Enhanced Relief Refinance Mortgage

As a homeowner, there are several reasons why you would want to refinance your home: to lower your rate, to shorten or lengthen the term of your loan, or to pull out some of the equity in your home. If your loan-to-value (LTV) ratio ꟷ the comparison between the amount of your loan and the value of your home ꟷ is high, you will have a hard time getting a loan with the typical programs that lenders offer.

Fortunately, the Federal Home Loan Mortgage Corporation (Freddie Mac) created the Enhanced Relief Refinance Mortgage Program, which might help with your situation.

The Issue of High LTV Ratios

Lending institutions usually deal with other people’s money, and they have to calculate various risk factors before they close on a loan. One of their primary considerations is the value of the collateral for the loan, which, in this case, is your home. When a borrower defaults on their mortgage, banks rely on selling the house to recoup their funds; therefore, it is too risky for them to allow you to borrow more than, or even close to, what the home is worth.

Why the Program was Created

Because lenders in the private sector shy away from high LTV loans, Freddie Mac, a government-backed agency, decided to introduce the Enhanced Relief Refinance Mortgage Program. The premise of the program is that providing you with more favorable loan terms will only increase the chances that you will continue to pay your mortgage on time. The fact that you’re having an issue with the value of your home shouldn’t hinder your ability to refinance and improve your financial situation.

How a Home Could be Worth Less than the Original Loan Amount

There are two types of homeowners who have LTV issues and could use such a program:

  1. People whose homes are in a declining real estate market. If you purchased a home for $200,000 and it is now worth $150,000, even if you originally paid a down payment of 20%, your house could be worth less than the loan amount.
  2. Some people buy a home with a negative amortization loan, so their monthly payments are not enough to cover the principal of the loan. In such cases, the loan amount increases with time, and they could end up owing more than the house is worth.

Enhanced Relief Refinance Mortgage: Requirements and Guidelines

While the Enhanced Relief Refinance Mortgage Program is designed to help people whose homes are in the red, it has very specific criteria. To be eligible:

  • Your home has to be a one to four-family primary residence or investment property, or a single-family second home.
  • Your current mortgage must be at least 15 months old.
  • Your existing loan has to be with Freddie Mac.
  • You can’t have been more than 30 days late on any of your mortgage payments in the past six months, or more than once in the past twelve months.
  • The LTV of your loan has to be higher than the maximum ratios for standard loans.
  • If you’re getting an adjustable-rate mortgage, the loan amount can’t exceed 105% of the value of your home (there is no maximum LTV for fixed-rate loans).
  • You can’t use the program to dip into the equity of your home and take out cash.

If you meet all of these criteria, you might be eligible for the Enhanced Relief Refinance Mortgage. For more information or to apply for a loan, feel free to call the Pacific Mortgage Group at (800) 691-1665, or contact us online. We have many years of experience and will be happy to guide you through the entire process.


Are Mortgage Rates Influenced by the Presidential Election?

Thinking of buying a home?

If you’re thinking of buying a home, it’s prudent to know if current events have any impact on the direction of mortgage rates. After all, the direction of mortgage rates means you can buy more house for the same money if they go down, or less if they go up.

Does the outcome of the presidential election have any influence on mortgage rates? Up? Down? Remaining the same?

Mortgage Rates Are Determined by the Federal Reserve

Mortgage rates are determined by the Federal Reserve, which meets about eight times a year and looks at economic data. If the economy looks strong, they may decide to raise rates. If it looks weak, rates are sometimes lowered to stimulate the economy.

The governance of the Federal Reserve, which determines the direction of interest rates, was designed in part to remove it from partisan politics. Although the president of the United States nominates the chair of the Federal Open Market Committee (FOMC), they serve for four-year terms and cannot be replaced. In other words, the inauguration of a new president does not coincide with the ability to name a new Fed chair, although that will happen down the road, when the term is up.

The governors of the Fed serve 14-year terms, and also cannot be removed. That means, for example, that the overall governance of the Fed cannot be removed because an incoming president doesn’t like their monetary policies.

Federal Reserve

It’s the Economy, Not the President

The ultimate determinant of interest rate direction and thus mortgage rate direction is the economy, not who sits as president.

Rates currently are at historically low levels, making this a good time to buy a house.

A recent survey of economists showed a consensus that the economic picture would be strong in November 2016, with low unemployment and good consumer confidence.

However, the consensus on the direction of interest rates has changed several times this year, with an unexpectedly weak job report and the British vote to leave the European Union affecting plans to hike.

The best bet is to stay tuned to the economic news.

 


Saving money: Tips and Tricks that are almost too Easy

Saving money is hard, actually the only hard part is allowing time for your money-saving tips to take effect. Many money-saving tips and tricks are so simple and easy, you should not have a problem implementing them into your daily life. The problems arise when those tips are not followed regularly. The biggest, and best money-saving tip anyone can give is this, choose one or two money-saving methods that you are going to use, and make habits out of them. In other words, keep it up and keep it regular. Now here are those, ‘almost too easy’ saving money tips and tricks:

Use Cash When you Shop

Instead of pulling out your debit cards and credit cards when you go shopping for groceries, clothing, or anything else, use cash instead. Set aside a certain amount of money for everything you have to buy for the month/week. Why? Because it is harder to spend money when you have to physically count it out and hand it to someone. Swiping a piece of plastic is much easier, and makes it harder to save money. Use cash and save your money in the long run.

Donate to Savings Every Week

This is a very simple tip, but it can be hard to turn it into a habit. Simply donate a small amount (the same amount) to your savings account each week. Choose a day, at the beginning or the end of the week, and make it a part of your weekly routine to transfer $5, $10, $15, or more into your savings account. Make sure you donate the same amount each week, unless you donate more – never donate less.

Use a Piggy Bank

This may seem childish, but saving your pennies can add up over time. Even if you only save $10, you can put that amount in your savings that week, and then you have an extra $10 for fun. This is also an easy tip because you can simply empty your pockets every day into your at-home bank. It may not be a get-rich-quick solution, but it can help you to save money.

If you would like to learn more about ways you can save money, please contact us today.


Mello-Roos Tax Assessments: What You Need to Know

The Community Facilities Act—also known as Mello-Roos—was enacted by the California legislature in 1982 to enable local governments to create Community Facilities Districts (CFDs) in order to obtain additional public funding . Named for the tax Act’s co-authors Sen. Henry J. Mello (D-Watsonville) and Assemblyman Mike Roos (D-Los Angeles), counties, cities, special and school districts, and other authorities use CFDs to pay for certain public works and services.

The Mello-Roos Act simply provides local governments with another way to obtain funding after Proposition 13 restricted local governments’ abilities to increase property taxes in order to finance public facilities and services in 1978. Mello-Roos differs from Proposition 13 in that in that Mello-Roos taxes are equally applied to all properties whereas Proposition 13 tax limits are based on real property values.

Community Facilities Districts (Mello-Roos Districts)

Property owners in a CFD are subject to a special tax to enable the district to obtain public funding through bond sales for certain infrastructure improvements and/or services.

Tax Uses

Mello-Roos taxes are paying for services and facilities such as:

  • Police and fire protection
  • Emergency services
  • Recreation programs
  • Libraries
  • Parks and open space
  • Museums and cultural facilities
  • Flood and storm protection
  • Hazardous material removal

Facilities purchased with Mello-Roos funding must have an estimated useful life of at least five years in order to qualify.

Tax Assessments

Individuals who purchase homes in a CFD are subject to Mello-Roos assessments which are commonly collected with general property taxes. Whereas the tax amount may vary each year, it may not exceed the maximum amounts specified upon creation of the CFD, which are recorded along with the method of apportionment (density, construction square footage, acreage, etc.). Homeowners will continue to pay these taxes until the bonds’ principle and interest—and administrative fees—are paid, but not longer than 40 years.

Finally, as the Mello-Roos tax is assessed upon the land, changes in property values will not affect the amount if the property is subsequently sold; however, unpaid or delinquent payments require settlement before any sale because the tax is recorded as a property lien.

For more information about Mello-Roos or any other California property questions, please contact us.


3 Great Online Tools for Money Management

In our search to bring you the very best sites online to help you with your money management, we turned to the experts themselves. The following three sites have helped millions of people to get a handle on their financial ‘big picture’, make a budget they can live with, and even get out of debt. Best of all, each one of these sites come highly recommended by experts in the field of money.

Mint.com

This site comes with a hearty recommendation from Kiplinger and boasts of helping more than 20 million people with their finances. It’s free to sign up, although it is unclear as to whether or not there may be fees for certain services once you get started.

What Mint does best is help you get all your financial information together in one place. Yes, you have to give them access to your bank accounts, credit cards, bills, and any other information you want help in tracking, but rest assured that they offer bank-level security. Your information is safe with them in what Kiplinger refers to as ‘bond-movie-like fashion”.

Once they have all of your information in one place, they can help you finally get a handle on exactly where your money is going. Then they can offer ideas and help to get that same income to go even farther.

Readyforzero.com

This site is another that comes with a Kiplinger recommendation. The goal of this site is a simple one: to help you become debt free. Once again, you begin by giving them access to your finances. They then help you make a customized plan to pay off your debt, and easily track your progress. They even give you access to a free credit score and the ability to watch your score improve as you follow your plan. Best of all, this site is very upfront about being totally free to join and use.

FlexScore.com

This site’s recommendation comes from Forbes. Probably the easiest of the three sites to use, you simply complete a profile with them (the more information you give them the more accurate your financial picture). Once your profile is complete, they will give you a FlexScore and then give you some actionable steps to take to improve that score to get more out of your financial life.

Any one of these three great online tools for money management will help you get a grasp on your finances, so why not start with one of them today? Whether you are saving for a new house or just wanting to get the freedom of being out of debt, managing your money is the key. Of course, if the new house is your goal, we hope you’ll contact us when you are ready to take that step.

Disclaimer: The material provided on this website is not intended to be your only source of information when you are making financial decisions. Pacific Mortgage Group is not a financial advisor. The information provided should be treated as a guide only and it not a substitute for independent professional advice. You should seek independent professional advice relevant to your particular circumstances.


What is happening to the Home Loans Market?

A 2013 survey (Belden and Russonello, America-in-2013-Final Report.PDF) showed that the demand for home ownership is very high, in spite of various difficulties experienced by the housing market. Most believe that home ownership is a good investment for them. Seventy percent of renters hope to buy homes within five years. Many people who own homes are looking for larger homes.

Demand for homes:

Qualifying for a home loan is part of the life cycle of Americans. The youngest generation (age 28 to 34) show the strongest preference for mixed use urban communities in the city. They want walkable communities and public transit. When people move into the 35 to 47 age group (the married and child-rearing phase), they begin to prefer to buy single-family homes. The older baby-boomer generation have diversified into a wide range of housing sizes and communities. They generally feel settled, except that some want to move into smaller homes with shorter transportation demand, close to parks and far from neighbors.

The need for home loans is a constant through all the varieties of location and need. According to the survey,

Living in a single-family house is…related…to their stage of in life. It is a goal that Americans move closer to as the age, marry, and earn more.”

Young adults in the millennial generation are heavily burdened by student loan debt.  A Wells-Fargo survey found that a majority of millennials (54 percent) describe debt as their biggest financial concern. Forty-two percent of millennials say their debt is “overwhelming.” Of the millennial generation 64 percent financed their education with student loans. This contrasts with baby boomers, of whom only 29 percent financed their education with loans, during a period when tuition costs and fees were much lower.

Millennials in the marketplace:

When millennials are ready to finance a home, what is the home finance market like for them? In 2013, 30 year-olds were as likely to be stuck in their childhood bedrooms as they were to own their own home. The job market was especially hard on millennials with unemployment rates at 14 percent for that group between 2007 and 2010. For many, saving and handling student debt were very hard.

With  the gradual recovery of the job market, the “household formation rates” (how many new household units–home buying units–are being formed) has reached close to normal levels. Normally this would signal a normalizing housing market. However, the people forming new households are disproportionally not millennials.

Surprisingly, even with improving conditions, the share of adults in the millennial age range living with their parents has continued to rise. The rate at which millennials get married or live with a partner has been decreasing for many years now, independent of the recession. Millennials, employed or not, are more likely than ever to live with parents and not form independent households. The increases in household formation is coming from older adults. Many feel that fewer households entering the home buying market is due to later marriages and not-good-enough jobs, as well as student debt.

Preparing Better Mortgages to Tempt Millennials:

The worry felt by many borrowers has to do in part with hidden costs of the mortgage. Over the last few years, the household lending industry has been borrowing the practice of Total Cost of Ownership from industrial management practice. Total Cost of Ownership (TCO) was popularized for business in 1987. The Total cost analysis in mortgage lending enables lenders to explore what their resources can afford in a home mortgage. This analysis treats home ownership as a cost-benefit proposition.

Looking at all the factors that go into mortgage cost gives purchasers a sense of closure and allays fears of the unknown. As will any Total Cost of Ownership calculation, the total mortgage cost analysis begins looking at all the factors that go into the cost of the mortgage:

  • Mortgage attributes–for a fixed rate mortgage: loan amount, loan term, and interest rates. For a variable rate mortgage: periodic rate cap, lifetime rate cap, months between rate adjustment, etc..
  • Down payment–the larger the down payment, the smaller the total mortgage costs. Recent government regulations permit down payments of 1 percent. What would such a small down payment mean for total cost?
  • Discount points–upfront fees paid to the lender.
  • Other closing costs–a multitude of upfront expenses for inspections, legal and document fees, surveys, etc..
  • Private mortgage insurance–usually around $55 per month for every $100,000 borrowed, until the remaining principle falls below 80 percent of the home’s fair market value.
  • Income tax ramifications–some mortgage expenses may be tax-deductible.

Pacific Mortgage Group makes it easy and stress-free for you to find a mortgage option that truly fits your needs. Our mission is to match you with the best possible home loan package so you can achieve your financial goals. Please contact us to learn more.


Discover Why Conventional Home Loans May Be the Best Option

Have you been trying to figure out which home loan is right for you? Well, if you have good credit, and have taken the time to save for buying a home, then a conventional home loan may be the best option. The main benefit is a conventional home loan will save you money.

The main advantages of FHA home loans and other government-backed mortgages include (1) the qualifying credit criteria is lower, (2) the amount of your required down payment is less, and (3) refinancing is easier. However, these benefits have a cost. You can end up spending much more, both with your monthly payment and over the life of the loan.

Down Payment

FHA home loans require as little as 3.5 percent as the down payment. Of course, the lower down payment means more of the sale price is financed. Your monthly mortgage payment is higher, affecting your payment-to-income ratio and loan approval. The higher financed amount also means paying thousands more in interest over the life of the loan.

Private Mortgage Insurance

When you place 20 percent or more down on a home, you are not required to pay for mortgage insurance. This insurance reimburses a financial institution if the home goes into foreclosure. The premium is added to your monthly mortgage payment, also affecting your payment-to-income ratio.

Mortgage Rates

Since FHA and other government-backed mortgages have lower credit standards, there is a greater financial risk for banks and mortgage companies.  This translates into higher interest rates. Since conventional home loans have higher credit standards, they offer better rates.

More Options

Conventional home loans provide more flexibility with payment terms. FHA home loans have either 15-year or 30-year terms (some lenders can be more flexible). Conventional loans have options that can help you pay your mortgage off earlier and save thousands in interest.

If you would like to talk more about why a conventional home loan may be the best option, or need more information, please contact us.


Tips on Owning a Home: It’s More Than Just the Mortgage!

One of the most common misconceptions about home ownership is that you simply buy a house, pay the mortgage every month, and call it a day. However, the reality of owning a home is that it costs a lot more than just the mortgage!

In this blog post, then, we’re going to go over the full list of expenses that come with owning a home so that you can decide if you’re in the market to buy a home, or to continue renting as you’re currently doing.

  • Insurance: many lenders, especially from the so-called “big banks,” will require you to have homeowner’s insurance before giving you a mortgage. This premium varies from state to state, and different environmental factors — such as your area’s propensity for hurricanes, earthquakes, and flooding — can drive the price up significantly.
  • Property Taxes: again, this is an inevitable cost. Now, there are some mortgages that allow this to be built in — and paid — from the monthly mortgage payment, but in the end, this will also drive your monthly payment up to more than you thought before. Like insurance premiums, property taxes vary from state to state, and are dependent on the value of your home.
  • Utilities: you thought you had the “utilities” thing down pat when you were living in your first studio apartment, but the reality is, the utilities go up tremendously when you’re trying to heat, water, and provide electricity to a home with a few thousand square feet. Make sure you budget accordingly!

For more information about us and our services, contact us today.


Four Benefits of a FHA Loan

FHA loans are government-issued loans by the Federal Housing Authority. Actually, you will still get loans through private lenders but, you will be protected by the government, if you should default on your loan.

Here are some of the benefits of getting a FHA loan.

  • Lower down payments required to get a mortgage. Most loans require at least five to ten percent of the cost of the house as a down payment. Some require even more. With a FHA loan, you only need 3.5% down! Closing costs can be even more expensive and that can be added to your mortgage.
  • Lower mortgage insurance. Mortgage insurance is expensive and is included in your monthly costs. With a FHA loan, you might be able to pay less, essentially paying less money each month with your mortgage payment.
  • Competitive interest rates. When you get a FHA loan, you will get a competitive interest rate, no matter what your credit score is. This allows people who have less than desirable credit to own homes.
  • Higher debt ratio. When figuring out your debt ratio, you are allowed to have more debt with a FHA loan than you can with a conventional loan. If you have a car payment or two, along with credit card debt, you might be better off looking at a FHA loan!

FHA loans are helpful when you are just starting out and you don’t have a lot of money for a down payment. They are also helpful if you don’t have the best credit. They are also helpful when you have a little bit of debt. However, make sure that you can afford your house or you will end up losing your home!

Contact us to see if you qualify for a FHA loan!


How FHA Streamline Loan Refinancing Works

If you have purchased your current residence via an FHA loan and have thought about refinancing to a lower rate to free up money for other purposes, FHA Streamline Loan Refinancing could be just the thing you need.

Features

Streamline loan refinancing through the FHA has several features that make it attractive to homeowners. These include:

  • Appraisal waiver, allowing you to use the original purchase price of your home, regardless of its value today
  • No income or credit score verification
  • No employment verification

The appraisal waiver is a particularly popular feature as it allows unlimited loan-to-value (LTV), an important feature for homeowners whose houses lost value during the economic downtown.  When applying for a Streamline Loan Refinance, homeowners can be jobless or have fair to poor credit and still receive approval, factors that prevent refinancing under other programs. If homeowners want to roll their closing costs into the loan, however, they must obtain an appraisal, otherwise, those fees must be paid out of pocket.

Eligibility

The only homeowners who are eligible for the Streamline loan are those who currently have FHA mortgages. Homeowners who want to refinance to an FHA mortgage from another type of loan must go through the normal FHA refinance process.

To obtain an FHA Streamline Loan Refinance, other factors are required. You must not have more than two, 30-day late payments on your mortgage in the last 12 months  and payment history must be perfect for the last three months. You must not have completed an FHA Streamline Refinance in the last six months. Finally, the refinance must show a net tangible benefit, meaning the new loan must reduce the total monthly mortgage payment by 5% or more. Refinancing to free money to pay bills is not acceptable.

For more information on how we can help you obtain an FHA streamline,  contact us or come visit us at Pacific Mortgage Group.