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Cancel Your Mortgage Insurance – Right Now!

November 5, 2016 / Tom Bonetto

If you bought a house with a down payment of less than 20%, your lender required you to buy mortgage insurance. The same goes if you refinanced with less than 20% equity.

Private mortgage insurance is expensive, and you can remove it after you have met some conditions.

How to get rid of PMI

To remove PMI, or private mortgage insurance, you must have at least 20% equity in the home. You may ask the lender to cancel PMI when you have paid down the mortgage balance to 80% of the home’s original appraised value.

The process to do so is straightforward. Get an estimate of value from a local real estate agent or loan officer. Online home valuation websites can be inaccurate, so be careful with those.

See if you have around 20% equity based on your home’s estimated value. Be sure to add closing costs onto your existing loan balance if you do not wish to pay them out of pocket.

Then, reach out to your lender and begin the refinance process!

Refinancing to get out of PMI

When mortgage rates are near record lows, as they are now, refinancing can allow you not only to get rid of PMI, but you can reduce your monthly interest payments. It’s a double-whammy of savings.

The refinancing tactic works if your home has gained substantial value since the last time you got a mortgage. Let’s say you bought your house 3 years ago for $100,000, and you borrowed $90,000. That means you have a loan-to-value ratio of 90%, and you pay for PMI.

Three years later, you’ve made all your payments and you have chipped away at the loan balance. Now you owe $85,000. And your home’s value has gone up — now it can be appraised at $112,000. Its value has grown 4% a year.

At this point, you owe $85,000 on a $112,000 house. This means you owe 76% of the home’s value — well under the 80% loan to value that triggers the need for mortgage insurance. Under these circumstances, you can refinance into a new loan without having to pay for PMI.

Here’s a great piece from Craig Berry at the Mortgage Reports for those who have FHA loans and are paying mortgage insurance (MIP). He outlines the benefits of the FHA loan – and examines why right now is a great time to move to a conventional loan.

Now is the time

With rates near historic lows and home values rising consistently, now is a fantastic time to look at refinancing away that PMI. I’d be happy to sit down with you and talk about alternatives and programs that could fit you needs!

The views expressed are my own and do not necessarily reflect those of American Financial Network, Inc.

Playing Baseball and Mental Preparation

November 5, 2016 / Tom Bonetto

We all have been there at one time or another – when you are playing with confidence and playing “free”, even when you are exhausted. The game seems slower, in a good way – you see the seams on the ball more clearly and it doesn’t seem to be moving as fast. You can’t wait for your next at-bat or the ball to be hit to you or to throw that next pitch. Really, it’s all about mental preparation and being ready in that particular moment.

“My ability to fully focus on what I had to do on a daily basis was what made me the successful player I was. Sure I had some natural ability, but that only gets you so far. I think I learned how to focus; it wasn’t something that I was necessarily born with.”

Hank Aaron

How do you get there?

I’d highly recommend that you first check out this video/interview with Evan Longoria about how he made the decision to really work on his mental preparation. Click on the image below to play:

As Tom Hanson and Ken Ravissa write, “working on the mental game is not a substitute for hard physical work. Regardless of how good your mental game is, if you are not putting in the effort on your physical body….you will not find out how good you can be.” Hanson and Ravissa have co-written Heads-Up Baseball: Playing the Game One Pitch at a Time.

I’d invite you to take a look at their book, here:

It’s the mental side of the game that makes the difference in getting to that “zone”. Most athletes leave their thinking to chance. If they are playing well, they are easy going and loose – but when things are not going well for them, they can’t get out of their own way.

I’m a big fan of both authors – and I hope you become one, too. I love the fact that these guys want players to embrace being uncomfortable in practice – so that they will be better prepared when the game is on the line. They encourage players to have a mental plan of letting the uncontrollables go and moving on to the next pitch or play.

I’d also highly recommend that you take a look at a variety of other “mental coaches” and read what they have to say. Here’s a list to start:

Dr. Patrick Cohn and his site, Peak Sports
Steve Springer and his site, Quality At-Bats
Dr. Jim Afremow and his site, Gold Medal Mind
Dr. Tom Hanson’s Book, Play Big

If you are a parent, take the time to sit down with your player and watch the Longoria video. And make sure to check out the links listed above. Take heart – you never know when your physical tools will catch up to your mental side to take you to that next level!

Stop Paying Rent – A Home Ownership Strategy

November 1, 2016 / Tom Bonetto

I have the privilege of talking to many would-be home-buyers, that’s what I do. You would be surprised how much they understand the market relationship of low inventory at particular price points and high rent. High rents are partly caused by declining inventories of available, affordable homes.

It’s frustrating to spend a significant percentage of monthly income on rent – and rent doesn’t generate any equity. To add insult to injury, the renter misses out on significant tax advantages of a mortgage.

How Do We As Agents & Lenders Help These Customers?

Long Term Relationships –It is important that buyers develop long term, trusting relationships with real estate agents and mortgage lenders.

Agents and lenders are competing for buyers – and buyers are competing for the affordable listings that are available, putting the sellers at the advantage. Sellers often receive multiple offers and bidding wars have become quite common. It is important that agents and lenders have strategies, outside of just the highest offer, to make their buyer the most attractive.

However, we must realize a competitive market is not necessarily a bad market. Homeowners are certainly due their return on investment. Obviously, the renter wants to enter the ranks of homeowners so they can get their return on investment too.

Back to the question – how do we as agents and lenders help these customers? The answer is relationships, knowledge, and execution.

The agent who understands the needs of the buyer reacts quickly in a changing market. The lender who has a keen understanding of all mortgage products equips the buyer to present a compelling offer relative to other bidders. The point is this, relationships between buyers, agents, and lenders are crucial in a competitive market.

Relationships & Knowledge – Keys to Strategy

Knowledge – Understanding the connections between a buyer’s financial condition, housing inventory, and mortgage products is vital to purchasing a home.

A reputable lender has many wonderful mortgage products at their disposal. These products give financing options to a lot of potential buyers. Products such as USDA, VA, Conventional, FHA, and Non-Prime all have features that make buyers attractive to sellers. If your lender doesn’t have a working knowledge of these products, the buyer will be at a competitive disadvantage.

Likewise, the real estate agent that has knowledge of the market will give a competitive advantage to the buyer. These agents act quickly and fulfill buyer requirements while meeting the financial expectations of the seller. A strong relationship between the agents, the buyers, and the lenders ensures the perfect home is financed with the right mortgage.

The Execution Phase

Execute – The real fun begins once the relationships are in place. Naturally, the nest step is executing a Purchasing Plan and visiting listings. The Purchasing Plan must match buyer’s needs, financial ability to purchase, and seller requirements. A well-executed Purchasing Plan will maximize the buyer’s ability to own their dream home.

Maximizing purchasing power relative to the available inventory requires constant communication, partnership, market research, and financial review by the real estate agent, the lender, and the borrower. It is a team strategy that requires knowledge, relationship, and communication. Executing a well thought-out Purchase Plan usually results in happy homeowners.

Closing Timeframes Continue to Lengthen

October 24, 2016 / Tom Bonetto

Since the implementation of the Consumer Financial Protection Bureau’s TILA-RESPA Integrated Disclosures rule last October, continuing evidence shows the impact of TRID in lengthening the time to close real estate transactions. Both purchase and refinances have been severely impacted by these new regulations.

Now, a report from Ellie Mae shows more statistical evidence on how deeply the impact of TRID is being felt, with the time to close a mortgage loan climbing yet again. Additionally, 2016’s average time to close a loan is 10 days longer than just one year ago in 2015, when the average time to close a loan was 40 days.

If you find 50 day closes unacceptable (as I do), please reach out to me so we can get your customer in their new home sooner rather than later! Take advantage of Equity Prime’s 30-day On-Time Closing Guarantee.

The gist of TRID is that mortgage lenders must send particular paperwork to mortgage borrowers 72 hours prior to closing, and that changes to any of the documents require a re-disclosure of said terms and another 72-hour waiting period.

Since October 2015, then, closings have had an additional 3 days tacked on; a government-mandated delay affecting all closed loans. But Equity Prime is still holding to it’s 30 day on-time closing guarantee!

The faster you can close on a mortgage, the lower the mortgage interest rate can be and the faster your client gets into their new home! Know the steps in a mortgage approval, and where you cut time and corners to get to closing quicker.

Source: The Mortgage Reports

Warrantable & Non-Warrantable Condo Mortgages

October 17, 2016 / Tom Bonetto

There is confusion about condo financing versus financing for detached single family residences. I suppose this is why buyers and agents ask me about the financing differences between these two property types. It really is important to understand what “warrantable” means and how it impacts the condo sale transaction.

Source: The Mortgage Reports

What is a “warrantable” condo and does it affect financing?

A warrantable condominium is a condo unit or building that meets specific financing and operations standards required for a government-backed mortgage loan approval.

These condos satisfy Fannie and Freddie conventional financing guidelines…and therefore qualify for purchase and sale on the secondary market. This is important because lenders buy and sell mortgages this way.

If you are an agent working with buyers interested in condos, make sure you have done the research to determine the warrantability of the condo.

A qualified lender can give you guidance and a condo questionnaire – and the ownership of the condo complex should provide the information for the questionnaire. Once complete, the lender can send it to underwriting for evaluation to determine its warrantability.

To be “warrantable” a condo community must meet certain requirements. For example, the condos can’t be part of a timeshare, and at least half of the units must be owner-occupied. In addition, the community must contribute at least 10% of its annual budget to its reserve account every year.

Do lenders think condos are more risky than detached homes?

Yes, condos are more risky for a lender than a detached home. The lender on a single unit shares some of the risk for the entire complex. Because of this shared risk items such as liability, fire, foreclosed units, vacant units, and delinquent HOA fees are all risks carried by both the lender and the individual owner. Before the lender will loan money for the condo, the lender does the research necessary to quantify the financial risk of the property.

What happens if the condo is “non-warrantable”?

A full service direct lender has access to a multitude of financial products. There are products for both warrantable and non-warrantable condos. Since the non-warrantable condo does not satisfy conventional guidelines the cost of financing will show increased risk.

It’s important to understand that non-warrantable condos aren’t sub-standard, they just don’t meet the lending guidelines for Fannie Mae, Freddie Mac, and the FHA.

A non-warrantable condo is also one that can operate as a hotel or provides short-term rentals. Therefore, these types of condos are sometimes located in touristy areas like beach resorts and in college towns.

Other features of a non-warrantable condo can include:

a single person or entity owns more than 10% of the units
many units are rentals
more than 25% of the space within the community is used commercially
the community is involved in a litigation

Click on the article linked at the top of this blog for more information. Gina Pogol wrote the article for The Mortgage Reports.

If you are a buyer looking at condos, make sure you have the warrantability conversation with the agent early in the process. Nothing is more heartbreaking to find the condo of your dreams only to have the financing fall through late in the approval process.

The Lending Coach

Page 71 of 82

Cancel Your Mortgage Insurance – Right Now!

How to get rid of PMI

Refinancing to get out of PMI

Now is the time

Playing Baseball and Mental Preparation

How do you get there?

Stop Paying Rent – A Home Ownership Strategy

How Do We As Agents & Lenders Help These Customers?

Relationships & Knowledge – Keys to Strategy

The Execution Phase

Closing Timeframes Continue to Lengthen

Warrantable & Non-Warrantable Condo Mortgages

What is a “warrantable” condo and does it affect financing?

Do lenders think condos are more risky than detached homes?

What happens if the condo is “non-warrantable”?

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