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How Much Do Extra Mortgage Payments Save You?

July 8, 2017 / Tom Bonetto

Paying extra on your home loan can make good financial sense.

It really means a guaranteed return on investment, which isn’t the case for other investments like stocks or mutual funds.

If your current mortgage interest rate is, say, at five percent, you are guaranteed to “earn” five percent — by saving interest — on any amount of principal you pay off.

Borrower Options

Most conventional, FHA, and VA loans allow the borrower to make extra payments (known in the industry as prepayments), without any penalty or fee.

To be clear, making extra mortgage payments might not be the right strategy for everyone, however.

Homeowners often refinance instead, into a 15- or even ten-year mortgage. This drastically cuts their interest rate and slices years off their mortgage.

For shorter-term loans, sometime is the 3% range, make refinancing a very attractive proposition.

Deciding to refinance or make additional payments takes some examination, but the right choice could help you save thousands in interest and get you closer to a mortgage-free life.

Find out more here, from The Mortgage Reports

Big Savings

By making extra principal only payments, the savings could be huge.

For example, a 30-year fixed-rate mortgage at 4% and $200,000 borrowed would require about $140,000 in interest over the life of the loan.

But if you were to prepay just an additional $100 a month toward principal, you would save about $30,000 in interest, and pay off that loan five years quicker.

Here’s another prepayment benefit: unlike the capital gains and dividends earned on other types of investments like stocks and bonds, the savings earned from prepayments are not taxable.

In many cases, taking a longer-term loan at 30-years might be a great option – especially if you pay off the principal faster. You get the flexibility of a smaller monthly payment, but can pay the mortgage down quicker, if you choose.

I’d be more than happy to sit down and talk with you about mortgage term related options. Contact me here for more!

True Communication in the Real Estate World

June 19, 2017 / Tom Bonetto

Whether you are the buyer’s agent or the seller’s agent, the communication with a loan officer can occasionally get tense.

As the seller’s agent you want to ensure that your client gets the best deal possible and you want the loan to close on time. As the buyer’s agent you want to ensure your client gets into the home of their dreams without a hitch.

At the same time, the single biggest issue I hear from agents regarding their lenders has to do with communication….or lack thereof.

“My biggest complaint has always been communication with the consumer and me through the entire process” – Mike K, Realtor

The most important thing to always keep in mind is that whether you are the buyer’s agent or the seller’s agent, I believe it’s best consider the loan officer a part of the team. Remember, we want this loan to close as badly as you and your client.

Key Questions to Consider

Are you receiving weekly and timely Loan Status Updates from your lender?

Are you the first to hear both good news and bad regarding the progress of your client’s loan?

Do you find out about the need for escrow extension only a day or two before the expected close?

If you can’t answer these in the affirmative, you might need to find a new “go-to” lender!

“If the client can’t qualifyy, then don’t waste my client’s time and MINE by trying to fix a square peg in a round hole. However, if they client can be brought along, developed, consulted into becoming a viable buyer then you are a hero to me! I want you calling me and not ME chasing you down.” Kyle C, Realtor

The Importance of The On-Time Close

As a loan officer, my worst nightmare is a loan that doesn’t close. We are paid strictly on commission, so we don’t get paid unless the loan closes (just like you), so there’s extra motivation to come up with any possible solutions to a problem. We don’t want to spend weeks and weeks on a file and then not have it close – and we are no different than the agents in this regard.

The Lending Coach as Your Teammate

So, think of me as your teammate throughout this process.

The referral agents I work with have my word that they will hear the good, bad, and the ugly immediately from me.

They know that we will work together to solve those problems and issues that inevitably arise quickly and professionally.

Please do contact me for more information and how we might be able to work together!

Fannie Mae Eases Qualification Requirements

June 12, 2017 / Tom Bonetto

The country’s largest source of mortgage money, Fannie Mae, soon plans to ease its debt-to-income (DTI) requirements, opening the door to home-purchase mortgages for large numbers of new buyers.

This move by the mortgage giant will dramatically increase the number of people who will now be able to qualify for a home loan.

Per The Washington Post, “Studies by the Federal Reserve and FICO, the credit scoring company, have documented that high DTIs doom more mortgage applications — and are viewed more critically by lenders — than any other factor.”

Using data over the last 15 years, Fannie Mae’s researchers analyzed borrowers with DTIs in the 45 percent to 50 percent range and found that a significant number of them actually have good credit and are not prone to default.

Simple Definition : Debt-To-Income (DTI)

Debt-to-Income (DTI) is a lending term which describes a person’s monthly debt load as compared to their monthly gross income.

Mortgage lenders use debt-to-Income to determine whether a mortgage applicant can maintain payments a given property.

DTI is used for all purchase mortgages and for most refinance transactions.

It can be used to answer the question “How Much Home Can I Afford?”

Debt-to-Income does not indicate the willingness of a person to make their monthly mortgage payment. It only measures a mortgage payment’s economic burden on a household.

Most mortgage guidelines enforce a maximum debt-to-Income limit – and Fannie Mae has essentially “upped” that ratio to help more borrowers qualify!

Housing Ratio or “Front-End Ratio”

Lenders add up your anticipated monthly mortgage payment plus other monthly costs of homeownership. These other costs of homeownership could include homeowner association (HOA) fees, property taxes, mortgage insurance, and homeowner’s insurance.

Normally, some of these expenses are included in your monthly mortgage payment. To calculate your housing ratio or front-end ratio, your lender will divide your anticipated mortgage payment and homeownership expenses by the amount of gross monthly income.

Total Debt Ratio or “Back-End Ratio”

In addition to calculating your housing ratio, lenders will also analyze your total debt ratio. At this time your other installment and revolving debts will be analyzed and added together. Installment and revolving debts will appear on your credit report.

These payments are expenses like minimum monthly credit card payments, student loan payments, alimony, child support, car payments, etc.

Your monthly installment and revolving debts are then added in addition to your estimated monthly mortgage payment and housing expenses and divide that number by your monthly gross income.

Because of these changes by Fannie Mae, many individuals that did not qualify for a home loan might now be eligible under these new regulations.

Please contact me to find out more!

Sports Injuries and the Mental Side of the Comeback

June 10, 2017 / Tom Bonetto

One of my favorite reads is Dr. Patrick Cohn, he’s a sports psychologist out of Orlando Florida. He’s always preaching mental toughness – and the techniques athletes can use to grasp it.

His recent article on the psychology of a sports injury really caught my attention – and I’d highly recommend that you check it out.

Many, if not all, athletes have been forced down the injury road, and it’s in these trials that they can gain great strength.

Injury is a challenge that most athletes will face at some time during their career. They can range from mild to serious ones requiring surgery – and they are not easy for anyone. For some athletes, the emotional impact of an injury can be devastating.

With injury, athletes have a fear of the unknown, “Will I return one hundred percent?” “Will I lose my starting role?” “What if I get cut from the team?”

How you respond to injury shapes your rehab, return to competition, and post-injury performance.

If you respond with frustration, fear and worry, you will delay recovery and potentially suffer re-injury.

It is normal to experience some negative emotions… the very thing that you love doing has been taken away for a period of time. The key is to not wallow in those negative emotions and move forward…

What are the anxieties and fears when you are injured?

A loss of identity: Since you probably have competed in your sport from an early age, you probably identify with your sport (“I am a baseball player,” “I am a gymnast,” “I am a soccer player,” etc).
Losing that connection with your team: Your team is most likely part of your social circle also. You may feel your injury is driving a wedge between you and your friends/teammates.
Doubts about your future: You may wonder if you will be able to compete at the same level as before the injury or, even worse, will the injury prevent you from ever playing again. You may fear losing a scholarship or not getting accepted into the college of your choice.
Losing your role on the team: You may fear being replaced on the team or having your playing time drastically reduced.
The pain of rehab: Rehab can be physically uncomfortable, take a huge chunk of time out of your day and may be a financial strain on your family.
Fear of re-injury: When you return to your sport, your head may be filled with images of getting hurt again and may be an even greater source of anxiety.
Loss of confidence: Injury can lead some athletes to doubt their ability to return to a prior level of performance before injury.

As Dr. Cohn states, “the mental impact of injury must be handled with care if you are to have a successful return to your sport.”

Again, I invite you to follow the link to learn more – and pass this on to any athlete you know that’s on the comeback trail!!

Pre-Approvals and “Findings”

June 5, 2017 / Tom Bonetto

Here are a few great quotes from agents regarding the importance of the mortgage pre-qualification process:

“If the buyer I sent in your direction receives a pre-qual, and then three weeks later does not pass underwriting, whose fault is that?”

“To be honest, if the mortgage broker or lender will not invest in the front end, collect and verify the critical information, I truly don’t have much use for them.”

“I need to KNOW that the buyer, who has invested their trust in me, will not be compelled to find someone else at the last minute in order to salvage the transaction.”

With that said, you can actually evaluate the quality of the pre-approval you received from your lender with one question:

“What are your findings?”

This simple question will go a long way in determining the validity of your pre-approval letter. The answer is either Approve/Eligible (Fannie Mae) or Accept (Freddie Mac).

What Are Mortgage Pre-Approval ‘Findings’?

These “findings” are in the report that outlines the factors that were used to either approve or disapprove that loan application.

The Fannie Mae (Desktop Underwriter) or Freddie Mac (Loan Processor) programs are the specific automated underwriting systems. These should absolutely be completed prior to the issuance of that pre-approval letter.

The underwriting report summarizes the overall underwriting recommendation. It lists the steps necessary for the lender to complete the processing of the loan file.

If a lender receives the go-ahead from Fannie or Freddie through these automated systems, underwriting should be relatively easy. If not, the transaction is most likely heading for trouble.

Timeframes

The pre-approval process is not a 15-minute conversation. If you supply me with all the documents necessary for a full document (full doc in industry jargon) review, I need time to read them. I’ll do the analysis, load the data into systems, and run the analytics….which takes a bit more than 15 minutes. Giving your lender time to process the information helps to secure a reliable pre-approval.

If your lender is offering you a super speedy pre-approval, you as the agent need to question your choice of loan officer.

Obvious mortgage killers, un-seasoned BK, late payments, etc, are the exception. These issues take only a minute or two to disqualify the credit approval.

Negotiation Importance

Home sellers and their Realtors insist that home buyers submit a valid pre-approval letter along with their initial offer for the home. Sellers don’t consider offers from people who haven’t taken the time to determine if they can even get approved for a loan in the first place.

Again, make sure to have your client reach out to me prior to going house hunting to get a true pre-approval letter!

The Lending Coach