Once there was a young prince who sat for hours waiting on his chance to capture the great, white unicorn. The sorcerer from the other side of the mountain decided to trick the young prince and duct-taped a stick to a horse’s head and sent him into the forest. The prince, seeing the horse with the duct tape, thought he had finally found his unicorn …

Once there was a young home owner who heard an exciting story about the “no-cost home loan” and rushed to his computer to apply online. When he received his Good Faith Estimate he was so sure he was getting the best of all worlds he did not even bother to notice his loan amount was higher than it should have been and his interest rate was a little higher than he had heard from the reputable lender he had spoken with earlier …

Okay so the tale really isn’t always that grim. It is, however, always about that technical. There is no such creature as a “no-cost” or “zero cost home loan”. There are closing costs and somebody pays them. Not the sheriff of Nottingham, not the prince … the home owner or buyer. The person who is about to become the mortgagor, also referred to as borrower, is the one who always pays the closing costs.

There are three ways to pay closing costs:

• The buyer or seller can pay the costs in cash at the closing and they’ll be shown on the HUD 1
• The loan officer can increase the interest rate a little to get a higher yield and pay the closing costs
• The loan officer can increase the loan amount, when possible, and pay the costs from the refinance proceeds

The second and third bullet points in the list above are the ones used to cover the costs in the so called no-cost closings. This does not make these evil, bad or even suspect. In fact there are times when this method makes great business and can work in the favor of the borrower.

Borrowers generally keep the same loan for no more than 5 to 7 years. There are some instances, say when someone intends to live in the home only for a couple of years, where the methods can be beneficial. With that in mind the spread sheet below should illustrate the point nicely and help the borrower make the decision of which method is best to use for their immediate circumstance. See Figure 1 comparing a vanilla closing to a no closing costs home loan.

Figure 1: No closing costs home loan chart

While this chart is not 100% accurate to today’s interest rates or closing costs it is accurate enough to illustrate the point. The best you can do for yourself is to ask your loan officer for a quote in all three ways to help you make up your mind how you wish to proceed. With rates higher than personal yield from most stock investments and certainly CD’s you can see paying the costs at closing is generally a more fiscally sound decision, especially long term, than going for the exciting sounding no cost home loan. Your mileage may vary.

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A parent can be the non-occupant co-borrower for a child with an FHA home loan

No. Well, yes. Sort of. Mortgages can have co-borrowers. Instead of getting all wrapped up in the differences and similarities let’s simply cut straight to what a mortgage can have and when and how it is used. More specifically let’s look at the non-occupant co-borrower. In other words someone will be on the loan but not living in the property.

While a NOCB is not exclusive to FHA home loans that is the most common place to find them allowed. Some smaller lenders who portfolio or have special products may also allow them but generally this technique is permitted only FHA home loans.

The NOCB must have qualifying credit and so must the occupant borrower. The reason for using a NOCB is for income calculations. The upside is a borrower who does not have enough income to qualify on their own can have a family member or significant other help them to meet their monthly expenses. The non-occupant is equally responsible in making sure the mortgage is paid on time as is the occupant.

Non-occupant co-borrowers cannot overcome bad credit on the part of the occupant borrower. In fact if the occupant borrower is not credit qualified a non-occupant is moot because the loan will not be approved.

An ideal situation for a NOCB would be if the occupant is a student and has good credit scores but limited income and the parents would serve as the co-borrowers to make sure the debt-to-income ratio is within specifications. In this case the credit of both and the income of both will be used and the income of the child (occupant) can be zero provided the parent’s income is high enough to cover all of their existing obligations and well as the new mortgage.

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Mortgage rates lowest in history.

The news is everywhere today that home loan rates have dropped to an all time low – even lower than the historic lows we have been seeing for the last several months. While this may be a reflection on the poor state of the economy it is also an opportunity for those who are ready, qualified and able to refinance or purchase to save a tremendous amount over the lifetime of their home mortgage.

Today I just priced a fifteen year fixed mortgage at 3.25% with an APR of 3.78% on a $180,000 refinance and low closing costs (point in yield). This is an incredibly low rate and most certainly cannot be sustained.

Why are rates so low? The 10 Year Treasury yield is low. That’s the main reason.

Ti qualify for these low rates you need a good credit score, at least 20% equity in your home (or a 20% down payment), steady income and a few minutes to complete an application.

Even though you may have heard and read “mortgage rates can’t stay this low for ever” and they seem to have been hanging pretty low for the last few months the statement is still correct. Here’s what it looks like on a few different loans at low rates:

*This does not constitute and offer to lend. Applicant must qualify by applying for the loan and providing the necessary information and documentation to prove eligibility. These are conventional rates and the APR may vary based on how closing costs are paid: the borrower may pay them in cash, they may be “rolled in” to the loan amount or they may be paid from rate yield.

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Sometimes FAST is the key to success. You may have seen advertisements from lenders who “guarantee” very quick closings and offer to “make it right” if they don’t meet the deadline. That is not what this is – in fact instead of promising something that cannot be delivered unless a long, long list of stipulations is met we’ll start with the facts and deliver based on the borrower’s ability along with the ability of a few third party providers to deliver. Eight days is possible and can be done and something reasonably close can be achieved in the majority of cases.

Fast Home Loan Closings for Georgia Mortgages

1. Good credit, income and assets are required for the fastest closings. Some hopeful competitors won’t even consider a loan application with someone who has challenges and they only want to work with “the cream of the crop”. So do we, however we work with anyone and everyone.
2. The property must be acceptable and ready to occupy under standard lending guidelines.
3. The borrower(s) need to have all of the requested verifying documentation in the lender’s hands within hours of being requested.

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These days it is almost impossible to get the best home loan without the best credit. During the “sub-prime” boom it was possible to achieve high balance financing with low credit scores if you had the right income and assets. During that time borrowers simply paid a higher interest rate to “offset the risk”. In today’s economy and lending environment, however, the industry has returned to more common sense lending practices. As a result having the best credit score and history possible is key to achieving the best home loans available at the best interest rate.

Key Number One

Have open credit with activity on it. The older the credit line and the better the activity on it the higher your score. New credit lines can temporarily lower your score until the reporting agencies see that you are going to manage your credit well. There are some offers in consumer lending which require the credit line to be at least 15 years old or older to qualify for the offer. This is generally for extremely low rate or high balance/high reward credit cards. So Key Number One is to actually have credit that has always been paid on time and is used regularly.

Tips for great credit for Georgia mortgages

Key Number Two

One of the best ways to tank your credit score and history is to make a late payment. Even a late payment on an auto or credit card can adversely impact your credit score and history enough to eliminate you from qualification for the best home loans. Some loans require there to have not been a late payment on any consumer credit in the last 12 to 24 months and most require no home mortgage late payments in the last 12 to 24 months. So Key Number Two is never pay late. By never I mean never.

Key Number Three

Keep your loan balances low. Paying a loan off, believe it or not, may have less of a positive effect than keeping your loan for the duration but paying it down quickly. With credit cards keeping a very minimal balance is key to increasing scores. For example if you have a credit card with a $5,000 limit and your outstanding balance is $4,900 this can hold your scores down. Conversely if you have a $100 balance on that same card you will notice an up trend in your scores. Likewise with car loans and other types of credit. Paying them off and closing them is not usually as good as paying them down and keeping them open. So Key Number Three is low balance to loan amount or credit line amount.

If You Have Questions

If you have questions about getting the best home loan to purchase or refinance a home loan in Georgia don’t hesitate to contact me. My office is in Marietta near the intersection of Windy Hill and Power’s Ferry so if you want to come by to discuss your situation and opportunities feel free to contact me to schedule an appointment. The coffee or soft drinks are on me! I specialize in Cobb County luxury home financing as well as any home for primary residence or real estate investment purchase or refinance in the north metropolitan Atlanta area of Cobb, Cherokee, Fulton, Paulding and Gwinnett.

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This is not one of those “dangerous” loans made during the sub-prime runup. In fact this loan pre-dates those loans and has performed very well over the years even though it does not require the buyer to have “skin in the game”. We’re talking about the section 502 Guaranteed Rural Home Loan available to homes in designated areas to buyers who demonstrate steady income and a good credit history.

Finding out of the home is in a designated area is simple and takes just a phone call or email. I can help you if your property search is in Georgia and it only takes a few minutes. Listen to this short audio message for more information and call me at the numbers listed all over this page and on the audio segment.

To request more information directly from me (I do not sell leads, ever) simply complete the form below or telephone me during normal business hours:

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We have to face it – there just isn’t as much credit and cash to go around today as there was a few months ago. In spite of that fact people still have to buy a home from time to time for a plethora of reasons. Some may be transferring to new locations or simply graduating, marrying and buying a home. In fact the National Association of REALTORS has a prediction of 4.8 million homes being sold this year by members and non-member agents.

Bigger Families Need Larger Homes

A few months ago, less than 3 years, it was possible for a wide range of home buyers to purchase a home without making any down payment. While some of that activity is to blame for the mortgage crisis the truth is well qualified buyers have always had access to loans which would not require as much of a down payment especially with the use of a company which insures the lender against loss. The mortgage insurance companies have been around for many years and are very good at evaluating risk to their own investors as well as the market place. True enough some of them suffered huge losses after the “bubble burst” (aka market correction) but others had been a little more cautious on the run up and therefore did not suffer as great a hardship as others.

Who does Mortgage Insurance benefit?

That’s a two sided answer. MI benefits the home buyer because it allows them to purchase a home with a much lower down payment thus retaining their liquid capital or simply to make a lower cash injection at the time of purchase. Considering the down payment on a $200,000 home at 20% would be $40,000 and MI will allow a buyer to acquire the property with a down payment of as little as $6,000 I would say that could be a great benefit to the buyer.

Mortgage Insurance also benefits the lender. In fact if the lender does their job right, and most do, if the buyer ever defaults on the loan the MI company will be responsible for indemnifying the lender according to the policy provisions. It is an absurd assumption that MI companies and lenders collude on foreclosures “just to get the home” since MI companies actually fight with the lender to do their best to keep from paying the claim!

How much does Mortgage Insurance cost?

This varies by credit score, loan amount, property type, and a couple of other factors. Today I priced a 97% loan for someone with a 680 score on a $200,000 loan in Georgia and the amount was around $200 per month. Considering that will keep $37,000 in the buyer’s pocket I would call that a real bargain!

Do I have to pay Mortgage Insurance for as long as I own the home?

Mortgage Insurance can be cancelled when the amount owed on the home is less than 80% of the current value of the property. It is up to the home owner to keep up with this and notify the MI company. Obviously an acceptable appraisal or valuation per the MI company’s guidelines will be required. Typically this is about 5 years after the purchase in a stable market.

More questions about Mortgage Insurance

I can answer your mortgage related questions about purchases in the state of Georgia. Simply use the Contact Me form or call me at my office at 770-818-4365.

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HUD has issued Mortgagee Letter 2010-28 changing the Upfront and Annual Mortgage Insurance Premiums effective with case numbers assigned on or after October 4, 2010 as follows:

Upfront Premiums

Annual Premiums

These premiums are effective with case numbers assigned on or after October 4, 2010.

For many years the Up Front Mortgage Insurance Premium, established and priced by the Federal Housing Administration, has been at 1.75% of the loan amount on purchases and non-streamlined refinances. Due to increased costs and losses in the Administration a new level for the UFMIP has been established and will go into affect on April 5, 2010.

The UFMIP is not the same as the Monthly Mortgage Insurance Premium but rather is paid in full at the time of consummation of the loan. In other words the date the final loan documents are paid and monies exchange hands.

The HUD Mortgagee Letter 2010-02, issued by David Stevens, Secretary of HUD, issued on January 21, 2010 gave notice to lenders and the public of this change. Increases on FHA insured loans include an increase to 2.25% on purchases and streamlined refinances and an increase to 2% on HOPE for Homeowners refinancers and Home Equity Conversion Mortgages also known as “reverse mortgages”.

Annual mortgage premiums, also expressed as MMI from above, will not be affected at this time. The decision to increase UFMIP only was based on the effect of raising a home owner’s debt ratio above acceptable levels by increasing their monthly housing cost.

If you are unfamiliar with FHA mortgage insurance it is exclusively to encourage lenders to make loans. FHA mortgage insurance provides lenders with protection against losses as the result of homeowners defaulting on their mortgage loans. The lenders bear less risk because FHA will pay a claim to the lender in the event of a homeowner’s default. Loans must meet certain requirements established by FHA to qualify for insurance.

Every year the United States Department of Agriculture (USDA) ?guarantees thousands of home loans to borrowers who have?an income of up to 115% of the median income for the area. Funding for the program is always uncertain and there is generally a period during which funding for the program is not available and that time usually is late in the year.

This year the dry up came a little early with an announcement sent on March 9 to participating lenders. “This message is to notify you that program funding for the Single Family Housing Guaranteed Loan Program will likely be exhausted by the end of April, 2010″, the letter reads.

Because there is no certainty when the funds will be made available the department is not issuing any statements regarding a time period.