Title Insurance

Black's Law dictionary defines title insurance as an:
"...agreement to indemnify against loss arising from a defect in title to real property, usually issued to the buyer of the property by the title company that conducted the title search."

Reasons for Title Insurance

When the lender decides to lend money to a borrower, the lender must be satisfied that there are no liens, judgments or other mortgages on the property that could take a priority interest over that of the lender's security interest. Likewise, it is important for the borrower to be satisfied that the property is free of liens at the time of the title transfer. When buying a home, especially, this is very important. You will want to be sure that the previous owner satisfies ALL liens at closing and that you are issued a clear title.

Are you "Pre-Approved" or "Pre-Qualified"?

These terms are used interchangeably in the mortgage industry (and others), but there are distinct differences. A pre-qualification is an informal review of a prospective borrower's ability to qualify for a loan. A pre-approval involves a formal review of the prospective borrower's credit and income and includes a conditional commitment to lend.

If you provide pay-stubs, W2's, tax-returns, asset statements, and allow for me to check your credit, You will receive a pre-approval letter (assuming you qualify for the terms requested).

If we talk about a loan application and you tell me that you have a job and you tell me that you have good credit, I can then say to you that 'based on the information you have given to me, you are pre-qualified'.

U.S. Treasury to Push Lenders to Finish More Home Modifications

Long Article, but this is a very good read...

The Break-Even Point

Is a permanent buydown worth the cost? When you are considering the costs, for a buydown, use this calculation and you will then know if the buydown will be beneficial.

First, calculate the PI payment at the market rate, and then at the buydown rate. The difference between the two payments is the monthly savings. To finish the calculation, divide the cost of the buydown by the monthly savings. The answer is the number of months that it will take to break even on the costs.

Example:

If you were to reduce your rate on a loan amount of $150,000 from 6.5% to 5.75% at the cost of 3 points on a 30 year fixed, then the math would look like this;

(Payment at 6.5% = $948.10)(Payment at 5.75% = $875.36) The difference between the two is $72.74/Month. Now take the cost (3% x $150,000 = $4500) and divide that by $72.74, then your answer will be 61.86. This is the number of months that it would take for you to break even on the cost of the buydown.

You can also use this math on the normal costs of a refinance. If you knew that you were planning on moving in 5 years or less, than the above options would NOT make sense for you. This is another reason to talk through your short term and long term goals when we discuss loan programs.

I hope this helps. - Tim

What Drives Interest Rates?

Mortgage rates are driven by mortgage backed securities (MBSs), or mortgage bonds. Many people think that the 10-Year Treasury Note or the 30-Year Treasury Bond affect interest rates for mortgages, but that is typically not the case. The secondary market for the mortgage industry is invested in MBSs and this is where the funds come from to make new loans.

Also, when the Federal Reserve drops the Fed Funds Rate or Discount Rate, this is to influence interest rates and the economy. Many assume that when this happens, you can lock in at the new 'rock-bottom' rate. In fact, mortgage rates often move in the opposite direction due to the way the financial markets adjust in response to inflation.

There are a number of other indices/rates, aside from MBS's, that are relevant to the mortgage industry. With the exceptions of the Prime rate, they are virtually all used for determining the rates for ARMs. (LIBOR, COFI, COSI, CODI, and CMT)

FHA Appraisals - How Strict Are They?

I have heard this question more and more as many homeowners choose FHA loan programs to improve their monthly payments and to meet their long term goals. I have listed some of the most common issues that I have seen on appraisals. Of Course, I am NOT an appraiser, so these items are basic repairs that have come up in the past. To determine what is needed on your home and to determine the accurate value, contact me so we can order an appraisal.

Tax Credit HAS BEEN extended!

The $8000 first time homebuyer tax credit has been extended. ALSO, there is a credit for the homebuyers that currently own their home, and are upgrading. To read more, click HERE.

Also, here is the form that you will need when applying for the tax credit (This form is good for a home purchase in the year 2009. Speak with your tax advisor for more details).


IRS Form 5405 - First-Time Homebuyer Credit -

"Rates On 30-year Fixed-rate Mortgages Below 5%"