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
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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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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
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
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.”
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
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
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
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
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
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
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
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:
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
— “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,
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:
Rate locking is one step in the
process that will help alleviate some of the first time home buyer stress
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:
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
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:
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
Tip #8 — Consider Life After
Buying Your First Home
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
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
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:
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:
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
Tip #5 — Get Serious About Your
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:
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.
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?
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
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
Here’s a few simple ways to stay
out of sight:
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
At Premiere Mortgage Services Inc. we have over 35 years experience and a stellar reputation.
Dana Bain & Robin Dunbar Bain
Premiere Mortgage Services Inc.
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
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Friday, May 12, 10:00 am, et
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
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.
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.
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
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 firstname.lastname@example.org
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.
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
Tuesday, April 25,10:00 am, et
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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 BainPremiere Mortgage Services Inc.www.BainMortgage.comhttps://danabain.mortgagemapp.com978-422-2311Mortgage 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 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
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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.
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
“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?
the spring market warms up, here are some ideas that may help:
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.
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.
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.
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:
For more information, here
is a link to the CFPB’s page on obtaining credit reports.
always, we are here to help you and your clients have a smooth and successful
home buying experience!
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?
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
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
Is LPMI better
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
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.
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.
Out-Of-Pocket Expense: LPMI vs Monthly PMI vs FHA
option comes out on top? Let’s look at an example of a $250,000 home purchase.
$245,471 (includes 1.75% upfront
Interest Rate & APR
4.0% (APR 4.053%)
3.5% (APR 3.948%)
3.25% (APR 4.798%)
Principle and Interest Monthly
Monthly Taxes and Insurance
Estimated Total Cash Needed to
Close the Loan
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.
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:
after 10 years
PMI after 10 years
after 30 years
PMI after 30 years
Lifetime MI cost
$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
10 years: $135,960
10 years: $139,721
30 years: $407,880
30 years: $395,561
Should You Choose
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?
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.
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.
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.
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:
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.