Premiere Mortgage Services Inc. - Dana Bain

Newsletter-May 15th, 2017
Provided by
Dana Bain
DanaBain
Premiere Mortgage Services
11 Malvern Hill Road
Sterling, MA01564
Phone: (978) 422-2311
Fax: (978) 422-2313
E-Mail: dana@bainmortgage.com

Market Comment

Mortgage bond prices finished the week near unchanged which kept rates in check. There was a slight negative bias throughout most of the early part of the week despite wild stock swings. Fed speakers primed the financial markets for an announcement sometime this year regarding a reduction in their balance sheet. Weekly jobless claims were 236K versus the expected 245K. Producer prices rose 0.5% versus the expected 0.2% increase. The core, which excludes volatile food and energy, rose 0.4%. Analysts looked for a core reading of 0.2%. Tame consumer inflation readings Friday morning erased the earlier losses. CPI rose 0.2% as expected while the core rose 0.1% versus the expected 0.2% increase. Retail sales rose less than expected. Mortgage interest rates finished the week unchanged to better by approximately 1/8 of discount point.


LOOKING AHEAD

Economic
Indicator

Release
Date & Time

Consensus
Estimate


Analysis

Housing Starts

Tuesday, May 16,
8:30 am, et

1220K Important. A measure of housing sector strength. Weakness may lead to lower rates.
Industrial Production

Tuesday, May 16,
9:15 am, et

Up 0.2%

Important. A measure of manufacturing sector strength. A lower than expected increase may lead to lower rates.
Capacity Utilization

Tuesday, May 16,
9:15 am, et

76%

Important. A figure above 85% is viewed as inflationary. Weaker figure may lead to lower rates.
Weekly Jobless Claims

Thursday, May 18,
8:30 am, et

235K

Important. An indication of employment. Higher claims may result in lower rates.
Philadelphia Fed Survey

Thursday, May 18,
10:00 am, et

22

Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates.
Leading Economic Indicators

Thursday, May 18,
10:00 am, et

Up 0.3%

Important. An indication of future economic activity. A smaller increase may lead to lower rates.

Housing Starts

Housing starts data is a leading indicator of the state of our economy. This report, provided by the Bureau of the Census, takes into account data from both single-family homes and multi-family dwellings. Building permits are also released with the housing starts data. By knowing the number of permits issued monthly, analysts can attempt to estimate for the upcoming months. Normally, starts are 10% higher than permits since all locations are not required to have a building permit.

Housing starts and permits give a warning of future economic activity. In effect, a rise in housing starts can lead to a fall in the bond market and vice versa. Consumers tend to hold off on the purchase of new homes, new cars, and other big-ticket items if they are worried about the future of the economy. Housing is an important part of our economy. Declines in housing starts can lead to economic slowdown. On the other hand, increases in housing starts can signal positives for the economy. From the opposite perspective, changes in interest rates often lead to changes in housing starts. Higher interest rates can cause a significant decline in home sales, which can lead to a drop in housing starts. Just the opposite happens when rates remain low. Low mortgage rates affect both home sales and housing starts.
.

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Posted in:General
Posted by Dana Bain on May 15th, 2017 4:52 PM

A Complete Guide To Buying Your First Home!

Our team at Premiere Mortgage prides itself on helping first time home buyers understand the home buying process.

First time home buyer tips come in all shapes and sizes. From little tricks of the trade related to the mortgage process to insider information on selecting a real estate agent, there surely is no shortage of guidance available to a first time home buyer.

But much of this important information is fragmented – meaning a first time home buyer must look in many places to get the information they need throughout the home buying process. This lengthy and often convoluted research process can deter a first time home buyer from starting the home buying process.

Well, look no further. Our team of experienced brokers at Premiere Mortgage have put together a detailed compilation of some of the best first time home buyer tips available. It is our hope that a first time home buyer who follows some or all of these surefire tips will be better prepared for their first home buying experience.

Tip #21 — Be Real About Your Budget

The idea of being realistic with your budget pretty much applies to anything in life — shopping at the mall, going to the grocery store or planning a vacation. But this is principle is especially necessary for a first time home buyer who is taking all the necessary steps to buy a house. In fact, of all of the first time home buyer tips out there, this may be the most important.

In order to determine your monthly housing budget, get familiar with the term “housing expense ratio” — which, according to this Credit.com article, is an indication of a borrower’s ability to make the payments on their mortgage loan. This ratio measures housing expense as a percentage of gross income (income before deducting for Social Security, Medicare, and taxes). Mortgage lenders expect a borrower to have a housing expense ratio of approximately  28%.

“If a borrower’s salary was $4,000 per month, a lender would approve their loan if the housing expense – mortgage payment, fire insurance, and property taxes – were less than $1,120 per month. $1,120/$4,000 = 0.28.”

http://www.myfico.com/

Lenders will also likely consider a borrower’s total expenses — which include housing expenses and fixed monthly obligations. Industry experts say a borrower’s expenses should not exceed 43% of gross income.

Thanks to the new Qualified Mortgage rule, most mortgages have a maximum back-end DTI ratio of 43%. There is a temporary exemption for many loans, but a lot of lenders still want this number to be under 43%!

Let’s look at a basic example of debt-to-income ratio:

$120,000 annual gross income as reported on your tax returns/pay stubs

  • Monthly liabilities: $3,500
  • Monthly gross income: $10,000
  • 35% debt-to-income ratio

In this example, your debt-to-income ratio would be 35% ($3,500/$10,000).

However, the debt-to-income ratio goes into greater detail and comes up with two separate percentages, one for all of your monthly liabilities divided by income (back-end DTI ratio), and one for just your proposed monthly housing payment (including taxes and insurance) divided by income (front-end DTI ratio).

Front-End and Back-End Debt-to-Income Ratios

So in the above example, if your proposed monthly housing payment makes up $2,000 of your $3,500 in monthly liabilities, your front-end DTI ratio would be 20%, and your back-end DTI ratio would be 35%. Many banks and lenders require both numbers to fall under a certain percentage, though the back-end DTI ratio is more important.

You may see a debt-to-income requirement of say 30/45.  Using the example from above, your front-end DTI ratio of 20% would be 10% below the 30% limit, and your back-end DTI ratio of 35% would also have 10% clearance, allowing you to qualify for the loan program, at least as far as income is concerned.

*If you own other property with a mortgage, it should be included in the back-end DTI ratio because it’s not part of the new loan you are applying for.

Max DTI for Conforming Loans (Fannie Mae and Freddie Mac)

The classic, “rule of thumb” ratios are 28/36, meaning your front-end ratio shouldn’t exceed 28%, and your back-end ratio shouldn’t exceed 36%.

However, this measure is more conservative than what you might actually see in practice today. For example, back in the day many homeowners put down 20%. Today, the down payments are often just 3-10%, to give you some perspective.

But, Fannie Mae still does impose a max DTI of 36% for manually underwritten loans, though the majority of loans are approved via their automated underwriting system called Desktop Underwriter (DU).

And DU will allow DTIs up to 45%, and as high as 50% with compensating factors, such as plentiful assets, larger down payment, great credit, etc.

For Freddie Mac, underwriters must include a written explanation that justifies exceeding the 28/36 ratios when files are manually underwritten. Like Fannie, the ratios may go higher if the file is approved via automated underwriting.

Max DTI Ratio for FHA Loans

The max DTI for FHA loans depends on both the lender and if it’s automatically or manually underwritten.  Some lenders will allow whatever the AUS (Automated Underwriting System) allows, though some lenders have overlays that limit the DTI to a certain number. These limits can also be reduced if your credit score is below a certain threshold.

For manually underwritten loans, the max debt ratios are 31/43. However, for borrowers who qualify under the FHA’s Energy Efficient Homes (EEH), “stretch ratios” of 33/45 are used.

These limits can be even higher if the borrower has compensating factors, such as a large down payment, accumulated savings, solid credit history, potential for increased earnings, and so on.

To sum it up, if you can prove to the lender that you’re a stronger borrower than your high DTI ratio lets on, you might be able to get away with it. Just note that this risk appetite will vary by lender.

Also note that mortgage insurance premiums are included in these figures.

Max DTI Ratio for VA Loans

For VA loans, the same automated/manual UW rules apply.  If you get an AUS approval, the maximum DTI ratio can be quite high.

However, if it’s manually underwritten then the maximum debt-to-income ratio is 41% (back-end).  There is no front-end requirement for VA loans.  Again, as with FHA loans, if you have compensating factors and the lender allows it, you can exceed the 41% threshold.

Specifically, if your residual income is 120% of the acceptable limit for your geography, the 41% DTI limit can be exceeded, so long as the lender gives you the go-ahead.

In other words, most of these limits aren’t set in stone, assuming you’re a sound borrower otherwise.

Max DTI Ratio for USDA Loans

For USDA loans, the max DTI ratios are set at 29/41.  However, if the loan is approved via the Guaranteed Underwriting System (GUS), these ratios can be exceeded somewhat, similar to FHA/VA loans.

Long story short, if you have a credit score of 660 or higher, solid employment history, and the potential for increased earnings in the future, you may get approved for a USDA loan with higher qualifying ratios.

How to Calculate Your DTI Ratio

If you’d like to figure out your debt-to-income ratio, simply take your average gross annual income based on your last two tax returns and divide it by 12. Then add up all your monthly liabilities and divide that total by your monthly income and voila. Keep in mind that you’ll need a free credit report to accurately see what all your monthly payments are.

The credit report will show you what your minimum or monthly payment is for each tradeline, which makes it simple to add them up. Some banks and lenders allow installment credit cards such as those issued by American Express to be excluded from the debt-to-income ratio as they often account for thousands of dollars a month, and likely get paid off in full monthly.

The debt-to-income ratio is a great way to find out how much house you can afford, as well as the maximum mortgage payment you qualify for. Simply add up all your liabilities and your proposed mortgage payment plus taxes and insurance to see what type of loan you can take out.

Tip #20 — Get Pre-Qualified, Even If You’re Not Quite Ready

Well before even starting to seriously look at houses, a first time home buyer should get pre-qualified for a mortgage. The last thing you want is to find the home of your dreams and then have the financing fall apart.


“Sellers want to see a pre-approval/qualification letter before signing a contract with you. It is the nightmare of every seller that they will tie up their home for months with an unqualified prospect. A seller wants a fast sale.”

Realtor.com

A good way to shop around for financing is to engage at least three different types of lenders — big banks, regional banks, local lenders, credit unions or mortgage brokers.

The advantage of a well experienced mortgage broker like Premiere Mortgage Services Inc. we have a huge network of Bank & Lenders Nationwide so we generally always have the best financing options and rates available.

Eventually, after shopping around, you will find mortgage terms that make the most sense for you. The next step will be to get pre-qualified, which involves providing your lender with various details related to your credit score, income and assets. Your mortgage broker will then verify all of the information you gave them and issue a letter telling you how much the bank is willing to lend you. And remember, a pre-qualification is not a guarantee.

Tip #19 — Deal With Your Debt…Now!

Debt comes in all shapes and sizes. There’s student loan debt from those fun four (or more) years of college, there’s credit card debt (most likely also from those fun years of college) and there are other forms of debt related to car loans and personal loans.

When dealing with debt obligations, a first time home buyer should get their old debt squared away before applying for a mortgage. If you don’t deal your debt before applying for a home mortgage loan, chances are you either won’t be approved or you’ll get less than stellar terms on your mortgage loan.

More often than not the bulk of debt owed by a first time home buyer is related to student loans, so be sure and take this valuable advice:

“If you have student loans and want to buy a home, you will need to be vigilant about making your loan payments on time. A delinquency on a student loan will not only damage your credit score, it could also stop you from qualifying for a home loan. This is particularly true if you have a government-backed student loan and apply for a loan from the Federal Housing Administration, Veterans Affairs, or the U.S. Department of Agriculture Rural Development, because your lender will check the federal Credit Alert Verification Reporting System database to make sure you are not in default on any government obligations.”

— Michele Lerner, “Student Loans Can Affect Mortgage Approval

Having your debt in order and in good shape will show a lender that you are ready, willing and able to handle a mortgage payment!

Tip #18 — Monitor the Market

A first time home buyer should be like a hawk — surveying the local and regional real estate market similar to how a hawk surveys its prey. Seriously!

By knowing how the market behaves, a first time home buyer can monitor the selling prices of comparable homes in their area, which thereby allows them to be a bit more knowledgeable when going to look at homes.

Getting started is pretty light lifting. Web sites such as Zillow can give a first time home buyer a general idea of what’s out there. Real estate listings are also abundant on the Internet, through sites like National Association of Realtors®. It’s also a good idea to create a few Google Alerts for when new homes come on the market—and don’t be shy about picking up those real estate magazines sitting on the rack in the supermarket either.

Tip #17 — Make Friends in the Marketplace

It’s okay to make the acquaintance of local real estate agents or mortgage brokers, even if you’re not ready to pull the trigger just yet. A first time home buyer shouldn’t be shy about calling and asking for advice about the home buying process. This is also a good way to vet the people who may end up helping you apply for a mortgage and may hold the keys to your new home.

If you have in fact found a broker and a real estate agent that meets your needs in terms of understanding the process, be sure that these folks are also professional, friendly, honest and courteous people.

Another good first time home buyer tip is to ensure that your real estate agent and broker are able to work together. Teamwork is vitally important for a first time home buyer.

Tip #16 — Penny Pinch

Maybe you go out to eat less, maybe you make your own coffee instead of buying it every morning, maybe you reconsider going on that vacation this winter. Whatever it is, a first time home buyer will need to be as frugal as possible prior to buying a home.

Keeping in mind that you will have to make some sacrifices, both large and small. Take a look at some of these recommendations on how to penny pinch towards your goal:

  • Work overtime or find a second job that caters to your work schedule
  • Downsize living situation by either moving back home, finding a smaller, more affordable apartment or take a roommate
  • Eliminate extraneous expenses like cable subscription, eating out, gym membership etc.
  • Scale back your contributions to your 401k or retirement savings plan

There are many ways to save money. Be sure to find the methods that work best for you.

Tip #15 — Get Organized

Organization is a key component to the home buying process. With so much information related to the mortgage process, not to mention the search for that right home, a first time home buyer should try and find an effective way to keep all of this information together.

“The house hunting process does not have to be chaotic. If you take an organized approach to finding the right real estate for your lifestyle and budget, you will have your dream home in no time.”

— “How to Organize Your Real Estate Search,” wikiHow

A good way to stay organized is to create a “First Time Home Buyer” binder and fill it with everything from real estate flyers and mortgage material to pictures and contact information of local brokers and realtors.

Also, consider creating a checklist as a guide to follow throughout the process.

Tip #14 — Create a Wish List

A wish list a will allow a first time home buyer to prioritize what they want in a home, thereby making the real estate search a little bit more focused and easier to deal with.

The important part of doing this, however, is knowing what you’d like to have in your first home and knowing what you can live without. A good way to do this is to separate your list into “Need” and Want.” This allows a first time home buyer an opportunity prioritize what they REALLY should have in their first home.

Wish list items can include: a pool, a big back yard, central air, office, playroom etc.

Tip #13 — Timing is Everything, Don’t Hesitate

It’s not rare for a home to sell super fast — especially when cash buyers are involved. The National Board Realtors reported earlier this spring that properties sold faster for the fourth straight month in April, reflecting the prolonged lag in inventory relative to demand.

While the general rule of thumb for a first time home buyer is almost always to take your time and not rush, making haste when in the home buying process can sometimes result in getting the home of your dreams. But BE AWARE: this only works if you have all of your ducks in a row and feel comfortable pulling the trigger.

Tip #12 — Don’t Settle

While this may seem contradictory to your instinct, as well as to our earlier tip about not hesitating, it’s crucial to be sure you’re not settling for something you may not be happy with six months down the road.

This principle relates to not only the search for that perfect home, but also translates when figuring out the terms of your home mortgage loan. Persistence can pay off, so don’t settle for a price or for an interest rate that makes you uncomfortable.

Tip #11 — Lock in a Rate ASAP

Timing is everything when it comes to getting ideal mortgage terms. Rates are expected to climb in 2017 due to an expected reduction in economic stimulus from the Federal Reserve, so it’s key to lock in a rate as soon as possible.

If you’re working with a mortgage broker, chances are you’re in good hands. If not, there are some things you should know before trying to lock in a rate:

  • Know the difference between a rate lock and a rate quote
  • Typically, you can lock in a rate once you’ve located a property, and up to 5 days before closing
  • Make sure the rate lock is in writing
  • Research whether or not rates are predicted to rise or fall before deciding to lock in a rate
  • Ensure your rate lock expiration date is realistic
  • Be aware of rate caps
  • Settle your loan before the rate lock expires

Rate locking is one step in the process that will help alleviate some of the first time home buyer stress around financing.

Tip #10 — Don’t Be Shy, —Bargain

Believe in your bargaining power — this is what the home buying game is all about.

When dealing with lenders, especially in a down market, be aware that your bargaining chip is the fact that you are interested and they want your business. This gives you some wiggle room to shop around.

But when dealing with home price negotiations, tread lightly. This process can be a back and forth battle of wills. Here are a few good tips to help your bargain efforts:

  • Go into purchase negotiations primed with as much information as you can gather
  • Don’t lowball. The seller wants to know you’re serious
  • Keep a poker face
  • Know when to walk away
  • Know when to throw in the towel and accept a price

And remember to be cautious when dealing with a seller; there are many instances of home buying blunders related to negotiations gone wrong.

Tip #9 — Know Your Rights

Knowing your rights as a mortgage borrower is key for a first time home buyer going through the home buying process.

The U.S. Department of Housing and Urban Development recommends a first time home buyer be aware of their rights before entering into any loan agreement. Because remember, buying a home is perhaps the largest and most important loan you will ever get. Here are some of your rights as a mortgage borrower, courtesy of HUD:

  • You have the RIGHT to shop for the best loan for you and compare the charges of different mortgage brokers and lenders.
  • You have the RIGHT to be informed about the total cost of your loan including the interest rate, points and other fees.
  • You have the RIGHT to ask for a Good Faith Estimate of all loan and settlement charges before you agree to the loan and pay any fees.You have the RIGHT to know what fees are not refundable if you decide to cancel the loan agreement.
  • You have the RIGHT to ask your mortgage broker to explain exactly what the mortgage broker will do for you.
  • You have the RIGHT to ask questions about charges and loan terms that you do not understand.
  • You have the RIGHT to a credit decision that is not based on your race, color, religion, national origin, sex, marital status, age, or whether any income is from public assistance.
  • You have the RIGHT to know the reason if your loan was turned down.
  • You have a RIGHT to ask for the HUD settlement cost booklet “Shopping for Your Home Loan”.

The Consumer Financial Protection Bureau recently enacted a slate of new rules for borrowers. These are especially important if you run into issues with your mortgage servicer in 2014 or fall behind on your payments.

Tip #8 — Consider Life After Buying Your First Home
First Time Home Buyer Tips Life After Buying

The excitement of buying that first home can sometimes blind a first time home buyer to the true investment of home ownership. For instance, the only thing a new homeowner may have on their mind is what their mortgage payment will look like when it’s all said and done. And while this is certainly an important figure, it’s critical to recognize that home ownership is much more than a monthly mortgage payment.

Personal finance guru Suze Orman recommends that before committing to a mortgage amount, a first time home buyer should take into account the true cost of making those monthly mortgage payments — such as the amount of principal, interest, taxes and insurance payments that will come about each month. Orman also suggests considering all of the “extras,” which more commonly refers to maintenance, repair and unexpected disasters like a broken water heater or burst pipe.

“Don’t worry about mortgage deductions or the after-tax consequences – just look at the numbers and think about what else you spend each month and try to understand if you’ll feel comfortable. Because if you can’t sleep at night worrying about paying the mortgage or fixing your broken water heater, you’re spending too much.”

— Suze Orman

Lastly, the true cost of home ownership is not always about money. For instance, that green grass that comes along with your new home will eventually need to be cut and that old fence will likely need to be fixed at some point. While both of these activities may require a financial investment of some sort, they also require some time and energy on the part of the homeowner.

Tip #7 — Select a Reputable Home Inspector

This is a no brainer for a first time home buyer. Selecting a knowledgeable home inspector is just as important as a great real estate agent, and in the long run, can save you thousands of dollars.

The first thing you should do is ask friends, family and co-workers for referrals. Also be sure to talk to your broker, if you are using one, as well as your real estate agent.

Once you’ve gotten a few names, do the following to ensure they are right for you:

  • Conduct interviews — ask questions related to their process and how long an inspection takes.
  • Ask for proof of credentials and/or association with organizations — this is a good way to check for references and determine the home inspector is who they claim to be.

Some other good recommendations, according to this post from MSN Real Estate, involve: asking tough questions, checking for complaints and getting it all in writing.

Tip #6 — Survey Your Surroundings

While the type of home you choose is of utmost importance, so too should be the neighborhood that surrounds it.

Consider the following when looking beyond the borders of the home itself:

  • Are the streets/sidewalks in good condition?
  • Who are your neighbors?
  • How close are you to places you visit on a regular basis, such as schools, gym and grocery store, etc.?
  • Is it safe for children (i.e., is there good lighting, do cars speed by on a regular basis)?

In the case of getting to know your neighborhood, take the time to consider all of the factors that can play into whether a neighborhood is right for you.

Tip #5 — Get Serious About Your Credit Score

Lack of a good credit score can be one of the biggest obstacles a first time home buyer will have to conquer when buying a home.

Generally, a first time homebuyer with a higher credit score will have a better shot at securing a mortgage loan with a low interest rate, meaning lower monthly payments. A first time homebuyer with poor credit, however, will experience difficulty securing that low interest rate, among other things, and will likely incur higher monthly payments.

Luckily there are some simple steps a first time home buyer can take to begin the healing process now. Here’s just a few:

Step 1:

You should go to your bank and give them $1,000 (or whatever you can manage) and ask them for two “secured” credit cards. They should give you a Visa and a MasterCard against the funds that you gave them. Use these cards monthly for gas or something nominal and pay it off in full each month. This will build a credit history for you. Within 6-12 months you will have established credit scores. Once you have established credit, you can ask for your secured funds (deposit) back.

Step 2:

If possible have a family member or close friend add you to one or more of their accounts as an “authorized user.” You will gain all of their past history, so if they have had a card for several years or more. You obviously want to make sure they had a good credit history with these accounts.

Have poor credit?

http://www.myfico.com/credit-education/improve-your-credit-score/

Tip #4 — Accept Assistance

A first time home buyer has a variety of tools available to them when kicking off the home buying process.

The U.S. Department of Housing and Urban Development recommends you contact one of the HUD-funded housing counseling agencies in your area to talk through other options for help that might be available to you. Also, be sure to check with your local government to see if there are any local home buying programs that could help you.

Tip #3 — DON’T Wear Your Heart On Your Sleeve

While this may be easier said than done, try to not become emotional when embroiled in the home buying process.

As one expert states in this round up of home buying advice, “First time buyers should check their emotions at the door.” When not properly kept in check, emotions can lead to mistakes.

Put on your poker face and remember that buying a home is all about business.

Tip #2 — Fly Under the Radar

A first time home buyer should try to stay out of sight when waiting on approval for a home mortgage loan. Things like overspending or taking on new debt can throw a wrench in a potential approval.

Here’s a few simple ways to stay out of sight:

  • Don’t make any large purchases
  • Don’t apply for any new credit accounts
  • Don’t close any credit accounts
  • Don’t move your money around
  • Don’t skip or miss payments

Tip #1 — Ask A LOT of Questions

Again, buying a home is usually the first significantly large purchase a first time home buyer has made. Therefore, you shouldn’t be afraid to ask all of your questions, and ask again until you’re comfortable with the answer.

Also, don’t ever feel like you’re bugging your real estate agent or broker — they’re getting paid to help.

At Premiere Mortgage Services Inc. we have over 35 years experience and a stellar reputation.

Dana Bain & Robin Dunbar Bain

Premiere Mortgage Services Inc.

www.BainMortgage.com

Posted in:General
Posted by Dana Bain on May 11th, 2017 1:38 PM
Newsletter-May 8th, 2017    
Provided by
Dana Bain
Dana Bain
Premiere Mortgage Services
11 Malvern Hill Road
Sterling, MA 01564
Phone: (978) 422-2311
Fax: (978) 422-2313
E-Mail: dana@bainmortgage.com
 
 

Market Comment

Mortgage bond prices finished the week lower which pushed rates higher.  The Core PCE, the Fed’s favored inflation gauge, fell 0.1% as expected.  Personal income rose 0.2% and spending was unchanged.  The ISM Index was weaker than expected.  ADP employment showed the economy added 177,000 jobs in April which was near the expected 170,000.  Productivity showed a sharp decrease of 0.6% in the first quarter.  Analysts looked for a 0.1% increase.  There were no surprises from the Fed as they left rates unchanged and indicated they will continue to reinvest in mortgage-backed securities which is good for rates in the short term.  Unemployment came in at 4.4% versus the expected 4.6%.  Payrolls rose 211,000 versus the expected 180,000 increase.  Mortgage interest rates finished the week worse by approximately 1/8 of discount point.


LOOKING AHEAD

Economic
Indicator

Release
Date & Time

Consensus
Estimate


Analysis

3-year Treasury Note Auction

Tuesday, May 9,
1:15 pm, et

None

Important.  Notes will be auctioned.  Strong demand may lead to lower mortgage rates.
10-year Treasury Note Auction

Wednesday, May 10,
1:15 pm, et

None

Important.  Notes will be auctioned.  Strong demand may lead to lower mortgage rates.
Weekly Jobless Claims

Thursday, May 11,
8:30 am, et

240K

Important.  An indication of employment.   Higher claims may result in lower rates.
Producer Price Index

Thursday, May 11,
8:30 am, et

Up 0.1%,
Core up 0.2%

Important.  An indication of inflationary pressures at the producer level.  Weaker figures may lead to lower rates.
30-year Treasury Bond Auction

Thursday, May 11,
1:15 pm, et

None

Important.  Bonds will be auctioned.  Strong demand may lead to lower mortgage rates.
Consumer Price Index

Friday, May 12,
8:30 am, et

Down 0.1%,
Core down 0.1%

Important.  A measure of inflation at the consumer level.  Weaker figures may lead to lower rates.
Retail Sales

Friday, May 12,
8:30 am, et

Up 0.4% Important.  A measure of consumer demand.  A smaller than expected increase may lead to lower mortgage rates.
Business Inventories

Friday, May 12,
10:00 am, et

Up 0.2%

Low importance.  An indication of stored-up capacity.  A significantly larger increase may lead to lower rates.
U of Michigan Consumer Sentiment

Friday, May 12,
10:00 am, et

97 Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.

Yellen

Fed Chair Yellen has a difficult road ahead.  She wants to raise rates but the recent disappointing growth figures make a hike in the short term difficult.  The last thing the Fed wants to do is tip the economy the other way.  The Fed indicated last week that, “The Committee views the slowing in growth during the first quarter as likely to be transitory and continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, labor market conditions will strengthen somewhat further, and inflation will stabilize around 2 percent over the medium term.”

 

The good news is that rates remain historically favorable.  Now is a great time to get a low interest rate mortgage ahead of any potential rate volatility.

 Dana Bain & Robin Dunbar Bain

 www.BainMortgage.com 

danabain.mortgagemapp.com

 


                                     

 
   MORTGAGE MARKET IN REVIEWNewsletter-May 8th, 2017    
Posted by Dana Bain on May 5th, 2017 5:45 PM

What does a mortgage loan originator do?

Loan officers working

There are a lot of people involved in helping a borrower successfully secure a mortgage, but one of the most important individuals in the process is the mortgage loan originator. What exactly does a mortgage loan originator do? In this post, we’ll explore the duties of a mortgage loan originator and explain what qualities a good mortgage loan originator should have.

What is a Mortgage Originator?

In simplest terms, a mortgage loan originator (aka mortgage loan officer, loan officer, LO, etc.) is typically an individual who works with a borrower to complete a mortgage transaction. The mortgage loan originator/officer is usually the borrower’s main point of contact throughout the entire home loan process.

To delve a little deeper into what a mortgage loan originator does, you can take a peek at this sample job description from popular job searching site, Monster.com:

“Mortgage Loan Officer Job Responsibilities:

Increases mortgage loan portfolio by developing business contracts; attracting mortgage customers; completing mortgage loan processing and closing; supervising staff.”

Keep in mind that the example above is just a sample, and depending on the company, certain duties may not be required. Likewise, there may be duties not listed in the example above that an LO would be responsible for.

What Do Mortgage Originators Do?

A few common duties performed by mortgage loan originators include but are not limited to…

Interviewing mortgage applicants
Analyzing and screening preliminary loan requests
Gather background financial information
Submit loan applications for processing
Monitor loan progress from application to closing

What to Look for in a Loan Originator:

Aside from simply being able to complete the necessary tasks associated with processing a mortgage, a good mortgage loan originator should posses certain characteristics to help them and their borrowers succeed.

First and foremost, LOs should maintain industry standards of honesty and integrity. Even with all the recent improvements in borrower protection, it can still be possible to work with an unscrupulous lender. The best way to ensure you’re working with a good LO is to do a little homework on him/her or their company. Check their rating with the Better Business Bureau, ask for references from previous clients, read online testimonials and most importantly, go with your instinct. Once you meet with the LO, you will most likely be able to get a sense of their work ethic and determine whether or not you will work compatibly together.

Loan originators should also be good with dealing with the public, as they have to work one-on-one with all sorts of borrowers from all walks of life. In addition, good LOs will want to develop new business opportunities whenever possible, so they will actively work to develop a rapport with real estate agents, property appraisers and attorneys. The more an LO does this, the more their reputation grows.

At Premiere Morgage, we’ve spent close to 21 years developing a reputation as a leader in residential mortgage lending. Our certified loan officers are some of the best in the industry.  If you’d like to learn more about our company and our selection of loan products, feel free to reach out to us today. Simply call toll-free at 978-422-2311 or send resume to info@bainmortgage.com  

Steps to Become a Loan Officer

The following are steps you can take to become a loan officer.

Step 1: Earn a Bachelor's Degree

Although loan officers need at least a high school diploma, advanced positions such as commercial loan officers will require a bachelor's degree in economics, finance, business or other related fields. Pursuing a degree in one of these fields can prepare a commercial loan officer for analyzing the finances of a business, reading financial statements and understanding principles of business accounting. Coursework for these programs typically includes accounting, mathematics, finance, economic statistics and business statistics.

Since loan officers must be able to clearly answer any questions customers may have and guide them through the loan application process, excellent interpersonal and communication skills are needed to be successful in this position. While in school, you can take advantage of courses in communications, public speaking and psychology.

Step 2: Gain the Necessary Work Experience

For many employers hiring loan officers, previous experience is highly preferred. This is especially true for individuals who do not have a bachelor's degree and are seeking employment out of high school. Aspiring loan officers can establish themselves in the field by seeking employment in a variety of settings, including customer service, banking, and sales.

Step 3: Complete On-The-Job-Training

Participating in on-the-job-training is a requirement for individuals, regardless of what degree they hold. The type of training received can vary depending on the work setting and may include a combination of informal training and company-sponsored training. Some training with specific software may be included as well, particularly for those involved in underwriting.

Step 4: Obtain Licensure

All mortgage loan officers must be licensed as a mortgage loan originator (MLO). This process involves completing 20 hours of required coursework, passing an exam and a credit and background check. The MLO exam contains a national component and a state component that is unique for each state.

Step 5: Become Certified

Although certification is not a requirement for loan officers, obtaining certification may improve employment prospects. The Mortgage Bankers Association (MBA) and American Bankers Association (ABA) offer opportunities for becoming certified. A few certifications offered by the ABA include certified financial marketing professional (CFMP), certified lender business banker (CLBB), and certified trust and financial advisor (CTFA). The MBA offers a variety of certification options for mortgage bankers, including commercial, residential, executive and master. These credentials require a minimum amount of work experience, successful completion of an examination, and the completion of continuing education courses.

Completion of continuing education credits is needed to maintain an MLO license, which must be renewed on a yearly basis. This typically requires the completion of eight hours of continuing education courses each year. Other requirements may vary by state. Certifications offered by the ABA are usually renewed every three years. The renewal process will vary and may include completing continuing education credits, paying an annual fee, and adhering to the Institute of Certified Bankers' Professional Code of Ethics. CMB designations offered by the MBA must be renewed every two years. Earning five points of continuing education activities is required to maintain certification. This can be accomplished by completing coursework offered by the MBA, participating on committees, or attending conferences and conventions.

Posted by Dana Bain on May 2nd, 2017 2:00 PM
Newsletter-April 24th, 2017    
Provided by
Dana Bain
Dana Bain
Premiere Mortgage Services
11 Malvern Hill Road
Sterling, MA 01564
Phone: (978) 422-2311
Fax: (978) 422-2313
E-Mail: dana@bainmortgage.com
 
 

Market Comment

Mortgage bond prices finished the week near unchanged which kept rates steady.  Rates started the week lower Monday morning but the improvements were erased by Thursday.  The NAHB Housing Market Index printed at 68 versus the expected 70. The index is based on a monthly survey of members belonging to the National Association of Homebuilders (NAHB) is designed to measure sentiment for the U.S. single-family housing market.  Weekly jobless claims were near expectations.  Leading economic indicators rose 0.4% versus the expected 0.3% increase.  The Philadelphia Fed survey showed strong economic activity in the Mid-Atlantic region.  Mortgage interest rates finished the week unchanged to better by approximately 1/8 of discount point despite some volatility.


LOOKING AHEAD

Economic
Indicator

Release
Date & Time

Consensus
Estimate


Analysis

FHFA House Price Index

Tuesday, April 25,
10:00 am, et

Up 0.4%

Moderately Important.  A measure of single family house prices.  Weakness may lead to lower rates.
New Home Sales

Tuesday, April 25,
10:00 am, et

600K

Important.  An indication of economic strength and credit demand.  Weakness may lead to lower rates.
Consumer Confidence

Tuesday, April 25,
10:00 am, et

126

Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.
Treasury Auctions Begin

Tuesday, April 25,
10:00 am, et

None Important.  2Y Notes on Tuesday, 5Y Notes on Wednesday, and 7Y Notes on Thursday.
Durable Goods Orders

Thursday, April 27,
 8:30 am, et

Up 1.8%

Important.  An indication of the demand for “big ticket” items.  Weakness may lead to lower rates.
Weekly Jobless Claims

Thursday, April 27,
8:30 am, et

240K Important.  An indication of employment.   Higher claims may result in lower rates.
Q1 Advance GDP

Friday, April 28,
8:30 am, et

Up 2.1% Very important.  The aggregate measure of US economic production.  Weakness may lead to lower rates.
Q1 Employment Cost Index

Friday, April 28,
8:30 am, et

Up 0.5%

Very important. A measure of wage inflation.  Weakness may lead to lower rates.
U of Michigan Consumer Sentiment

Friday, April 28,
10:00 am, et

98.2 Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.

Employment Cost Index

The employment cost index is a quarterly report issued by the Department of Labor.  The report measures the growth of wages, salaries, and benefits costs over a certain period of time.  Though ECI figures are usually weeks old, the data remains the best indicator of employment price pressures considering it factors employees’ total compensation.

 

If wage pressures become evident, higher expectations of inflation also tend to arise.  However, increasing compensation does not necessarily lead to increased inflationary pressures.  Oftentimes, increased productivity enables employers to increase compensation without increasing the costs of their goods or services.  Be cautious heading into this release.

 


Dana Bain & Robin Dunbar Bain
Premiere Mortgage Services Inc.
www.BainMortgage.com
https://danabain.mortgagemapp.com
978-422-2311
Mortgage In Massachusetts & New Hampshire for over 30 years.  Most Competitive mortgage rates available.  Find Us On LinkedIn & Face Book www.Bainmortgage.com/DanaBain-PremiereMortgage-Reviews

 
   MORTGAGE MARKET IN REVIEWNewsletter-April 24th, 2017    

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Want to know if a home is still on the market, or if the price has changed? We can help. Simply fill out the information below and with no obligation to you we'll get back to you with your requested information. We guarantee your privacy.

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Posted by Dana Bain on April 21st, 2017 6:43 PM
Newsletter-April 3rd, 2017     
Provided by
Dana Bain
Dana Bain
Premiere Mortgage Services
11 Malvern Hill Road
Sterling, MA 01564
Phone: (978) 422-2311
Fax: (978) 422-2313
E-Mail: dana@bainmortgage.com
 
 

Market Comment

Mortgage bond prices finished the week a little higher which helped rates hold steady. Rates started the week lower with no data Monday in response to the failure to repeal the Affordable Health Care Act. Stocks took a hit early amid concerns that stimulus spending would run into similar legislative issues. Some of the rate improvements were erased mid-week as several Fed officials talked about rate hikes. Weekly jobless claims were 258K versus the expected 245K. Q4 GDP rose 2.1% versus the expected 2% increase. Personal Income rose 0.4% as expected. Outlays were a little weaker than expected with an increase of 0.1% versus 0.2%. PCE core inflation (The Fed's preferred inflation gauge) rose 0.2% as expected. Mortgage interest rates finished the week better by approximately 1/8 of discount point despite some volatility.


LOOKING AHEAD

Economic
Indicator

Release
Date & Time

Consensus
Estimate


Analysis

ISM Index

Monday, April 3,
10:00 am, et

57.9 Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates.
Trade Data

Tuesday, April 4,
8:30 am, et

$49B deficit

Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates.
Factory Orders

Tuesday, April 4,
10:00 am, et

Up 0.9% 

Important. A measure of manufacturing sector strength. Weakness may lead to lower rates.
ADP Employment

Wednesday, April 5,
8:30 am, et

296K

Important. An indication of employment. Weakness may bring lower rates.
Fed Minutes

Wednesday, April 5,
2:00 pm, et

None

Important. Details of the last Fed meeting will be thoroughly analyzed.
Weekly Jobless Claims

Thursday, April 6,
8:30 am, et

256K

Important. An indication of employment. Higher claims may result in lower rates.
Employment

Friday, April 7,
8:30 am, et

4.7%,
Payrolls +240K

Very important. An increase in unemployment or weakness in payrolls may bring lower rates.
Consumer Credit

Friday, April 7,
3:00 pm, et

$9.5B

Low importance. A significantly large increase may lead to lower mortgage interest rates.

ADP Employment

The ADP employment report is a measure of employment derived from data of roughly 500,000 US businesses. The survey focuses on the private sector of the economy. In contrast, the Bureau of Labor Statistics releases the regular employment report which includes both private and government employment statistics.

The Fed is usually focused on inflation. Tightening employment conditions can result in wage inflation. The ADP report provides solid data on these conditions. Despite this, the data can still diverge from the regular employment report. The employment report is derived from a household survey and an establishment survey. These surveys often differ from one another and from the ADP employment report in that they are based on different data sets. There are no guarantees that the most important employment report the first Friday of each month will mirror the ADP report released 2 days prior but the Fed looks at all the data.

 


 

 
   MORTGAGE MARKET IN REVIEWNewsletter-April 3rd, 2017     





http://mortgagesinmassachusetts.com/ http://www.bainmortgage.com/Home #MortgagesInMassachusetts #RealEstate Dana Bain & Robin Dunbar Bain 978-422-2311 ** See Testimonials At http://www.bainmortgage.com/DanaBain-PremiereMortgage-Reviews

Home Status Report

Want to know if a home is still on the market, or if the price has changed? We can help. Simply fill out the information below and with no obligation to you we'll get back to you with your requested information. We guarantee your privacy.

Your Information
Property Information



 
Posted by Dana Bain on March 31st, 2017 4:43 PM

Lender List


Wholesale Lenders
1st Alliance Lending
ACC Wholesale
ACH Trust
Acopia Capital
Advancial
American Financial Resources
American Southwest Mortgage
AmeriSave Lending
AnnieMac
Astoria Mortgage
B of I Federal Bank
Bank of Hawaii
BHL – BANC Home Loans
Blustream Lending
Caliber Funding
Carrington Mortgage
Century Lending
Cherry Creek Mortgage
CMG Financial
Commerce Mortgage Wholesale
Direct Mortgage Wholesale
Endeavor America
Envoy Mortgage
Essex Bank
Ethos Lending
Fairway Wholesale Lending
FBC Mortgage
Finance of America
First Cal Wholesale
First Guaranty
First Hawaiian Bank
Flagstar
Florida Capital Bank Mortgage
Franklin American
Freedom – Fees In
Freedom – Fees Out
Fremont Bank
GMFS
GreenBox Loans
Guaranty Trust
Guild Mortgage
Home Bridge
Home Point Financial
Homeward Residential
IMPAC Mortgage
Interfirst
JMAC Lending
Lakeview
LDWholesale
LHFS – Land Home Financial
Live Well Financial
LoanStream
Luxury Mortgage
M&T Bank
Majestic Home Loans
MB Financial
Michigan Mutual
Mid-Island Mortgage Corp
Mortgage Solutions Financial
Motive Lending
Mountain West Financial
Nations Direct
New American Funding
New Leaf Wholesale
New Penn Financial
NexBank
NYCB Mortgage
Oaktree Funding Corp.
Pacific Union Financial
Parkside Lending
Peoples Home Equity
Platinum Mortgage
Plaza Home Mortgage
Primary Capital Mortgage
PRMG
Provident Bank
Provident Funding
Quicken Loans
REMN
Residential Acceptance Corp.
Ridgewood Savings Bank
Santander
Sierra Pacific
Stearns Lending
Stonegate
SunWest Mortgage
TJ Financial
Total Mortgage Services
Union Wholesale Mortgage
UNMB
US Bank Prime Plus Portfolio
US Bank Wholesale
UWM – United Wholesale Mortgage
Western Bancorp
Correspondent Lenders
Amerihome
B of I Federal Bank
BB&T Mortgage
Caliber Funding
Chase
Ditech
Envoy Mortgage
Everbank
Farmington Bank
Fifth Third
First Guaranty
Flagstar
Florida Capital
Franklin American
Freedom Structured Products
Guild
Homeward
Impac
Interfirst
Liberty Savings Bank
M&T Bank
MB Financial
Nations Direct
Nationwide Bank
NYCB Mortgage
Pacific Union
Parkside Lending
PennyMac
Plaza Home Mortgage
Provident Funding
Stearns Lending
Stonegate
SunTrust
SunWest
The Money Source
US Bank
Wells Fargo


Posted by Dana Bain on March 29th, 2017 1:25 PM

“Before you start trying to work out which direction the property market is headed, you should be aware that there are markets within markets.”

We once again seem to be in a buyer’s market locally, with demand outpacing inventory, homes getting bid-up and buyers frustrated. How do you find listings and fresh inventory? How do you identify potential sellers, or help those on the fence decide that now is the right time for a move?

As the spring market warms up, here are some ideas that may help:

Call through your past client database-88% surveyed by NAR said they would work with their agent again, but how many agents reach out and assess when “again” might be? Call and ask! Remind them you are there when they are ready, ask what their concerns are, make sure to give your updated contact info, and to get theirs. Add them to a weekly email with homes for sale in their neighborhood, along with a place of interest to them, so they can see for themselves that now may be the right time to sell.

The local real estate market is at a peak, so it could be a great time to sell, even for those not sure where they want to land next. Empty nesters who no longer have to worry about schools may be more willing to experiment with lifestyle, sell their home and rent in the city, or in a more resort-like area. Now is a great time to check out what’s next. Be the one to market to people’s dreams and help them see the future.

Anticipate objections and be prepared to help. Many would-be sellers get overwhelmed by repairs or updates they think are needed prior to selling, or the amount of work to cull through and get rid of their accumulated stuff. Offer a free home assessment to identify the minimum repairs or updates, and recommend services like transition specialists and tradespeople that could alleviate that burden. You want to be an invaluable resource for all things related to the sale of the home, not just the sale itself.

In Other News:

Credit Alert-On Friday it was reported that one of the 3 main credit reporting agencies has been fined by the CFPB for misleading consumers about its PLUS Score product. This product, sold by Experian, is considered “educational” and intended solely to educate consumers about their credit score. The CFPB found that the PLUS Score was represented as the same score used by lenders, which is false. The CFPB found that in some cases there were substantial differences between the PLUS Score and the actual score used by lenders, creating confusion regarding how lenders determine credit worthiness. Please remind your clients that they are entitled to a FREE credit report annually and can obtain one from: AnnualCreditReport.com For more information, here is a link to the CFPB’s page on obtaining credit reports.

As always, we are here to help you and your clients have a smooth and successful home buying experience!

How To Contact Us

By Phone: 978-422-2311 (Office)
  1-800-480-0545 (Toll Free)
  978-501-0427 (Mobile)
By Fax: 978-422-2313 (Fax)
By e-mail:Dana@BainMortgage.com
Address:PREMIERE MORTGAGE SERVICES INC.
11 Malvern Hill Rd
Sterling, MA  01564-2829


Posted in:General
Posted by Dana Bain on March 28th, 2017 3:19 PM

More and more borrowers today are looking for ways to finance their home purchase without making a full 20% down payment. As FHA continues to increase fees, many are turning to private mortgage insurance (PMI) combined with a conventional loan.

To the surprise of many homebuyers, there is more than one way to obtain PMI. One of those PMI alternatives is called Lender Paid Mortgage Insurance, or LPMI.

What is Lender Paid Mortgage Insurance?

Lender Paid Mortgage Insurance is a form of PMI that is paid for by the lender via a one-time fee, rather than by the borrower monthly. Some form of PMI is required whenever a borrower puts less than 20% down on a conventional loan.

The term “Lender Paid Mortgage Insurance” is a bit misleading, however. The lender does not pay the borrower’s mortgage insurance premium out of the goodness of its heart. Rather, the lender raises the interest rate on the mortgage to generate enough profit to pay the mortgage insurance company the required one-time fee.

The party who ends up paying the cost of LPMI is ultimately the borrower, since it’s the borrower’s interest rate that is increased. For this reason, LPMI is sometimes referred to as Single Premium mortgage insurance.

The reason it is often called “lender paid” is that the borrower is not allowed to pay the one-time premium directly out of their own funds. The funds must come from the lender, or from another party, such as the builder or seller.

Some lenders offer a PMI option where the borrower pays the one-time premium out of their own funds. This is known as either Borrower Paid Mortgage Insurance, BPMI, or Borrower Paid Single Premium mortgage insurance. If you want to buy out your own mortgage insurance to avoid the LPMI rate increase,  ask your lender about their BPMI programs.

How Does LPMI work?

What’s not readily apparent to homebuyers is that the higher the interest rate on your mortgage, the more profit is available to the lender. So, let’s imagine that you accept an interest rate on your mortgage that is 0.50% higher than market rates. The rate increase generates an extra $5000 in profit on that loan.

Let’s also imagine that a PMI company agrees to accept a one-time payment of $5000 in lieu of receiving a monthly PMI payment from the borrower.

The lender could opt to take that extra $5000 in profit and essentially prepay the PMI premium. The borrower ends up with a higher rate, but no monthly mortgage insurance fees.

Is LPMI better than FHA?

Federal Housing Administration (FHA) loans have been a great tool for homebuyers over the past few years. If not for FHA, many would be locked out of homeownership. However, FHA is increasing fees again as of April 1, 2013, to steady its troubled financial position. LPMI might become a more attractive option.

It’s true that the interest rate on an LPMI loan would be higher than an FHA loan. But FHA has very high monthly mortgage insurance costs, and also an upfront fee of 1.75% of the loan amount. FHA mortgage insurance negates any savings from a lower interest rate.

Still, FHA may be a better option for some homebuyers. FHA allows for as little as 3.5% down, compared to LMPI’s 5% down requirement. FHA also allows for more seller contributions toward closing costs. Leniency from FHA means a lot less out-of-pocket expense for FHA borrowers.

In addition, borrowers can qualify for an FHA loan with a lower credit score.

As shown in the chart below, each borrower would have to analyze their available funds, their monthly payment tolerance, and their credit rating to opt for LPMI or FHA.

Payments and Out-Of-Pocket Expense: LPMI vs Monthly PMI vs FHA

Which mortgage option comes out on top? Let’s look at an example of a $250,000 home purchase.

 

LPMI 5% down

Monthly PMI 5% down

FHA 3.5% down

Credit Score

740

740

680

Loan Amount

$237,500

$237,500

$245,471 (includes 1.75% upfront fee)

Interest Rate & APR

4.0% (APR 4.053%)

3.5% (APR 3.948%)

3.25% (APR 4.798%)

Principle and Interest Monthly Payment

$1133

$1066

$1068

Monthly mortgage insurance

$0

$132

$269

Estimated Monthly Taxes and Insurance

$268

$268

$268

Estimated Total
Monthly Payment

$1401

$1,466

$1,605

Estimated Total Cash Needed to
Close the Loan

$17,870

$17,831

$14,070

LPMI seems to come out on top based strictly on monthly payment. But that’s not the whole story. LPMI has its advantages as well as disadvantages depending on other factors.

LPMI Advantages

  • Homebuyers can put as little as 5% down on a home, rather than the standard 20%, yet avoid monthly PMI
  • The initial monthly payment for LPMI loans is often lower than that of monthly PMI or FHA financing
  • When rates are low, homebuyers can get a great rate despite the LPMI rate hike
  • Those who qualify for monthly PMI probably also qualify for LPMI
  • As FHA costs increase, LPMI will become cheaper in comparison.

LPMI Disadvantages

  • Your interest rate remains higher through the life of the loan.
  • With monthly PMI, you can cancel monthly PMI when your loan reaches 80% of the home’s value.
  • A fairly high credit score is needed to qualify for LPMI
  • LPMI requires higher out-of-pocket costs than FHA
  • LPMI is not offered by every lender

Ask Yourself: How Long will I Keep this Mortgage?

Even though the monthly payment on an LPMI loan might be cheaper initially, it might cost more than monthly PMI if you keep your loan for 30 years. This is because you can cancel monthly PMI when your loan reaches 80% Loan-to-Value (LTV), but you can’t lower your LPMI interest rate at any time without refinancing. Let’s look at a cost comparison of a person who keeps their mortgage for 10 years and 30 years. All scenarios assume a 5% down payment:

 

LPMI
after 10 years

Monthly
PMI after 10 years

LPMI
after 30 years

Monthly
PMI after 30 years

Interest Rate & APR

4.0% (APR 4.053%)

3.5% (APR 3.948%)

4.0% (APR 4.053%)

3.5% (APR 3.948%)

Lifetime MI cost

$0

 $11,801

$0

$11,801

Principle and Interest Payments

$1133 x 120 months: $135,960

$1066 x 120 months: $127,920

$1133 x 360 months: $407,880

$1066 x 360 months: $383,760

Total Principle, Interest, and
PMI costs

10 years: $135,960

10 years: $139,721

30 years: $407,880

30 years: $395,561

Should You Choose LPMI?

The main benefit to LPMI is simply lower monthly payments at the beginning of the mortgage, when you’re first starting out on your homeownership journey. It’s also nice to know that you won’t be seeing that pesky mortgage insurance payment on your statement each month for the first 7-10 years of your mortgage. It’s a great program for those who want a low monthly payment and don’t mind a slightly higher interest rate. Ask your mortgage professional and see if a loan with Lender Paid Mortgage Insurance is right for you.

All PMI scenarios based on $250,000 purchase price and value, 5% down, 740 credit score. 30 year fixed rate 1st mortgage with principle and interest payment. FHA scenario based on $250,000 purchase price and value, 680 credit score, 3.5% down. Mortgage payments rounded to the nearest dollar.

When can I remove private mortgage insurance (PMI) from my loan?

Answer: To remove private mortgage insurance you must be up to date with your monthly payments. And you have to reach the date when the principal balance of your mortgage is scheduled to fall to 80 percent of the original value of your home.

To remove private mortgage insurance (PMI) that you pay on your mortgage loan, you must be up to date with your monthly payments. These rules apply to mortgages closed on or after July 29, 1999. Federal law generally provides two ways for you to remove PMI from your home loan: canceling PMI or PMI termination.

http://www.consumerfinance.gov/askcfpb/202/when-can-i-remove-private-mortgage-pmi-insurance-from-my-loan.html

 

How To Contact Us

By Phone: 978-422-2311 (Office)
  1-800-480-0545 (Toll Free)
  978-501-0427 (Mobile)
By Fax: 978-422-2313 (Fax)
By e-mail:Dana@BainMortgage.com
Address:PREMIERE MORTGAGE SERVICES INC.
11 Malvern Hill Rd
Sterling, MA  01564-2829


 

Posted in:General and tagged: PMI LPMI FHA
Posted by Dana Bain on January 17th, 2017 7:37 PM

Mortgage lending underwriting criteria falls into three general categories, credit, collateral, and capacity. Credit has to do with how well you pay your bills (as evidenced by a credit report and score), collateral has to do with the type and quality of the property you’re using to secure the loan, and capacity has to do with your financial ability to repay the loan. Your debt-to-income ratio falls into the latter category – capacity – and is considered an important factor in determining your financial ability to pay back your mortgage.

What is a Debt-to-Income Ratio?

Your debt-to-income ratio, or DTI, expresses in percentage form how much of your gross monthly income is spent on servicing liabilities such as auto loans, credit cards, mortgage payments (including homeowners insurance, property taxes, mortgage insurance, and HOA fees), rent, credit lines, etc.

Living expenses such as cable, gas, electricity, groceries, etc., are not considered part of your DTI.

If your DTI is high, it means you are highly leveraged and have tight finances, which, naturally, is considered risky from a lending standpoint. On the other hand, if your DTI is low, the lender knows you have plenty of room in your monthly budget to absorb unexpected expenses and still make your mortgage payments.

In today’s mortgage marketplace, the maximum DTI allowed is 45% for Fannie Mae loans and 50% for FHA-insured loans. In other words, for a Fannie Mae loan, no more than 45% of your gross (pre-tax) monthly income can go to debt service and mortgage and housing-related expenses.

Both Fannie and FHA allow for higher DTIs under limited circumstances, but these are the standard guidelines.

Calculating Your Debt-to-Income Ratio

If you’re in the market for a home loan, it doesn’t hurt to calculate your debt-to-income ratio ahead of time so you know where you stand. To do this, simply tally up your total monthly debt obligations and divide by your gross monthly income, as follows:

  1. Either obtain a recent copy of your credit report or gather up your most recent statements for all your debt obligations. Note that only debt obligations are included in your DTI, not utility bills, phone, cable, etc.
  2. Tally up your payments for all debts, including auto loans, credit cards (use just the minimum payment), credit lines, student loans, and any other debt obligations that you have.  If you have an American Express credit card, use 5% of the outstanding balance if the minimum payment is showing as the full balance on your credit report. Note that underwriters will include any child support payments in your DTI.
  3. Add your rent or home mortgage payment, including monthly property taxes, homeowner’s insurance, homeowner’s association (HOA) fees, and private mortgage insurance (PMI) premiums.
  4. Divide your total debt obligation figure by your gross monthly income (assuming you’re a W2 wage earner), then multiply by 100 to get a percentage.

If you’re self-employed, I recommend working with your loan agent to determine your qualifying DTI. Self-employed income verification is more complicated and there’s really no way to determine your qualifying income definitively without tax returns.

Keep in mind that when you’re qualifying for a home loan, your qualifying DTI will be based on what your expenses will be after the loan is complete. In other words, if you’re currently renting and are taking on a house payment higher than what you’re paying for rent, your qualifying DTI will be based on the new mortgage payment. If you’re refinancing and consolidating debts, your qualifying DTI will reflect your expenses after the various debts are consolidated.

How To Contact Us

By Phone: 978-422-2311 (Office)
  1-800-480-0545 (Toll Free)
  978-501-0427 (Mobile)
By Fax: 978-422-2313 (Fax)
By e-mail:Dana@BainMortgage.com
Address:PREMIERE MORTGAGE SERVICES INC.
11 Malvern Hill Rd
Sterling, MA  01564-2829

Posted in:General
Posted by Dana Bain on December 27th, 2016 5:35 PM

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