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What is Harp 2.0 and How Do I Qualify?
On September 7, 2008, the collapse of two government-sponsored enterprises (GSEs)—the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac)—changed the landscape of the mortgage lending industry completely.
Since then, there has been much effort within the mortgage industry to restructure itself why following stricter guidelines. This recovery effort includes mortgage lenders and servicers, as well as private mortgage insurers—all seeking to help find ways to increase the number of homeowners who might be able to refinance their mortgage to more affordable interest rates. The Obama Administration’s Home Affordable Refinance Program (HARP) is one such program that is designed to assist homeowners in refinancing their mortgages—even if the mortgage is more than the home’s current value.
Now, the HARP program is in its second stage, and is commonly referred to as Harp 2.0. Despite the benefits offered in this government program, many homeowners have still not taken advantage of the ability to possibly refinance on much better terms than those they currently have in their mortgage. In order to qualify, borrowers must meet the following guidelines:
- The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.
- The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
- The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
- The current loan-to-value (LTV) ratio must be greater than 80%.
- The borrower must be current on the mortgage at the time of the refinance, with no late payment in the past six months and no more than one late payment in the past 12 months.
How long does the mortgage process take?
Current turn around times to process a refinance or purchase loan is approximately 3 weeks. Retail banks can often take 60-90 days which creates a tremendous advantage for small direct lenders like Choice Mortgage Bank. Another reason for the fast turn around time is the file is always overseen by the broker and not passed along the chain through several hands.
Is there a way to reduce closing costs?
One way to reduce closing costs is to structure the loan with a marginally higher than best available rate which creates revenue for the bank to help pay your closing costs. For instance, if the best available rate for a 30yr fix is 3.75% with standard closing costs, we can raise the rate by a .25%-.375% and pay all or the majority of the fees.
What are the closing costs involved with refinancing?
Here in Florida we have three components of fees which include the bank, the title company, and the state. My bank does not charge any points and therefore our fees only change depending if the loan is a government loan or conventional loan. Most of the title fees and state fees are promulgated by the state and based on the loan amount.
I financed my home at 5%, how low does the rate need to fall to make sense financially to refinance?
In order to analyze how much the interest rate must drop before I refinance, one would have to calculate the closing costs and the monthly savings. Once we know how much money you are saving every month, we divide that monthly savings by the total closing costs to find your breakeven point as to when you will recover the cost of the refinance. Everything after that breakeven point equates to savings. Depending on loan size and other variables, we often structure loans to ensure we make sense for clients to refinance. For instance, there are certain situations where we pay all of the closing costs for clients which therefore allows the client to refinance without having to have a large drop in rate. For example, a client has a 300k loan at 5% and we refinance down to 4.25% but the bank pays all the closing costs. The savings is $135/mo which is not a tremendous amount, but if its free, how can you say no.
Credit Faux Pas
Applying for a mortgage can be a stressful process. It’s stressful enough to have to really sit down and look at your financial profile, but when you add on concerns over whether or not you’ll be able to get the home you have always wanted you’ve created a recipe for giving yourself more than a few new gray hairs. The best way to make sure you can apply for the mortgage you need with as little stress as possible is to start your mortgage planning early on. Perhaps the most important step you can take in your mortgage planning is making sure you keep your credit in good health so you look like a strong candidate for your desired home loan.
There are a few active steps you can take to keep your credit in good health and to look like an attractive financial prospect to the bank, but most of the steps you need to take are preventative. If you simply focus on avoiding the following credit faux pas you won’t need to sweat when you apply for your mortgage.
First, you want to keep your overall level of debt as low as possible. A huge percentage of your credit score is determined by the amount of debt you presently hold. The amount of debt you hold affects your credit score in a couple big ways. The more debt you have the greater your monthly payments on that debt. The greater the monthly payments you have on that debt, the less money you’ll have to contribute to your mortgage. The less money you have to contribute to your mortgage, the less likely you will receive the mortgage you need on the terms you want.
Now, debt is relative when it comes to your credit score. An individual who makes $100,000 a year and has $10,000 in debt is going to be a much more attractive prospect than an individual who makes $25,000 a year and has $10,000 in debt. Banks will also look at your current debt load in terms of how much total credit you have. So an individual with $5,000 of credit who holds $500 of debt from that credit looks better than an individual with $1,000 of credit who holds $500 of debt from that credit.
No matter how large your credit line and how high your annual income, overall the less debt you have the more attractive you will look to mortgage lending institutions such as banks.
However, remember the attractiveness of your credit profile depends on not only how little debt you have but also how much free credit you have on hand. So while paying down your debt to skew this ratio in your favor is a wise move, closing out your credit once it’s paid off (and removing that open stack of credit from your profile) is a bad move.
Closing out lines of credit isn’t the only credit faux pas you can fall into when applying for a mortgage- you can also take on new debt. Using your credit cards when you’re applying for a mortgage is a very, very bad move, but it’s not the only method of accumulating new debt which you should avoid. Don’t take on car loans, student loans, or other forms of “good” debt either during the mortgage process.
Finally, when paying down your debt keep an important point in mind. Paying off accounts with collection agencies is generally a good idea because it reduces your debt load. But overall it’s significantly better to negotiate with those agencies to DELETE your accounts from all reporting agencies and bureaus. After all, having an account with a collection agency will always look bad, even if you’ve paid that account completely off.
Holding a large amount of debt is a serious problem for your credit, but so is handling that debt poorly. Perhaps the biggest credit faux pas you can make is having negative marks on your credit report from missing monthly payments or otherwise making them late. Someone who has $4,000 of debt but who makes all of their payments on time can look better to the banks than an individual who has $400 of debt but hasn’t made a payment on time in a year.
Building a negative relationship with debt is the worst faux pas you can enact when it comes to getting the mortgage you need, so make sure you keep your debt in good order well before you apply for your mortgage.
Home Valuation Code of Conduct
The Home Valuation Code of Conduct (the HVCC) offers a set of rules for the most ethical manner in which mortgage lenders (such as banks) are able to act when they commission the appraisal of a property. The actual HVCC is an industry agreement which was negotiated and accepted between the Fannie Mae , Freddie Mac and New York state and was ultimately implemented in the Dodd-Frank Act . Home valuation codes of ethics is now a national issue of contention, but there are a few important points which you need to make sure are upheld by your lender to make sure you receive a fair deal on your property.
The basic principal of the regulation is to prevent any individual who has a potential financial benefit from having any direct contact whether that be via phone, email, in person, etc with the appraiser. This is to eliminate any “leaning” or “suggested valuation” and to keep the appraisal process as pure as can be. In theory this is a very good concept that uses a middle man called an Appraisal Management Company to act as a go between the appraiser and lender and all of their employees (brokers, processors, etc).
Some of the problems with the HVCC from a consumer stand point is that the appraiser is not hired by your lender or by you and therefore does not have any incentive to perform well. The appraisers in general are making so much smaller a piece of the pie then in years past they have lost that motivation to work the extra mile for the clients. A client also does not have the insight to not go through with an appraisal until they have paid for it, even if the appraiser knew prior to doing the appraisal that the requested value was not even close to actual value.
On the upside, you will be protected knowing you are not paying too much for a property as influence and sales price are left out of the appraisal equation in terms of value. Appraisals have become under much scrutiny because of the bank owned sales, foreclosures, and short sales that are lowering values of all neighborhoods. Hopefully some of the regulation will unwind and a better formula will arise to create true value and get our real estate markets back on track.
Bank Statement Mistakes
Applying for a mortgage is a huge event in your financial life, and making sure you receive approval for the mortgage you need and want requires a little advanced planning. One area of your financial picture you need to optimize to increase your chances of receiving the best mortgage is your Bank statement . Most people aren’t aware the actions they take with their bank account leading up to applying for their mortgage, or during the application process, can have a huge impact on their ability to receive approval for their loan. Here are some of the biggest bank statement mistakes you can make without knowing it, and how you can mitigate any damage from necessary faux pas.
The first thing you should do is keep all of your cash and assets in one place. If possible don’t transfer any money around, don’t liquidate any assets, and otherwise try to create a very stable and static personal financial picture. When you’re applying for a mortgage your prospective lender is going to look at all of your income and assets and make sure they are where you say they are, in the amounts you say they sit in. If you transfer money around during the application process your prospective lender will have to trace all of those transactions, making their job more complicated and more error prone. As best as possible, avoid moving around your assets and cash throughout the entire application process.
You also want to avoid making any huge changes to the amounts in your financial and asset accounts. One of the worst things you can do during your mortgage application process is receiving huge deposits in your account. It’s common for individuals to receive large cash gifts from relatives when they’re applying for a mortgage to make their cash-on-hand appear larger than it actually is or to help pay for closing costs. If a bank sees a big deposit into your account that is not a direct deposit from your employer they will want to source that deposit. Often times the deposit is likely a gift, which requires a gift letter and needs to be sourced.
Avoiding receiving these gifts is wise, though there are plenty of circumstances when you might receive additional funds through more legitimate means. For example receiving your paycheck, receiving a bonus or commission check from work, liquidating assets… all of these actions result in an increase in your cash and shouldn’t be avoided. Instead you should simply make sure you have as much documentation as possible for these transactions. Having copies of paystubs and documentation surrounding asset sales will ensure your bank factors them into your application process appropriately.
As a general rule it’s wise to keep documentation on hand for all changes, adjustments, additions or subtractions from your bank accounts when applying for a mortgage. You never know what documentation and clarifications your prospective lender will need, and you never know what activity they might view as suspicious or otherwise problematic. It’s wise to have all of your documents together from the last 2 years, but if you’re not used to accumulating these documents it’s smart to start collecting them as soon as possible.
Things to consider when refinancing a VA Mortgage Loan
Should you refinance your VA Mortgage
Many people are considering refinancing because the current market interest rates are so low. If you have been looking into how refinancing benefits you and you want clarity as to how it works, you need to have a conversation with a qualified mortgage loan expert.
Because mortgages make up one of the largest debts you will incur, even a small adjustment in mortgage rates can save you hundreds. If you have an adjustable rate mortgage, this may be especially clear to you, as your monthly payments change with the interest rates. But even with a fixed-rate mortgage, you can quickly calculate that with a few tenths of a percentage point off my interest rate, you could save over a thousand during the length of my mortgage. That’s a thousand that could go into your retirement account, or for the kids’ college.
Refinancing can seem a little complex but Choice Mortgage Bank has streamlined the process with their Approval Express which can let you know with almost certainty about your ability to have you loan approved.
Contact Emmanuel St.Germain, Vice President of Choice Mortgage Bank today to get started, 561.400.7317.
Are VA Mortgage Rates Better Than FHA Mortgage Rates?
If you are looking for a home loan you might become confused with all of the options
and the various abbreviations. 
And I’m sure you’re hoping to find a great rate this will mean finding a loan officer who can help. Most loan officers are quite knowledgeable and will be able to explain how VA and FHA mortgage rates are different.
You will need to find out which program best fit your needs and that you will be
qualified for.
VA Mortgage Loan Program-
*You will need to meet the eligibility requirement
*They offer zero down mortgage loans if you meet certain requirements.
*VA mortgage programs don’t charge private mortgage insurance.
*And once you have a VA loan if you ever needed to refinance VA has a streamlined refinance program which is simple and efficient.
*Closing costs and fees can be rolled into the loan.
*First time VA Fee much more expensive than FHA’s, although financed
FHA Mortgage Loan Program-
*They will charge private mortgage insurance
*You can put as little as 3.5% down.
*Closing costs are rolled into the loan.
*Seller concessions up to 6%
Both loans are government loans which mean they do not have a prepayment penalty and both are assumable loans as well.
The overview of these two programs should give you enough information to understand which program will best meet your needs. The interest rates on these types of loans are quite comparable and in general VA Loans are better for individuals with less down payment money.
For more information – please see our Video on this topic at
http://www.youtube.com/watch?v=HQ-jzwilxvk&feature=youtu.be