Ingrid B. Quinn

NMLS ID #211652 Arizona, Loan Consultant


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Jumbo Loans vs Conforming Loans

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I recently began working with a client on a home loan that requires Jumbo financing. I was surprised to hear that the realtor was running into trouble finding a lender to provide the financing her clients needs. So I felt that an explanation of the two types of programs was required. Every client has a unique situation and should speak with a professional about their specific needs. So back to the subject at hand, a jumbo loan!

There are conforming loans and non-conforming loans. Conforming loans are loans that adhere to guidelines set by Fannie Mae and Freddie Mac and the amounts vary, depending on where you live and what the median prices for homes are. In most of the areas of the country, $417,000 is the Fannie Mae and Freddie Mac conforming loan limit. In higher cost areas of the country such as California, Hawaii and the Washington, DC metropolitan area, there are Conforming-Jumbo Loans (also called Conforming “High Balance” loans). They range from $417,001 up to $625,500 for a single unit property (single family homes, condos, townhouses), 10% is the minimum down payment. These loans have rates approximately .25% to .375% higher than Conforming loans. And condos have higher rates by approximately .25% on these as well. Multifamily properties also have higher rates by approximately .25%, and higher down payment requirements of 20% to 25% down.

A home loan that goes over either of these types of loans is considered non-conforming and is referred to as a Jumbo loan. Jumbo loans (also called Non-Conforming) are from $625,501 and up for high cost areas and $417,001 and up for the rest of the country. The minimum down payment required is usually 20% though there are select programs that may offer a lower down payment. An example may be a doctor’s loan. These loans have rates approximately .5% higher than Conforming loans. Condos and multifamily properties may or may not have higher rates depending on the lender.

Jumbo loans are for the luxury or higher priced market. They are designed to meet the needs of the high income, high asset and high credit score client or in certain cases the just high asset, high credit score client. For more information about Jumbo loans, please contact me at Ingrid.Quinn@cobaltmortgage.com or visit my websites http://www.scottsdalemortgageexpert.com or http://www.cobaltmortgage.com/ingridquinn.


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To Make a Pre-Payment or Not?

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I get this question quite often from clients who would like to make a lump sum payment and reduce their mortgage payment without going through a full refinance. Check with your servicer to find out if they offer this feature in your loan or if you are contemplating a purchase or new refinance, it is a good question to field before you choose a lender for your transaction. The feature initially discussed is a courtesy offered by your servicer and not all lenders or servicers allow for recasting. Prepayment without penalty is allowed on most loan products and a review of your loan documents at closing is important.

Recasting is the process whereby a borrower applies a significant one-time payment to substantially reduce the unpaid principal balance of the loan in order to lower the monthly payment. Although the remaining loan term and interest rate remain unchanged, re-amortizing the loan based on the newly reduced principal amount results in a lower monthly payment. Conventional, conforming Fannie Mae and Freddie Mac loans are generally eligible, but loan recasts are not allowed on FHA and VA loans. Recasting a jumbo loan depends on the individual loan.

Different lenders will require a different minimum principal curtailment. Typically, the minimum is $5,000 or even $10,000. There will be a nominal one time fee ranging from $100-$500 also. The interest rate on the loan will not change and the re-amortization will be over the remaining original term of the loan. The loan will be re-amortized based on the newly reduced principal amount, resulting in a decreased Principal and Interest (P&I) payment and an overall lower monthly payment. New billing statements will be adjusted to reflect the lower payment amount.

This is a good alternative to a refinance when you have a more favorable interest rate than what the current market is offering. Also, there are no typical refinance closing costs related to the re-amortized loan process.
On the other side of this scenario, is a lump sum payment keeping the P & I payment the same and the term of the loan will then be shortened. This is a typical pre-payment. It obviously will depend on your long term reasons for opting for either type of loan restructure and you should consult your financial professional and your mortgage professional for guidance.

For questions please feel free to email me at Ingrid.quinn@cobaltmortgage.com or visit http://www.scottsdalemortgageexpert.com or http://www.cobaltmortgage.com/ingridquinn.


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Condo Project Eligibility

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When looking to purchase a home in a condominium project, there are a few things to consider. Condominiums are treated a little differently than a single family detached or even an attached home in a homeowner’s association subdivision. The overall financial health of the condominium association is scrutinized. As a result, the project must be acceptable by guidelines put in place by Fannie Mae, Freddie Mac, FHA or VA. The scope of the guidelines and the specific eligibility criteria are dependent upon whether the condo project reviewed is an established community or new construction. I am going to focus on established projects and conventional guidelines. Below are guidelines for such condo projects:
• at least 90% of the total units in the project have been conveyed to the unit purchasers;
• the project is 100% complete, including all units and common elements;
• the project is not subject to additional phasing or annexation; and
• Control of the homeowners’ association has been turned over to the unit owners.
Some General Questions to ask about the Condominium Association
• Is there current litigation involving the association?
• How many units are investor units out of total count?
• Are there more than 15% homeowners 30 days or more delinquent in association fees?
• Does any single entity own more than 10% of the units?
By getting answers to these few questions, you may find out sooner than later whether you will have difficulty obtaining financing for the home you want to purchase.
Condo Insurance Requirements
The condo project insurance policy must ensure the homeowners’ association maintains a master or blanket type of insurance policy, with premiums being paid as a common expense. The insurance requirements vary based on the type of homeowners’ association master or blanket insurance policy. Also, be aware there must be a fidelity bond coverage or employee dishonesty coverage which covers against theft by those entities handling community funds. As for unit coverage, there are a couple of types available and you must check with your lender for what is required:
“All-In/Single Entity” (sometimes known as an “all-inclusive”): The policy must cover all of the general and limited common elements that are normally included in coverage. These include fixtures, building service equipment, and common personal property and supplies belonging to the homeowners’ association. The policy also must cover fixtures, equipment, and replacement of improvements and betterments that have been made inside the individual unit being financed. If the unit interior improvements are not included under the terms of this policy type, the borrower is required to have an HO-6 policy with coverage, as determined by the insurer, which is sufficient to repair the condo unit to its condition prior to a loss claim event.
“Bare Walls”: This policy typically provides no coverage for the unit interior, which includes fixtures, equipment, and replacement of interior improvements and betterments. As a result, the borrower must obtain an individual HO-6 policy that provides coverage sufficient to repair the condo unit to its condition prior to a loss claim event, as determined by the insurer. Depending on the type of loan you choose there can be a requirement for flood insurance.
Buyers need to know this information when looking into purchasing a condo. To determine eligibility for your condominium contact your lender and discuss what information you have and need to obtain for a smooth transaction. This adds an additional step to your mortgage process so make sure you have sufficient time to process your loan application.
For questions or suggestions please feel free to email me at Ingrid.Quinn@CobaltMortgage.com or visit me at either http://www.ScottsdaleMortgageExpert.com or http://www.CobaltMortgage.com/IngridQuinn


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Locking, What is it?!

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In today’s volatile market, consumers need to understand what a lender offers as options for locking in their loan. Many consumers think that when they begin speaking to a lender, the rate they discuss that day will be the rate they carry from there on. However, this is not the case. Laws govern what constitutes a loan application. An actual loan application requires that 6 pieces of information are received, which triggers disclosures for the good faith estimate and the ability to lock in loans. These items are social security number to pull credit, borrower name, estimated value, monthly income, loan amount sought & property address. These six things are important because without these six items a lending company is not able to give a borrower a locked rate.
A borrower is required to give all of the information except the address when prequalifying. Once you have a property under contract then you have the ability to lock in a rate for the loan. Loan rates are locked in for a specific period of time. This time frame is based upon the close of escrow date. Typically loans are locked 15, 30, 45 or 60 days. There is the option of locking in rate for a longer period of time, but this is mainly used when you are purchasing a home that is being built for you and will not be completed with in 60 days.
What does locking in a rate/loan actually mean? When you lock your loan your lender should provide you the rate and/or points as well as the specific date of expiration of those terms. Regardless of how the market changes, your rate will continue to hold as it was locked. This can be both a good and bad thing.
Whether the market improves and rates lower or the market worsens and rates increase you are guaranteed to have the rate you have in writing. There can be an exception to these rules, but only with some lenders. This is called a renegotiation policy. This can typically occur when the market improves at least .25%(depending on your lender’s rules) and your lender will allow you to change your locking contract. Keep in mind that when you choose to lock in your rate, you are asking the lender to protect you and you are making a commitment to do the loan with your lender. The shopping rate time is over. Renegotiation is a courtesy provided by your lender.
Borrowers need to make sure that when they go to lock in their rate, that their lender gives them their terms in writing. You should never assume something has been done without seeing it in writing. Be safe, talk to your lender about locking and what their renegotiating options are. Never hesitate to ask questions and learn as much as you can.
For questions for suggestions please feel free to email me at Ingrid.Quinn@CobaltMortgage.com or visit me at http://www.scottsdalemortgageexpert.com or http://www.CobaltMortgage.com/IngridQuinn .


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APR vs. Interest Rate, What’s the Difference?

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Recently one of the Realtors I work closely with asked me what the actual difference between APR (annual percentage rate) and the Interest rate. Well, there is a big difference and when you are shopping for a home mortgage you are going to want to pay attention to a lot more than just the APR that is being offered by a lender. The short answer to this question is that simple interest is only the interest you pay on the loan whereas the APR is an informational number that covers some of costs of obtaining a residential loan, including points, interest, lender administration fees, mortgage insurance and various title fees.
In the case of a mortgage, the annual percentage rate, or APR, is the total yearly cost of financing a home, expressed as a percentage of the amount financed.
The federal Truth in Lending Act requires the lender to disclose both the nominal rate and the APR. Loans are frequently offered on different terms. Loan terms from different lenders can make it hard to figure out which offer is truly the best one.
The APR disclosed can be rounded up or down to the nearest one-eighth of a percentage point. Both the APR & simple interest rate must be advertised in the same font size or APR may be larger in print.
What this all means is that the APR of a loan is essentially a consumer tool designed to assist people when looking to make a major purchase. On the other hand, you have your simple interest rate. This is a very straight forward percentage that will be applied to your loan and determines your monthly payment.
People can use APR to get a general idea of what you will be looking at long term, but when it comes down to it people need to not be hesitant to ask lenders questions. Call them and find out what exactly their APR includes and what other fees are to be expected. You can also talk to your realtor and ask them about different lenders they have worked with. It’s never a bad thing to get a second opinion. Especially from a professional who is there to get you into your new home or assist you your refinance transaction.
For any questions or suggestions please feel free to email me at Ingrid.Quinn@CobaltMortage.com or visit me at http://www.CobaltMortgage.com/IngridQuinn or http://www.ScottsdaleMortgageExpert.com .


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How Much Can I Qualify For? DTI, What is it?

canada-cut-interest-rateIf you talk to a lender, they are going to drill down to the 4 most important aspects of your loan when trying to purchase or refinance a home. What do you make, Who do you owe, How much cash do you have to work with and What is the property value?
I am going to focus this blog on the numbers involved in qualifying income and what the rules are to get someone an approved loan. Growing up in the mortgage business, I learned the rule of 28/36. Back in the 80s those were important numbers. What do they mean? They stand for the debt to income (DTI) ratios that lenders use as a basic qualifying guideline.
28% of someone’s gross monthly income (or determined self employed income or passive income of some kind) could be tied up in housing expense. That includes principal, interest, taxes, insurance, HOA/condo fees, and possible 2nd mortgage, if applicable. 36% of your income could be tied up in total debt. That includes house expense plus monthly debt like car payments, student loan debt (see Student Loan blog) or credit card payments.
Now, we hear how the mortgage market has tightened up, but the ratios we work with have relaxed over the years surprisingly. It is not uncommon to see ratios in the 35/45 range or even 35/55. Different types of loans, such as FHA, Conventional, VA or Jumbo have different thresholds for approval. You will see more flexibility when the quality of the loan is stronger. Larger down payments, high credit scores and/or cash reserves after closing are all qualities that could command a lower risk loan and therefore allow a higher DTI.
Many loans are run through automated underwriting systems such as DU (Desktop Underwriter) or LP (Loan Prospector) that measure the risk of a loan. Lenders take those results and continue to process the loan if an acceptable response/approval has been received. Knowledgeable loan officers and processors can work with these systems and try to figure what characteristic of the file may need to be improved to reach an acceptable response. Then the loan officer will be able to tell the borrower how much of a loan they are qualified for.
For further questions or suggestions, please feel free to email me at Ingrid.Quinn@cobaltmortgage.com or visit me at http://www.ScottsdaleMortgageExpert.com or http://www.CobaltMortgage.com/IngridQuinn.


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In House Lenders Pros & Cons

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Often times a Realtor will suggest to a homebuyer that they use the real estate company’s “in-house” lender. Realtors don’t usually push these lenders on their buyers, but they are definitely suggested and buyers will sign a disclosure that the real estate company does have affiliations and receives some compensation for that referral. Every wonder why? It is important to know how these lenders are structured, and how they operate. I have been on both sides of the table with this. I was an in-house loan officer for a couple of years about 7 years ago. That was before licensing became mandatory and the mortgage meltdown.
These in-house lenders are a joint venture between the Real Estate firm and an outside lender. The Real Estate firm takes a piece of the profits (most for the firm, a small amount for the Realtor) in trade for allowing the lender to be an “in-house” lender.
An in-house lender has trouble retaining quality loan officers because they offer low pay. Because there is a captured audience the loan officer does not have to pound the pavement for business but it is important that they establish a quality relationship with the Realtors in their office and are accessible to them.
An in house loan officer is only as good as their supporting backroom. If processing is out of state, the loan officer has limited control over the process and relies on a strong team to take care of his/her deal. I had that benefit when I was working for a Realty office, thank goodness, but most in house lenders have the kind of a system that follows the retail bank model, and the service can be less than par. In today’s hyper complicated mortgage environment, everyone needs a top notch mortgage representative, who is full time, who will make things as smooth as possible, and who will fight for their loan; all while providing competitive market terms.
It’s an understatement to say the financial world is getting complicated. You can still hire the best mortgage loan officer, and also get the best terms. Simply stay away from online lenders, and lead aggregation websites. Use local referrals, which are accountable, experienced, systemized, and have a vested interest in maintaining their reputation.
Have you had experience with an in house lender? I would love to hear about it. Contact me at Ingrid.Quinn@cobaltmortgage.com or visit my website at http://www.scottsdalemortgageexpert.com or http://www.cobaltmortgage.com/ingridquinn.