 26-years.

While it is little know, and even less used as most people select a very traditional 15-yr, 20-yr, or 30-year mortgage, many mortgage lenders (including us) allow you to select any number of years you wish. If you want a 17-yr fixed, or the aforementioned 26-yr fixed, no problem. We can do that.

For FHA loan holders, a quick, immediate fix is possible to help those people refinance by simply changing a mortgage insurance rule. Allow people with existing FHA loans to refinance with their current mortgage insurance rate.

Everyday I speak with homeowners with FHA loans, where I could easily lower their interest rate by 1% – 1.5%, but it makes no financial sense for them to do it.

FHA loans all have mortgage insurance. Up until recently, the cost of the insurance, which is included in their monthly payment, was just 0.55% of their loan amount. A simple way to understand the cost, is on a $200,000 mortgage loan, the insurance costs $110 per month.

Last year, FHA increased the insurance to 1.15%. So on the same $200,000 loan, the monthly cost is now $230! YIKES. The higher insurance cost eats up most, if not all of their potential monthly savings, leaving many FHA homeowners unable to take advantage of today’s low mortgage rates.

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There are differences in Loan Officer qualifications. Know how to tell who you are working with

Is your Loan Officer Licensed, or simply registered? There is a BIG difference YOU need to understand

Recent changes to the lending industry requires all loan officers to have a tracking number, known as an NMLS number (Nationwide Mortgage Licensing System and Registry). It should be displayed on their business cards, E-Mail, web sites, all correspondence, and most loan documents.

The display of the NMLS number may make many believe the Loan Officer is licensed. Sadly, this isn’t true, and working with an unlicensed, untrained Loan Officer can cause you many headaches and hassles.

Simply put, Loan Officers at Banks, most Credit Unions, or Mortgage Companies owned by a bank are NOT REQUIRED to be licensed, take classes, pass any tests, take continuing education, or pass any state or federally mandated tests to be a Loan Officer!

CHECK YOUR LOAN OFFICER OUT on the Nationwide Mortgage Licensing System and Registry at http://www.nmlsconsumeraccess.org

My NMLS # is 274132

It is hard to determine if the Loan Officer is simply registered, versus licensed. When looking up a loan officer, you have to go to the bottom of their NMLS identification page and look under State Licenses/Registrations or Federal Registrationheading.

  • A LICENSED Loan Officer will say “State Licenses/Registrations” and will have one or more STATES listed with licensing information.
  • An UNLICENSED, but simply REGISTERED Loan Officer will say “Federal Registration” and the something like Federal Mortgage Loan Originator.

Who is Best? Banks, Brokers, or Direct Mortgage Lenders?

Now I am not trying to make this into a David versus Goliath story, but I am trying to emphasize the huge differences between Loan Officer training. As the new requirements have been rolling out across the country, many Loan Officers who have been unable to meet the new licensing and testing requirements, and especially those who have failed the new tests, have simply gone to the large banks to work.

Calling “1-800-Big-Bank” to get a loan??? YIKES. Here is a chart to show the differences:

SAFE ACT Loan Officers
(MLO’s)
Bank Loan Officers (RMLO’s)
Have Personal License Yes No
Registered in NMLS Yes Yes
FBI Background Yes No
Fingerprinted Yes No
Surety Bonded Yes No
Pre-Employment education Yes No
8 hours continuing education each year Yes No
Personal Credit checked Yes No
Pass Tough State Test Yes No
Pass Tough Federal Test Yes No
Complaint mechanism’s Yes No
Licensing fees and renewals Yes No
Loan Officer Designation MLO RMLO
NMLS = Nationwide Mortgage Lender System and Registry (Tracking Number)
MLO = Mortgage Loan Officer (Licensed and Trained)
RMLO = Registered Mortgage Loan Officer (simply registered)

I think the choice is clear. Who would YOU rather be working with on the largest financial transaction of your life? A fully trained, licensed, fingerprinted, and background checked Loan Officer – or the untrained, unlicensed, and simply registered Loan Officer at the bank?

The funny part is the cost for the service based on rates and fees are usually about the same, if not slightly cheaper in both rate and costs. Plus non-bank lenders usually close the loans faster, and have more knowledgeable and experienced Loan Officers.

The best S.A.F.E. ACT Loan Officer (non-Bank) analogy I can use is having a choice of working with an experienced CPA to do your taxes vs. you using Turbo Tax to do it yourself, but paying the same price.

Finally, THIS IS A CLEAR REASON why people should follow my #1 mortgage shopping rule: GOOGLE THE NAME OF YOUR LOAN OFFICER before allowing them to handle the largest financial transaction of your life!


Refinancing? Common mistakes to avoid

Mortgage Interest Rates are near historic lows. You want to refinance?
Common mistakes, and what NOT To Do

There are a lot of things “not to do”. I will point out only the 3 most common mistakes I see people make.

  1. Setting an unrealistic goal. I always get inquiries from people who say something like, “I have a 30 year fixed rate loan at 5.875% and I will refinance ONLY when rates get to 4.0% with no closing costs”. Sometimes I call people back and say, “Why 4%? why not 3% or 2%? They say, “Well rates are not going to go that low”. Right and they are unlikely to go to 4% with no closing costs also (“no closing cost” loans typically cost anywhere from 1/2% to .75% higher than the going interest rate) You should first succumb to the fact that once you can lower your rate with no out of pocket expense, you should probably refinance. Don’t draw unrealistic interest rate lines in the sand. They get blown away too easily.
  2. The “Once rates start dropping, they are going to continue to drop and I’m smart and I am going to lock when rates hit the bottom of the market” syndrome. It is very hard to guess the interest-rate cycle, and pretty hard to catch the bottom. Remember that rates can rise fairly quickly.
  3. “If the rate goes down just another 1/8th percent, then I’ll lock” This one just kills me! I see people lose all the time over this theory. If your current rate is 5.875% and today’s rate is 4.875%. LOCK & CLOSE! Most people have what I call “interest rate block”. They get a rate stuck in their head, and that is the rate they want, no matter what. Most people fail to realize (and most loan officers fail to show them), that the difference on the average loan over 1/8th a percent is usually less than $15 per month. If you can save $150 per month on your loan at today’s rate, why gamble? Why hold out for another $15 when the odds are against you?

Don’t get piggy. Work with us. Set a goal and lock when it gets there. Are we going to hit the bottom? Probably not. Are we going to save you money? Yes. If you can save money with no out of pocket costs, than you have nothing to lose. If you want to gamble go to Las Vegas. It’s a heck of a lot more fun. Apply Now

Extra Tricks to Save Money When Refinancing

The purpose of most refinance loans is simply to save money. The goal is to minimize your expense over the life of the loan or to minimize your monthly payment in the near future.

If you can swing it, don’t roll every cost of refinancing into your new loan. Most people escrow for taxes and insurance. If you do, your current lender must give you escrow refund within 30 days of paying off their loan. Your new lender, be it us or someone else, must take the equivalent amount of money (or more) at closing to start the new escrow account.

Remember that you always get to skip a month of payments. If you close June 5th, your first new payment is August 1st.

Knowing this, paying some of your closing costs out-of-pocket will save you even more money in the long run. Why roll in $4000 in closing costs, when you really only need to roll in $2000 ($1000 escrow refund + $1000 missed payment = $2000). Paying that $2000 over 30 years doesn’t make sense if you don’t have too.

On the other hand, some people love the fact that they didn’t pay anything out of pocket to refinance, got a nice escrow refund check, then got to miss a mortgage payment. They use the ‘extra’ money to pay bills, go on vacation, etc.

Picking a Lender & Closing Costs

Shopping for a home loan is confusing. No matter what we’re looking for — from cars to refrigerators’ — there’s a built-in element of confusion. Why? Lack of knowledge. An unfortunate rule of thumb is that the less we know about something we need to buy, the more we can expect to pay for it.

Shopping for a mortgage in Minneapolis, St Paul, Duluth, Rochester, Madison, Milwaukee, and throughout all of Minnesota and Wisconsin is complex at best — even for the savvy previous home owner. Daily rate changes, time-sensitive lock-in periods, points, lender’s fees… plus the emotional element of probably the largest financial deal any of us will ever make. Throw in to this already murky stew the ingredients of tricky internet mortgage rate advertising, commissions for every officer, agent and broker who ‘helps’ in your transaction, and the obscure differences between ‘rates’ and ‘fees.’ It’s no mystery that many buyers settle for a home loan that exceeds their monetary means out of sheer exasperation!

Please review our information on closing costs and “BAD Good Faith Estimates“. There is currently a large number of fly-by-night lenders doing some incredibly misleading rate & closing cost advertising. Remember, if it sounds too good, it probably is! Also check out my article “Best Rate or Lowest Cost” for more loan comparison information.

The Bottom Line
Remember, the first rule is that there are no rules. You should refinance if it makes sense for you. Every person & situation is different. What makes sense for one family, may not make sense for you. Call me today to discuss your wants, needs, and goals. Together we’ll determine if refinancing makes sense for YOU.

Click here for more information on the actual loan process.
Click here for
10 Tips to a Smooth Closing
Click here for
10 Mistakes to Avoid


The credit bureau is selling your info. Here is how to stop it

Getting a mortgage loan? Beware of the credit bureau.

You’ve shopped a few lenders, gotten some quotes. You’ve narrowed your search, supplied a full application, and supporting documents. The lender has now pulled your credit report, and informed you everything looks great. You lock your interest rate, and move forward.

Suddenly, you are overwhelmed with telephone calls and an overflowing mail box with offers from competing mortgage companies. What is going on?

Sadly, there is a new and horrible marketing trend called “trigger lists”. Because the lender and pulled your credit (they had to), they triggered an  unintended event.

The credit bureaus have found another way to increase their revenue at your expense, and WITHOUT YOUR PERMISSION.

Having credit checked is an important and necessary step in the home buying process, as well as something that is done for many other legitimate reasons.  Very few people realize that each time your credit is
checked, an “inquiry” is generated on your personal credit report.

The credit bureau’s are now selling your “inquiry data”, including name, address, phone number (even unlisted), credit score, current debt, debt history, property information, age, gender, and estimated income.  They are selling all this personal and confidential information to anyone who writes them a check!

These low life mortgage lenders purchase these leads at a premium price. They then will do, and say anything they can to recoup their investment and turn a hefty profit. Bait and switch tactics are being used to lure clients away from their reputable lender. Many of our clients have even been called by these disreputable lenders and told that the lender they had been speaking to previously “passed on” the information to them!

The good news is you can make it stop immediately. The consumer credit reporting industry has provided a way to “opt out” and remove your name from these lists.  You can contact them by phone at
1-888-567-8688
or online at www.optoutprescreen.com.

You certainly have the right to shop for the best professional to meet your lending needs. This should be done on your terms, when and how YOU chose. Unfortunately at this time, these unsolicited marketing tactics are a nuisance and intrusive, but perfectly legal.

Our company, Mortgages Unlimited, and my team are doing everything in our power to limit these credit report abuses. We suggest you call your representatives to let them know how you feel too.

Take the time to protect yourself from identity theft and unwanted solicitations. OPT-OUT NOW!


MORTGAGES for SELF-EMPLOYED, and COMMISSIONED INCOME Clients

MORTGAGES FOR THE SELF-EMPLOYED,   COMMISSIONED, or TIPPED INCOME Clients

Self employed individuals often ask … Why is it so difficult to qualify for mortgage financing?

Minneapolis, MN:  Self-employed borrowers, those who work on commission, or those who receive tipped income present one of the most challenging areas of mortgage underwriting. Qualifying self-employed people often requires significant extra time, energy, and patience. A fair and honest pre-qualification requires a special set of Loan Officer skills and expertise.

Long gone are the days when any Loan Officer could give a low doc, no doc, or stated income loan to a self-employed borrower, commission, or tipped income client without any training or special consideration.

Generally speaking, it’s tougher for the self-employed buyer to qualify for a mortgage because it is hard to answer the question: “What is your income?”

What did you earn, what did you write off? Taking advantage of tax laws to reduce income is great for reducing tax liability, but also shows you make less money, making a potential home mortgage loan approval difficult.

Next lenders are looking to see a income history. Is income increasing, decreasing, or stable? This all comes into play for self-employed, commissions, and tipped income home buyers and those same type clients interested in a refinance of their existing home loan.

Today, lenders are back to the old way of providing mortgage loans, and the vast majority of Mortgage Companies, and especially Mortgage Loan Officers are either afraid to work on a self-employed persons home loan, or simply lack the extra knowledge and skill required to get self-employed people a home loan.

Reading, understanding, and qualifying a buyer off of tax returns is not for the weak of heart, or unlicensed bank reps working at a call center.


Self-Employed and Commissioned DOCUMENTS REQUIRED:

Be prepared to send us the following documents. We will be unable to assist you or evaluate you mortgage loan qualifications without them:

  • Last two years personal tax returns (all pages, All schedules)
  • Last two years business returns if employed through a corporation (all pages, all schedules)
  • Current Year-to-Date P&L (Profit and Loss Statement) and Balance Sheet

We will also require the traditional standard home loan approval documents:

OTHER INCOME

  • Copy of most recent two (2) years W-2 statements (for you and any co-borrowers)
  • Copy of pay stubs covering the last (30) thirty days (for you and any co-borrowers)

ASSETS

  • Copy of most recent monthly bank statements (ALL PAGES. If it says “page 1 of 3”, I need all 3 pages no matter what is on them.
  • Copy of most recent statements on 401K, IRA, or Mutual Fund Accounts
  • Copy of most recent brokerage statement for any stocks, bonds or certificates of deposits (or copies of actual certificate)

LESS THAN 2-YEARS SELF-EMPLOYED? YES, it is possible… But it is an exception and NOT easy to get approved. You will need to have worked in the exact same field, with a similar income, and have at least 1-yr of self employed Federal Tax Returns


About the Metzler Mortgage Group at Mortgages Unlimited

About the Metzler Mortgage Group at Mortgages Unlimited. Why we are a great choice for getting your home mortgage loan.

Read moreAbout the Metzler Mortgage Group at Mortgages Unlimited