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Unfortunately, many homes across Colorado have dropped in value since they were last financed. Both Fannie Mae and Freddie Mac have special refinance programs that can help many homeowners refinance to a lower rate and possibly to a lower term. Typically the interest rate is as good or nearly as good as if the homeowner had over 20% equity in their home.

Here are some examples:

1. When the Smiths bought their home several years ago for $200,000 they put 20% down to avoid mortgage insurance. Now their home is valued at $180,000 and interest rates are 1.5% lower than when they made their purchase and their mortgage balance is $154,000. Their current loan-to-value is 86%–which would normally put them into mortgage insurance. If their loan is either a Fannie Mae or Freddie Mac loan, they can use one of the special refinancing programs and avoid mortgage insurance and still get a rate comparable to someone with a loan to value under 80%. The Smiths still must qualify considering their credit, income, employment history, etc and their current loan must be a Fannie or Freddie loan.
2. The Donavans have a 1st mortgage of 200,000 and a 2nd mortgage of 50,000 and their house is now valued at $220,000. So the loan to value of the first mortgage is 91% and the combined loan to value is 114%. If their loan is a Freddie Mac loan they can still refinance with a competitive rate, however, their closing costs will be higher since the home value is less than the current value. Again, their current loan must be a Freddie Loan.

In today’s real estate and mortgage environment these are exceptional mortgage programs!

One of the simplest ways to understand a refinance is that it is replacing your current mortgage with a new mortgage, however, with a different rate, term, loan amount  or type of mortgage.

Although there are other reasons to do a refinance, the most common reasons are:

1. Reducing your rate and monthly payments
2. Reducing your term, such as from a 30 year fixed rate to a 15 year fixed rate loan
3. Paying off the current loan and taking out additional cash
4. Consolidating loans to reduce overall monthly payments
5. Converting from an adjustable rate mortgage to a fixed rate mortgage

Obtaining a refinance loan is very similar to obtaining a purchase loan. A complete loan application must be done verifying current borrower info, credit reports must be redone, as well as appraisal, title work, and thorough underwriting. [Read more →]

A value of the property being financed is one of the most important factors when a lender is considering a mortgage for that property.  It is a very comprehensive report considering many factors about a property such as age, type of construction, living space, size of lot/land, rooms, floor plan, as well as several others.

Although only a general view of residential appraisals, they result in a fair market value assessment of the subject home based on at least 3  nearby homes of comparable size, style, and age that were sold in the last six months.

Appraisals typically cost $350-450 for a single family home that will be occupied by the owner.  Appraisals for large or unique residences will cost more. If the appraisal is for an investment property, it is likely that the range will be $450-700 depending on number of units in the property.

Residential appraisals have received a lot of attention starting in 2008 when the housing prices began to decline.  Now for the FUSS: [Read more →]

Have you ever wondered what makes mortgage rates go up and down? Watch this clip which explains the dynamic between bonds and mortgage rates – in simple terms.

(Video created by Dustin Hughes and Nick Mallory, www.edgevolution.com and www.thelendingjournal.com).

Consider these five factors when trying to improve your credit.

Payment History has a 35% impact. Paying debt on time and in full has a positive impact, and late payments, judgments and charge-offs have a negative impact.

Outstanding Credit Balances have a 30% impact. Debt ratio of outstanding balance to available credit is important. Keeping that below 50% is wise and below 30% even wiser. It is never a good idea to close an account; the debt ratio will go up and the number of seasoned lines will decrease. Pay outstanding debt down as close to zero as possible and evenly redistribute the remaining balance among the open lines. The increased interest incurred by moving a balance from a 0% card to a 23% card will be minimal relative to what the increased mortgage debt might be with a low credit score. Hitting the maximums of available credit can be very negative. It may be worth calling and asking the credit company to increase your available credit to lower the debt ratio, provided they can do so without a hard credit inquiry. [Read more →]

Following are some helpful tips to avoid the credit mistakes many borrowers make during the loan process:

1. DON’T APPLY FOR NEW CREDIT OF ANY KIND, including those “You have been pre-approved” credit card invitations that you receive in the mail. Every time that you have your credit pulled by a potential creditor or lender, you lose points from your credit score immediately. Depending on the elements in your current credit report, you could lose anywhere from 2-50 points for one hard inquiry.

2. DON’T PAY OFF COLLECTIONS OR CHARGE-OFFS during the loan process without discussing with your lender. Paying collections will decrease the credit score immediately due to the date of last activity becoming recent. If you want to pay off old accounts, do it through closing and make sure that 1) you validate that the debt is yours, and 2) that the creditor agrees to give you a letter of deletion. [Read more →]