Ingrid B. Quinn

NMLS ID #211652 Arizona, Loan Consultant


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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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Interest Rates Are Up!

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Interest rates are now up about 1.25% from their rock bottom lows in October 2012 and again in May 2013. The inevitable interest rate increase from all-time lows is continuing. Following the Federal Reserve meeting last week, it seems that if the economy performs as expected, then the Fed plans to taper its bond purchases as early as later this year. Over the past few years, the Federal Reserve bond purchase program has helped mortgage rates drop and stay at historically low levels.

However, even though interest rates are volatile, they do not move in a straight line up or down. They have been moving so fast the last few days, as a reaction to the Fed news of possible pull back that we may see some correction. However, that is conjecture, and anyone contemplating a mortgage these days needs to be aware that the mortgage market is highly volatile right now. It seems the Federal Reserve believes the economy is no longer in recession, and as a result the Fed has indicated that it appears ready to scale back its bond purchases.

The rapid rise in mortgage rates has been shocking, but it had to happen at some point. To boost the economy during the financial crisis, the Federal Reserve undertook an unprecedented program to purchase enormous quantities of mortgage backed securities and U.S. Treasuries in an attempt to push rates down. Before the Fed started this program, rates were about 1.5% to 2% higher, so it looks like that is where we are headed again. We are already a good bit of the way there!

So, what you are witnessing with the rise in rates is the market trying to determine the realistic range of mortgage rates without the intervention of the Federal Reserve. Lots of people try and guess the direction of the market and react in advance for their own benefit.. The market buys on rumor and sells on news.

So clearly the market is signaling that it believes the Fed is done with this part of the stimulus. Now it seems we will see the market reconfigure to the new reality.


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Always Get a Home Inspection!

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Finding the perfect house is like love at first sight. You can search and search and when you least expect it, you will fall in love, but when love at first sight strikes, you need to be cautious. Just as you would get to know a person and see if you are compatible before settling down you should get to know the house. A home is where you build your life and this is a commitment not to be taken lightly. I always suggest that my clients need a professional’s eye when looking into the possible issues of a home.
Think of having a home inspection like bringing your newfound love home to meet your parents. Just as your parents will scrutinize this new person in your life, the home inspector will scrutinize the house. Both simply want the best for you and are willing to do what it takes to show what’s really underneath the surface.

Normally, you have 10 days according to the Arizona standard real estate contract, to do all the inspections on a home, structural, mechanical, well and septic, termite, permits with the county, crime reports, etc. The cost of the inspection is outside of your loan transaction. Usually, I wait for the go ahead that the inspection was satisfactory and that there are no deal killing issues with the home before I order the appraisal for my client. Why spend $400-$500 on the appraisal if the inspection is not acceptable?
I highly recommend doing all the necessary inspections and that unless you are a licensed contractor and know a lot about a home and its construction that you have a licensed professional perform the home inspection. Your Realtor should give you the names of a few inspectors to contact.
I would be interested in your comments about any home inspection stories you can share. Please comment on my blog page. I can be contacted at Ingrid.quinn@cobaltmortgage.com or visit my website at http://www.cobaltmortgage.com/ingridquinn.


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Using Alimony and/or Child Support Income to Qualify for a Mortgage

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The number 1 question I get about using alimony and/or child support income to qualify for a home mortgage is what if you have not been receiving alimony for 12 months? Well, good news, many people do not have to wait that long. For these situations, I recommend pre-approval in advance of looking for a home. Our automated underwriting engines (DU or LP) will determine the length of time this type of income needs to be received for the loan approval. It is common for a divorcee to want to use alimony/child support income to purchase a home immediately after a divorce.

Below are the guidelines as to how to document this income:

Document that alimony or child support will continue to be paid for at least three years after the date of the mortgage application, as verified by one of the following:

• A copy of a divorce decree or separation agreement (if the divorce is not final) that indicates payment of alimony or child support and states the amount of the award and the period of time over which it will be received. A copy of the children’s birth certificates may be required. Note: If a borrower who is separated does not have a separation agreement that specifies alimony or child support payments, the lender should not consider any proposed or voluntary payments as income.
• Any other type of written legal agreement or court decree describing the payment terms for the alimony or child support.
• Documentation that verifies any applicable state law that mandates alimony, child support, or separate maintenance payments, which must specify the conditions under which the payments must be made.

Document the borrower’s regular receipt of the full payment, as verified by:

• deposit slips,
• court records,
• copies of signed federal income tax returns that were filed with the IRS, or
• Copies of the borrower’s bank statements showing the regular deposit of these funds.

Review the payment history to determine its suitability as stable qualifying income. Each individual’s situation with the ex-spouse is different so it will be important to check with the lender you choose how to work it out. If you have further questions or comments, please contact me at Ingrid.quinn@cobaltmortgage.com or visit me at http://www.cobaltmortgage.com/ingridquinn.


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Student Loans and Qualifying to Buy a Home

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With graduation season upon us, student loan repayment clocks will start ticking. So I decided to tackle a small but significant question in qualifying for a mortgage. Banks and lenders take a look at a borrower’s capacity to repay a mortgage loan along with the rest of their debts.
When analyzing a borrower’s income and debt, we have debt to income (dti) ratios to adhere to. Generally, housing expense to income should not exceed 35% of a borrower’s income. Total debt, including housing expense, car loan payment, and student loan and credit card payments should not exceed 45-50% of income. Again, keep in mind this is a general rule. Just because someone does not have additional obligations over their housing expense does not automatically mean lenders will allow housing expense to go up to 50% of someone’s income. This is a common misconception. Below are the guidelines for those types of loans depending on the type of financing for a home that is requested.

Deferred Installment Debt for Conventional Loan Qualifications
Deferred installment debts, such as deferred student loans, must be included as part of the borrower’s recurring monthly debt obligations. If the borrower’s credit report does not indicate the monthly amount that will be payable at the end of the deferment period, the lender must obtain copies of the borrower’s payment letters or forbearance agreements so that a monthly payment amount can be determined and used in calculating the borrower’s total monthly obligations.
Exception: For a student loan, in lieu of obtaining copies of payment letters or forbearance agreements, the lender can calculate a monthly payment using no less than 2% of the outstanding balance as the borrower’s recurring monthly debt obligation. However, if any documentation is provided by the borrower or obtained by the lender that indicates the actual monthly payment, that figure must be used in qualifying the borrower.

Deferred Installment Debt for FHA Loan Qualifications
Debt payments, such as a student loan or balloon note scheduled to begin or come due within 12 months of the mortgage loan closing, must be included by the lender as anticipated monthly obligations during the underwriting analysis. Debt payments do not have to be classified as projected obligations if the borrower provides written evidence that the debt will be deferred to a period outside the 12 month timeframe.
Deferred Installment Debt for VA Qualifications
If student loan repayments are scheduled to begin within 12 months of the date of VA loan closing, lenders should consider the anticipated monthly obligation in the loan analysis. If the borrower is able to provide evidence that the debt may be deferred for a period outside that timeframe, the debt need not be considered in the analysis.
Student loans can be in deferment for a period of time and many borrowers think they should not be counted in their dti. It is important to check qualifying guidelines with you mortgage lender. If you have any questions or comments, please contact me at Ingrid.quinn@cobaltmortgage.com or visit http://www.scottsdalemortgageexpert.com or http://www.cobaltmortgage.com/ingridquinn.


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PMI vs MIP. What are the differences?

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Many homeowners pay it and many home buyers try to avoid it…mortgage insurance. You may be wondering, “What is mortgage insurance and why do I have to pay for it?” Conventional mortgages have private mortgage insurance (PMI) and FHA loans have what is termed mortgage insurance premium (MIP). Here’s more information on both and how they may affect your payments when you purchase a home or closing on a refinance.

Private Mortgage Insurance (PMI)As part of the loan qualifications set out by Fannie Mae and most investors, a borrower is required to pay PMI when at least 20 percent of a home’s purchase price is not provided as a down payment. Private mortgage insurance is paid by the borrower, but it benefits the lender. It protects the lender against loss if a borrower defaults on a loan.
PMI rates vary depending on down payment and FICO scores. You may find the annual premiums (divided by 12 to make monthly payments) on a minimum down payment conventional loan to run from 1.20% to .59% a year. Conventional loans also have a variety of ways to pay for the mortgage insurance. It can be paid in one lump sum, paid monthly only, or split in lump sum and monthly in one transaction.
Mortgage insurance will also drop off automatically at a certain point in the loan life. You may have to get a mortgage that requires paying PMI, but it’s also possible to obtain more than one loan (Home equity loan/2nd mortgage) and avoid paying PMI. When obtaining a mortgage, it’s important that you find a loan that fits your specific situation and goals.

Mortgage Insurance Premium (MIP)FHA guidelines allow for a small amount of cash down payment to close a loan. As a result, all borrowers must pay a MIP to insure the lender against loss if the homeowner defaults on the mortgage. While there are ways to avoid PMI with conventional loans, there is no way to avoid MIP on FHA loans because that is how the program is set up.
The MIP has increased in the last 3 years, on 4 occasions to a current level for 30 year mortgages of 1.75% in an upfront premium financed on top of the loan and an annual premium of 1.35% a year with the minimum required down payment. The annual premiums can vary depending on down payment and the term of the loan (30 year vs 15 year loans). MIP has also undergone a significant change in that the mortgage insurance premium will stay on for the life of the loan no matter how much equity the owner has in the property.

It is important to explore the differences between Conventional and FHA loans because the mortgage insurance has a significant impact on your monthly payments. It is important to find a knowledgeable loan officer that can explain your options to you.
If you have any questions or comments, please 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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What Kind of Lender Are You Using?

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When looking to buy a home, one of the most important things to think about is what type of lender you are going to be working with. You may be surprised by how many different options there are.
Banks, large and small: Due to their size, banks have a tendency to be a bit slower. In general, I have seen the banks take weeks to go through a process that takes other lenders days. There may be the chance that you are working with a Private Banking Associate who may get your file through a bit faster. On the negative side, trying to get a loan through a bank’s branch network, 1-800# call center or a low to middle producing loan officer can be painful.
There can also be a challenge with having the appraisal done through a bank’s system. Due to changes enacted by the CFPB, all lenders must use a 3rd party system of ordering appraisals. Banks use their own Appraisal Management Company (AMC). I equate ordering an appraisal to pulling a number out of a Bingo basket. It is random and the pool of appraisers is quite large. Obtaining a mortgage through a bank tends to be a conveyer belt process, possibly in another state or region. This can cause the loan process to take longer as well as be a bit more complex.

Credit Unions: Credit unions can go either way. From life experience a credit union’s functionality and speed are greatly affected by the loyalty you show. Credit unions also draw from their own AMC, and tend to be similar to a big bank. When it comes down to it Credit Unions are a 50/50 shot on whether you are going to have a great experience or a bad one.

Mortgage Brokers: Mortgage brokerage firms seem to be mostly about the individual broker. This can be a good thing when it comes time to shop rates for the client. If you are thinking of working with a Mortgage Broker, you will want to meet them in person and get to know their work ethic to see what to expect during your transaction. There are some downsides such as, appraisal ordering is subject to the AMC of the institution the broker chooses to go to. Some of these lenders broker to big banks, small banks, wholesale entities, insurance companies, credit unions, private banks and more. Guaranteed before your first payment is due the loan, will have been transferred and may do so a number of times throughout the life of the loan. The broker has very little negotiation power during the underwriting process as far as any hiccups on the file.

Mortgage Bankers: A good mortgage banking firm is a worthwhile contact right now. A mortgage banker is usually set up to underwrite and close loans in-house, which means faster turn times, more control and the underwriting staff, closers, funders personally know the people who are handling your loan . Some mortgage bankers even have their own AMC, populated by a smaller pool of self selected appraisers they know well, which can make for the best results for a tight appraisal situation you may be worried about. Most Mortgage Bankers also have constant contact with your loan and have the ability to check status and in turn give you immediate feedback and updates throughout the process. This keeps the control with your Mortgage Banker and allows you to have more input into the process. They are also very likely to service the loan after it closes, so you have a loan life partner in your loan officer.

Online lenders: When looking at online lenders the best way to think of it is, would you want to place the largest purchase in your life in the hands of a nameless, faceless entity? Online lenders are big, with no knowledge of the local market and are subject to large AMC’s. From my experience, they tend to be slow and cause frustration. If a client wants to take a leap of faith and purchase or refinance with an online lender, I am honestly going to try and talk them out of it. I personally would not risk going to an online lender.