Ingrid B. Quinn

NMLS ID #211652 Arizona, Loan Consultant


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First and Second Combo Mortgages are Making a Come Back!

983077351003885_mortgage-applicationI have recently come across loan pre-qualifications where a 1st and 2nd combination mortgage loan option may be the right solution for a client. One main reason that a client may wish to separate their total mortgage amount into two loans; avoiding P.M.I. (private mortgage insurance). Many lenders including Cobalt Mortgage offer these types of loan scenarios when buying a home. Use of the combination of a 1st mortgage and 2nd mortgage is when the total amount to be borrowed is to be separated in to two loans. This is typically done with the first mortgage being within conforming loan guidelines (loan amount depending on location of the home) and a secondary retail or private loan being is set up for the remaining amount. A conforming (Fannie Mae or Freddie Mac) first mortgage will typically have more favorable interest rates than a non-conforming loan. Second mortgages can be taken in typically 2 forms, as a Home Equity Line of Credit (HELOC) or a fixed rate mortgage.
PMI or Private Mortgage Insurance is required by Fannie Mae and Freddie Mac as well as most investors when a 20% down payment is not made. Private mortgage insurance is paid to protect the lender against loss if a borrower defaults on a loan. Some borrowers choose to use a 1st and 2nd mortgage loan option when they have money for a down payment; however it is not enough to meet the 20% requirement. I have discussed P.M.I. in detail in my previous blog “P.M.I. vs. M.I.P. What’s the Difference?” (Please feel free to visit that blog for further information on that subject) PMI may also be tax deductible for some clients but for those who it is not, may want the 2nd mortgage for the purpose of having tax deductible interest.
It is best to discuss your options with your mortgage lender and your tax professional for guidance on the options right for you. For questions or suggestions please feel free to contact me at Ingrid.Quinn@CobaltMortgage.com or visit me at http://www.ScottsdaleMortgageExpert.com or http://www.CobaltMortgage.com/IngridQuinn .


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Flood Insurance Changes and How They Effect Your Home Purchase

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A few months ago F.E.M.A. made some significant changes to the National Flood Insurance Program (NFIP) that was originally established in 1968. For details on this subject refer to the F.E.M.A website, http://www.FEMA.gov , but I felt that there are a few key points that people need to know about. Typically, a homeowner’s insurance policy is shopped for towards the closing date of a purchase transaction. At that time, a purchaser finds out they will need to purchase flood insurance if their new home is located in a flood zone. An issue that clients have been running into is the lack of an elevation certificate on the home they are purchasing and effective October 1, 2013 an insurance agent must quote worst case premiums which can reach into the thousands of dollars if an elevation certificate is not available on the home they are buying.

The elevation certificate is an important administrative tool of the NFIP. It is to be used to provide the elevation information necessary to ensure compliance with community floodplain management ordinances, to determine the proper insurance premium rate. The surveyed elevation data, typically the elevation of the lowest adjacent grade of the structure in question, is provided by a Licensed Land Surveyor. If you are looking to buy a home that is in a flood zone and requires flood insurance to be purchased, this should not be left to the end of the loan process because it may take a week, two or three to obtain the certificate and closing may be delayed.

The cost of obtaining an elevation certificate is usually the responsibility of the buyer. Maximum coverage through the NFIP is for $250,000. For full details and changes made to the National Flood Insurance Program please visit: http://www.fema.gov/media-library-data/7c1b0352fe3987c36569fccc492ab2ca/change_package_508_oct2013.pdf. For questions, please contact me by email at Ingrid.quinn@cobaltmortgage.com or visit my website http://www.scottsdalemortgageexpert.com or http://www.cobaltmortgage.com/ingridquinn.


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Bi-Weekly Payments, Good or Bad?

Occasionally, a client will ask about a program to make bi-weekly payments on their mortgage and I feel this subject should be discussed. If you have recently taken a mortgage, you will likely receive information in the mail about this type of payment plan, from your own lender or a third party. Please take the time to verify if it is coming from your lender servicer or a third party service that got your loan information from public records. The usual information states that for a few hundred dollars, you can save thousands in the long term interest, simply by having half your mortgage payment debited from your bank account every two weeks, instead of making one monthly payment.

Lenders often use an automatic bank draft for their biweekly plans, which means all your mortgage payments will be made on time. The main reason a homeowner may choose to take this option is if it makes their monthly budget work for their household and the long term effect on their accumulated interest is beneficial. By making 26 payments of half your mortgage, you are in effect making 13 monthly payments instead of the normal 12.

Depending on the terms of your loan, that extra payment each year may make a change in the principal amount of your loan and in turn lower the amount of interest accumulated over the life of your loan. There may be an up front fee to enroll or a monthly fee included in the payment which is typically charged by a third party servicer. The results of this type of payment plan can be achieved by homeowners taking the initiative themselves.

There are a two ways this can be done:

– saving money throughout the year for the extra payment and at the end of it

or

– dividing the cost of one monthly payment and add that amount to each monthly payment in principal reduction

When all is said and done, homebuyers should look at the big picture. How long are you planning on staying in the home? Can you comfortably make those bi-weekly payments? Homebuyers should not hesitate to speak to a mortgage professional about this type of payment program.

If you have any questions or suggestions for blogs please feel free to contact me at Ingrid.Quinn@cobaltmortgage.com or visit me at http://www.ScottsdaleMortgageExpert.com or http://www.CobaltMortgage.com/IngridQuinn


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Numbers and their Impact

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I read an interesting article by Lew Schelman in the November 4th National Mortgage News. He pointed out some interesting statistics and tidbits about how numbers correlate to certain home pricing strategies and some things to consider when coming up with the number to set a home’s sales price.

“Home sellers may not be afraid of certain numbers, at least not all of them. But according to Trulia, setting a price and “lucky” numbers go hand in hand.” Studying asking prices for homes since October 2011, Jed Kolko, Trulia’s chief economist, discovered that sales prices that end in 9 were the next most popular number after zero. 53% of all non-zero list prices on their site ended in 9. The next most common number was 5. Also, when home prices are reduced, they are more likely to have a 9 as the last number. When sellers are more eager to sell, the home price will also be more likely to have a 9.

When home prices were over $1,000,000, buyers are less likely to be influenced by the numbers game. Only 1 in 4 homes listed for $1,000,000 and up had a 9 as the last digit. The number 9 is also more popular in some markets, for example in up state New York. The number 4 is a number that can be unsettling in Chinese communities because the pronunciation of the number is similar to the word “death” in many Cantonese and Chinese dialects. On the flip side, the number 8 is “phonetically similar” to the words wealth or prosperity. The number 13 anywhere in the list price only appeared in the asking price of 13% of Trulia’s listings. In Nevada, lucky number 7 was more likely to be found in their listing numbers and the numbers 3 and 6 that represent positive and negative references in Christian numerology are more prevalent in a Bible Belt’s home prices.

So as an agent or a home seller, thinking about the numbers and their impact may be worthy of consideration in setting your sales price. Jed Kolko also wrote that “setting the right asking price for your home isn’t all science and it isn’t all art. Sellers and agents pick numbers to signal their strategy, and to appeal to the traditions and superstitions of local buyers.” Have you considered this when setting your selling prices?

I’d love to hear your feedback. I can be reached by email Ingrid.quinn@cobaltmortgage.com or leave a comment on my blog page. Visit me at http://www.scottsdalemortgageexpert.com or http://www.cobaltmortgage.com/ingridquinn.


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Jumbo Loans vs Conforming Loans

983077351003885_mortgage-application
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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Your Home Loan Was Sold?

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recently experienced a situation with clients who were confused as to why their loan had been sold to a secondary lender. This has no reflection on the borrower. Selling a loan is typical in the mortgage industry. Mortgage brokers do not close loans in their own name. The funding lender’s name will be on the borrower’s closing documents. Mortgage bankers and banks close loans in their own name and typically retain the servicing (collection of monthly payments) of the loans while selling the loan on the secondary market.
A common reason for banks and lenders to sell their closed mortgages is to free up capital to do more loans. Lenders can only fund so many loans before they no longer have any funds on their warehouse line left to loan. This is where the secondary markets (the place that mortgages are bought and sold after they are closed) come in to play. When a lender funds a loan and then sells it to a secondary market investor (commonly Fannie Mae, Freddie Mac, Ginnie Mae or jumbo loan investors), they are able to make a profit as well as free up capital to originate new loans.
This system actually benefits borrowers by increasing demand in the mortgage market. If the process of selling loan did not exist it would force lenders to create a set amount of loans and they would have to wait for the loans to be paid off prior to creating new loans. The competitive part of the business would be reduced.
Borrowers have nothing to worry about if/when the loan is sold. The loan terms are set in your note and will not change. If you have a home loan and want to see what entity actually owns the loan, call your customer service department and ask. A servicing company is not generally the owner of your mortgage.
For questions or suggestions please feel free to contact me at Ingrid.Quinn@cobaltmortgage.com or visit me at http://www.CobaltMortgage.com/IngridQuinn or http://www.ScottsdaleMortgageExpert.com .