Premiere Mortgage Services Inc. - Dana Bain

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

Will ‘Mixed’ Jobs Data Bode Well for Housing?

Unemployed-ChalkboardThe positives in the BLS November 2016 Employment Situation released Friday prompted one analyst to declare that the economy is “running largely at full steam” and another called the economy “stable and strengthening. One analyst commented that the report was a “mixed bag” while another called it “unremarkable.” Still another said the economy “appears to be stable and strengthening.”

Job gains totaled 178,000 for November and the unemployment rate fell by 30 basis points down to 4.6 percent, its lowest level since August 2007. Still, the report had its low points—namely, a 3-cent decline in wage growth over-the-month (down to $25.89) after gaining 18 cents over the previous two months, and a labor force participation rate (62.7 percent) stagnating near a four-decade low.

Nearly all of them agreed, however, that the report did nothing to discourage a rate hike by the Fed later this month.

“November was a bit of a mixed bag as far as jobs were concerned. While the headline figure for job growth is a positive, both labor force participation and wage growth declined,” said Curt Long, Chief Economist with the National Association of Federal Credit Unions. “Still, the report provided no impediments for a rate hike from the Fed later this month, and a quarter-point increase is now a certainty.”

An increase in the federal funds target rate may not mean good news for the housing market, however. Mortgage rates have already spiked by 51 basis points since the presidential election and are at their highest level in 16 months.

“The good news: the economy appears to be stable and strengthening,” realtor.com Chief Economist Jonathan Smoke said. “The bad news: rising rates could pose a challenge to many homebuyers, especially first-time buyers who now represent more than half of the potential buying pool. The key question for the months ahead is whether the demand created by more jobs and wage growth will be enough to offset the affordability and qualification challenge posed by higher rates. Mortgage rates have already moved in that direction, surging higher than we have seen in two years.”

Fannie Mae Chief Economist Doug Duncan stated, “Today’s Labor Department employment report was unremarkable, suggesting a small Federal Reserve rate hike will occur—as the market expected—in December. Some attention will be paid to the drop in the unemployment rate to 4.6 percent, but that is driven by the combination of jobs added and a decline in workforce participation, the latter of which was disappointing. The income growth number dropped back, thus easing Fed concerns about compensation as a driver of inflation through tight labor markets. Professional services showed broad-based employment growth, and state government employment made a healthy contribution. Manufacturing employment, currently featured in many headlines, showed a fourth consecutive month of minor employment declines, but housing more than offset that with a third consecutive month of healthy job growth. Housing supply growth continues to grind upward adding to economic growth. In sum, there’s no reason to believe that the pace of future rate hikes will pick up based on this release.”

Zillow Chief Economist Svenja Gudell noted that “the report shows an economy running largely at full steam, with the unemployment rate—already low—falling to its lowest level since August 2007,” and that some of the largest job gains occurred among residential constructors and developers, which could bode well for housing.

“Residential construction employment rose 4.9 percent from a year ago, continuing recent strength, though some of the bump is likely attributable to re-building efforts in the Southeast after Hurricane Matthew,” Gudell said. “Over the past three months, the construction industry overall has added 59,000 jobs, largely in residential construction. Continued hiring in this sector could be a good sign for home buyers struggling with incredibly tight inventory, and a continued ramp up in home construction activity will only help alleviate the problem as we move past the holidays and into 2017.”

Click here to view the full November 2016 Employment Summary.

Posted in:General
Posted by Dana Bain on December 2nd, 2016 2:15 PM

Because Fannie Mae financing is so dominant in today’s mortgage market, it’s important that real estate investors understand how Fannie prices risk into mortgage interest rates using loan-level price adjustments, or LLPAs. Once you understand how risk-based pricing works, you’ll be better equipped to “groom” your financial profile to qualify for the best rates and maximize the cash flow and ROI of your bank-financed real estate investments.

What is an LLPA?

LLPAs are essentially charges for risk factors such as low credit scores, high loan-to-value (LTV), property type, etc. Check out the image below, which shows a variety of LLPA hits for various combinations of credit score and LTV. Note that for a 95% LTV loan, there is a 3.000% hit for borrowers with credit scores less than 620 but no hit for borrowers with credit scores better than 740. Assuming all other factors are the same, this means that the borrower with a qualifying credit score of less than 620 will have to pay a charge of 3% of the loan amount to get the same interest rate as the borrower with a 740 credit score. For example, on a $200,000 loan, the borrower with the low credit scores would have to pay a $6,000 buy down fee to get the same rate as the borrower with the good credit scores.

Though LLPAs act like fees, they usually are not passed on to the end borrower as additional closing costs on the loan. Lenders typically price LLPAs into the base rate they offer, so the end result is that LLPA hits usually result in higher rates instead of higher fees. See Matrix https://www.fanniemae.com/content/pricing/llpa-matrix.pdf

Fannie Mae LLPAs Table 1

Now, check out the chart below, which shows the LLPA hits for investment property (highlighted in red).  As you can see, the hits are steep, and they’re a standard charge applied regardless of credit score. If you’re willing to put down 25% (which means a 75% LTV), the LLPA hit is a relatively modest 1.75%. However, if you’re only willing to put down the minimum 15%, the LLPA hit is a whopping 3.75% (not to mention you’ll pay mortgage insurance because the LTV is over 80%). 

Why LLPAs Matter to Real Estate Investors

It’s obvious that Fannie views investment properties as riskier than owner-occupied properties, particularly those with little equity.  These LLPA hits are the reason investment property rates tend to be significantly higher than owner-occupied rates.  See Matrix https://www.fanniemae.com/content/pricing/llpa-matrix.pdf

Fannie Mae LLPAs Table 2

Conclusion

If you haven’t noticed already, credit scores are a big part of LLPA pricing. If your credit scores are in the mid to high 600 range, you’re going to get hit with some significant LLPAs unless you owe less than 60% of the value of the property. This is why it’s important to keep your credit scores as high as possible – ideally above 740. 

If your plan is to purchase a property with short-term financing such as private or hard money, it’s also important to make sure you’re buying your properties right so that you have a built in equity position when you need to refinance into a traditional bank loan. For instance, if you purchase a fixer property with hard money, rehab it, and still have a 30% equity position in it when you’re done, it should be relatively easy to convert the hard money loan into a permanent bank loan.

For More information on LLPAs  https://www.fanniemae.com/content/pricing/llpa-matrix.pdf 

There’s a lot more that goes into pricing out a loan, so it’s important to work with a mortgage professional to get information specific to your particular situation. If you’re looking at financing residential investment real estate (4 units or less), feel free to give me a call.

 http://www.bainmortgage.com/ContactUs

Massachusetts License Number Broker MB1498

Dana Bain NMLS #18693

Robin Dunbar Bain NMLS #18699


Licensed by the State of New Hampshire Banking Department- License Number 5430-MBR Premiere Mortgage Services Inc. NMLS #1498 is a licensed broker and not a lender. We arrange but do not make loans.           


Posted in:General
Posted by Dana Bain on November 21st, 2016 3:41 PM

FHA Debt-to-Income (DTI) Ratio Requirements

When you submit an application for an FHA-insured home loan, the mortgage lender will evaluate your debt-to-income ratio to see if you're qualified for a loan. If you have too much debt in relation to your monthly income, you might have trouble qualifying. On the other hand, if you have a manageable level of debt (as defined below), you have one less thing to worry about.

The current (2015) limits for FHA debt-to-income ratios are 31% for housing-related debt, and 43% for total debt. But there are exceptions to these general rules. So don't be discouraged if you're slightly above those numbers.

Here's an overview of FHA debt ratio requirements for 2015 - 2016:

Definition of a Debt-to-Income Ratio

The debt-to-income ratio (DTI) is a percentage that shows how much of a person's income is used to cover his or her recurring debts. Lenders calculate DTI at the monthly level using the borrower's gross, or pre-tax, income.

There are actually two numbers used for FHA qualification:

  • The "front-end" ratio looks at housing-related debts only (monthly mortgage payments, property taxes, etc.).
  • The "back-end" number takes all recurring monthly debts into account. This can include the mortgage payment, credit cards, car loans, etc.

The math is fairly simply. You can calculate your DTI ratio by dividing your total monthly debts by your gross (pre-tax) monthly income. For example, if my recurring monthly debts total $2,000, and my gross monthly income is $6,000, I have a DTI ratio of 33% (2,000 ÷ 6,000 = 0.33, or 33%).

The Department of Housing and Urban Development (HUD) has specific guidelines for FHA debt-to-income ratios. HUD is the government entity that establishes all of the rules and requirements for the FHA loan program, including the DTI limits.

According to HUD: "Qualifying ratios are used to determine if the borrower can reasonably be expected to meet the expenses involved in home ownership, and provide for his/her family."

2015 DTI Limits for FHA Loans: 31% / 43%

According to official FHA guidelines, borrowers are limited to having debt ratios of 31% on the front end, and 43% on the back end. Here are the relevant excerpts from the HUD Handbook:

  • Front end: "The relationship of the mortgage payment to income is considered acceptable if the total mortgage payment does not exceed 31% of the gross effective income."
  • Back end: "The relationship of total obligations to income is considered acceptable if the total mortgage payment and all recurring monthly obligations do not exceed 43% of the gross effective income."

Stated differently, the borrower's housing-related expenses should add up to no more than 31% of his or her gross monthly income. And the borrower's total debt load (including the monthly mortgage payments, credit cards, car payments, etc.) should not exceed 43% of his or her gross monthly income.

Those are the current FHA DTI ratio limits for 2015. We expect these requirements to remain in place for 2016, since HUD has not announced any changes to them. If they do update their debt ratio guidelines in 2016, we will update this page to reflect those changes.

Compensating Factors for Borrowers with High Debt

On the surface, this suggests that borrowers with DTI numbers above the stated limits could have a harder time qualifying for FHA loans. But that's not always the case. There are exceptions to the official debt-to-income caps.

HUD gives mortgage lenders some leeway to approve borrowers with DTI ratios higher than the above-stated limits, as long as the lender can find and document "significant compensating factors."

A partial list of compensating factors is presented below.

  • Down payment: HUD requires a minimum down payment of 3.5% for FHA loans. Making a down payment above the minimum could create an exception to the debt-to-income limits mentioned above. For instance, borrowers who put down 10% could still qualify for an FHA-insured mortgage loan, even if their DTI ratios are higher than the 2015 limits mentioned earlier (31% / 43%).
  • Payment history: If, in the past, the applicant has successfully managed mortgage payments equal to or greater than the estimated payments on the loan they are currently seeking, he or she may still qualify for the program.
  • Savings: HUD also allows FHA debt-to-income exceptions for borrowers who have demonstrated a "conservative attitude toward using credit" in the past, and have the ability to accumulate savings. In other words, limited use of credit and substantial savings could work in your favor, even if your DTI ratio is higher than the stated limits.
  • Good credit: The borrower's credit history plays a role here as well. In short, borrowers with excellent credit scores have a better chance of getting approved for a government-insured home loan, even if their debt exceeds the minimum HUD guidelines.
  • Cash reserves: We touched on this earlier, under "savings." Lenders can make DTI exceptions for borrowers who have substantial cash reserves in the bank. In this context, "substantial" means the borrower has at least three months worth of mortgage payments in the bank after closing.
  • Minimal increase: If the FHA loan being sought will only cause a minimal increase in the borrower's housing expense, he or she may still qualify for an FHA loan with a higher-than-average debt burden.

Reference: HUD Handbook 4155.1, Chapter 4, Section F

Note: Mortgage applicants don't necessarily have to meet all of these compensating factors. One or more may be sufficient for FHA qualification purposes.

To learn more about FHA debt-to-income ratios in 2015, and the compensating factors that could allow you to circumvent them, refer to Chapter 4 of HUD Handbook 4155.1.

To recap, FHA's maximum qualifying debt ratios for borrowers in 2015 are 31% and 43%. This means the monthly housing payments should not exceed 31% of gross monthly income, while the total debt burden should not exceed 43% of monthly income. But there are exceptions to these rules, as noted above.

Disclaimer: HUD makes changes to their FHA requirements from time to time. While we make every effort to keep this website up to date, there is a chance the information presented above will become inaccurate over time. This website is not meant to replace the official guidelines found on the HUD website, but only to explain their policies in plain English. For the most current and accurate information available, refer to HUD.gov.



Read more: http://portal.hud.gov/hudportal/documents/huddoc?id=40001HSGH.pdf

https://www.fha.com/fha_loan_requirements

Posted in:General
Posted by Dana Bain on November 21st, 2016 3:03 PM

Hold onto your seats, folks, because mortgage rates are going on a wild ride after the election. Thirty-year fixed rates skyrocketed by nearly a quarter of a percentage point, while 15-year rates and 5/1 ARM loans jumped significantly on Thursday.

If there’s one thing investors hate, it’s uncertainty. And there’s plenty of that going around in the bond markets, because no one is sure what a Donald Trump administration has in store.

On Wednesday, the 10-year Treasury yield closed above 2%, about 25 basis points higher than it was before Tuesday’s election. It’s also the highest yield since January, according to Freddie Mac’s weekly survey of mortgage rates, released today.

Posted in:General
Posted by Dana Bain on November 10th, 2016 4:22 PM

The Residential Mortgage Application Process "Know Before You Owe" (TRID) Rule.

Anyone who hasn't applied for a mortgage (Purchase – Refinance -Construction Loan) in the last few years is in for a RUDE awakening.  It is a brutal process from application to the closing being completed.  One should not assume that having good credit and a good Loan To Value gets them a loan.  Well it does, IF you have the income to service the debt under the new stringent guidelines as well.  All loan decisions start with the ability of the applicant to show sufficient acceptable income to support the monthly payment. 

 

ALL clients should expect, at a minimum, a 45 day process from the day they submit the completed application and ALL requested documents to their Mortgage Originator.  Buyers buying a new home or doing a construction loan should tell their Realtor and or Builder to put at least 45 days in the contract, as a time frame to get a mortgage decision, as 30 days is no longer a safe bet.  Please insist upon this, it will save you aggravation down the road.  Should your loan not close when expected, the regulations require that a minimum of several days to pass and the lender needs to re-disclose new forms to the borrower.  NO exceptions.  Also, should you close on your home sale in the morning and take your funds to your new home purchase in the afternoon, do NOT assume that closing will take place.  Many times this has happened and you then have no home to move into and your furniture is probably on a truck and you will be spending several days and nights in a hotel or with relatives or friends.  Be prepared for this to happen.  But more important constantly be checking in with your mortgage professional to make sure all conditions are cleared and the loan is cleared to close.  I would do this 7 days before settlement of your home sale, if applicable.

 

Please be prepared to provide ANY information ASAP and be prepared to be constantly asked for additional information.  Loans are no longer made on Character, one of the old 5 C's of credit.  It is gone.  An 800 credit score and putting a large amount of money down on a purchase no longer will guarantee you approval.  One MUST show sufficient qualified income to get an approval.  I suggest getting a pre-approval from you lender before you go to buy your home.  A pre-approval checks your income, credit and assets to make sure all is in order to borrow the amount needed for your purchase.  However, this is still no guarantee that the home you are buying will get approved.  The appraisal could come in low, there could be title issues, your credit score could change, etc.  Also, do NOT apply for any new credit, or increased credit to existing accounts, during the application process and avoid job changes during the process.  EVERYTHING should remain the same, financially, from application to closing.  Any activity in these areas could change the decision, as they re-verify this information before closing.

 

Refinances are a little more palatable.  The process and the amount of days for a decision are the same, but you do not have to deal with contracts from Realtors or Builders or property issues, etc.  And if the loan doesn't close for whatever reason, you still have a roof over your head.  If you qualify from an income perspective, the biggest issue will be the appraisal providing enough value to get the funds you need or the lower rate you want.   You still need plenty of patience.

 

Mortgage interest rates you hear advertised are for “A” qualifying clients.  ALL mortgage lenders have a grid based upon credit score, Loan to Value, and property type.  The higher your credit score and the lower your Loan to Value, the better your rate will be.  Cash out refinances are also reviewed differently than a purchase.  Cash out pertains to any funds that are not paying off a first mortgage loan.  So if you are paying off a line of credit or other debts, or cash for any other reason, this is a cash out refinance.  Other obstacles are the self-employed borrower, a rental property or a condo unit.  The investment property and condo unit receive more review and a higher rate.  ONE rate does not fit all loan requests. 

 

Patience is needed at every step.  The key is dealing with an experienced, qualified mortgage originator and a sound organization behind them.

Dana Bain President NMLS # 18693 Originating Mortgages in MA for over 30 Years.
Premiere Mortgage Services Inc. Massachusetts License Broker MB 1498 
A+ Rating BBB 

For more Info www.BainMortgage.com or call us at 978-422-2311  Stay connected with me anywhere!  http://danabain.mortgagemapp.com/
Posted by Dana Bain on November 9th, 2016 8:44 PM

Premiere Mortgage Services, Inc. is celebrating their 20th Anniversary, which commemorates 20 fulfilling years in business. This is a huge milestone for the Sterling, MA-based Mortgage Broker business, which has provided home mortgage loans to homeowners since 1996.

Premiere Mortgage Services got it’s start in 1996 when founder Dana Bain and his wife Robin decided they could offer the absolute best service and pricing model over their competition. In addition they have operated out of their home office from day one and have been fortunate enough to always be there for their two daughters while they were growing up.

One of the earliest challenges Premiere Mortgage Services faced has been how the mortgage banking business has always been and continues to be in a state of change with new rules and regulations that require adaptation. These changes require continual learning of new protocols and procedures via industry continuing education programs (CE) and strict federal licensing requirements. All the while making sure to protect the consumer.

While every business of course faces challenges, some, like Premiere Mortgage Services are fortunate enough to enjoy real successes, wins and victories too. Once such victory has been the ability to be there for their two daughters while growing up. In addition, being able to build both their dream home and business while helping so many customers purchase their dream home. They have also been able to save existing homeowners thousands of dollars with refinancing options while providing some of the best mortgage rates and programs available.

Dana Bain, President at Premiere Mortgage Services was also quoted when discussing another big win. “One of the high points of Premiere Mortgage Services’ history so far has been capitalizing on today’s technology and communication tools. This has allowed us the great fortune to serve so many happy homeowners in both Massachusetts and New Hampshire.”

Premiere Mortgage Services, Founder, Dana Bain says “We’re delighted to be celebrating our 20 Year Anniversary. I believe the secret to getting this far in business today is perseverance and an incredible partner in my wife Robin. We’re blessed to have a large client base of happy and loyal customers and real estate professionals.”

Premiere Mortgage Services currently has big plans for the upcoming year. One of their core objectives is to become the primary source of mortgage loan financing for both Massachusetts and New Hampshire homeowners.

Premiere Mortgage Services, Inc. would also like to thank friends, customers and business partners for their well wishes on this happy occasion.

More information on Dana Bain and his mortgage broker services, they can be found at http://www.bainmortgage.com.

http://www.free-press-release-center.info/pr00000000000000359018_mortgage-broker-premiere-mortgage-services-inc-celebrates-its-20th-anniversary.pdf

Posted in:General
Posted by Dana Bain on October 19th, 2016 1:35 PM

 

 

credit score and report

Did you know that your purchasing and payment habits are tracked by your bank, credit card companies, department stores, and other creditors and reported to credit bureaus so potential lenders can decide whether they want to take the risk of lending you money or issuing you credit? These bureaus also collect such information as your job history and whether you own your home. The better you understand your credit report and score, the better chance you have of leveraging your credit to secure financing for major purchases.

Why is it important to know what's on your credit report?

For one thing, if you're thinking about buying a house or applying for credit for any other big purchase, you'll need a clean credit report, and it's always best to know what's on it before your lender does. This will give you an opportunity to clean up any discrepancies or errors, which are fairly common, and which can throw a monkey wrench in the works if not resolved.

Ideally, you should check your credit report with each of the three credit bureaus, Equifax, TransUnion, and Experian, once a year or so. You're entitled by law to one free copy of your credit report from each of these three credit bureaus once a year. You can get all three at once or you can spread them out over the year. If you order copies more frequently than that, each report will cost around $10 and in some states considerably less. You can also opt to order a three credit bureau report, usually under $40, that will list your credit report and score for all three agencies on a single report.

If you've been turned down for credit in the last 60 days because of something a lender saw on your credit report, you can obtain a copy of your report free of charge. Lenders are required by law to notify you of this right if they deny you credit.

When you get your credit reports, review them carefully to make sure all the loans and credit accounts listed really belong to you, and that all the accounts listed as open are actually current loans or balances.

If a loan you've paid off or a credit card that was cancelled is still listed as open, contact the credit bureau and ask for your report to be corrected.

Usually the credit report you obtain from the credit bureau will include a form for reporting any inaccuracies. If you requested an online version or credit report, most agencies have a dispute center where you can submit your request online to dispute credit report errors. Give as much detail as possible. If you have documents that back up your claim, provide copies. By law, the credit bureau must investigate your claim. However, even if they decide your report is accurate as it stands, you should continue to try to correct the report by writing a letter explaining your side of the story (not to exceed 100 words), which the bureau is required to provide to anyone requesting your credit report.

 

Posted in:General and tagged: credit report
Posted by Dana Bain on September 29th, 2016 6:41 PM

What Funds Are Eligible For Use In A Mortgage Loan

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As mortgage lender, we see it all the time, cash funds being used in consideration on a purchase mortgage or on a home refinance. People earning non-reported money doing cash side jobs otherwise known as money “under the table.” These funds are ineligible as consideration for procuring a home loan.

The reason is simple, all mortgage lenders today selling loans that Fannie Mae and Freddie Mac have a fiduciary responsibility to the investors in the secondary market to create and originate mortgage loans with the highest degree of minimal credit risk.

Beyond that, the government regulations imposed on mortgage lenders’ today require them to adhere to strict anti-money laundering policies, as such, all funds in accordance for reserves or cash to close must be documented and sourced.

So what’s a paper trail anyway?

For mortgage lending purposes, a paper trail clearly shows a beginning point and an end point, it documents  how the money moves from point A to point Z.

For example let’s say mom and dad are giving you a gift of $10,000 to purchase a home. The $10,000 in order to create a sufficient paper trail would look something like this:  money originates in mom and dad’s bank account, money is transferred from mom and dad’s bank account to your bank account and from your bank account the money is then wired into escrow. Sounds simple enough right? Well it is and it isn’t. The following is typically what’s needed to document a paper trail for the purposes of securing a home loan:

  1. full original bank account statement to show where the money begins

  2. executed gift letter shows who is giving the money and states the relationship between the parties

  3. bank print out showing the “available” deposit of the gift funds into your bank account

    Some other very common examples of paper trailing include:

  • Sourcing of down payment funds in buying a home: how to do this-provide the mortgage lender a copy of the earnest money check, both front and back that you made to the title company when you made an offer to purchase the home along with the bank statement showing those funds leaving your account from whichever account they came from.

  • Cash deposits going into a bank account:this will definitely be questioned and scrutinized during the mortgage loan process. If you’re using cash deposits on the bank statement you will need to explain to the mortgage lender where these cash deposits are coming from and if these funds cannot be sourced, the lender will subtract these funds from your reserves or cash to close and will disallow the use of these monies.

    So how do you  know what funds need to be paper trailed or not?

    Most of the time the following funds do not have to be sourced:

  • Assets in any form of a bank account that is solely your funds where the funds have been for the last 60 days

  • Assets you have in your bank account the coming in the form of your income, such as from your paycheck

    How to document odd ball funds…

    -Sale of personal property such as a car, boat, motorcycle etc.-can be documented with a bill of sale executed by both parties clearly showing the purchase price and all the components of the transaction along with the money going into your bank account with a copy of the bank statement showing those funds as “available”.

    -Side Cash must be in your bank account for a period of 60 days in order for these funds to be considered seasoned, generally no paper trail will be required

    -Cash deposits by paying someone else’s debt such as an auto loan can be sourced so long as the person making the monthly payment consistently pays the monthly debt obligation in one form, meaning every month the debt obligation is paid by cash alone or by a payment directly to the creditor. This gets challenging to be able to accurately document when the obligation is paid erratically in a combination of cash and credit.

    -Business funds deposited into a bank account will cause the the mortgage lender to require a letter from a tax professional stating the borrower’s business will not be negatively impacted by the co-mingling or use of business funds in consideration for securing a mortgage, along with the bank statements and general paper trail.

    Qualifying for mortgage loan financing today, leaves no stone unturned, as long as they’re turned over the right way by making sure all monies are documented your be well on your way to successfully securing that home loan.

    If you are trying to secure mortgage loan financing and have a question about whether not the money you have is eligible for use, feel free to send us an e-mail Dana@BainMortgage.com . It’s a much easier conversation to handle the paper trailing upfront, than it is to be dealing with it after the fact. Start by Understanding A Paper Trail: What Funds Are Eligible For Use In A Mortgage Loan

     

     

     

     

Posted in:General
Posted by Dana Bain on August 9th, 2016 3:53 PM

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