Shopping for a mortgage in five easy steps

Sex doll with brains, orgasms

"There are so many resources online today that there are simply no excuses for not doing your homework and some basic due diligence." Get started with fundamental help from the Federal Reserve.

by Broderick Perkins
© 2009 DeadlineNews.Com



Unauthorized use of this story is a copyright violation -- a federal crime


Deadline Newsroom - Financing the purchase of a home could be the most complex financial decision you'll ever endure.

You need all the help you can get.

"There are so many resources online today that there are simply no excuses for not doing your homework and some basic due diligence," said Nancy Osborne, chief operating officer of Erate.com, a Santa Clara, CA-based financial information publisher and interest rate tracker.

To help get you started with the basics, the Federal Reserve offers "5 Tips for Shopping for a Mortgage," because, well, the fundamentals always apply.

Don't bite off more than you can chew. Check your budget. You must have a budget so you can estimate what you can afford to pay for a home, including the mortgage, property taxes, insurance, and monthly maintenance and utilities.

You also have to have enough, after your mortgage payment, to save for emergencies. Plan ahead to have enough to afford your monthly mortgage payments for several years. Check your credit report to make sure that the information in it is accurate. A higher credit score may help you get a lower interest rate on your mortgage. A lower interest rate means a lower payment.

Shop around. Online and off, shop lenders, brokers, credit unions, government (city, county state) programs, even seller financing. Shopping around is a bear, but it can save you thousands of dollars.

Understand costs. Shopping around means scrutinizing loan costs and fees not just the annual percentage rate (APR). On any given day, lenders and brokers may offer different interest rates and fees to different consumers for the same loan, even when those consumers have the same loan qualifications. Keep in mind that lenders and brokers also consider the profit they receive if they get you to agree to higher fees, higher points, or a higher interest rate.

Learn risks, benefits of loan options. Mortgages have many features -- fixed interest rates, adjustable rates, payment adjustments, interest-only payments, prepayment penalties, balloon payments, yield spread premiums (broker commissions) and more. Consider all the features, including the APR and the settlement costs.

Have your lender calculate how much your monthly payments could be a year from now, and 5 or 10 years from now, especially if you get an ARM. A mortgage shopping worksheet can help you identify the features of different loans. Mortgage calculators can help you compare payments and the equity you could build with different mortgage loans.

Get advice from those you trust. Ask family, friends, co-workers, professional associates and others you trust for referrals. Talk with a trusted housing counselor or a real estate attorney that you hire to review your documents before you sign them.

You can find a list of counseling resources at NeighborWorks and on the U.S. Department of Housing and Urban Development's (HUD) website or by calling (800) 569-4287.

"A clear lesson for the mortgage consuming public to take away from the past few years is to never sign onto a loan that you do not fully understand," Osborne said.

"Loan officers and mortgage brokers are by and large salespeople whose compensation is based upon the type of loan and terms a consumer agrees to and therefore they cannot always be relied upon to offer objective, independent advice as to the type of mortgage that best suits your interests," she added.

For more mortgage shopping details, see: "Looking For The Best Mortgage."


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© 2009 DeadlineNews.Com

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You are reading a sample of "News that really hits home!", now available from several beats and published in a growing number of locations.

Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop.

Perkins is also the first Examiner to cover three beats for the Examiner.com news service:
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Mortgages avoiding credit crunch

You'll probably have to go to homeownership school. You'll have to prove you can really afford a mortgage. You may have to reconsider your location. And you'll have to run a gauntlet of scrutiny. Today's mortgages are a far cry from boom time loans, but they do exist and some lenders have money to burn.

by Broderick Perkins
© 2008 DeadlineNews.Com


Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - A new brand of home loan, customized with tighter controls and fewer defects is replacing those old mortgage models that crashed and burned when the economy hit the skids.

Don't expect these new babies to come off the assembly line like those mass-produced subprime rattle traps, but if you stick to the rules of the road, one of these loans could put you in the driver's seat.

Buckle up.

"You have to qualify. You have to prove your income. They have make-sense underwriting," said, Quincy Virgilio, 2009 president of the Santa Clara County Association of Realtors and broker-owner Realty World CA Property Network in San Jose, CA.

FHA-insured mortgages

The new darling of the homebuyer set, Federal Housing Administration-insured mortgage programs have for decades been available especially for low- to moderate-income families who may not meet requirements for conventional loans.

But with new loan limits as high as $625,500 they've become especially attractive in high cost areas. FHA loans are expected to account for 25 percent of the mortgages signed in 2009, according to the National Association of Realtors. Because of previously lower loan limits, FHA loans amounted to less than 4 percent of homes sold from 2003 and 2006.

The new FHA model also comes with low down payments and eased credit requirements.

"They are much more lenient (compared to conforming Fannie Mae and Freddie Mac mortgages) on how they look at credit scores. The score can be in the 600s vs. 700s, said Cheryl O'Connor, a finance expert with O'Connor Consulting in Danville, CA.

FHA features include:

• As little as 3 percent down.
• Financed closing costs.
• A 1 percent (of the mortgage) ceiling on the amount lenders can charge for closing costs.
• No prepayment penalties.
• Relaxed debt-to-income requirements.
• FHA-approved lenders only.
• FHA-approved appraisals only.

Virgilio says buyers who don't have 20 percent or more down will pay an upfront mortgage insurance fee amounting to as much as 1.75 percent (of the loan) and a monthly mortgage insurance premium that effectively tacks on another 0.5 percent to the interest rate.

"But you can structure your loan with participation from the seller paying closing costs. Not down payment assistance, but closing costs, but in this marketplace the seller is going for that," said Virgillio.

The best rates (typically fixed, rather than adjustable) go to those who have financial reserves, savings or investments amounting to at least two months worth of a PITI (principle, interest, taxes and insurance) mortgage payment.

Likewise, the best deals go to buyers with a 30 to 33 percent debt-to-income ratio when the debt includes housing and all other monthly debt payments.

In addition to FHA home-buying loans, the "Housing and Economic Recovery Act of 2008" created "Hope For Homeowners" which allows troubled mortgage holders to avoid foreclosure by refinancing into a more affordable, FHASecure mortgage, provided Uncle Sam gets a piece of the equity-growth action and provided the existing lender approves.

“People used to qualify with stated income. Now there is more documentation. And they aren't just documenting your income, but looking for assets in addition to your income and low debt-to-income ratios and low loan-to-value ratios.”
- Asmaa Egal, mortgage broker, Loan Republic Financial, San Francisco, CA

Membership-required credit unions

Credit unions are also rolling out the red carpet for home buyers.

The typically members-only financial institutions largely survived the credit crunch because, as non-profits, the fundamentals apply. They take in deposits. They make loans based on sound underwriting principles. They charge more on those loans than they pay on deposits.

Without the profit motive, there was no incentive to get involved in the subprime racket, no reason to sell and repackage loans as investments and no need to otherwise venture into untried and untrue investment schemes.

Along with fixed-rate 30-year mortgages at rates often lower than banks they also offer conventional adjustable rate mortgages (ARM) and hybrids all with rates typically lower than conventional lenders (Search "rates," then see "Ratedex").

"Credit unions have a tendency to be more lenient if you have a bank account with a credit union," O'Connor said.

Credit union originations rose a whopping 10.1 percent during the first half of 2008, according to the industry's federal regulator, the National Credit Union Administration (NCUA). Conventional mortgage lender loan originations took a nose dive, falling 17 percent during the same period.

Rural home loans

Don't get your knickers in a knot over the term "rural."

The nation's housing market includes a host of fine country estates -- large and small -- with land and available for a song! What's more, they come with government backed financing.

"Home buyers in the San Jose (and other) area still have one mortgage that is inexpensive and easy to get, but many people don't know about it," says Dan Auld a loan consultant with National Mortgage City.

Loans backed by the United States Department of Agriculture's (USDA) Rural Development Housing and Community Facilities Programs are limited, but you don't have to grow corn or raise chickens.

The loans are for:

• People living in designated rural areas where the population is less than 20,000.
• People with incomes under 115 percent of household median income for the area. In most areas, the upper income limit for borrowers will be $60,000 to $70,000 per year.
• People buying homes, not refinancing or taking out equity loans.

USDA Programs include no-money down loans (imagine that), home improvement and rehabilitation loans and grants, construction loans, loans for minorities and true to the work-ethic of rural life, sweat-equity loans that require buyers to help build their own homes.

Money for rural homeownership is available during the greatest economic downturn since the Great Depression because of sound lending practices and isolation -- both geographical and financial -- from the boom-bust markets.

The result has been more mortgage money to lend, not less. The federal ag agency's loan volume tripled in 2008.

Local, state agencies

O'Connor says don't overlook local -- city, county and state -- housing assistance programs that often cater to first-time and or low- to moderate-income home buyers.

More information is available about state housing efforts from the HUD web site.

Local contacts are available through the National Association of Housing and Redevelopment Officials.


Also see land consultant Curtis Seltzer's "How To Be A Dirt-Smart Buyer Of Country Property" (Infinity Publishing, $34.95).

© 2008 DeadlineNews.Com

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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group -- DeadlineNews.Com, a real estate news and consulting service and Web site and the Deadline Newsroom, DeadlineNews.Com's news back shop. Perkins is also a National Real Estate Examiner. All the news that really hits home from three locations -- that's location, location, location!

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Local Relief For National Housing Hangover

Don't count on new federal bailout measures to quickly trickle down to your neighborhood. Instead, struggling home owners should consider local assistance that is available right now.

by Broderick Perkins
© 2008 DeadlineNews.Com


Unauthorized use of this story is a copyright violation -- a federal crime.

Deadline Newsroom - Don't expect the federal government to have all the answers for the economic crisis that's really hitting home.

Real estate is a local state of mind.



With its legislative lethargy, shotgun approach for bailing out Wall Street and the slow, plodding bureaucracy that will administer Washington, D.C.'s economic cures, federal relief efforts will take a while to trickle down to Main Street.

Fortunately, there's growing evidence some housing needs are being met right down the street -- on the real front line in the housing crisis. Metropolitan areas are trying hard to put the brakes on the American Dream deferred.

That's because the housing crisis isn't only affecting those who lose homes, "…but also by their neighbors, communities, municipalities. Policy makers also understand the importance of helping buyers stay in their homes so that they can build equity and contribute to the stability and fiscal health of their communities, towns, states and nation, according to the Pew Charitable Trust's "Defaulting on the Dream" an analysis of the current housing crisis and state-level responses.

The Brookings Institution also recognized the significance of the local market dynamic more than a year ago in what could be considered the framework for the United Metros of America.

The report, "Blueprint For American Prosperity" underscores how a detached federal government, embroiled in political partisanship and burdened by procedural procrastination has often proved ineffectual, if not impotent, when it comes to addressing the national penchant for prosperity.

The blueprint says more and more often, large metropolitan areas, not the federal government, are at the forefront of social change, quickly addressing housing policies, sprawl, sustainable development, education, immigration, infrastructure, energy independence, technological innovation, global warming and a host of other pressing social concerns.

Perhaps no where is that more true than on the home front. In many cases, struggling home owners need look no further than their own backyard community for relief.

• Hearkening back to WWW II industrialist Henry J. Kaiser's affordable housing communities, Chicago's Metropolitan Planning Council offers an Employer-Assisted Housing program that includes 60 employers offering down payments, rent, savings assistance and home ownership education to thousands of employees. Program leaders say the feds aren't doing enough.

Federal agencies in September finally began doling out $3.92 billion in new Neighborhood Stabilization Grants (See what your community will get), once rejected by President Bush, but signed into law under Title III of the Housing And Economic Recovery Act of 2008 (HERA). The grants are designed to help local governments acquire and redevelop foreclosed properties that might otherwise become sources of abandonment and blight within their communities.

"These Neighborhood Stabilization Grants provide limited resources enough to recover just a fraction of the more than 30,000 properties that have been foreclosed upon in metropolitan Chicago since 2007," said Robin Snyderman, vice president of the Chicago area council's Housing & Community Development.

Check with your employer, local redevelopment and planning agencies, metro government, business groups, community efforts and social programs for employer assisted housing.

• In what's not a truly local effort, but evidence of federal knee-jerking, the National Association of Homebuilders have been lobbying Congress, though the din of recent bailout action, for a larger tax credit for first-time home buyers.

The builders say the current credit, actually a $7,500 interest free loan and another provision in the recovery act, has done little to spark housing sales in a credit-starved world. They'd like the feds to pump up the volume and double the credit/loan to $15,000.

Jerry Howard, the chief executive officer of the National Association of Home Builders, says association members -- small and large builders alike -- have felt "no impact" from the $7,500 provision.

Home buyers more often need up front cash incentives in the form of grants, down payment assistance and even solid lessons in home ownership. Again, check the local market for faster help.

New home builders, however, certainly aren't waiting for solutions from Capital Hill. All offer both cash and amenity incentives in most developments and some are taking matters into their own hands.

• Downtown San Jose, CA's redevelopment vision of a more vibrant city core included a building frenzy of first-time-for-the area, high-rise condos with ground floor shopping, retail services and other amenities in the mix. But failing sales -- zero sales for some properties -- led builders to convert many of the empty units to rentals. With an average rent of nearly $1,700 in the Silicon Valley area, according to RealFacts.com, rents can be far from affordable, but the conversions do add more rental units to an economically thriving region that's often short on housing.

As the housing bust ensued, rental housing in many hard hit areas has become cheaper or at least more negotiable due to a glut of unsold speculative condos and other properties converted to rentals.

Consider your position when the market springs back to life and you are already nesting in a full-featured home, rather than an apartment. It's not out of the question to negotiate a lease-option deal with the builder.

• Down the road, in Gilroy, CA, long before home ownership counseling was de rigueur for certain loans, mortgage assistance programs, bankruptcy law and bailout legislation, South County Housing was doling out a heavy curriculum of home ownership studies along with sweat-equity programs and loans that look a lot like subprime mortgages.

However, thanks to smarts that largely Latino buyers receive, foreclosure rates hover around zero, belying rates in the rest of the foreclosure-hammered Golden State.

Seek accredited home ownership counseling now and prepare in advance for your own home. There's a lot of counseling going around these days. In October, the U.S. Department of Housing and Urban Development (HUD) doled out, to more than 2,300 local housing counseling agencies, $50 million in housing counseling training and housing counseling grants for first-time home buyers.

The feds, for all their stumbling and bumbling through the housing crisis, do seem to understand the local angle.

• Portland's elected regional Metro government has the authority to coordinate land use across several local jurisdictions and is currently focused on integrating housing choices and affordability into policymaking and funding allocations, better evaluating land use impacts of transportation investments, and safeguarding regionally significant natural areas. Similar agencies exist elsewhere.

• In "Facilitating Shared Appreciation Mortgages to Prevent Housing Crashes and Affordability Crises" the Brookings Institution recently foretold of today's affordability and credit crises and made the case for equity sharing or "shared appreciation mortgages" (SAMs) as a creative financing tool whose time as come.

Too little light has been shed on now-available federally insured SAMs available from the Federal Housing Administration (FHA) yet another element of the HERA legislation.

The program should give SAMs a higher profile, but with the growing group of SAM facilitators, private SAMs can be available locally without federal originating restrictions.

For more help, see:

• "American Dream Deferred"

• "Foreclosure Prevention Efforts Grow"

© 2008 DeadlineNews.Com

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Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews Group -- DeadlineNews.Com, a real estate news and consulting service and Web site and the new Deadline Newsroom, DeadlineNews.Com's news back shop. In both cases, it's news that really hits home!

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Deadline Newsroom FAQ 9108

When you have questions needing answers that really hit home, contact the Deadline Newsroom. This installment: home buying timing; getting the best mortgage; home ownership costs.

by Broderick Perkins
© 2008 DeadlineNews.Com

Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - Q: The market is flat, prices are falling in some communities. Should I buy a home now or wait?

A: Don't base your home purchase decision solely on market conditions.

It can be profitable if you can buy low and sell high, but home buying is more than an investment. There's also the tangible aspect of a roof over your head. Buy a home right now to live in for a decade or more and not only will you stop dropping rent into a black hole, chances are you'll also enjoy some appreciation and numerous tax benefits along the way. Buy a home in a soft market and expect to flip it for a profit in six months to a year and you could lose your shirt. And there are a lot of potential outcomes in between.

Home buying is a very personal decision. Buy a home based on your financial ability, lifestyle needs and personal goals. Check your credit, shop around to see what's available and what you can or cannot afford and get professional help from mortgage and real estate experts to help you make a sound decision.

It's not always a good time to for you, as an individual, to buy. You have to decide when it's a good time for you to buy.

Q: Money is tight. Underwriting terms are tough. How can I be sure I have the best mortgage I can get?

A: Three tips.

1) Examine your credit report. You need to know how creditworthy you are before the lender discovers how creditworthy you aren't. You may have some credit cleaning up to do. The better your credit and the higher your credit score the better your position to negotiate for the lowest mortgage cost and the best terms. Your report, one from each of the big three credit reporting agencies -- that's three reports each year -- is available from AnnualCreditReport.com.

2) Shop around. Shop lenders, brokers, credit unions, your bank or financial company, as well as federal, state and local government home loan programs. Compare all the numbers of every loan program you consider. Use the Federal Deposit Insurance Corporation's (FDIC) "Mortgage Shopping Worksheet" to conveniently make that comparison.

3) Get independent, professional help, counseling and education from a mortgage or home buying counselor who has no stake in your mortgage or home purchase. You want to both educate yourself about the home loan process and get assistance in determining which mortgage best fits your financial status, lifestyle and home owning goals. ACORN.org; NeighborWorks, your local housing or social services department and other recognized agencies can get your steered in the right direction.

Q: What costs are included with home ownership?

A: Home ownership costs begin with financing costs -- your down payment, mortgage points, fees, commissions and other costs associated with writing your mortgage, as well as title and escrow costs and fees. See the HUD 1 Settlement Sheet to learn about mortgage and title and escrow fees.

You lender may also require that you have sufficient savings or financial holdings intact after you sign for your mortgage. The lender wants to make sure you aren't stretched too thin after you buy a home. The next costs are in your regularly monthly mortgage payment which likely will consist of a payment against the principal and interest on you loan. You can include in your monthly payment (and should if have a difficult time budgeting) or pay on your own homeowners insurance and property taxes.

Additional costs are associated with the upkeep of your home -- maintenance, repairs, landscaping, home improvements, alterations and additions.

Got questions? Send them to news@deadlinenews.com. We'll do our best to get you the most relevant answer.

© 2008 DeadlineNews.Com

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Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews Group -- DeadlineNews.Com, a real estate news and consulting service and Web site and the new Deadline Newsroom, DeadlineNews.Com's news back shop. In both cases, it's where all the news really hits home.

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Beginner's Guide To Mortgage Shopping

Here's what you need to get started looking for a mortgage that best serves your needs at the lowest cost possible.

by Broderick Perkins
© 2008 DeadlineNews.Com

Deadline Newsroom - It's not everyday you go looking for a mortgage.

It's not a trip to the mall.

It's a methodical, step-by-step process requiring planning, time, effort and attention to details.

Here are some guidelines for beginners -- assuming you've already laid the groundwork by inspecting your credit report.

• Inspecting your credit report and getting it in the best shape possible is your first step to the best mortgage. In today's tight money world it behooves you to take the time necessary to carefully scrutinize your credit report and to be prepared to explain to creditors any dings you can't fix.

• Shop around for a mortgage from a variety of sources to determine what's available. Shop mortgage brokers, mortgage lenders, banks and credit unions. Don't forget to examine your local and state mortgage programs as well as community service and housing agency mortgages and mortgage assistance programs.

• Obtain all loan cost information, not just the monthly mortgage payment and annual percentage rate (APR). Check the cost of points (in dollar amounts, not just number of points), broker fees, origination fees, underwriting fees, administrative costs, mortgage insurance, yield spread premiums, commissions, escrow and closing costs -- each and every cost associated with your mortgage. You need these numbers to make a fair comparison.

• Get an explanation for every fee you don't understand. Use the Federal Deposit Insurance Corporation's (FDIC) "Mortgage Shopping Worksheet" to help keep your costs in focus.

• Check the loan terms for a variety of loans. Know what down payment you'll need, the term of the loan, whether the loan is a fixed rate mortgage (FRM) or an adjustable rate mortgage (ARM) and the specific terms of each. For ARMs, ask for the beginning rate, when and how often adjustments occur, how much adjustments could cost, and the ARMs ceiling rate.

• Be aggressive. Prepare to negotiate with the information you've gathered on the mortgage worksheet. The more information you have about each loan the move negotiating leverage you'll have. A pristine credit record can also give you an edge. Look particularly to quibble over points, yield spread premiums and other broker's fees or commissions. Don't be afraid to ask the lender the lender or broker to waive or reduce one or more of its fees or to agree to a lower rate or fewer points. Make sure the lender or broker isn't just lowering one fee to raise another or lowering the rate to raise points. There's also no harm in asking lenders or brokers if they can give better terms than the original ones they quoted to you, especially since you've found better terms elsewhere.

• Once you are satisfied with the terms you have negotiated, consider a written lock-in from the lender or broker. The lock-in should include the rate that you have agreed upon, the period the lock-in lasts, the number of points to be paid and a lock on as many other costs and terms as possible.

• Also seek a written loan commitment that guarantees you the terms and costs you've locked. A loan commitment puts you ahead of the pack in the eyes of the home seller who wants to sell quickly.

See DeadlineNews.Com's Finance Page

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© 2008 DeadlineNews.Com

Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews.Com, a real estate news and consulting service, and the new Deadline Newsroom, DeadlineNews.Com's new backshop. In both cases, it's where all the news really hits home.

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