What are property requirements?
Disclaimer: As a result of fast changing mortgage rules and underwriting guidelines, this document is for your reference only. AAXY LLC dba Austin First Mortgage and all of its loan officers/staff do not provide any direct or implied warranty of accuracy of this document. Please consult your loan officer regarding your specific case. The lenders/investors we use to provide the most competitive rate/cost DO require that the property in the transaction meet their requirements. Below are property requirements to qualify for our best deal. If your property does not meet our requirement below, please contact our loan officer who may find a lender/investor that can accept the property: By default, all our rate quotes (GFE, TIL) assume the subject property is a normal acceptable detached single family house. Please tell the loan officer if the subject property in a loan application is not a detached single family house and write it down on the good faith estimate and loan application. Single/multi-family residences located on a lot no more than 10.00 acres. The property is in or above average condition. In some case, it may go up to 20 acres. Please discuss with a loan officer if the lot size is more than 10 acres. The property must be in average or above condition and all structure, equipment, appliances are functionally work and in normal condition. All repairs/defects (usually be found by an appraiser, home inspector, seller disclosure or other resources) must be repaired/fixed/finished before the final approval and closing unless the defect is obvious minor and not affect livability, safety and value. Lender may accept an explanation letter from a professional, (inspector, appraiser, engineer, etc), certifying that no repairing of such a defect does not affect the safety and livability and the property value as well. The property must be appraised with value to support the loan with recent similar sales in the same market area. The appraiser must be in compliance with HVCC. That means in almost all cases, the appraiser must be selected by the lender/investor appointed appraisal Management Company. The property is appraised with value to support the loan. As the new rule HVCC in force on May 1st, 2009, borrower or loan originator can not order appraisal from an individual appraiser. All appraisal orders must go through lender approved management companies, or AMCs. AAXY LLC dba Austin First Mortgage has no affiliation with any appraisal firm. It is violate law/regulation to instruct the appraiser to get a certain value. Condo or Townhouse: If the property is a condominium or Townhouse, including some detached condominium, please ask home owner association manager to fill a condo form to let lender review. – please contact us for Condo Questionnaire form Condos must be Fannie Mae approved at the time of loan application in order to qualify. Here is a link where you can check if the property is on the approved list: https://www.efanniemae.com/syndicated/documents/dps/condopud/TX.pdf Townhomes/attached single family homes, may qualify if the HOA and home owners carry appropriate insurance. 2-4 units may qualify with a slightly higher rate/closing cost. 2-4 units do not qualify as 2nd homes nor Texas primary home Cash out 50(a)(6) loans. The below Properties are Unacceptable Single/multi-family residences located on a lot more than 20.00 acres. Manufactured house. Leasehold estates, cooperatives, working farms, mobile homes. Soundness, or habitability of the property or that adversely affects the financial solvency of the HOA. Five or more units. Time-Shares. Unusual/unique properties. Properties zoned agricultural but located in a rural area. (This does not include properties zoned “Residential-Agricultural” that meet lender other appraisal requirements) Properties zoned EFU (Exclusive Farm Use), which requires an income-producing subject. Properties in fair/poor condition as noted by the appraiser. Properties with empty pools (must be filled with water or dirt and photos required). Properties with pools must not have the pools located less than three feet from the structure nor a distance that is unacceptable to county code. Properties with below ground oil tanks that are not in use. Properties with spring-fed water as the only source. Properties located in areas of environmental contamination. Properties that have windows with bars without the safety releases in rooms without a secondary exit. Properties with doors leading out on the second story with an incomplete deck, without meeting county code requirements. Properties currently listed for sale or which have been listed for sale within the last six months prior to the loan application and the transaction is for a refinance. Properties that have more than one parcel and the additional parcel could be subdivided and built upon. The loan application is cash out and current owner own the property less than 6 months. The application is for a Texas (a) (6) refinance(Cash out refinance) and the property has a Texas 50(a)(6) lien closed in last 12 month. This applies to the borrowers’ primary home only. If the property has a Texas (a) (6) loan (Texas cash out or Texas home equity loan) and pay off that loan is needed, the property is not qualify for a rate/term refinance. This applies to the borrowers’ primary home only.
How are rates/costs decided?
How does a mortgage loan originator decide the rates and the closing cost? Please read this article, you will learn how the mortgage wholesale system works. How a Mortgage Loan be priced?
What are APR and TIL?
When a borrower shopping a mortgage, compare two quotes by just looking APR may get a wrong result. Let’s understand what is APR, Rate and some terms. All we talk here are about conventional mortgage. Interest Rate (Rate): Interest rate is the rate showing on Good Faith Estimate. Interest Rate is a number that the lender used to calculate how much to charge the borrower for using the money. For a mortgage loan, the borrower will pay the lender every month: Interest payment = Rate * Balance / 12. The balance is the loan principal balance at the time the interest is calculated. Usually is before the monthly principal payment applied. The first and last month interest is calculated by days. The first month interest is calculated as: Interest payment = Rate * Balance /365 * (days left after funding of the loan). Some lenders use 360 day for simple. The different from using 365 or 360 days is very small. Closing cost: fees paid at time of closing to cover different agency cost to make the loan. The closing cost can be charged by a lender/broker, an appraiser, a title company, or local government and some other agencies. Finance charge: The interest is a finance charge. Some prepaid closing costs are also finance charge. Usually the finance charges are fees charged by lender/broker. But some title company fees are also be treated as finance charge. The interested things are different parties may treat a fee in different way. Mortgage insurance payments are also finance charges. Prepaid Finance charge: Part of closing cost paid at closing belongs to finance charge. This including prepaid interest a borrower paid for the month the loan close/fund. APR: Considering all finance charges of the loan (add all prepaid finance charge, interest, private mortgage insurance), treat it as interest and re-calculate an equivalent interest rate, call it Annual Percentage Rate. Below is the official formula of calculating APR. Get total prepaid finance charges (that is part of closing cost), deduct it from loan amount. Usually it is less than the loan amount when closing cost is positive number. Use the reduced number and get a interest rate that makes the monthly payment the same as original amortization payment. That interest rate is the APR. As it is complex that I never know how to calculate it with hand and paper. All loan officers I know use computers to do the work. Please understand that in purpose of marketing, usually title company and third party fees are not included when calculate APR. When those fees added, APR can change. Prepaid interest is another item not included in marketing. It can be added as well. So do not surprise the APR change from initial disclosure to final closing statement. Current regulation only require the lender/broker keeps its total adjusted origination fee not increase, the prepaid interest and title fee can increase as it out off lender/broker control. Current regulation also allows the APR change by 0.125% (that equal to $3000 finance charge increase for a $200,000 loan amount) without re-disclose. The APRs will also be different if two loan amount different and lender/broker fees keep the same. Here is another example: if a borrower only compares APR, in below 2 options the borrower may select one not suite for him/her. With general one extra point (1% of loan amount) lender/broker fee change 0.25% rate. If the loan amount is $200,000 and no point no lender/broker fee rate is $3.875% with 30 year fixed rate, APR is 3.875% as no prepaid finance charge. If the borrower pays one point origination fee, the rate can lower to 3.625%, the APR is 3.707% looks better than no origination fee option. The truth is most financial advisors will suggest you to chose the no point one. The reason is when calculate APR, it calculates next 30 years. In real life, very few borrowers will keep the loan for 30 years. The average time to pay off a loan is about 7 years. As people moved, house sold, refinanced. The prepaid point is a prepaid interest that is not refundable. If a borrower really keeps a loan for very long time, pay point may be a good deal. But as most people do not know future, plus inflation, prepay point usually is a bad idea. The real practical way to shopping a mortgage is to compare rate and closing cost (only compare lender/broker section as in most time, lender/broker does not control title fees). We recommend borrowers to pay a small lender/broker closing cost (less than $2000) or less. The Rate (that lender used to calculate interest every day/month when borrower use lenders money) and closing cost (real number) are more easily to be understandable. The second number on truth in lending is Finance Charge. It is the total interest the lender will get in life of the loan plus the finance charge borrower paid at closing. As very few borrowers will pay the loan for whole 30 years, this number not much meaningful. Financed Amount. This is an easy being confused item. Many borrowers asked me why this number is not the same as loan amount. The Financed Amount is defined as loan amount minus prepaid finance charges (remember that is part of closing cost, not all). A simple example is a borrower asks a bank loan $10 to him, the bank charge $1 processing fee. On closing table, the bank only gives the borrower $9 and keeps the $1 as fee it charge. Looks the bank only loans $9 at closing. The finance amount is $9. Please aware the loan is still $10. After closing, the borrower owns the bank $10. Why to define this way? I am sorry that I do not know. The borrower may still need pay title company, attorney fees to get the loan. The last number is the Total Payments. It is the total Finance Charge plus the loan balance. Above we did not mention later fee. During the life of the loan, if the borrower forgets to pay bill on time, the borrower may need to pay later fee. That is also finance charge and will add to the cost of the loan. If the borrower pay extra principal one time, that will reduce interest payment in future and reduce the finance charges. On Truth in Lending, another statement usually confuses borrowers. That is under prepay penalty section. The statement say: If borrower payoff the loan early, there are no prepay penalty, but not be entitled to a part of finance charge paid. Many borrowers asked that if the loan be paid off early, the borrower still need to pay the whole finance charge on Truth in Lending. Please notice the statement point the finance charge paid. Not unpaid. Every month, when the lender receives the payment from the borrower, it always calculates the last month interest and pays it first, whatever left will apply to the principal. When the loan is paid off, the lender will charge all unpaid interest and balance. Lenders charge interest till the day the lender receives the payoff fund. The borrower will not need to pay any more interest in future. As lender calculates interest based on current principal balance, The statement stated no-refund of finance charge majorly means the finance change paid at closing. One example is if the borrower paid point to buy down rate, the borrower sells the house and pay off the mortgage in 3 months after closing as job relocation. The point paid at closing is not refundable. As the job relocation was not predictable, the borrower pays more money comparing not pay point to buy down rate. All conventional loans we originated are not assumable. That is to say when you sell the property, you have to pay off the loan.
What are requirements for insurance and tax?
As we use the Fannie Mae and Freddie Mac lenders/investors, the lenders/investors do have requirements for tax and insurance payments. This is a short summary of Requirements for insurance: For single family and multi-units, borrower(s) must provide documentation to certify that the property is appropriately insured. 1. Insured name and address must match the mortgage application. 2. Policy inception and expiration dates must be clearly indicated. 3. Annual premium must be indicated along with paid receipt. 4. Amount of Coverage must equal to or greater than the subject property full replacement cost. In some cases, the insurable amount or loan balance is higher. 5. Windstorm, hail and/or hurricane, smoke, riots, civil disturbances, aircraft, vehicles must be included or a separate insurance policy is required. 6. Deductibles cannot exceed the greater of $1000.00 or 1% of the dwelling coverage, and Windstorm, Hail, and/or Hurricane coverage deductibles (whether included in the homeowners policy or written under a separate policy) cannot exceed the greater of $2000.00 or 2% of the dwelling coverage, unless a higher deductible is required by state law. If the loan term is 30 year or 15 year fixed rate loans, some lenders/investors accept upper to 5% deductable now. Check with loan originator or processor to verify. 7. First year insurance must be paid at closing for Purchases. For refinance, the current policy must be fully paid and the renewal date must be 2 to 3 month after closing. If current insurance is paid month to month, the borrower may be required to pay the rest of the premium before or at closing. 8. If the subject property is a condo, other than necessary HOA insurance to cover the property and liability, the inside of unit, appliances, must be appropriately insured as well. Usually a condominium unit owner insurance policy is required if the HOA mast policy does not cover the inside. Usually an HO-6 policy will meet the lender’s requirement. If HOA insurance does not cover the subject dwelling, owner insurance must cover full loan amount as land value is hard to evaulate for a condo unit. For Tax: 1. Borrower should have no tax lien on subject property, no unpaid or past due HOA dues, and no past due personal taxes, as well. 2. When a loan closes after October 1st, the property tax may already be due. In case the property tax is due, it must be paid at or before closing. 3. Please understand that in Texas, the property tax is due on the date the county tax office sends the tax bill out, not January 31 of next year. 4. If the loan has an escrow account, the escrow calculation is federally regulated. It is usually based on a December payment and the escrow tax collection is based on 14 months taxes. Example: if the loan closed in July, there is no mortgage payment in August. The first mortgage payment is September 1st. There will be 4 payments before the end of the year. The tax reserve collected at closing for the escrow account will be 10 months tax premium.
What are closing costs and settlements?
Closing costs, Pre-paid items, settlement charges and cash to close. Closing costs: In a real estate transaction, the one-time costs for the transaction are called closing costs. Usually the closing costs include: Loan origination fee, this loan origination fee is what the lender/broker charges for originating the loan. This fee includes many fees like lender underwriting fee, origination fee or point, admin fee, processing fee, attorney fee, lender documentation fee, and all lender and broker direct charges. This fee is controlled by the broker/lender and is a negotiable fee. In most cases, the loan origination charges (or adjusted loan origination charges as related to the interest rate). The lower the rate means the higher the fee. Depending on the arrangement with the loan originator, the loan origination fee may show up differently on the Good Faith Estimate. If the loan originator (the company you deal with) is a broker, the loan origination fee is a broker loan origination fee minus a lender credit or plus a lender discount point. If the loan originator (the company you deal with) is a lender, it may show the fees on GFE the same way as a broker or just show one fee. The difference is between different regulations applying to brokers and lenders. For shopping purposes, I recommend that a borrower look at the rate and adjusted origination fee as it is the fee the borrower will pay. In most cases, the broker or lender does not control the third party fees. Please understand that the market changes from time to time. If you got a quote a week ago, it may not available today. It is similar to the stock market, the price changes. Appraisal Fee: paid to an appraisal management company to hire an appraiser to value the property. Per current regulation, a loan originator cannot hire an appraiser directly and is required to go through an Appraisal Management Company (AMC). Depending on the lender or investor, the AMCs are different and fees are different. The fee is out of our control. Please keep in mind that rental properties, duplexes or 3,4 units will need higher appraisal costs. The standard appraisal cost at this time is about $350 to $480 for a single family house less than 3500 sf and located close to one of Texas’ major cities. Rental properties may need $100 to $200 more. Credit Report: This is for a credit report and re-use fee. Tax Certificate: A few lenders may ask borrowers to pay for a tax certificate. Flood cert: Flood certificate is required to determine if the property is located in a flood zone or not. Above are lender direct charges or lender specific charges. A borrower cannot select service providers for above charges. Below are third party fees that the loan originator does not control. If a borrower thinks those fees are too high, the borrower can shop around for service providers. Simply let us know the contact information. Please understand that if the borrower changes service providers like the title company in the middle of loan processing, the loan closing may be delayed. Closing/Escrow Fee: This fee is charged by the title company to handle the closing. Title other fees: including but not limited: copy fee, courier, overnight, admin fee, tax certificate, title search fee, notary fee, remote closing fee, all charged by the title company. Currently we refer a few title companies that we believe charge less to our customers. Lender or owner title insurance: this is Texas State regulated and all title companies should charge the same based on the loan amount, payoff loan amount and old loan closing date (for refinance loans). Some insurance endorsements are also required. Based on new regulation (RESPA), the owner title policy is defined as a buyer cost. This seems to conflict with Texas tradition that in most Texas purchase transactions the sellers pay the buyers owner title insurance. In reality, the title closer usually charges the borrower the owner title insurance and lets the seller compensate the cost. The premium for owner title insurance is also Texas regulated. I would like to remind buyers/borrowers that some title companies may try to sell some optional title insurance not required by lender. The seller may not compensate that part. Buyers should ask the title company and determine if any optional items are there and decide if the buyer will buy them or not. Lender/brokers do not charge any title fees and do not decide who pays owner title insurance but have to estimate this cost on the Good Faith Estimate. Guarantee fee: This is Texas state charge, which is currently $5 for each title policy. Recording Fee: the local county charge for recording the transaction documents like deed of trust and warranty deed. Survey: survey is required in most transactions. All lenders, title companies accept an existing survey if it still matches the current property. That is to say, after the survey was done, no permanent improvements like a pool or new fence have been added on the property. As we do not know if borrower can provide an existing survey, usually we estimate the cost here. If an existing survey be used, a form called T-47 may be required by current owner to state that no improvements were added after the survey was done. The existing survey must be a clear copy of the original official survey with all content readable. If the original survey is on a large form, piece by piece copy may be acceptable if all parts of the original survey are copied and organized. Some other closing cost may be also required in a real estate transaction. One example is HOA transfer fee. If the property is subject to an HOA, HOA may charge fees for purchase and/or refinance transactions. Per current regulation, this fee is not required to be disclosed on the GFE. Below items are not closing costs but still part of settlement charges. Usually we call them pre-paid items. Pre-paid interest: When a new loan is originated, the lender charges interest from the day it sends the money out, the first month’s interest is usually charged on the day of closing. In most cases, the borrower will not have a mortgage payment the next month. Here is an example. If we close a loan on the 15th of September, the borrower needs to pay 15 days of interest for using the money in September. There are no payments in October, the first mortgage payment is due on November 1st (the lender will not charge late fee if funds received on or before 15th of every month). The November payment will pay October’s interest and the rest will go to reduce the principal. Sometimes when a loan is closed and funded in first few days of a month, the lender may pay the borrower interest for the days before the funding day. That way, the borrower will pay mortgage the next month and will pay a full month interest through the first payment. Tax/Insurance reserve: Tax, insurance reserve shows on the GFE when a loan has an escrow account. Current regulations require that a number be disclosed on the Good Faith Estimate but it does not have to be accurate. The escrow reserve is federally regulated so the lender will collect based on the guideline. The number on the Good Faith Estimate may not be accurate. One Year Insurance: For all purchase transactions, the lender requires a borrower to buy one full year of property insurance. As the borrower can shop for insurance from any qualified insurance company, the lender/loan originator does not need to disclose an accurate insurance cost. In refinance transactions, if the insurance policy will need to be renewed at a date before the new loan’s first payment, the lender will require the borrower to buy a full new year of insurance. Any unpaid insurance premium for the current insurance term must be paid at closing, as well. I really cannot understand why people put their money in a bank savings account to collect 0.1% interest and pay the insurance company service fee to use month by month payment that can raise their insurance cost 20% more than that if paid once. Tax, if it is due: In Texas, most people think the property tax due date is January 31 for the last year’s property. That assumption is wrong. The property tax is due when the tax office sends out the tax bill. There is no penalty if the tax is paid on or before January 31st of the next year. When the tax office sends out the tax bill, it is considered a lien on your property until you pay it off. So, if you have a refinance loan expected to close/fund at the end of a year (usually after the middle of October), you must be prepared to pay property tax at closing. Liens on title: All un-normal liens on the title must be paid before the new loan can be closed and funded. Sometimes, pay off of such liens is arranged at the time of closing. That will let the Title Company or loan closer collect funds to pay off such liens. HOA due: All unpaid HOA dues must be paid at or before closing as well. All above items, including closing cost and pre-paid items are settlement charges. Settlement charges show on the closing statement (HUD-1) page 2. Cash to Close: Other than closing costs and pre-paid items, some other items will affect your cash to close (that is the money you will bring to or you will get from a loan closing). Purchase price: the price a buyer agrees to pay the seller to get the property. It is the number shown on the purchase contract. Down payment: the difference between the purchase price and the new loan amount. Pre-paid earnest money and option money: If the buyer has paid the seller or title company earnest money and option fees those are agreed to be refunded to the borrower at closing. They will show on the closing statement as credit to borrowers. Existing loan payoff: If the subject loan is a refinance and the borrower has an existing loan to be paid off, please remember that the current loan pay off may be more than your current balance as unpaid interest and some fees (like record of release of lien) will be added. Interested party Credit. The lender/broker credit is usually shown on the Good Faith Estimate. The other credits, like seller credit or Realtor credit usually are not. These credits will affect the borrower’s cash to close. When a lender/broker creates a Good Faith Estimate, many of those items are unknown to the loan originator. The regulation does not require the loan originator to give accurate estimates of such numbers like tax, insurance due. Therefore, the total settlement charges on the Good Faith Estimate may not be accurate. The cash to close equals: Settlement Charges + Purchase Price or current loan payoff – new loan amount – third party credit – earnest money credit – option money credit. The borrowers can ask the loan originator or the loan processor to update the settlement changes during the loan processing and before closing. Most Realtors are also able to provide an estimated cash to close number after knowing the lender’s cost. You may also ask the title company to provide a closing statement at least one day before closing for review. Please understand that does not extend the locked rate. Always check for when your lock expires during the loan processing as the borrower may need to pay a rate extension or lose the locked rate if a loan cannot be closed and funded on or before the rate lock expiration date.
If I apply a 30 year loan or 15 year loan. Which is better?
Some consideration can help you to make decision. 1. If I apply a 30 year loan or 15 year loan. Which is better? Assume a typical loan of $200,000 for a purchase price of $250,000. That is an 80% loan or say the borrower paid the 20% down. Assume the borrower has A+ credit score, good income, enough assets to satisfy the lender underwriting guideline. He/she qualify both 15 and 30 year mortgage. As current market November 7, 2012, we can offer 3.125% rate for 30 year fixed rate term and 2.5% rate for 15 year with the same origination fee. Use these two rates for below home work. Using any online mortgage calculator, you can calculate monthly payment. For a $200,000 loan with 3.125% rate and 30 year term, the minimum monthly payment (principal and interest) will be $856.75 and total payment the loan will be $308,430.53 in next 30 years. Assume the borrower do not pay any extra, do not pay any late. If the loan is a 15 year fixed rate term, with the same closing cost, interest rate can be 2.5%. I use an mortgage calculator to get $1333.58 monthly payment. Total payment in next 15 year will be $240,044.01. Compare last 2 results, looks the 15 year save a lot money. Total $308,430.53 – $240,044.01 = $68386.52. If you look at the interest paid every year, you can find first year the 30 year term need $6191.75 for 30 year term and $4873.04 for 15 year term. The interest different for the first year of the loan is $1318.71. Looks 15 year term is saving money. Right? Let’s see below opinion. As the borrower can afford the 15 year term that will have $1333.58 – $856.75 = $476.83, we use 30 year term mortgage and put that $476.83 to an investment like bond, mutual fund, annuity, some kind of life insurance. Assume different investment return that we can see result. Assume investment return is 5% annually, the 15 year $476.83 monthly investment will have $127982.54 in end of 15 year. The mortgage amortization table can help us to see for a 30 year mortgage will have principal balance after 15 year as $122,988.91. So if you use the investment return to payoff the mortgage then, you will have $127982.54 – $122,988.91 = $4993.63. Here we did not count tax result and inflation. Actually most people can get tax benefit for mortgage interest payment and need to pay tax for investment return. The result can be different and complex. The inflation will make future money less value. The main idea is if you know an investment that return better than 5%, the 30 year is likely to be better than the 15 year return. How to find a better investment is a tough question. I am not a general investment advisor and not like to provide you detail advising. Here are some examples. For simple, all investment examples are for illustration only. I just think what we put investment in 15 years ago and see what average return after 15 years. This is not a good analysis for comparing the every month investment as we suppose to do for above mortgage comparison. But for your reference what kinds of investments get what return in last 15 years. S&P 500 index: Most S&P 500 index mutual fund follow S&P 500 index. Today (November 8, 2012) the S&P 500 index is 1391.84, and 15 years ago in Oct 1997, it was 970.43 as Yahoo finance data. The 15 year average return is only about 2.0%. Not a good option. My personal opinion is that the stock is not a good investment for future. Gold: Current published price is $1715 per oz. In 1997 it was about $375. Average yearly return is about 10.5%. If you think in future the inflation will be high, the gold will be good investment. Real Estate in Austin: Real estate investment is much more complex and here can be a very typical case. It is the most complex but highest return and relatively safe. Assume buying a single family home 15 years ago and rented out. After 15 years, let see what we have. It can be a real story. Address: 4610 Philco Dr, Austin TX 78745. I use this property is because I bought this property on summer 1996. The recorded purchase price was $55,000 and seller give $1500 credit. I get a loan for $52250 that was 95% of the purchase price. That is to say my down payment was $2750. As our closing cost was $3500 that I really paid $2000 for closing cost as seller paid $1500. Total money investment was $2950. For simple our analysis, I change the purchase day to end of 1996 and start mortgage on Jan 1997 and sell the house on December 2012 for $179670. Keep the house for 192 months. That is exact 16 year. The mortgage rate was high as 8.25% with private mortgage insurance. My monthly payment was $394.41 for mortgage principal and interest, $41 for mortgage insurance, tax $106.75, insurance $50 all counted per monthly. Total $592.16. I like to add $100 per month for repair and maintenance. I leased out for $750 per month to a tenant. I count 11 month lease per year as vacancy and leasing cost. That bring average rental to $687.5 per month. I get only -$5 cash flow for me. Today, this house worth about $179,670 (as average similar house sold recently), can rent for $1400 per month. This house needs to pay county tax $4161 per year. We estimate insurance for $800 per year. Assume we sold this house in 2012, the selling cost 7% (commission plus seller paid closing cost). Assume the house get refinance in 2012 for rate of 5.0% 30 year term. With cost of $2500, this refinance remove the mortgage insurance as loan to value is less than 80% then. Let see how much cost and income in since the owner bought this property. 1. Mortgage payment: till end of 2002, total principal, interest and mortgage insurance are ($433.54 +$ 41) * 72 = $34166.88. The mortgage balance left was $49159.13 When 2002, refinance to a 5.0% rate 30 year term, loan amount $51660 that add about $2500 closing cost to the loan so owner did not pay cash for the refinance. After refinance, the mortgage payment reduced to $27.32. Till the owner sold house in 12/2012, total mortgage payment is $277.32 * 120 = $33278.4 and principal balance left was $42021.69 Total mortgage payment is $67445. Balance left is $42022. 2. Tax and insurance. For simple we use average to estimate. The tax was $1281 per year. Current tax is $4161. Average $2720.5 total estimate $2720.5 * (120 + 72)/12 = $43528. Insurance estimate: 700/12*192 = $11200. Total tax and insurance = $54728 3. Repair: $100 *192 = $19200. This looks higher than the real repair cost. 4. Total operation cost: $67445 (mortgage) + $43528 (tax) + $11200 (ins) + $19200 (repair) = $141373. Let see income: 1. Rental income. When the house was bought, the monthly rental was $750 and now it can be rent for $1400 per month. Average $1075 per month. Use 11 month per year. The estimated rental income is $1075 * 192 *11/12 = $189200. 2. Sell the house to get $179670 (sold price) – $12576.9 (sell commission and cost) – $42022 (mortgage balance) = $125071.10. 3. Total operation income $125071.1 + $189200 = $314271.1 à $314271 Total income minus cost = $314271 – $141373 = $172898. Consider the initial investment of $2950. The investment return is 5860% and count to yearly, this is about 17.5% compound yearly return. Above is an assumed case, in reality, I sold the property in March 2000 for $92152. I keep 45 month and estimated return was 92152 (price) – cost = $83701 – $50765 = $32936 (cash get from sell). Cost ($433.54+$41) * 45 (mortgage) = $21354. Tax, insurance cost 2600 /12 * 45 = $9750, repair cost $10000 (I repair the house that really prevent future repair cost). Total cost $41104. Total income during that 45 month are 750*45 (11/12) (still count one month per year rental cost) $30937.5. I actually live there for about half of the time. As If I am not live there, I need rent a place to live anyway. So I count all rented as we are doing investment study. Total cost: $41104 and total income $30937.5 + 32936 = $63873.5. Net profit = $22769.5. Investment return was $22769.5 /$2950 = 770% or say about 70% annually return. This was my first real estate investment and this case took me to the world of real estate. For simplify, my case study did not involve tax. In real world, the tax play important role in any investment. You need to pay income tax and capital gain tax. For real estate investment, you can enjoy the depreciation (that is free money the federal government loan to you) and lower capital gain tax. You may interested to learn why 2012 president candidate Romney only pay 14% for his income and most of us hard working people pay much higher. Please understand that investment return is not guaranteed. But for people intend to take a risk, and get high return. We may not change the game as rulles are setup by richs. We can learn from richs and follow them to make ourself rich. If you have any comment or suggestion, please send email to me at firstname.lastname@example.org or call me at (512) 785-3841.
Which Refinancing Option is Right for You?
Although it seems like it at times, there are not as many refinance loan programs as there are applicants! Contact us at (512) 377-6580 and we can work with you to qualify you for the perfect refinance loan to fit your financial situation. There are some general things to have in mind while you consider the options. Lowering Your Payments Is your refinance primarily to lower your rate and monthly payments? In that case, a low, fixed rate loan may be your best option. Maybe you are now in a loan with a high, fixed interest rate, or a mortgage loan with which the interest rate varies : an adjustable rate mortgage (ARM). Even if rates get higher later, unlike with your ARM, when you close a fixed-rate mortgage, you set the low rate for the life of your loan. If you are not planning on moving in the near future (about five years), a fixed rate mortgage loan can particularly be a great option. However, an ARM with a low intitial payment could be a smarter way to reduce your payments if you expect to move in the next few years. Cashing Out Is your refinance goal mainly to pull out some of your home equity for an infusion of cash? It could be you’re going on a much needed vacation; you need to pay tuition for your college-bound child; or you plan to renovate your home. So you want to find a loan higher than the remaining balance of your existing mortgage loan.So you will You will need to get a loan for more than the remaining balance with your present mortgage in this case. However, if your loan interest rate is high now and you’ve held it for a long time, you may be able to achieve your goals without a rise in your mortgage payment. Consolidating Your Debt Do you want to pull out some of your equity to consolidate additional debt? Good plan! If you have built up some home equity, taking care of other debt with higher interest rates that your home loan (credit cards or home equity loans, for example) could help save you a lot of cash each month. Building up Equity Faster Do you plan to build up equity more quickly, and have your mortgage paid off sooner? If this is your goal, your refinance can move you to a mortgage loan program with a short, such as a 15 year loan. Although your mortgage payment amount will probably be more, you can be paying less interest; so your equity amount will build up faster. However, if you have had your current 30-year mortgage for a number of years and the remaining balance is rather low, you may be do this without increasing your monthly payment — it’s even possible to save! To help you determine your options and the many benefits in refinancing, please contact us at (512) 377-6580. We are here to help you reach your goals! Curious about refinancing your home? Call us: (512) 377-6580.
What is credit score?
Before they decide on the terms of your mortgage loan (which they base on their risk), lenders need to know two things about you: your ability to pay back the loan, and if you are willing to pay it back. To figure out your ability to pay back the loan, lenders look at your debt-to-income ratio. To assess your willingness to repay the mortgage loan, they look at your credit score. The most widely used credit scores are called FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (very high risk) to 850 (low risk). We’ve written more about FICO here. Credit scores only assess the information in your credit reports. They don’t consider income or personal characteristics. These scores were invented specifically for this reason. “Profiling” was as dirty a word when these scores were first invented as it is in the present day. Credit scoring was developed as a way to take into account solely that which was relevant to a borrower’s willingness to repay the lender. Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated wtih positive and negative information in your credit report. Late payments count against you, but a record of paying on time will raise it. Your report must contain at least one account which has been open for six months or more, and at least one account that has been updated in the past six months for you to get a credit score. This history ensures that there is sufficient information in your report to build an accurate score. If you don’t meet the minimum criteria for getting a score, you might need to establish a credit history before you apply for a mortgage. AAXY LLC DBA AAXY Mortgage can answer your questions about credit reporting. Give us a call: (512) 377-6580.
How can you improve your credit score?
|It’s virtually impossible to change your score in the time between when most people decide to buy a home or refinance their mortgage and when they apply. So the short answer is, you really can’t “on the spot.” But there are strategies you can live with to make sure when you apply for a loan your score is as high as possible. Make sure that the information each of the three credit reporting bureaus has on you is consistent and up to date. Order a copy of your credit report about once a year, and dispute any inaccuracies. Note: Theoretically, if a series of credit reports is requested on your behalf during a limited amount of time, your score goes down until time passes without any inquiries. Changes in the law though have made “consumer-originating” credit report requests not count so much. Also, a series of requests in relation to getting a mortgage or car loan is not treated the same as a number of credit card requests in a limited time. This is because the credit bureaus, and lenders, realize that people request their own credit reports to keep up with what’s on them, and smart consumers shop around for the best mortgage and car loans. Unsolicited credit card solicitations in the mail don’t count against your credit report, so don’t worry. The two main components of your credit score are your payment history and the amounts you owe. Bankruptcy filings and foreclosures, which can stay on your credit report for as long as 10 years, can significantly lower your score. It’s never a good idea to take on more credit than you can handle. Late payments work against you. It’s extremely important to pay bills on time, even if it’s only the monthly payment. Don’t “max out” your credit lines. Since the size of the balance on your open accounts is a factor, lower balances are better. It’s said that by carefully managing your credit, it’s possible to add as much as 50 points per year to your score.|
Should you buy points?
How do you “buy” a better rate? Do you plan on keeping your loan for a while? Then it may make sense to “buy” a lower interest rate by paying one or more “points.” Even if you’re unsure of how long you plan to keep your mortgage before you move or refinance, paying points now for a lower rate may make sense. For example, do you have a high-paying job now but you think you might change careers in the next few years? We can help you sort it out. It’s part of our goal to find you the right loan for your means and future. A point — which equals one percent (1%) of the total loan amount — is an up-front fee that lowers your annual interest rate and total interest due over the life of your loan. So, a one point loan will have a lower interest rate than a no point loan. Basically, when you pay points you trade off paying money later in favor of paying money now. You can pay fractions of points, meaning there are a lot of points packages that can make a loan’s terms more favorable if that’s what’s right for you. There are a variety of rate and point combinations available. When you look at different loan programs, don’t look just at the rate — compare the whole package. Federal law requires lenders to publish their loans’ Annual Percentage Rate, or A.P.R. The A.P.R. is a tool used to compare different terms, offered rates, and points.
Should I use PMI?
When a borrower pay less than 20% down, he/she has 2 options. Pay PMI (private mortgage insurance) or have a 2nd lien. Recent as 2nd lien hurt 1st lien pricing. To use PMI may make sense for borrowers. The Homeowners Protection Act of 1998 (the Act) was signed into law on July 29, 1998, and became effective on July 29, 1999. The Act was amended on December 27, 2000 to provide technical corrections and clarification. The Act, also known as the “PMI Cancellation Act,” addresses homeowners’ difficulties in canceling private mortgage insurance (PMI) coverage. It establishes provisions for canceling and terminating PMI, establishes disclosure and notification requirements, and requires the return of unearned premiums. Excessive PMI coverage provides little extra protection for a lender and does not benefit the borrower. In some instances, homeowners have experienced problems in canceling PMI. At other times, lenders may have agreed to terminate coverage when the borrower’s equity reached 20 percent, but the policies and procedures used for canceling or terminating PMI coverage varied widely among lenders. Prior to the Act, homeowners had limited recourse when lenders refused to cancel their PMI coverage. Even homeowners in the few states that had laws pertaining to PMI cancellation or termination noted difficulties in canceling or terminating their PMI policies. The Act now protects homeowners by prohibiting life of loan PMI coverage for borrower-paid PMI products and establishing uniform procedures for the cancellation and termination of PMI policies. The Act applies primarily to “residential mortgage transactions,” defined as mortgage loan transactions consummated on or after July 29, 1999 to finance the acquisition, initial construction, or refinancing of a single-family dwelling that serves as a borrower’s principal residence. A condominium, townhouse, cooperative, or mobile home is considered to be a single family dwelling covered by the Act. Cancellation and Termination of PMI for Non High Risk Residential Mortgage Transactions A. Borrower Requested Cancellation A borrower may initiate cancellation of PMI coverage by submitting a written request to the servicer. The servicer must take action to cancel PMI when the cancellation date occurs, which is when the principal balance of the loan reaches (based on actual payments) or is first scheduled to reach 80 percent of the “original value,” irrespective of the outstanding balance, based upon the initial amortization schedule (in the case of a fixed rate loan) or amortization schedule then in effect (in the case of an adjustable rate loan), or any date thereafter that: . the borrower submits a written cancellation request; · the borrower has a good payment history; · the borrower is current; and · the borrower satisfies any requirement of the mortgage holder for: (i) evidence of a type established in advance that the value of the property has not declined below the original value; and (ii) certification that the borrower’s equity in the property is not subject to a subordinate lien Once PMI is canceled, the servicer may not require further PMI payments or premiums more than 30 days after the later of: (i) the date on which the written request was received or (ii) the date on which the borrower satisfied the evidence and certification requirements of the mortgage holder described previously B. Automatic Termination The Act requires a servicer to automatically terminate PMI for residential mortgage transactions on the date that: the principal balance of the mortgage is first scheduled to reach 78 percent of the original value of the secured property (based solely on the initial amortization schedule in the case of a fixed rate loan or on the amortization schedule then in effect in the case of an adjustable rate loan, irrespective of the outstanding balance), if the borrower is current; or if the borrower is not current on that date, on the first day of the first month following the date that the borrower becomes current If PMI is terminated, the servicer may not require further payments or premiums of PMI more than 30 days after the termination date or the date following the termination date on which the borrower becomes current on the payments, whichever is sooner. There is no provision in the automatic termination section of the Act, as there is with the borrower-requested PMI cancellation section that protects the lender against declines in property value or subordinate liens. The automatic termination provisions make no reference to good payment history (as prescribed in the borrower-requested provisions), but state only that the borrower must be current on mortgage payments C. Final Termination If PMI coverage on a residential mortgage transaction was not canceled at the borrower’s request or by the automatic termination provision, the servicer must terminate PMI coverage by the first day of the month immediately following the date that is the midpoint of the loan’s amortization period if, on that date, the borrower is current on the payments required by the terms of the mortgage. (If the borrower is not current on that date, PMI should be terminated when the borrower does become current.) The midpoint of the amortization period is halfway through the period between the first day of the amortization period established at consummation and ending when the mortgage is scheduled to be amortized. The servicer may not require further payments or premiums of PMI more than 30 days after PMI is terminated . D. Loan Modifications If a borrower and mortgage holder agree to modify the terms and conditions of a loan pursuant to a residential mortgage transaction, the cancellation, termination or final termination dates shall be recalculated to reflect the modification E. Accrued Obligations for Premium Payments The cancellation or termination of PMI does not affect the rights of any lender, servicer or mortgage insurer to enforce any obligation of a borrower for payments of premiums that accrued before the cancellation or termination occurred. Exceptions to Cancellation and Termination Provisions for High Risk Residential Mortgage Transactions The borrower-requested cancellation at 80 percent LTV and the automatic termination at 78 percent LTV requirements of the Act do not apply to “high risk” loans. However, high-risk loans are subject to final termination and are divided into two categories -conforming (Fannie Mae/Freddie Mac-defined high risk loans) and non-conforming (lender-defined high risk loans)
How to save on my mortgage?
Making regular additional payments toward the principal will yield big savings. You can pay more on principal in various ways. For many people,Perhaps the easiest way to organize this process is by making one extra mortgage payment per year. But many people can’t swing such an enormous extra expense, so splitting a single extra payment into twelve additional monthly payments is a fine option too. Another very popular option is to pay half of your payment every other week. The effect here is that you will make one extra monthly payment in a year. These options differ a little in reducing the final payback amount and reducing payback length, but they will all significantly shorten the length of your mortgage and lower your total interest paid. One-time Additional Payment It may not be possible for you to pay extra every month or even every year. But remember that most mortgages will allow additional payments at any time. You can benefit from this rule to pay extra on your principal when you come into extra money. Here’s an example: several years after buying your home, you get a larger than expected tax refund,a large legacy, or a cash gift; , you could pay this windfall toward your mortgage loan principal, which would result in significant savings and a shorter loan period. Unless the mortgage loan is quite large, even a few thousand dollars applied early in the loan period can yield huge savings over the life of the loan. AAXY LLC DBA AAXY Mortgage can walk you through the pitfalls of getting a mortgage. Give us a call: (512) 377-6580.
The Homeowners Protection Act of 1998 (the Act) was signed into law on July 29, 1998, and became effective on July 29, 1999. The Act was amended on December 27, 2000 to provide technical corrections and clarification. The Act, also known as the “PMI Cancellation Act,” addresses homeowners’ difficulties in canceling private mortgage insurance (PMI) coverage. It establishes provisions for canceling and terminating PMI, establishes disclosure and notification requirements, and requires the return of unearned premiums. A. Borrower Requested Cancellation A borrower may initiate cancellation of PMI coverage by submitting a written request to the servicer. The servicer must take action to cancel PMI when the cancellation date occurs, which is when the principal balance of the loan reaches (based on actual payments) or is first scheduled to reach 80 percent of the “original value,” irrespective of the outstanding balance, based upon the initial amortization schedule (in the case of a fixed rate loan) or amortization schedule then in effect (in the case of an adjustable rate loan), or any date thereafter that: • the borrower submits a written cancellation request; • the borrower has a good payment history; • the borrower is current; and • the borrower satisfies any requirement of the mortgage holder for: (i) evidence of a type established in advance that the value of the property has not declined below the original value; and (ii) certification that the borrower’s equity in the property is not subject to a subordinate lien Once PMI is canceled, the servicer may not require further PMI payments or premiums more than 30 days after the later of: (i) the date on which the written request was received or (ii) the date on which the borrower satisfied the evidence and certification requirements of the mortgage holder described previously. B. Automatic Termination The Act requires a servicer to automatically terminate PMI for residential mortgage transactions on the date that: the principal balance of the mortgage is first scheduled to reach 78 percent of the original value of the secured property (based solely on the initial amortization schedule in the case of a fixed rate loan or on the amortization schedule then in effect in the case of an adjustable rate loan, irrespective of the outstanding balance), if the borrower is current; or if the borrower is not current on that date, on the first day of the first month following the date that the borrower becomes current. If PMI is terminated, the servicer may not require further payments or premiums of PMI more than 30 days after the termination date or the date following the termination date on which the borrower becomes current on the payments, whichever is sooner. There is no provision in the automatic termination section of the Act, as there is with the borrower-requested PMI cancellation section that protects the lender against declines in property value or subordinate liens. The automatic termination provisions make no reference to good payment history (as prescribed in the borrower-requested provisions), but state only that the borrower must be current on mortgage payments. C. Final Termination If PMI coverage on a residential mortgage transaction was not canceled at the borrower’s request or by the automatic termination provision, the servicer must terminate PMI coverage by the first day of the month immediately following the date that is the midpoint of the loan’s amortization period if, on that date, the borrower is current on the payments required by the terms of the mortgage. (If the borrower is not current on that date, PMI should be terminated when the borrower does become current.) The midpoint of the amortization period is halfway through the period between the first day of the amortization period established at consummation and ending when the mortgage is scheduled to be amortized. The servicer may not require further payments or premiums of PMI more than 30 days after PMI is terminated. D. Accrued Obligations for Premium Payments The cancellation or termination of PMI does not affect the rights of any lender, servicer or mortgage insurer to enforce any obligation of a borrower for payments of premiums that accrued before the cancellation or termination occurred. E. Exceptions to Cancellation and Termination Provisions for High Risk Residential Mortgage Transactions The borrower-requested cancellation at 80 percent LTV and the automatic termination at 78 percent LTV requirements of the Act do not apply to “high risk” loans. However, high-risk loans are subject to final termination and are divided into two categories -conforming (Fannie Mae/Freddie Mac-defined high risk loans) and non-conforming (lender-defined high risk loans).
Value & Appraisal
|Many borrowers think the county appraised value is a reliable value when they apply a mortgage refinance. It is a misunderstanding as current lenders/investors use Fannie Mae appraisal guidelines. The appraiser must find three or more recent similar sold comps in a certain distance (same market area) from subject property to support the value. Generally one similar property comp that is sold within last 3 months is required and another two comps can be sold within last six months. One way to find out sales comp information is to get help from a local Realtor. You can ask a Reator to pull out the data and email it to you. Most Realtors are willing to provide those information for free! Currently we can help to estimate property value by reviwing local MLS data base in great Austin and great Houston area. Please send your questions to mailto:email@example.com|
How Escrow works?
Closing the Sale Escrow To finalize the sale of the home a neutral, third party (the escrow holder, a.k.a. escrow agent) is engaged to assure the transaction will close properly and on time. The escrow holder insures that all terms and conditions of the seller’s and buyer’s agreement are met prior to the sale being finalized, including receiving funds and documents, completing required forms, and obtaining the release documents for any loans or liens that have been paid off with the transaction, assuring you clear title to your property before the purchase price is fully paid. The documentation the escrow holder may be collecting includes: Loan documents Tax statements Fire and other insurance policies Title insurance policies Terms of sale and any seller-assisted financing Requests for payment for various services to be paid out of escrow funds Upon completion of all instructions of the escrow, closing can take place. All outstanding payments and fees are collected and paid at this time (covering expenses such as title insurance, inspections, real estate commissions). Title to the property is then transferred to the seller and appropriate title insurance is issued as outlined in the escrow instructions. At the close of escrow, payment of funds shall be made in an acceptable form to the escrow. As your real estate agent, I’ll inform you of the acceptable form. The Escrow Holder Will: The Escrow Holder Won’t: Prepare escrow instructions Request title search Comply with lender’s requirements as specified in the escrow agreement Receive funds from the buyer Prorate insurance, tax, interest and other payments according to instructions Record deeds and other documents as instructed Request title insurance policy Close escrow when all instructions of seller and buyer have been met Disburse funds and finalize instructions Give advice – the escrow holder must maintain neutral, third-party status Offer opinions about tax implications Mortgage Escrow Account A Mortgage Escrow Account is established to pay on-going expenses while there is a loan on the house. These expenses include property taxes, home insurance, mortgage insurance, and other escrow items. Generally, the Escrow Account is partially funded at closing and the home buyer makes on-going contributions through their monthly mortgage payment.
What is title fee on loan estimate?
This content is for your reference. author try his best to be accurate but not guarantee all 100% accurate. If you have any question, please consult your loan originator. Recent regulation changes make title fee on Loan Estimate change. Some times the change confuse consumer. I like to explain here. First per Texas tradition, the title insurance has two parts in a purchase transaction. Those are owner title insurance (insure owner) and lender title insurance (insure lender). A typical insurance cost looks like: (assume $350,000 purchase price and $280,000 loan amount). Seller agrees to pay owner title insurance. Owner title insurance: Owner title insurance Base premium: $2260 This is based on $350,000 coverage. Lender Title Insurance: $100 Endorsement: $250 Total: $2610 Here when purchasing Owner title insurance: The lender title insurance is a discount as $100. The lender required endorsement may change based on real property and loan type. Here is just an example. As most Texas transaction, seller would pay owner title insurance, so in above example, owner would pay $2260 to buyer at closing for the owner title insurance part. Buyer pay lender title insurance part including endorsement. In this example, total $350. Before Oct. 2015, these numbers are showing on closing statement. Start from Oct. 2015, federal government enforce to use a new set of disclosures and closing document. As the new guideline, owner title insurance is defined as optional and lender title insurance is mandatory. So the full lender title insurance premium must be disclosed on new type of disclosure called Loan Estimate that substitute the old Good Faith Estimate and Truth in Lending. So on New Loan Estimate, the title insurance will be on section B. But as regulation required. The lender title insurance must be here and use full premium. Assume buyer does not buy owner title insurance. In above example, the lender title insurance will be: Lender title insurance: $2122.2 This is based on coverage of $280,000 Some lender disclose in more detail: Lender title Insurance: $1872.2 Endorsement: $250 The total is the same. Then Loan originator need to add owner title insurance as difference on section H of Loan Estimate. This section will be: $487.8 So on Closing statement called closing disclosure now, will show charges from you as: On the Loan Estimate, you may not able to see how much seller will pay as no full owner title insurance number there. The owner title insurance is an optional. As a real estate professional, I always recommend that you buy owner title insurance. You can see, if you buy owner and lender title insurance at the same time, total cost is $2610, if you do not buy owner title insurance, total cost will be about $2122. Title company may disclose title fees on Form T-64. If you see numbers different from lender Loan Estimate, no worry. Title company fees are more accurate. But Lender can not make Loan Estimate exact match title company’s fee disclosure as regulation reason. As a lender, it is required to disclosure full lender title insurance and owner title insurance on Loan Estimate. But please aware that lender does not sell insurance. You as a buyer can shopping around to decide where you like to buy title insurance. As long as the title insurance company is a qualified company accepted by lender. So lender estimate may not 100% accurate. You need to ask the title company you choose for exact how much it charges. In Texas, the owner title insurance is an negotiate item on contract. It may be paid by buyer or by seller. It is not lender control but you, as a buyer, negotiate with seller to get a deal. On Loan Estimate, lender just estimate to buyer that it is a title insurance required by lender and optional owner title insurance. If seller agree to pay your owner title insurance, you will see a credit from seller equal to the full owner title insurance premium.
When is Refinancing Worth it?
It has been said that only when your new interest is at least 2 points below your current rate, should you refinance your loan. Maybe that was good advice a number of years ago, but as refinance costs have been falling recently, it may be time to look into it. Refinancing your loan has various advantages that will often make it worth the initial expenditure several times over. Benefits When you refinance, you may be able to reduce the interest rate and monthly payment amount, perhaps significantly. You also could have the option of tapping into your home equity by “cashing out” some money to fix up your home, consolidate debt, or take your family on a vacation. You may be able to refinance into a shorter-term mortgage loan, enabling you to add to your home equity quicker. Fees and Expenses As you probably know, you’ll have some fees and expenses during the the refinance process. You will be charged the same types of fees as with your present mortgage loan. Among these may be settlement costs, appraisal fees, lender’s title insurance, underwriting fees, and others. Do the Math Paying points can get you a lower interest rate. If you pay (on average) three percent of the loan amount initially, the savings for the life of the new mortgage can be substantial. We recommend that you consult with a tax professional before acting on advice that these paid points may be deducted on your taxes. One more expense that a borrower may consider is that a lower rate of interest will lower the interest amount you will be able to deduct from your taxes. We can help you do the math! Call us at (512) 377-6580. Most people find that the savings per month outweigh the initial cost of a refinance. We can help you explore your options, considering the effect a refinance may have on your taxes, if you are likely to sell your home in the next couple of years, and your money on hand. Call us at (512) 377-6580 to get started. Want to know more about refinancing? Give us a call at (512) 377-6580.
How to get approval for a loan?
In many Texas markets, buyers need provide a lot more than usually to get a bid. In some case, seller rather to sell to a cash buyer instead of sell to some one need a loan as if the loan not go through, the seller wastes time and have to refund earnest money to buyer. We can provide help in such situation to get our buyers/borrowers fully credit approved before submit and an offer to seller. To do so, please submit full loan application online,pull a credit report here or from the free site, send us support documents. If you own business, please send last 2 year copies of personal and business tax return. We will go through the underwriting process to approve the loan without the property. The seller should not worry in the buyer loan will fail as it is fully approved. The chance of the loan not finally approved will be much smaller. Even it is still possible (like borrower lost job before closing). When you let your real estate broker send an offer to a seller, you can let your real estate broker tell the seller agent that this borrower is fully credit approved. Other than the cost for the credit report (it is paid to credit vendor) and AAXY LLC does not charge anything for such underwriting approve. At the same time, we still provide traditional pre-approve and pre-qualify letters. AAXY LLC is a Texas licensed mortgage company and direct lender for most kind of loans we originated. It is a equal housing lender.
What support documents are needed?
For most borrowers this list should be enough, 1. Income, one full month paystubs, last 2 year w-2. If you use bonus/overtime, better to provide last 2 year last paysyub. 2. income: If you are self employed (including own a side business), last 2 year tax return copy and current year to date profit loss statement (no need be audited) 3. Asset: Last 2 month bank statement (all pages), if you have transaction after last statement date, plus online print out of recent transactions. Please explain all big deposit and provide source of fund documents. If any / all big deposits are not borrowers normal wage/salary income. 4. If borrower own any real estate, please provide all copies of mortgage statement, tax, insurance, HOA statement and current lease copy. If rental income need be used, also provide last 2 year tax return. Here is a list of required documents. Please review. If you have any question, call 512-377-6580 or text to 512-785-3841.
How is an index and margin used in an ARM?
An index is an economic indicator that lenders use to set the interest rate for an ARM. Generally the interest rate that you pay is a combination of the index rate and a pre-specified margin. Three commonly used indices are the One-Year Treasury Bill, the Cost of Funds of the 11th District Federal Home Loan Bank (COFI), and the London InterBank Offering Rate (LIBOR).
How do I know which type of mortgage is best for me?
There is no simple formula to determine the type of mortgage that is best for you. This choice depends on a number of factors, including your current financial picture and how long you intend to keep your house. AAXY Mortgage can help you evaluate your choices and help you make the most appropriate decision.
What does my mortgage payment include?
For most homeowners, the monthly mortgage payments include three separate parts:
- Principal: Repayment on the amount borrowed
- Interest: Payment to the lender for the amount borrowed
- Taxes & Insurance: Monthly payments are normally made into a special escrow account for items like hazard insurance and property taxes. This feature is sometimes optional, in which case the fees will be paid by you directly to the County Tax Assessor and property insurance company.
How much cash will I need to purchase a home?
The amount of cash that is necessary depends on a number of items. Generally speaking, though, you will need to supply:
- Earnest Money: The deposit that is supplied when you make an offer on the house
- Down Payment: A percentage of the cost of the home that is due at settlement
- Closing Costs: Costs associated with processing paperwork to purchase or refinance a house
How do I know how much house I can afford?
Generally speaking, you can purchase a home with a value of two or three times your annual household income. However, the amount that you can borrow will also depend upon your employment history, credit history, current savings and debts, and the amount of down payment you are willing to make. You may also be able to take advantage of special loan programs for first time buyers to purchase a home with a higher value. Contact us and we can help you determine exactly how much you can afford. We provide free consulting to help you find the best loan product suite to your need. You can send a loan application, send your income , asset documents. Then set an appointment with one of our Sr. loan originators to discuss the best loan products for you. We do not only “approve” or “deny” your loan but find a way to get a loan for you that can be approved and best suite for you. We provide such consulting for free.
What is the difference between a fixed-rate loan and an adjustable-rate loan?
With a fixed-rate mortgage, the interest rate stays the same during the life of the loan. With an adjustable-rate mortgage (ARM), the interest changes periodically, typically in relation to an index. While the monthly payments that you make with a fixed-rate mortgage are relatively stable, payments on an ARM loan will likely change. There are advantages and disadvantages to each type of mortgage, and the best way to select a loan product is by talking to us.
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How loan application and processing work?
Step by Step Instruction about Loan Application and Processing Today’s loan application processing is much more complex than before. The underwriting guidelines and regulations change from time to time. The below steps are for general reference to give you an idea of how a loan progresses from rate quote to close/funding. Every loan application may have different steps: 1. To get a rate quote, please fill out the rate quote request form. It can be the the online request, a simply email with necessary information or you can copy/past the rate quote form to your email and provide the necessary information. 2. To get an official GFE (Good Faith Estimate), Truth-in-Lending, please submit an official loan application. You can either do it online or contact us for paper application form. Please also provide other question form and PayPal. If you need to use rental income to qualify, please fill the REO info Sheet 3. To get a loan pre-approval, please fill out loan application, pull out the credit report and other info form. REO info sheet is needed if rental income is used for loan approval 4. To get the rate lock and start loan processing, please submit an online application with us then sign/initial the Good Faith Estimate, Truth IN Lending that we sent to you and fill out rate lock agreement, Intend to proceed form and appraisal disclosure then send back to us. If borrower is self-employed, commissioned, rental income be used, or non base salary income be used, we may ask for full income and asset document to be reviewed before locking rate 5. Fill out Other Questions and send to us. You may also copy/paste to an email and send to firstname.lastname@example.org or save it to a text or word file and upload it to your online account. 6. Read How to Use Online Application if you have any questions. 7. Visit http://aaxymortgage.net/creditpull.html to pull a credit report for all borrowers. If you have two borrowers and are spouses, please pull one joint credit report. If you have two borrowers but are not spouses, please pull separate individual credit reports. 8. Send an email to email@example.com or tell your loan officer that you have finished the loan application and pulled the credit report or call us @ 512 377-6580. 9. If we find out that the borrower is not qualified after we reviewed the loan application or we do not have a loan product that suite the borrowers need, we will notify the borrower of denial and no Good Faith Estimate and Truth in Lending will be sent. 10. If borrower is qualified for the loan, we will send out the loan package to borrower to sign. We expect borrower to send us the signed disclosures and supporting documents within 3 days after we send the loan package out. 11. We will assign a loan processor who will be your main contact during the loan processing. 12. The loan processor will send you updates, missing document lists and process the loan for you. 13. The loan processor will review your file, work with the loan officer to order appraisal, title, and insurance, verify income, assets and prepare the loan package that we will send to the investor’s underwriter. 14. In Texas the borrower(s) have the right to select any qualified title company to close the transaction. If the transaction is a purchase, usually the seller’s real estate agent and buyer’s agent may already select a title company for the transaction. It is usually stated on the purchase contract. Please be aware that if the title company is not we referred Title Company, we don’t guarantee the title fees on the Good Faith Estimate as current regulation. 15. After lender’s underwriter reviewed the file, they may ask for more documents as conditions. Our loan processor will work with the underwriter, borrowers, and all third parties to get all such conditions cleared. Please help the loan processor to get necessary documents, letters of explanation/statements to the underwriter as soon as possible, and following the underwriter’s guidelines/requirements. 16. After all conditions are cleared (the loan is CTC, clear to close) we will work with the lender/investor to get final closing documents to the title company. Our loan processor and the title company will contact you to setup a closing date/time. Usually the final closing statement HUD1 will be reviewed one day before closing and we will try to let borrower review the closing statement as soon as we can. Please do not be surprised if the initial HUD1 has some mistakes on it, let us know which part you think might not be correct and our loan processor/loan officer can review the HUD1 with you and answer all your questions before closing. If the initial HUD1 has mistakes our loan processor/loan officer, Title Company and lender’s legal department (who prepares the closing documents) will work together to get it corrected. 17. Borrower(s) attend the closing at the title company, or sometimes the title company may arrange a remote closing, with extra fee. 18. After the loan is closed and the lender releases the fund to the title company, the title company will distribute the funds to each party on the HUD1 statement. The loan is then closed and funded. In some cases, the final funding may be 3 business days after closing date.
How to send edocuments to us?
To protect sensitive information, we do not recommend sending loan related document through plain email. We now use sendin.com secured email solution. You can go register a free account to use or when you received a secured message from us that you can reply to attached your documents.
How to document your income?
|In order to get a loan approved, we must document the borrower’s income. Alimony, child support, or separate maintenance income does not need to be revealed, if the borrower chooses not to use it as income for repaying the loan. We must have reasonable documents to confirm that income has been received in past and will continue in the future. All stable income that will continue in the future, from legal sources, can be considered in underwriting. Below is a list of income and documents to support the income. All documents mentioned can be an electronic or photo copy:
1. Base salary/wage income: need paystubs to cover at least one month of income, plus last two years w-2’s.
2. Bonus/commission: need one month paystub, last two year W-2 plus official verification of income. Employer must document base salary, bonus, and commission separately on VOE. Broker/Lender will do the verification of employment. Borrower must provide necessary contact information about the employer’s HR, payroll or third party information about how to do the VOE.
3. Self-employed income: if a borrower owns one or more businesses as a major owner (lender may define how much percentage ownership is a major owner), the borrower is defined as a self-employed borrower. Need last 2 years personal and business tax returns and Current year to date profit/loss statement. If the borrower receives w-2 income, current one month paystub and last two years w-2’s are needed, as well as, copies of all 1099 and K-1.
4. Interest/dividend income: Need personal tax return, 1099, 1098, k-1 to document last two years payments and current year to date payments. Document asset that generate the interest, dividend are still the same and will continue the same or similar in the next few years.
5. Passive Business ownership income: same as above.
6. Real estate rental Income: some lenders require last two years tax returns-all schedules, Current lease agreement, Mortgage statements, tax, insurance, HOA due documents are needed to document net cash flow. Lender may only consider rental income reported on tax return sch E. Some lenders may consider recently purchased rental property rental income or rental income from borrowers intending on vacating their current primary residence, if 30% equity can be documented.
7. Withdrawal from IRA account: last two years tax returns, withdrawal history, and asset document to document the fund will not dry in at least three years.
8. Pension/annuity: Award letter from the admin company.
9. Alimony, child support, or separate maintenance income: divorce decree with last three month payment record.
10. Military Income: Paystub, w-2, verification of income from Military admin.
11. Social Security Income: Award letter from Social Security Admin, Last two years personal tax return, IRS W-2, and last bank statement.
12. Note Receivable: Last two year personal tax return, copy of note. Must also document receiving history and that it will last at least 3 years after loan close.
13. Trust Income: last two year tax return, Trust Agreement or trustee’s statement confirming the amount, frequency, and duration of payment. Receiving history must be documented.
14. Capital Gain Income: if capital gain is used in qualifying the loan, last two years personal tax returns and current year to date record must be provided. Income history and expectation to continue the income in the future must be documented.
15. Royalty income: last two year tax return, document last 12 months payments received, document showing the payment history and expected payment in next 3 years.
16. VA Benefits: If it will continue in future years, a letter from VA office to certify the benefit and certify the benefit will continue at least in next three years after the loan closes. Education benefits are not acceptable income.
17. Unemployment benefit: if the borrower(s) receives unemployment regularly, for example, seasonal workers might be an acceptable income for loan underwriting. Need last two years personal tax return and Year to date income.
18. Foster Care Income; borrower(s) must have two year providing foster-care services history and document expected to receive the income in future.
19. Boarder Income: relatives (parents, adult child) live together with borrower(s) but not to be borrower on subject transaction may pay rent, share living cost. To use this income, borrower must document the relative(s) living together at least in the last 12 months. Also provide Copy of driver’s license, bank statements, bill, etc., and document last 12 months payment (canceled check, bank statements showing money transfer). This income cannot be more than 30% of borrower’s total income.
20. Non-Occupying Co-borrower’s income: this income may used to compensate other liabilities. Non-Occupying Co-borrower’s income may also contribute to reserves and down payment.
21. Other income: all stable income to be considered in underwriting must be documented with possible continuation to receive it at least the next three years. If the income is not listed above, consult a loan officer.
How to document asserts?
1. Only verified funds can be used at closing.
2. Funds needed to close must be in checking or saving accounts. If other funds are to be used, like IRA, stock, or liquidation a detailed transaction history may be required.
3. Cash on hand is not an acceptable fund.
4. Two months bank statements may be needed.
5. Any large deposits on statements, usually $1000 (sometimes $100 or less), and the source of the funds must be documented.
6. IRA, Stocks, or mutual fund accounts may be used, possibly with reduced value and usually at 60% of face value. This is for reserve use only.
7. IRA may not be used as reserve for 2nd lien or jumbo loan lenders.
8. Gift funds are acceptable if they are from relatives and have documented the source of the fund and ability to give gift to the borrower. 2nd homes and investment property transactions cannot use gift funds.
9. Un-documented funds are not acceptable.
10. 401k(IRA) loan: 401k(IRA) statement and withdrawal/loan policy. If funds are used for cash to close, proof of liquidation is required.
11. Employer Assistant: funds must come from established company program and are subject to the underwriter’s approval.
12. Funds from a secured loan from an institute lender are acceptable. Need to document the source of funds and monthly payment must be counted in the debt to income ratio.
13. Unsecured loans are not acceptable funds. Example, cash withdrawal from credit card
14. Life insurance cash value: can be used for reserve. If needed for cash to close, liquidation need be documented.
15. Credit cards can be used for appraisal, credit report and application fee/rate lock fee only. Total credit card charges cannot be more than 2% of the loan amount.
16. 1031 exchange: The property must be similar to the changed property. Funds must be managed by an approved escrow manager. Copy of exchange document required.
17. Funds from Business banking account: only primary home transactions may use funds from a business account. Two months bank statements required. Borrower must have 100% ownership in the business. A letter from an accountant to state that the borrower has access to the funds and that withdrawal of such funds will not have a detrimental effect to the business is required. 2nd home or investment property transactions cannot use funds from business.
18. Reserve requirement: reserve is the borrower’s cash equivalent asset for closing the loan. Generally speaking, primary home transactions with 80% or lower loan to value ratio may not need any reserves. Borrowers verified funds to satisfy the cash to close is enough. For primary home cash out transactions or if loan to value is higher than 80%, 2 to 6 months real estate payment PITI (which includes mortgage, tax, insurance and HOA dues for all borrower owned real estate properties) must be documented. If the transaction is an investment property or 2nd home, six months PITI reserve must be documented.
19. There are many different loan products and many different policies. Above are the general rules and may not apply to your situation. Please help to prepare your asset documents (along with all other documents) ASAP to prevent delays in the loan closing. Please ask your loan originator if you have any questions.
How refinance benefit a borrower?
Generally to say if you current interest rate is higher than 4% for 30 year or 3.5% 15 year and you have good credit, good income, and did not refinance in last 6 months, you should ask us to get an free rate quote to see if a refinance benefit to you. Below case studies are helping you to understand how a refinance can help borrower save money in detail. Generally to say if reduce rate by 0.5% and your loan amount is about $200,000, your estimated interest saving is $1,000 per year in first few years of the loan. For non-single family homes, like duplex, condo, or property used for investment property, the interest rate or closing cost may be higher. But as interest rate is so low, many loans not make sense to refinance last year now can refinance with real benefit to borrowers. We offer free loan consultant to help our borrowers to arrange the best loan program to fit their need. Our no cost loan can help our borrower to reduce the investment risk to very low. Please email to firstname.lastname@example.org or call (512) 377-6580 if you have any question. Case study: 1. I already paid 10 year for a 30 year term mortgage and if I refinance with another 30 years, I need to pay more interest in next 30 years. So refinance is not benefit to me. The answer is yes or no. It depend how you feel the benefit. Let’s just look at your case. Your current mortgage was originated 10 years ago with interest rate 4.25%. Original loan amount $240,000 and original purchase price was $300,000. You paid 20% down payment when you bought the house. Your monthly payment (principal and interest only) is $1180.66. Till 2012 Oct. (after oct payment), you balance is $190157.70. We assume you paid on time with no extra principal payment. I attached the amortization table. If we do not refi, until you payoff the loan, you will pay 360 – 121 = 239 payment and 239 * 1180.66 = $282,177.74. and last payment will be 09/01/2032. As we are not able to change past, so we focus future. If you refinance today with current low rate, can you save money in future? I can have different arrangement for you. First let’s assume you will not sell the house quick. That means you will plan to stay there for many years. As current market we can offer 3.125% rate, total closing cost are: 1) New loan amount $190,200 that is very close to current balance 2) Loan origination fee $1495, 3) Discount point 0.5% that is $1140. 4) Appraisal $450 5) Credit report $20 6) Title company fee and title insurance $1420 7) County recording fee $97 Total closing cost $4622. Monthly payment $814.77. Assume we closed on October 20th and your new loan payment will start at December 1st 2012. See attached amortization table, your next 30 year payment will be totally $293,317.29 and plus closing cost your total payment will be $297979.29. Compare with without refinance you will pay 282,177.74. Looks the borrower will not save at all. But this is not comparing an apple to an apple. As payment reduces also bring benefit to borrowers. As all our loans have no prepay penalty, you can arrange to pay off the loan quick. For example, keep your current payment, as less interest will be changed, more money goes to your principal. So after refinance, you get interest rate as 3.125%*, if you keep before refi payment that is similar to $1180.66. That will not affect your life in near future. I make it $1181.21 that will make the loan be paid off in 209 months and total payment will be $246874.27. You add closing cost of $4622 get total $251496.27. Compare with no refinance that borrower will pay $282,177.74. That can bring our borrower $30681.47 saving in life of the loan. With $4622 investment, that is 663.8% of return. And it is guaranteed as it will not be affected by unpredictable stock market. See amortization table here. If you do not have $4622* to invest. I can roll the closing cost to the loan as you still have equity on the house. So let’s see if you do not pay anything or very little at closing. Roll it to the loan, we make new loan amount to $194800. The borrower only pays $22 closing cost at closing. We still make the monthly payment to $1180.3 per month. The loan can be paid off in 216 month with total $254943.58. That will save the borrower total of $282,177.74 – $254943.58 = $27,234.36. In this case, the borrower only paid very minimum closing cost at closing. See amortization table for this case here. 2. I have no idea when I will move or say sell the house, I may sell it in 2 to 3 years. Do refinance still a good option? In above example, as the borrower paid $4622 closing cost and save roughly about 1.125% rate that is about $190.000 *1.125% = $2137 per year. If the borrower payoff the loan in 2 years, the borrower will not save anything but loss some closing cost paid or borrowed. If this is the case, for borrowers not sure how long he/she will stay in the home, I will recommend the borrower to apply so called no closing cost refinance. As current market, for $190,200 loan amount, my company can offer 3.5% rate with lender or broker paid closing cost.* With the same idea that the borrower will keep the similar monthly payment as not refinance, see attached amortization table that we have monthly payment as $1180.28. The $190,200 loan amount can be paid off in 218 months with interest rate of 3.5%*. Total mortgage payment will be $257,300.99. That will bring $282,177.74 – $ 257,300.99 = $24,876.75 total saving for the life of the loan.Amortization table is here. You will say, Hi: I said that I may sell the house in 2 to 3 years. Your 18 year estimate has no meaning for me. Ok, let’s just see if the refi save me any money if the borrower will only keep the loan for 2 to 3 years. Look at the amortization table (table 1). If you do not refinance, on your 2013 the borrower will expected to pay interest of $7917.71 and after refinance (table 5), the 2013 interest payment is only $6513.16 that is $1404.55 saving in interest payment. Even the monthly payment is very similar. More money pay to principal and the borrower’s equity will increase accordingly. And in this case, the refinance is no cost. The borrower will not pay any closing cost on closing statement. The borrower may still pay something like gas cost for driving to our office to fill loan application, printing cost to print out necessary materials. Time spent on the whole process. All those cost should be much less compares the first year savings. If the borrower finance changed and can affordable higher payment, we may offer a 15 year term, with interest rate 3.0% we can offer no cost loan at current market and save much more in interest payment. You can see for $1313.49 monthly payment, the 2013 interest will be $5541.08 that can save $7917.71 – $5541.08 = $2376.63 interest in the first year after refinance. Is this is a good option for a few hour work. The answer is sure for most people. Detailed amortization table is here for your reference. Above cases study are for illustration only. Every one may have different situation and not everyone qualify for today’s loan. But it is worth to ask for a free evaluation as long as you have income that keep monthly debt to income 50% or less and loan to value ratio is 80% or less. If your property is upside down (loan to value is higher than 80%) but if you paid 20% down when time of purchase and Fannie Mae own your current mortgage (does not matter which bank service the loan), you may qualify government HARP refinance that can still save you a lot money. In some case, we can loan upper to 95% of appraisaled (and underwriter accepted) value with private mortgage insurance. So call (512) 377-6580 or email a request to email@example.com that our senior loan originator can help to evaluate for you. That is totally free. * All interest rate/apr offered here is based on November 2nd, 2012 market and borrower has 740 or plus credit score, property qualify conventional loan and other conditions satify lender underwriting requirement. Rate and closing cost may change as market change at any time without notice. AAXY LLC is a Texas licensed mortgage company offering loans for Texas property only.
Who can get a loan?
Borrower Requirements To get our best deal, the borrower(s) must: If you do not meet below conditions, you may still get a loan, please consult a loan originator or send your question to firstname.lastname@example.org. 1. No corporation, LLC, partnership or entities. 2. The borrowers must own the subject property (in refinance transaction) currently or will own the property (for purchase transaction). 3. Age 18 years or older. 4. Be a US citizen, permanent resident or non-permanent resident. Please consult a loan originator if you are a non-permanent resident of United States. 5. Two years US credit history, with 740 or higher credit score. Credit report must have at least 3 trade lines with 2 year history, average balance/credit limit $2000 or more. 6. For borrowers who have lower credit scores we might have a loan program for them but with higher interests and closing cost. Please get a rate quote from a loan originator. 7. A valid social security number. 8. Two years US work/employment history must be documented if income from work/employment is used to qualify the loan application. 9. No co-signers, no Guarantors are allowed (co-signers, guarantors usually are people who agree to guarantee the loan but have no ownership of the property). To get our best deal, we only allow TWO borrowers. We may accept up to four borrowers in one transaction. 10. Non-borrowing owners are allowed in most transactions and they are required to attend the loan closing and sign a mini set of closing documents. 11. Non-borrowing Spouse is usually treated as the same as Non-borrowing owners unless there is a recorded pre-marriage agreement or other document to state the Non-borrowing Spouse has given up all interest in the subject property. Non-Arms-Length Transactions – Arm’s-Length transactions are not allowed for second home or investment property transactions. Double-Interest in one transaction usually is not allowed. For example, if the real estate agent is also the loan originator for that transaction. Another example is that if the loan originator is the seller in the transaction. Please discuss with a loan originator if you have questions.
What do we need from the borrower(s)?
1. To get a rate quote, please fill out the rate quote request form. It can be the the online request, a simply email with necessary information or you can copy/past the rate quote form to your email and provide the necessary information.
2. To get an official GFE (Good Faith Estimate), Truth In Lending, please submit an official loan application. You can either do it online or contact us for paper application form. Please also provide other question form. A credit report. You can either pull your own credit report or pay us the fee by Paypal. If you need to use rental income to qualify, please fill the REO info Sheet
3. To get a loan pre-approve, please fill out loan application, pull out the credit report and Other info form. REO info sheet is needed if rental income is used for loan approval
4. To get the rate lock and start loan processing, please sign/initial Good Faith Estimate, Truth IN Lending that we sent to you and fill out rate lock agreement, Intend to proceed form and appraisal disclosure then send back to us. If borrower is a self-employed, commissioned, rental income be used, or non base salary income be used, we may ask for full income and asset document to be reviewed before locking rate. 5. Get loan fully approved, full borrower document.