Reverse Mortgage: The Ins and Outs of How One Works

Reverse Mortgage: The Ins and Outs of How One Works

Reverse Mortgage: The Ins and Outs of How One Works

by Aiman Abozeid 

A number of senior aged homeowners have found themselves in a unique position. They cannot qualify for a refinance because their retirement income is lower yet they have a ton of equity in their home. Thus, the reverse mortgage was born. With conventional lenders offering these types of loan FHA has now entered the market with a reverse loan.

Basic Premise of the Loan
A reverse mortgage works like its name implies. Instead of making payments to a lender, the homeowner receives money from the lender. This money can come in the form of a lump sum, a line of credit like a home equity loan or a series of regular payments sent to the lender. It is also possible to get a combo of these elements. For instance, homeowners could get a large amount up front, such as $10,000 and get the rest of the amount in equal payments over time.

Qualifying for the Loan
Qualifying for a reverse mortgage is actually quite simple. There is no credit check and no income requirements. As long as borrowers meet these few guidelines, they should be approved for the loan:

• The homeowner must be a minimum of 62 years old
• The person must currently live in the property as their primary home.
• The person must own the home free and clear or have very small balance on their current mortgage.

How is the Loan Repaid?
Most people wonder how the loan will be repaid. That part is also simple. If the home is ever sold, the sale amount will be used to pay off the mortgage. Likewise, if one of the heirs decides to refinance the loan and live in the home, then the new loan will pay off the reverse mortgage.

For program information, visit our reverse mortgage page on our main site. To see if you qualify, contact me below or apply online!

Importance of the Appraisal

Importance of the Appraisal

Over the past 5 years many areas in the country have seen sharp declines in home values. Thankfully, that trend is starting to reverse. For this reason, most lenders are placing a lot of scrutiny on an appraisal for people considering a refinance. The appraisal is designed to ensure that the value assigned to the home matches the local market.

Basic Definition

The definition of an appraisal is that it represents the market price of a home. This is the estimated price which a seller and buyer would agree upon in a arm’s length sale. Arm’s length means the buyer and seller are not related to one another and undertaking the transaction on their own free will.

Each Home is Unique

Although two homes may sit beside each other in the same neighborhood, they could be vastly different. One may have a basement while the other is built on a concrete slab. One home may have a swimming pool and the other home may not have a yard big enough for a large car. An appraiser will look at the subject home and take down lots of notes about the size and features of similar homes in the area. The important key is that the subject home is compared to similar homes that have recently sold, usually in the last 6 months. This indicates what the market will bear for that kind of home in that same area.

Total Report

Once the appraisal is complete, the appraiser will compile a report and submit it to the lender. This report will have notes about the home’s location, general comments about the area and the detailed info about the home. Items like original build date, square footage and location of the home on a map will be listed. In addition, the other homes used in the appraisal, known as comparable sales, will be listed in detail on the map and in the final report.


For additional information, visit our refinance page on our main site or view our current mortgage rates. To see if you qualify, contact me below or apply online!
by Aiman Abozeid

Welcome to Wisconsin Real Estate with Lisa Bear

Thank you for visiting.  Please feel free to contact me for any of your real estate needs including an online market if you are a seller, or finding a home if you are a buyer. My real estate focus in the  Waukesha County, Milwaukee County, Lake Country, Jefferson County, Dodge County and Washington County areas.  I have my IRES designation (International Real Estate Specialist) so I can assist you with all your real estate needs in Wisconsin, the USA or anywhere in the WORLD!
When you are seriously looking or just browsing at real estate in Wisconsin, I am a great resource to help you with all your needs and questions, whether a first time home buyer, relocating to or from the beautiful LAKE COUNTRY area, looking to invest or explore foreclosure opportunities or just thinking ahead to the future.

Lisa Bear of RE/MAX (262-893-5555) is an experienced real estate agent in Waukesha County and the entire Milwaukee Metro area including:

The prospering communities of Waukesha County including Delafield, Waukesha, Oconomowoc, Pewaukee, Waukesha, Sussex, Wales, New Berlin, Dousman, North Prairie, Mukwonago, Chenequa, Menomonee Falls, Brookfield, Elm Grove, Okauchee, Eagle, Muskego and Merton.
Great municipalities in Milwaukee County including Milwaukee, South Milwaukee, Wauwatosa, Hales Corners, Greenfield, Glendale, Franklin, Bayside, Brown Deer, Cudahy, Fox Point, Greendale, Shorewood, Oak Creek, St. Francis, West Allis and Whitefish Bay.
The hometown favorites of Washington County, Jefferson County and Dodge County including Watertown, Hartford, West Bend, Germantown, Jackson, Richfield, Ashippun, Lake Mills, Jefferson, Johnson Creek, Slinger and Erin.

Real Estate in Wisconsin is an excellent investment!
 

 "HELPING YOU MOVE IN THE RIGHT DIRECTION"

Where Are Rents Headed?

Where Are Rents Headed?

 Where Are Rents Headed?

Where Are Rents Headed?

Posted: 13 Nov 2012 04:00 AM PST

When deciding whether or not to buy a home, one consideration will be the cost of alternative housing options. Renting an apartment is one such alternative. Where are rental prices heading over the next few years?
Rental prices usually increase by about 3 percent annually. Trulia just released their Trulia Rent Monitor where they revealed that rental prices have increased dramatically in the last year.

“Nationally, rent gains continued to outpace home price increases in October, rising by 5.1 percent.”

Based on the concept of supply and demand, we believe rental prices will continue to substantially increase over the next few years. The long-run 30-year average increase in rental households is 200,000 each year. Over the next few years, those numbers will more than double to over 500,000 each year. Freddie Mac in their latest report, Multifamily Research Perspectives, projects housing demand going forward.

“Given assumptions consistent with economic growth slightly slower than long run averages, multifamily demand is likely to be in the range of 1.7 million net new renter households between now and 2015.”

The cost of owning a home will begin to increase as both prices and mortgage rates are expected to inch up in 2013. Perhaps now is the perfect time to lock in your long term housing expense by purchasing your own home.

FHA, VA and Rural Housing Loans


FHA, VA and Rural Housing Loans

FHA, VA and Rural Housing Loans

by Aiman Abozeid 

FHA, VA and Rural Housing Loans in Wisconsin 

No down payment home loans enable those who have not been able to save for a down payment to realize the dream of home ownership. We offer two mortgage programs still available with no money down 100% financing and a third that only requires 3.5% down for all Wisconsin residents:

• FHA Loans (requires 3.5% down)
• VA Home Loans
• USDA Rural Housing Loans

FHA Loans:
FHA loans are federally insured loans that allow buyers who have little or no credit history, coupled with limited funds available for down payment, to obtain a mortgage with a great interest rate and low monthly payments. FHA home loans are also available for first time buyers. FHA Loans are assumable and streamline refinancing to lower the interest rate is available.

VA Loans:
VA loans continue to be eligible for 100% financing, of course only those few borrowers with a VA Certificate of Eligibility are able to qualify for this loan. In addition to no down payment, VA home loans have the added benefit of not requiring PMI or private mortgage insurance. VA mortgage loans are guaranteed by The Department of Veterans Affairs, but are made by private lenders to eligible veterans for the purchase of a home. VA loans offer up to 100% financing on the value of a home.

Rural Housing Loans:
Rural home loans are optimal for first time homeowners in approved Rural Housing Service areas. USDA rural housing loan programs allow qualified homebuyers to get loans with minimal closing costs and no down payment. The purpose of this loan program is to enable eligible low and moderate income (up to 115 percent of the Area Median Family Income) rural residents to acquire modestly priced housing for their own use as a primary residence. The Guarantee Rural Housing Loans also have flexible credit standards, expanded qualifying ratios, no maximum purchase price limits and generous income limits. Closing costs, prepaids and lender required repairs can be rolled into the loan amount up to 100% of the appraised value (not the purchase price).

A no money down mortgage loan is an excellent choice for a home buyer, who may not have enough money for the standard 20% down payment.

Visit our website at http://www.madisonmortgageguys.com for additional No money down FHA, VA and Rural Housing loan program information.

Old Collection Accounts Can be Ignored When Applying for FHA Mortgage


Old Collection Accounts Can be Ignored When Applying for FHA Mortgage

Old Collection Accounts Can be Ignored When Applying for FHA Mortgage

by Aiman Abozeid on November 9, 2012 · 0 comments

Some borrowers have re-established their credit and are making the right moves to prepare themselves for a home purchase. At one time, these people would be held back from buying a home due to old collection accounts appearing on their credit report. However, that issue has been resolved for FHA loans.

Old Rule
The FHA rule stated that if a borrower had a collection account, or a disputed account, with a balance of more than $1,000 then the person could not be approved for an FHA loan. This was a death blow to many borrowers who had fallen on hard times and wound up with a few bad accounts or had suffered through some medical problems.

In order to be eligible for FHA financing the debt had to be paid off completely or the borrower had to arrange a payment plan with the creditor. Often times the new debt payment would negatively impact debt to income ratios for the borrower and eliminate them from FHA consideration.

New Rule
Now, this rule has been rescinded. In April of 2012 it was proposed to remove the rule but then delayed. Mortgage lenders, real estate agents and other interested parties pleaded with FHA to put the rule in place. Finally, in June of 2012 the administrators of FHA agreed to take the rule off the books.

This is great news for many potential borrowers. People that have made strides to pay their bills on time, reduce their credit card debt and maintain a stable employment history for the past 2 years now have even more reason to seek out an FHA mortgage for their home purchase.

View our FHA Loan program page for additional information. If your house needs rehab work, be sure to check out the FHA 203k program. To see if you qualify, contact me below or apply online!

Cost of a Home: Impact of Interest Rates

Cost of a Home: Impact of Interest Rates

by The KCM Crew on October 2, 2012 

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The buyer should always look at the COST of a home, not just the PRICE. The cost is determined by the price and the mortgage interest rate which is available at the time. Below is a list of the interest rates over the last ten years and the impact they have on a $100,000 mortgage payment.

5 Reasons to Sell Now

5 Reasons to Sell Now

by The KCM Crew on September 24, 2012 · 4 comments

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Many sellers feel that the Spring is the best time to place their home on the market as buyer demand increases at that time of year. However, the Fall and Winter have their own advantages. Here are five reasons to to sell now.

Only Serious Buyers Are Out

At this time of year, only those purchasers who are serious about buying a home will be in the marketplace. You and your family will not be bothered and inconvenienced by mere ‘lookers’. The lookers are at the mall or online doing their holiday shopping.

There Is Far Less Competition

Housing supply always shrinks dramatically at this time of year. This year will be a little different as some of the distressed properties being liquidated by the banks (in the form of foreclosures & short sales) will enter the market. However, for those buyers looking for a non-distressed property, the choices will be limited. Don’t wait until the spring when all the other potential sellers in your market will put their homes up for sale.

The Process Will Be Quicker

One of the biggest challenges of the 2012 housing market has been the length of time it takes from contract to closing. Banks have been inundated with both purchase and refinancing loan requests. Both of these will slow in the winter cutting timelines and the frustration these delays cause both buyers and sellers.

There Will Never Be a Better Time to Move-Up

If you are moving up to a larger, more expensive home, consider doing it now. Prices are projected to appreciate by over 15% from now to 2016. If you are moving to a higher priced home, it will wind-up costing you more in raw dollars (both in down payment and mortgage payment) if you wait. You can also lock-in your 30 year housing expense with historically low interest rates right now. There is no guarantee rates will remain at these levels in years to come.

It’s Time to Move On with Your Life

Look at the reason you decided to sell in the first place and decide whether it is worth waiting. Is money more important than being with family? Is money more important than your health? Is money more important than having the freedom to go on with your life the way you think you should?
You already know the answers to the questions we just asked. You have the power to take back control of the situation by pricing your home to guarantee it sells. The time has come for you and your family to move on and start living the life you desire. That is what is truly important.

Discover REAL ESTATE in Wisconsin, Lisa Bear

Bathroom Improvements to Draw in Buyers

Bathroom Improvements to Draw in Buyers

Bathroom Improvements to Draw in Buyers


 by Alicia Murphy - 15 August 2012

For many homeowners, keeping their home in tip-top shape is a task that requires constant attention. Over the years the features that were once so en-vogue in your home become outdated and unattractive, not only to you and your family but also to potential buyers. One room where a little updating can go a long way is your bathroom.

© Wichittra Srisunon – Fotolia.com

Making The Master Masterful
The master suite isn’t really sweet without an en-suite. In particularly for those who own an older home many master bedrooms weren’t originally designed with a bathroom, and those that were often got a measly half bath. For today’s homebuyer in many markets a half bath can be considered sufficient while in other markets this simply wouldn’t do.
Before making costly changes check with a local REALTOR® to see what master bathroom features are trending in your area. If it is customary for homes in your area to have an en-suite you may want to consider adding one if your home is lacking that feature as this can be a huge turnoff for buyers. Fortunately bathroom improvements often carry a good rate of return so you’ll not only increase your home’s appeal to buyers but also increase your value.

Small Changes with BIG Impact
Many bathrooms suffer from dating in two key ways: wallpaper and old fixtures. If your bathroom suffers from wallpaper circa 1992 coupled with some nice gold fixtures chances are that it won’t be a top selling feature with buyers. By simply stripping the wallpaper and repainting the walls in a more neutral color you’ll move mountains. Fixtures such as drawer/cabinet pulls, towel rods, water faucets and lighting implements can be purchased for just a few hundred dollars. Adding some storage to a smaller bathroom is also a great way to maximize the space and buyer appeal.
Just remember that bathrooms are an important room to homebuyers. Updating or increasing this space not only increases your home’s value, it also gives it an edge on competing properties on the market.

We Can't Get A Mortgage, What Are Our Other Options? | REALTOR.com® Blogs

We Can't Get A Mortgage, What Are Our Other Options? | REALTOR.com® Blogs

We Can't Get A Mortgage, What Are Our Other Options? | REALTOR.com® Blogs

We Can't Get A Mortgage, What Are Our Other Options? | REALTOR.com® Blogs

we Can’t Get A Mortgage, What Are Our Other Options?

 
Q: My wife and I are looking for a house but can’t get a mortgage with our credit rates. How do I go in to a rent to own home? We have two kids and live in a townhouse, now it’s too small for us. What can I do to get a house?
–Anonymous, Clairton, PA

A: Hi Ryan,
I would suggest you sit down with a local lender or attend some first time home buyer classes if they are offered in your community. A lender can review your financial picture and help you come up with a plan to reach your goal. It might take some time, so be patient, you will get there.
Rent to own is usually not a good option for most first time home buyers as usually you have to come up with non refundable option money, which in this market would be better put to use as a down payment (in my opinion)
Teri Andrews Murch is a Realtor® with Lyon Real Estate in Auburn, CA.

A: The only thing you can do at this point is to find an owner that is willing to do a lease with option to purchase. Normally, in this area I am in, the seller normally wants a large payment up front to do so, but in that area, maybe they will just do a first and last like you do with rent. An agent there should be able to help you get started. It may take time to find someone with enough equity in their home that they can do this though.
Lana Lavenbarg is a Realtor® with RE/MAX Ideal Brokers, Inc. in Grants Pass, OR.

A: Rent to own, or lease to own, or rent w/options to buy (essentially all the same) is not the only option to becoming a homeowner. Also, if you did go that route, the options are very limited. Most owner who want to sell their homes are in a position where they have to sell, they need the money to move on so they’re not to keen on renting or leasing their properties. Before exploring the rent to own option, consult with a local lender in your area, get some recommendations from friends who’ve recently bought a house. The Lender will set you on the right path for becoming a homeowner, it may take a few months or even a couple years before you’re ready to buy, but it may also be the very best option and in the meantime you can begin working on saving a 10-20% downpayment.

Maria Jeantet is a Realtor® with Coldwell Banker C & C Properties in Redding, CA
Are you interested in having a qualified REALTOR answer your questions? Click through to Ask a 
REALTOR® now.
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Related posts:

1. How Do I Do Rent To Own In San Antonio?
2. Lease Options Make For Viable Options
3. How Do I Find A Rent-To-Own Home In North Carolina?
4. How Do I Rent To Own In Phoenix, Arizona?
5. Can We Qualify For A Mortgage Without A Down Payment?

Read more: We Can't Get A Mortgage, What Are Our Other Options? | REALTOR.com® Blogs

RE/MAX What Moves You? Grand Prize Winner.mov

Check out the MLS for homes for sale: www.wihomes4sale.comWisconsin Real Estate - Please feel free to call me for any of your real estate needs, including an online market if you are a seller, or finding a home in Waukesha County, Jefferson County, Dodge County, Washington County, Milwaukee County or any county in Wisconsin. Real Estate is an excellent investment!When you are looking at buying a Waukesha county home , real estate agent, finding a Waukesha real estate agent, finding a Delafield, Chenequa, Pewaukee, Oconomowoc, Hartland, Waukesha, Wales, Mukwonago, Wales,New Berlin, Brookfield, Dousman, Eagle or any other of the great municipalities in Waukesha County,Wisconsin.If looking for LAKE COUNTRY LIVING on one of Waukesha County's great lakes: Nagawicka, Pewaukee, Pine, Beaver, Okauchee, Moose, North, Oconomowoc,I would be glad to help you in any relocation to Waukesha County, or help in buying a home in Waukesha County, or selling a home in Waukesha County. I strongly encourage any seller that is looking to market their property this year to get a sound feeling for what it is worth. Real estate in Waukesha County, Real Estate in Wisconsin is now an excellent investment, prices of superb, selection is great, and the rates are outstanding.When you are looking at buying a Jefferson County home , or DODGE County real estate agent, finding a Watertown real estate agent, finding a Jefferson, Johnson Creek, Fort Atkinson, Ixonia, Lake Mills, Hartford, Ashippun, Slinger, Beaver Dam,or any other of the great municipalities in Jefferson County or Dodge,Wisconsin.Please feel free to call me for any of your real estate needs, including an online market if you are a seller, or finding a home in Waukesha County, JEFFERSON County, Washington County, Dodge County, Milwaukee County. Real Estate in Waukesha County is an excellent investment! 262-893-5555 Office/Cell888-893-5534 Direct Fax Proudly Serving Southcentral and Southeastern Wisconsin with Referrals from my Clients Look for properties across Wisconsin on MLS at http://www.wihomes4sale.com Lisa bear southeastern wisconsin waukesha county lake country lakes "HELPING YOU MOVE IN THE RIGHT DIRECTION"Wisconsin Real Estate, Waukesha County Real Estate, Waukesha County Real Estate Agents, Waukesha County, Waukesha County Lake Homes, Waukesha County Life, Buying A Home In Waukesha County, Waukesha County Lake Homes, Waukesha County Life, Buying A Home In Waukesha County, Waukesha County Commercial Real Estate, Waukesha Real Estate Agents, Waukesha County Lake Homes For Sale, Real Estate Waukesha County Wisconsin, Waukesha County Realtors, Oconomowoc Wisconsin Real Estate, Delafield Wisconsin Real Estate, Hartland Wisconsin Real Estate, Pewaukee Wisconsin Real Estate, Oconomowoc Wisconsin Real Estate Agents, Delafield Wisconsin Real Estate Agents, Hartland Wisconsin Real Estate Agents, Waukesha County Real Estate Companies, Search The MLS, Waukesha County Wisconsin Real Estate, REMAX AGENT

REMAX and WATERTOWN RIVERFEST - Win a free hot air balloon ride!

REMAX and WATERTOWN RIVERFEST - Win a free hot air balloon ride! 

A wonderful free community event  - WATERTOWN RIVERFEST

For just a year over of a quarter-century, Watertown's Riverfest has been bringing world-class musical entertainment to green and shady Riverside Park. This year's 26th annual lineup, which runs from Thursday, August 9 through Sunday, August 12, promises more great music for the thousands who now make the event an annual summer rite. 

Every year we attempt to have a REMAX balloon flight in conjunction with Watertown’s Riverfest. This year it is scheduled for Friday evening, August 10^th.

Be one of 2 lucky people to fly with the pilot - contact me if you are available to "fly" next Friday evening and are interested! All entries need to be in by Monday, the 6^th.

The winner will be drawn at the RIVERFEST  just prior to the launch.

REMINDER - You  need to be available the date and time of the launch and it is fully subject to weather.






Click here to see the Watertown Riverfest SCHEDULE OF EVENTS

Welcome to Wisconsin Real Estate with Lisa Bear

Thank you for visiting.  Please feel free to contact me for any of your real estate needs including an online market if you are a seller, or finding a home if you are a buyer. My real estate focus in the  Waukesha County, Milwaukee County, Lake Country, Jefferson County, Dodge County and Washington County areas.  I have my IRES designation (International Real Estate Specialist) so I can assist you with all your real estate needs in Wisconsin, the USA or anywhere in the WORLD!

When you are seriously looking or just browsing at real estate in Wisconsin, I am a great resource to help you with all your needs and questions, whether a first time home buyer, relocating to or from the beautiful LAKE COUNTRY area, looking to invest or explore foreclosure opportunities or just thinking ahead to the future.

Lisa Bear of RE/MAX (262-893-5555) is an experienced real estate agent in Waukesha County and the entire Milwaukee Metro area including:

The prospering communities of Waukesha County including Delafield, Waukesha, Oconomowoc, Pewaukee, Waukesha, Sussex, Wales, New Berlin, Dousman, North Prairie, Mukwonago, Chenequa, Menomonee Falls, Brookfield, Elm Grove, Okauchee, Eagle, Muskego and Merton.

Great municipalities in Milwaukee County including Milwaukee, South Milwaukee, Wauwatosa, Hales Corners, Greenfield, Glendale, Franklin, Bayside, Brown Deer, Cudahy, Fox Point, Greendale, Shorewood, Oak Creek, St. Francis, West Allis and Whitefish Bay.

The hometown favorites of Washington County, Jefferson County and Dodge County including Watertown, Hartford, West Bend, Germantown, Jackson, Richfield, Ashippun, Lake Mills, Jefferson, Johnson Creek, Slinger and Erin.

Real Estate in Wisconsin is an excellent investment!
 

 "HELPING YOU MOVE IN THE RIGHT DIRECTION"

5 Home Features Young Home Buyers Love | ForTheBestRate.com

5 Home Features Young Home Buyers Love | ForTheBestRate.com

5 Home Features Young Home Buyers Love

Selling a home can be contingent on the property's value, condition and desirable features. Depending on the type of home buyer, there are certain features that may help seal the deal.
Here's a list of some popular home options for the younger home buyer.

1. Move-In Ready
A lot of young buyers are busy starting careers or families and will appreciate a home that doesn't need a lot of transition time.

2. Low-Maintenance
Most young buyers are also first-time buyers, which means they won't have much experience in home maintenance. They'll be attracted to a home that runs smoothly, and doesn't require an extensive knowledge of plumbing, electricity or construction.

3. Great For Entertaining
Young, hip homeowners often enjoy an active social life, which means they will be on the lookout for a home that's conducive to entertaining. An open kitchen or a large, screened-in porch are a few great examples.

4. Modern appliances
The generation of young home buyers who are hitting the market now are of the information age. They want "smart" technology, and that doesn't just apply to their phones. High-tech home appliances are big selling points, especially to younger buyers.

5. Convenient location
A home that's situated close to shopping, dining and entertainment is an attractive option for any buyer - but young home buyers will be especially drawn to good locations.

Keep in mind that every home buyer is different. Despite the common similarities in certain buyers, this list may not apply to everyone.

Find information on mortgages that are popular with first time buyers such as FHA loans and USDA rural housing loan programs.

Did You Know? Basic Mortgage Traps and Pointers

Did You Know? Basic Mortgage Traps and Pointers

By: Deb Conrad

Mortgage Basics

What is a mortgage? In legal terms, a mortgage is a conveyance of a security interest in real property to secure the payment of a debt, typically evidenced by a mortgage note. The note imposes personal liability for the amount of the note on the person or persons who sign the note. The mortgage is a lien on the property.

From a REALTOR^®’s perspective, a mortgage may be viewed in a variety of ways: as that “necessary evil” that the buyer typically needs to arrange so that the buyer can purchase a property, or maybe as part of the long lists of items printed in a title insurance commitment, or the major obstacle in the way of a smooth short sale. There is no end to the trouble that mortgage loans can cause, but REALTORS^® can’t conduct a successful real estate practice without them!

There are two basic varieties of mortgages: fixed-rate and adjustable-rate mortgage (ARM). Fixed rate payments are steady and predictable, while the ARM payments start at a much lower rate yet pose the risk of dramatically higher payments later on. Beyond that basic distinction, mortgages comes in a whole array of varieties including FHA loans, VA loans, interest-only loans, home equity credit loans, Rural Development loans, reverse mortgages and so on.

For those embarking on the quest for a mortgage loan, or assisting a party in that endeavor, there are many traps for the unwary. The following practical pointers may help them steer clear of pitfalls, minimize the pain and derive the optimum benefits from the mortgage loan.

Consumer Misconceptions 

Buyers, particularly first-time buyers, may often have misconceptions about the mortgage loan process, including the following:

1. Mortgage lenders are required to give borrowers the lowest rate available. That would be wonderful, but currently there are no federal or state laws requiring a mortgage lender to give a borrower the best rate available.
2. The principal balance will go down each month as long as the borrower makes the required monthly payments. While this is true with a fixed-rate mortgage, with some option-ARMs and interest-only loans with teaser rates, for instance, the balance may not fall and instead may go up. This is the result of negative amortization that occurs when monthly payments cover only a part of the monthly interest owed and none of the principal. The interest not paid is added to the principal balance and thus the balance due actually increases.
3. The monthly payment will stay the same from month to month. Unfortunately a borrower’s monthly payments could increase dramatically, if the borrower does not have a fixed-rate mortgage loan. Interest-only loans and option-ARMs feature lower initial payments but also carry a significant risk of payment shock – a large and sudden increase in the monthly payment amount when, for example, the interest rate adjusts or the interest-only period ends.
4. If the lender is willing to lend the money for the home, then the borrower must be able to afford it. While reputable mortgage lenders will not lend beyond a person’s means, some others will. They may not consider the borrower’s ability to repay the loan over the long haul.
5. Discounted interest rates are a good deal because they lower the monthly payments. Paying “discount points” or a “discount fee” in return for a lower interest rate may be beneficial in the short term, but the lower interest rate may only last until the first payment amount of interest rate adjustment.

Mortgage Practice Pointers

Lock-In Policy 
Savvy consumers ask the lender to “lock your loan,” which is basically an agreement from the lender that states that the loan applicant is entitled to a certain interest rate through a certain closing date, and get the lock in writing. Most companies have a rate lock form that spells everything out. If the lock expires, any changes will not be to the applicant’s benefit and the applicant will likely need to accept a higher rate. The lender generally cannot increase the loan fees to cover the cost of the higher rate.

PMI Tips
If borrowers put down less than 20 percent on a house, they should expect to be required to purchase private mortgage insurance (PMI), which protects the lender in the event the borrower defaults on the mortgage loan. That means the borrower will have to pay PMI premiums, roughly $50 to $100 per month on average, in addition to the monthly mortgage payments.

Getting the PMI tax deduction    

Starting with loans issued or refinanced in 2007, and continuing through 2011, borrowers can deduct each year’s premiums paid on PMI for the principal residence and for a non-rental second home. Unless it is extended again, the deduction won’t be available beyond the 2011 tax year.

In general, the borrower can deduct PMI premiums in the year paid if the borrower itemizes deductions on his or her income tax return. However, if the borrower prepays PMI premiums for more than one year in advance, the borrower can deduct only the part of the PMI payment that will apply to that year. Rules can vary for mortgage insurance provided by the FHA, VA and Rural Housing Service, so it is always best to consult a tax adviser with any questions. 

The deduction begins to phase out once the adjusted gross income reaches $100,000 ($50,000 for married filing separately) and disappears entirely at an AGI of $109,000 ($54,500 for married filing separately). Depending on the specific circumstances, this can potentially save a few hundred dollars each year.

For more information, see the Internal Revenue materials at www.irs.gov/publications/p936/ar02.html.

PMI cancellation  

Canceling the PMI as soon as a borrower is entitled can save thousands of dollars. Under the Homeowners Protection Act (HPA) of 1998, when a home is purchased after 1999, the lender is required to automatically cancel the PMI once the mortgage is paid down to a 78 percent (0.78) loan-to-value ratio (LTV), or once the homeowner has 22 percent equity. To figure the LTV, divide the outstanding loan amount by the original price of the home.
When the LTV reaches 80 percent, the homeowner can submit a written request to the lender to end the PMI. This can be a lengthy process and the lender may require an appraisal or other property valuation to confirm the property has not declined in value. See the Federal Reserve materials at www.federalreserve.gov/boarddocs/caletters/2004/0405/CA04-5Attach1.pdf for more information.

Mortgage Terminology 101

Adjustable-Rate Mortgage (ARM): A mortgage where the interest rates are tied to an interest-rate index. If the index rises or falls, the mortgage interest rate and the monthly payment amount go up or down accordingly.

Debt-to-Income Ratio (DTI): This ratio represents monthly fixed expenses divided by gross monthly income, which is the income before taxes and deductions. The lender uses this ratio to help determine how much they will lend a potential borrower. If the percentage is greater than 36, the ratio could negatively impact the ability to obtain a mortgage loan because the lender considers that the borrower has too much debt.

Interest-Only Mortgage: The borrower is required only to make interest payments for a specified number of years. When this initial period expires, the mortgage may begin to fully amortize and monthly payments of principal and interest make the payment amount increase significantly.

Loan-to-Value Ratio (LTV): This ratio compares the value of the loan with the fair market value of the home.

Negative Amortization: If the monthly payment amount does not cover the interest owed each month, sometimes as the result of a teaser rate, the unpaid interest becomes part of the principal. Thus, the principal balance increases and may eventually exceed what was borrowed in the first place.

Option-ARM: This loan typically offers the borrower three different monthly payment options: 1) payments of principal and interest, 2) interest-only payments, or 3) minimum monthly payments that don’t cover the monthly interest such that the unpaid interest is added to the principal loan amount. To ensure that the loan is repaid within the agreed-upon time, these loans “recast” after a set number of years (usually three or five) and monthly payments increase significantly so that the loan fully amortizes.

Payment Shock: Payment shock is a large and sudden increase – sometimes as much as double or triple – in monthly payments, often seen with interest-only loans and option-ARMs.

Private Mortgage Insurance (PMI): PMI is required by lenders when a borrower has less than 20 percent down. PMI protects the lender from default losses in the event a loan becomes delinquent.

Teaser Rates: These are low rates that lenders offer to make mortgage products more attractive. When the “teaser rate” period expires, the lender raises the interest rate for the remainder of the loan period.

Types of Mortgage Loans

Rural Development: www.rurdev.usda.gov/HAD-HCFPLoans.html
FHA loans: www.hud.gov/buying/loans.cfm [The Federal Housing Administration (FHA), which is part of HUD, insures the loan, so the lender can offer the borrower a better deal, as well as low down payments, low closing costs and easy credit qualifying.]
VA loans: www.benefits.va.gov/homeloans
Home Equity Credit Lines:www.ftc.gov/bcp/edu/pubs/consumer/homes/rea02.shtm and www.federalreserve.gov/pubs/equity/equity_english.htm [A home equity line of credit is a form of revolving credit in which the home serves as collateral.]
Reverse mortgages:www.ftc.gov/bcp/edu/pubs/consumer/homes/rea13.shtm [Those 62 years or older can convert part of their home equity into cash without selling.]
Interest-Only and Option-Payment ARMs: www.fdic.gov/consumers/consumer/interest-only/index.html

Published: March 07, 2012

Homeownership: The American Dream (Part 2)

Homeownership: The American Dream (Part 2)

Homeownership: The American Dream (Part 2)

by The KCM Crew on July 19, 2012 ·

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A major benefit to homeownership is community. There is a greater sense of community among homeowners than there is with renters. Studies have shown that homeowners have a higher participation in local volunteer activities; participate more in local political activities and organizations; have higher voting rates; and are more involved in self-help activities (like the PTA and neighborhood crime watches) than those who rent. Homeowners do not move as frequently as renters, therefore providing more neighborhood stability. This helps reduce crime and support neighborhood upkeep and value.

Let’s look at homeownership as an investment. In 1998 the average Homeowner’s net worth exceeded that of renters by 31 times. In 2001 it was 36 times and eventually in 2007 it was all the way up to 46 times that of renters. Even in these toughest times, the wealth of the homeowner is still over 30 times that of renters. Now, homeownership isn’t about a guaranteed financial short-term return – the market goes up, down and back up again. We have to be prepared for the long-term and a key component to wealth is homeownership.  In Pew Research Center’s The Home as an Investment Survey, 81% of Americans agree that buying a home is still the best long-term investment a person can make.

There’s also the aspect of an educational investment. United States Immigrants all talk about home ownership because they want a better education for their children. It’s proven that children of homeowners achieve greater math and reading scores, they have lower high school dropout rates, and more years of schooling by the age of 25.

Not to mention there’s also a greater social network among homeowners than renters. You have a built in support system of neighbors and friends. You know the local merchants and they know you. You have that support system for you and your family – and it’s there for life.

There you have it. You now know the benefits to homeownership and the American dream.

Welcome to Wisconsin Real Estate with Lisa Bear

Thank you for visiting.  Please feel free to contact me for any of your real estate needs including an online market if you are a seller, or finding a home if you are a buyer. My real estate focus in the  Waukesha County, Milwaukee County, Lake Country, Jefferson County, Dodge County and Washington County areas.  I have my IRES designation (International Real Estate Specialist) so I can assist you with all your real estate needs in Wisconsin, the USA or anywhere in the WORLD!

When you are seriously looking or just browsing at real estate in Wisconsin, I am a great resource to help you with all your needs and questions, whether a first time home buyer, relocating to or from the beautiful LAKE COUNTRY area, looking to invest or explore foreclosure opportunities or just thinking ahead to the future.

Lisa Bear of RE/MAX (262-893-5555) is an experienced real estate agent in Waukesha County and the entire Milwaukee Metro area including:

The prospering communities of Waukesha County including Delafield, Waukesha, Oconomowoc, Pewaukee, Waukesha, Sussex, Wales, New Berlin, Dousman, North Prairie, Mukwonago, Chenequa, Menomonee Falls, Brookfield, Elm Grove, Okauchee, Eagle, Muskego and Merton.

Great municipalities in Milwaukee County including Milwaukee, South Milwaukee, Wauwatosa, Hales Corners, Greenfield, Glendale, Franklin, Bayside, Brown Deer, Cudahy, Fox Point, Greendale, Shorewood, Oak Creek, St. Francis, West Allis and Whitefish Bay.

The hometown favorites of Washington County, Jefferson County and Dodge County including Watertown, Hartford, West Bend, Germantown, Jackson, Richfield, Ashippun, Lake Mills, Jefferson, Johnson Creek, Slinger and Erin.

Real Estate in Wisconsin is an excellent investment!

 

 "HELPING YOU MOVE IN THE RIGHT DIRECTION"