Mortgage Q&A

**BAM6I4** · 08-10-2011 03:42 PM

^^^Thanks for the insight, I may do some asking around in the future, we'll see where rates go.

As to the other question....what about a HELOC? I know someone who purchased their home outright, then immediately took out a heloc for 50% of the value. That was in 2008 and there is no fee if you don't use it, but they have had 1.9% since the opening, and it's a 10 year thing. It's nice to have the money available at least, and in this method you aren't charged for anything unless you use it.

**ruetzal** · 08-10-2011 05:07 PM

wow a** pounding in the market today. Mortgage Brokers Celebrate

3.875% on a 30 year, 3.25% on a 15 year and 3% on a 5/1 ARM

Bam great point and thats what I suggested to him. Its very easy to get a heloc on a home especially when you own it out right. Usually they will give you 50% without even taking a look at you thoroughly. One downside is if you wanted to borrow a good chunk of the LOC and hold it out there for an extended period of time. Heloc's are arm's so the rate fluctuates and this is most people's worries when they take one out, also the terms are generally shorter in duration.

In his situation he wanted a 30 year fixed at these incredibly low rates but today its wasn't feasible until that SS checks come rolling in. Once he starts receiving those I am sure he won't have a problem getting a cash out at .50% over market.

For most people keeping cash in their pocket is more beneficial than buying down the principal balance. Especially in these times. I always suggest to figure out what you would need to have for 1 year of unemployment. After that you should be pretty set for even the hardest times. Then you can spend your cash how you would like to.

This is the reason even a guy this liquid would want to extend a term and have a fixed rate. Cash in hand is the most power anyone can have. And even some of the worlds richest folks would rather borrow than spend theres. I have heard/read some interesting articles of all these financial guru's tell you to keep your cash as much as you can and as long as you can. Even if in the long run you spend a few more bucks paying it in interest. It makes sense even though sometimes its not technically the most financial savy decision

**ruetzal** · 08-15-2011 05:11 PM

4.25% on a 30 year, 3.375% on a 15 year and 3.125% on a 5/1 ARM

**ruetzal** · 08-19-2011 02:04 PM

4% on a 30 year, 3.25% on a 15 year and 3.0% on a 5/1 ARM.

**jnm2.0t** · 08-19-2011 09:30 PM

Here's one for you... why do mortgage brokers suck so bad? We had a referred one suggest that we should take a mortgage at the max we could get approved for (which was looking like $150k more than we were comfortable with) AND dump all our savings into a house, this right after we told her we have a baby due in January.

**Egilbe** · 08-19-2011 09:36 PM

Originally Posted by jnm2.0t

Here's one for you... why do mortgage brokers suck so bad? We had a referred one suggest that we should take a mortgage at the max we could get approved for (which was looking like $150k more than we were comfortable with) AND dump all our savings into a house, this right after we told her we have a baby due in January.

bigger commission check for her, maybe?

**evosky** · 08-19-2011 09:42 PM

damn, i locked in at 4.5% a month ago thinking that would be the bottom, but wow, rates are wayyy down.

great time for anyone on the fence about going into a mortgage

**jnm2.0t** · 08-19-2011 11:49 PM

Originally Posted by Egilbe

bigger commission check for her, maybe?

Well of course that's it, but it was just so ****ty on her part that we were amazed.

**ruetzal** · 08-20-2011 11:33 PM

Jim for every good one there is 10 bad ones

its never a good idea to listen to them, IMO most mortgage brokers I have dealt should not be giving financial advice to anyone. Its always best with any financial decision to research and understand on your own. And then find terms that you are comfortable with. A big problem in this market is the lender wants to give people more than they can afford and the people think since they got approved for X amount of dollars they must be able to afford it. Thats wrong on so many levels! Plan your monthly expenses accordingly and then you have to figure a monthly $ your are comfortable with and work within your budgets. Its very easy to find mortgage calculators online to do this for you given the market rates.

These commission workers, especially in a tough market which we are facing today are trying to squeeze the most income out of every deal. The truly sad thing about that is they are doing it to people that don't deserve this kind of treatment. Fortunately for people that can think for themselves there are plenty of other people that will give them sound advice. IE financial planners, wealth managers etc. I always suggest you find a trustworthy financial person to help with decisions you do not know enough about. As if sounds like in your case at least you were smart enough to see she/he was a crackhead.

**ruetzal** · 08-20-2011 11:41 PM

Originally Posted by evosky

damn, i locked in at 4.5% a month ago thinking that would be the bottom, but wow, rates are wayyy down.

great time for anyone on the fence about going into a mortgage

on a refi you can always decide to walk away and re-lock with another lender, although sometimes you may lose your appraisal and will have to pay for another one since different lenders have different appraisal acceptance. but for a decent market swing it would most likely pay for itself. Also don't forget you will probably take another credit hit for a new lender pulling credit.

keep in mind the deal isn't done until you sign the paperwork. You have every right to walk away anytime before then. Otherwise another good suggestion is to see if your lender is willing to renegotiate your lock. Most will to a certain extent to save your deal

**jnm2.0t** · 08-22-2011 12:35 AM

Originally Posted by ruetzal

JAs if sounds like in your case at least you were smart enough to see she/he was a crackhead.

I have my head on straighter when it comes to personal finances than many in the industry.

**Rob Cote** · 08-22-2011 10:12 AM

ruetzal, this thread is extremely informative, so thanks for that! I've got a considerable amount of debt, mostly in the form of student loans. Could you comment on how this could affect my ability to be approved for a mortgage? Specifically, does a bank just look at how much I have coming in each month vs. how much is going out to determine if there is enough extra coming in to pay the new bill? Or do they look also at on time payments, paying more than minimum, etc? I know credit score is an important factor as well, but I have no idea how it is determined. It seems to me to be smoke and mirrors.

Any help you can provide is much appreciated. My girlfriend and I are trying to move into a first home and considering the possibility of a fixer-upper or starting from scratch with a piece of empty land. We're weighing all options and trying to take our time to be thorough in understanding all the possibilities, while also trying to expedite the process because we're sick of throwing money away by renting. Thanks in advance.

**ruetzal** · 08-22-2011 12:10 PM

Originally Posted by Rob Cote

ruetzal, this thread is extremely informative, so thanks for that! I've got a considerable amount of debt, mostly in the form of student loans. Could you comment on how this could affect my ability to be approved for a mortgage? Specifically, does a bank just look at how much I have coming in each month vs. how much is going out to determine if there is enough extra coming in to pay the new bill? Or do they look also at on time payments, paying more than minimum, etc? I know credit score is an important factor as well, but I have no idea how it is determined. It seems to me to be smoke and mirrors.

Any help you can provide is much appreciated. My girlfriend and I are trying to move into a first home and considering the possibility of a fixer-upper or starting from scratch with a piece of empty land. We're weighing all options and trying to take our time to be thorough in understanding all the possibilities, while also trying to expedite the process because we're sick of throwing money away by renting. Thanks in advance.

Rob
Debt is used to figure out your Debt Ratio or Gross income vs. the amount of your monthly bills. There is a Max Debt Ratio that we have to adhere to. Right now our Debt Ratios cannot exceed roughly 45% of gross income. You can figure this out on your own really. Just take you & the wifes monthly gross income and then add up all your note (loan) debt per month and divide by the gross. This should fall decently under 50% of gross income. Whatever the difference is you can afford in a home. So IE if you have 5000 gross income and you only have 1000 in loan payments per month then you can spend roughly 1500 per month on a mortgage payment. Now we only look at the Principal & Interest in debt ratio of the new home mortgage amount so you don't have to consider escrows in this calculation. Although be aware that you have to consider escrow (Taxes & Insurance) in your final mortgage payment amount. Some people forget they have to pay these

On a side note. Since I don't know if you are renting currently but I would sit down with the wife and take a look at the previous 6 month expense you are paying and add up all your bills on a monthly basis and take out rent if you are paying and then figure out what you could afford per month on a home. Take in consideration any furniture and utility bills/cable etc. and if you are saving money with after tax dollars you most likely can afford that home and get approved. Most advisers say that outside of investment dollars you should be saving anywhere from 700 and up per month. I like to keep it north of 1k. With family life things come up (kids) and other things that you should account for as well.

In the end if you add up everything you pay for monthly, take out any rent and put in the new mtg + taxes and insurance (monthly figures) and subtract from your take home pay. If you are saving money at those dollar amounts most likey you will qualify for a home. There is a few factors that you have to consider as well. Credit reports and things like that but if you are a good payer and have no problems you should be able to get a mortgage just fine.

so to answer your question yes thats all we do is take your loan payments and divide by gross income to figure out your debt ratios. You can probably google that to provide some more info on this but all we need to determine your ratio is the required mimimum payments of your debt divided by gross inc. also we do look at monthly minimums on credit cards as well. So everything you are required to pay monthly but obviously outside of utility bills/cable and things like that

Good luck to you guys! let me know if I wasn't clear enough or if you need anything else.

I also want to mention for anybody thats underwater on their mortgage to consider the DU Refi + program. So many americans do not know that this gov't program allows good borrowers to refi up to 125% Loan to value. This is to keep foreclosures down and to allow good americans to lower monthly payments. God Love America

**ruetzal** · 08-22-2011 12:20 PM

Originally Posted by jnm2.0t

I have my head on straighter when it comes to personal finances than many in the industry.

LOL and yeh that doesn't take much. Not to take any credit away from you though

**ruetzal** · 08-24-2011 02:10 PM

4.25% on a 30 year, 3.375% on a 15 year and 3.0% on a 5/1 ARM

**ruetzal** · 09-01-2011 02:13 PM

4.25% on a 30 year, 3.25% on a 15 year and 2.875% on a 5/1 ARM

**00boraslow** · 09-01-2011 03:47 PM

Originally Posted by ruetzal

4.25% on a 30 year, 3.25% on a 15 year and 2.875% on a 5/1 ARM

They keep dropping.

**dunhamjr** · 09-01-2011 03:55 PM

Originally Posted by ruetzal

4.25% on a 30 year, 3.25% on a 15 year and 2.875% on a 5/1 ARM

pretty nice numbers.

unfortunately the ARM my loan runs on keeps going down. its at 3% right now and adjusts in March.

its a hard pill to think about going from 24 yrs back up to 30 to get a higher rate of 4.25...
and even harder to take the payment increase of a 15yr loan to STILL have the rate go up a little bit to 3.25

**ruetzal** · 09-01-2011 05:26 PM

Originally Posted by dunhamjr

pretty nice numbers.

unfortunately the ARM my loan runs on keeps going down. its at 3% right now and adjusts in March.

its a hard pill to think about going from 24 yrs back up to 30 to get a higher rate of 4.25...
and even harder to take the payment increase of a 15yr loan to STILL have the rate go up a little bit to 3.25

LOL but it will be an easy pill to swallow when you arm adjusts to 7%

The comfort of the fixed rates make them attractive. Although I think you are safe for the next few years. I would set a point for a fixed rate interest rate and if you start seeing them rise consistently you could think about refi'ing into a fixed then. Run some #'s on what point you would want to switch to a fixed rate to save some face if interest rates jump on your arm

**ruetzal** · 09-02-2011 03:24 PM

4.125% on a 30 year, 3.25% on a 15 year and 2.75% on a 5/1 ARM

**Rob Cote** · 09-14-2011 07:14 AM

Hey ruetzal,

Can you tell us something about short sales? My girlfriend heard that it's possible for the seller's lender to come after the buyer for the forgiven amount. I don't understand how this is possible.

If Joe owes $200,000 on his home which is worth $150,000 and he decides to short sell it, he will be forgiven $50,000 (we're assuming all parties involved on Joe's side of the deal agree to this, for the sake of argument). I want to buy Joe's house for $150,000, so I sign a contract and get my mortgage for that amount. I have not signed up for any of Joe's debt, so how am I legally obligated to pay it off? Does his lender have a leg to stand on in coming after me for his money? Or perhaps part of the short sale deal DOES involve signing up for some of his debt. I'm just beginning to look into this as another option. I just want to be aware of any risk involved for myself.

**ruetzal** · 09-15-2011 11:02 AM

No the lender cannot come after you for someone elses debt. In a short sale the lender agrees to satisfy the mortgage at a reduced amount. Once the short sale is agreed upon the lender provides a payoff for the shorted amount and once they receive payoff they satisfy the debt with the county recorder. They have lost that money and know it will never be repaid to them.

On a side note forgiven debt is always taxed by the IRS. So in this ex. the seller would have to pay taxes on the 50k forgiven. What a kick to the nuts! LOL

**Rob Cote** · 09-15-2011 11:09 AM

Okay so it sounds like there was some misinformation. It didn't make sense to me the way it was explained, so I had to raise the question.

**ruetzal** · 09-15-2011 12:25 PM

no problem man.

On another side note I picked up a '09 A3 in boston and drove it back to WI on tuesday. What an upgrade from a 03 GTI. LOL

**Rob Cote** · 09-15-2011 12:31 PM

Awesome choice. So we'll be seeing you over in the 8P forum? 2.0t or 3.2?

**ruetzal** · 09-15-2011 01:51 PM

Yep thats where i noticed you hung out as well

09 s line with panaramic roof, 2.0t (love my turbos) navi, stick 70k for 18k pretty good price unfortunately I had to drive it 1100 miles back home, but well worth it!

**eluwak** · 09-16-2011 01:15 AM

Originally Posted by ruetzal

No the lender cannot come after you for someone elses debt. In a short sale the lender agrees to satisfy the mortgage at a reduced amount. Once the short sale is agreed upon the lender provides a payoff for the shorted amount and once they receive payoff they satisfy the debt with the county recorder. They have lost that money and know it will never be repaid to them.

On a side note forgiven debt is always taxed by the IRS. So in this ex. the seller would have to pay taxes on the 50k forgiven. What a kick to the nuts! LOL

That's not 100% true...

The debt forgiveness act of 2007 gives a loophole for personal residences short sold under certain situations (I had $223k written off for last year all forgiven). The mortgage company can come after the seller after the short sale to recoup losses, but if they were in an extenuating circumstance (i.e. like me being reduced) then it's unlikely they have anything to get outside of garnishing future wages.

Good thread though... I still got another two years before we will qualify for something we can afford

**Rob Cote** · 09-16-2011 06:24 AM

Originally Posted by eluwak

That's not 100% true...

The debt forgiveness act of 2007 gives a loophole for personal residences short sold under certain situations (I had $223k written off for last year all forgiven). The mortgage company can come after the seller after the short sale to recoup losses, but if they were in an extenuating circumstance (i.e. like me being reduced) then it's unlikely they have anything to get outside of garnishing future wages.

Good thread though... I still got another two years before we will qualify for something we can afford

But the key is that the lender can't get money from the buyer of the short sale. Right?

I'm hoping I have closer to two months or somewhere in that ballpark before I can move in. Sorry for your loss.

**ruetzal** · 09-16-2011 09:08 AM

Originally Posted by Rob Cote

But the key is that the lender can't get money from the buyer of the short sale. Right?

I'm hoping I have closer to two months or somewhere in that ballpark before I can move in. Sorry for your loss.

yeh there are some circumstances where the lender can try to recoup from the seller. Never can any company come after anyone that they didn't have a contract with. If you are the buyer you have 0 obligation to anyone unless you signed a Note that you would pay someone back. The only time anyone can go after anyone on collecting cash is if they had a contractual obligation with a party that defaulted.

**ruetzal** · 09-19-2011 03:42 PM

Originally Posted by ruetzal

4.125% on a 30 year, 3.25% on a 15 year and 2.75% on a 5/1 ARM

still the same!

**VT1.8T** · 09-20-2011 04:13 PM

Locked a 15 yr @ 3.25% this morning with 0 points, APR of 3.285. Going from a 30yr at 5.125% that I refinanced in 2009 from original loan in 2007 of 30yr @ 6.25%. No plans on moving, will have the house paid off just as the first kid is entering college.

**ruetzal** · 09-20-2011 04:57 PM

sweet man congrats! with that apr only at 3.285 must have some low fees as well! No reason to move unless you like losing money

**PoorHouse** · 09-20-2011 10:35 PM

Looking to refinance a rental property from a 30 year at 5.25 to a 15 year.

Want to wrap the mortagage $120k and a HELOC of $35k into the refi.

Will I run into any issues with this?

**ruetzal** · 09-21-2011 09:50 AM

no you should be ok. You might take a slight rate hit due to paying off the LOC but it shouldn't be much and it all depends on the loan to value. A lower LTV on a investment property you don't take rate hits generally under 60% ltv. So it all depends on how much equity you have in it. Otherwise you should be pretty good depending on your financial situation. I would think on a investment with a lower LTV you could probably get mid 3's on a 15 year. Maybe even better.

**ruetzal** · 09-22-2011 02:35 PM

3.75% on a 30 year, 3.25% on a 15 year and 2.75% on a 5/1 ARM

well the announcement of the fed "operation twist" seemed to work on a theory basis. While trying to read as much as I can most investors deemed this to not have a huge effect on things but the rate swing has proven different. Not sure how long it will last but off the get go here looks like the theory helped out. I think what really added to this change was a lot of oversea's worries about greek and some of the asian communities showing weak growth #'s. Market swung lower pushing all money into safety once again. Not sure how low they will go but some predict the 30 year to go down to roughly 3.25.

Its a hard gauge because some of the bigger banks have cautioned on the side of their own gains vs. passing the lower rates to the customers, In the industry we have saw this occur the whole year. Big banks taking more margin when rates push lower and not offering the best rate they can to the customer. They do this for a few reasons becuase their current locked in customers would move to some one else to get a better rate so to keep their "pull thru" in line (locked to close stage) they try to keep rates in an area so people won't pull their locks and go somewhere else. Although if they stay lower long enough the savings would eventually go to the customer.

VWVortex

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