Ingrid B. Quinn

NMLS ID #211652 Arizona, Loan Consultant


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Tax Time and Staying In Touch

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It’s that time of year again, when everyone is gathering their paperwork from 2013 and preparing to file their tax returns. Clients, who have either purchased a home or refinanced a current home mortgage in 2013, need to retain their final closing statement from their transaction for tax purposes.

Their tax preparer or online self preparing system will ask them for information from their settlement/closing statement. Clients will need to keep this paperwork handy to determine the amount of charges in relation to their recent transaction that can be used as a deduction on their taxes.
Tax payers have questions about what is going to be deductible and it’s always good to have them ask their preparer for that information. The http://www.irs.gov website is also very helpful. Also, remind them that they will get a year end summary 1098 from their mortgage company about interest, property taxes and mortgage insurance paid for the tax year. If the loan has been sold to a new servicer, it is also good to remind them that they will receive more than one 1098.

This is a great time for realtors to reconnect with their clients from the previous year. Sending your client a copy of their final HUD (closing statement) is a helpful service you can provide and is one of the activities you can plan on an annual basis when doing your yearly business plan. You can securely retain the final HUDs throughout the year and when January 2015 rolls around, you have them at your fingertips to forward to each client with a thank you and a reminder for referrals.

What else are you doing to stay in touch with your client during the year? I appreciate your feedback. To contact me please, email Ingrid.quinn@cobaltmortgage.com or visit my website at http://www.scottsdalemortgageexpert.com or http://www.cobaltmortgage.com/ingridquinn.


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Qualified Mortgage (Q.M.) What is it?

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Qualified Mortgage (QM) and Ability to Repay rules are in effect on loan applications received on or after January 10, 2014. Part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the new rules are designed to protect buyers from purchasing homes they can’t afford and provide lenders protection from liability when originating loans that meet the Qualified Mortgage standard.
What is a Qualified Mortgage?

A qualified mortgage is a home loan that has:
• Regular periodic payments in substantially equal amounts
• Been underwritten based on a fully amortizing payment schedule using the maximum rate allowable for the first five years after the date of the first periodic payment
• Verified the borrower’s income and assets; and current debts, including alimony and child support
• A borrower’s total debt-to-income ratio of no more than 43% (see “Temporary QM” for exceptions to this requirement)
• Met points and fees limitations
• None of the following features: negative-amortization, interest-only or balloon-payment features

Points and Fees

A loan must not exceed the limits listed below for points and fees for either Temporary or Standard Qualified Mortgages. These fees typically do not include those that are paid to third parties such as appraisers or title companies unless those companies are affiliated with the lender.

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Higher-Priced Mortgage Loans

For a lender to originate a Qualified Mortgage with safe harbor legal protections, the lender must ensure that the Annual Percentage Rate (APR) does not exceed certain thresholds. For 1st lien mortgage loans, the APR cannot exceed an index called the Average Prime Offered Rate (APOR) by more than 1.5%. For 2nd lien mortgage loans, the APR cannot exceed the APOR by more than 3.5%. FHA APR cannot exceed APOR +1.15% + annual NI%.

What does the Qualified Mortgage mean for you and your buyers?

Most loan programs today already adhere to the standards that make up the QM rule. The new rule simply formalizes that lenders must make – and document – a good-faith determination before closing the loan that the borrower has a reasonable Ability to Repay the loan. At minimum, this determination is made based on eight factors, which are already the tenets of mortgage underwriting:
• Current income or assets
• Current employment status
• Monthly mortgage payment
• Monthly payment on any simultaneous loan
• Monthly payment for mortgage-related obligations (taxes, insurance, HOA, etc.)
• Current debt obligations, alimony and child support
• Monthly debt-to-income ratio and residual income
• Credit history

There will not be a significant impact for loans that are eligible for Fannie Mae, Freddie Mac, FHA, VA or USDA. Although some jumbo and non-conforming programs will tighten their standards to the 43% debt-to-income threshold, most customers using these programs will still qualify.

The points and fees limitations and higher-priced mortgage loan limits are generally seen as a positive for homebuyers, as they will prevent many lenders from charging high ancillary fees, large amounts of discount points, and higher interest rates. However, there will be a small amount of riskier loan products that will be difficult to offer without violating the QM thresholds. Some lenders may decide to offer those mortgage products that are not eligible for QM safe harbor legal protection, but doing so will expose them to greater legal risks.


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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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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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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 .