$700 Billion, $300 Billion, $25 Billion, it seems that there is no end to the line of industry leaders standing before congress with their hands out. The banks got theirs and held onto it while others took advantage of the financial redistribution without making any changes to their business extravagance.
It's been several months now since the launch of the bail-out, and the only change we've seen in the news that impacts you and me is that it's gotten worse. More jobs lost, continued foreclosures and less money spent on Christmas shopping.
I like our economy and believe appropriate actions should be taken by our government to protect it. But isn't it time something is done to help those of us who work hard every day just to support our families and pay our mortgages? Yes steps must be taken to protect jobs and stem the rising tide of unemployment. But the answer is more specific than "bailing out" or "lending out" financial institutions, automakers, and no telling who else. It's time for a specific action plan to address issues that live on my street and your street.
In recent days there has been talk on "the hill" of making really cheap money available for homeowners. Just how cheap? How about 4.5% fixed for thirty? We haven't seen rates that low since the early 1960's.
Rates that low could make a significant difference in monthly payments. For example, a $125,000 30 year fixed mortgage at 6.5% would have a monthly payment of $790.08. That same amount financed for 30 years at 4.5% would have a monthly payment of $633.35, that's a monthly savings of $156.73 or $1880.76 per year!
So where does one line up for these great rates? Well, not so fast buster. You see this is still just in the "talking" stage. And there are no guarantees that any substance will emerge out of all this talk.
In fact dig deeper into the rhetoric and you'll find the consumers targeted for these historically low rates are new home purchasers. That's right, current intent is to make these rates available only to consumers purchasing homes, leaving the rest of us who already own a home out of the loop.
The national board of Realtors is pushing hard to get this legislation approved. They believe that the best way to protect our economy is to shore up home values, and the best way to do this is to reduce existing inventory. In their mind it's the law of supply and demand; fewer available homes translates into a stabilization of existing home values.
Okay, maybe this is true. But stabilizing home values does little to help slow the increasing number of foreclosures. And every family losing their home to foreclosure is one more family that finds themselves prohibited from buying a new home for up to 5 years.
It's time that some of these monies be used to help those who want to purchase new homes become responsible home owners. It's also time for some of these funds to be appropriated in ways that help home owners struggling to make their payments refinance to a low fixed rate they can afford. These are not easy answers with "point and click" applications pre-made, ready to un-box and implement.
There will be difficult decisions with equally problematic clarifications that will have to be made. But can these issues really be more complex than what we are already facing? For months leading up to the Presidential election we heard speeches about the importance of implementing new financial policies to protect Wall Street as well as Main Street. Well, we've seen Billions of dollars funneled into companies represented by cryptic symbols on Wall Street. And the effect of this cash infusion has done little to address the needs of Main Street.
I say if the government is going to make 4.5% available to consumers they should make it available for both purchases as well as refinances. And for those consumers who are already having difficulty making their monthly house payments, there should be a plan in place where they can find a workable solution with their current lender to renegotiate their existing mortgage into a rate and payment they can live with.
Friday, December 5, 2008
Friday, November 21, 2008
Anatomy of a V.A. Loan
I don’t know if it’s in response to the recent celebration of Veteran’s Day or what, but I’ve been working more V.A. loans than usual. I actually like providing these safe, secure, and easy to qualify for loans to Veterans. If you know a Veteran the information in this article could prove helpful to them.
Just what is a V.A. loan? It is a guaranteed loan made by private lenders to eligible veterans for the purchase or refinance of a home. If the loan is approved (and most of them are), the V.A. will guarantee a portion of it to the lender. If the Veteran has never used his/her entitlement before, or, has previously used it for a home which has been sold and the loan paid in full, then he/she has full entitlement available and can apply for maximum V.A. funding.
Currently the V.A. maximum purchase loan amount is $417,000 which equals current conventional conforming loan limits. In December 2004, V.A. guidelines were modified so the maximum entitlement will index and increase accordingly with conforming loan limits, therefore always equaling 25% of the current conforming limit.
Requirements for V.A. home loan approval are simple. 1) Applicant must be an eligible Veteran who has available entitlement; 2) The Veteran must occupy the property as their primary residence. That’s it.
V.A. loans can be used to purchase a home and even multi-family homes up to 4 family units for one Veteran, including townhouses or condos in a V.A. approved project. The loan can also be used to build a home or refinance an existing home to take cash-out, reduce the interest rate (“IRRRL”) or convert and adjustable rate mortgage to a fixed rate mortgage.
Some of the advantages the V.A. loan provides the Veteran are: 1) 100% financing – no down payment; 2) No cash reserves required; 3) More leniency on derogatory credit; 4) Sellers can contribute up to 4% of the purchase price toward Veteran’s closing costs; 5) No monthly mortgage insurance; 6) Low interest rates – in most cases near conforming levels.
One thing many Veterans are surprised to learn about is the up-front funding fee associated with every V.A. loan. The funding fee is a one-time, up-front charge applied as a percentage to the “base loan amount”. The funding fee may be financed into the loan provided the entire loan amount does not exceed current limits of $417,000.
A Veteran purchasing a home who has never used their eligibility is charged a 2.15% funding fee. The percentage of subsequent entitlement usage is 3.35%. The percentages are slightly higher for Reservists and National Guard Veterans. The same percentages apply to first time and subsequent cash-out refinance loans. But if the Veteran is simply reducing the interest rate on their home loan the up-front funding fee is only .50% and if the Veteran receives V.A. disability benefits, then the funding-fee is waived for all home loan transactions.
If you need a copy of your certificate of eligibility there are two ways to get it. The quickest and easiest way is to meet with your mortgage lender. In most cases when Veterans come to my office, I am able to access their certificate on-line in a matter of minutes and there is no charge for this service. On the rare occasion when the certificate is not available on-line I can provide the form the Veteran must complete and mail to the Department of Veteran Affairs Eligibility Center P.O. Box 20729 Winston-Salem, NC 27120.
For a comprehensive government website please go to: www.homeloans.va.gov.
Just what is a V.A. loan? It is a guaranteed loan made by private lenders to eligible veterans for the purchase or refinance of a home. If the loan is approved (and most of them are), the V.A. will guarantee a portion of it to the lender. If the Veteran has never used his/her entitlement before, or, has previously used it for a home which has been sold and the loan paid in full, then he/she has full entitlement available and can apply for maximum V.A. funding.
Currently the V.A. maximum purchase loan amount is $417,000 which equals current conventional conforming loan limits. In December 2004, V.A. guidelines were modified so the maximum entitlement will index and increase accordingly with conforming loan limits, therefore always equaling 25% of the current conforming limit.
Requirements for V.A. home loan approval are simple. 1) Applicant must be an eligible Veteran who has available entitlement; 2) The Veteran must occupy the property as their primary residence. That’s it.
V.A. loans can be used to purchase a home and even multi-family homes up to 4 family units for one Veteran, including townhouses or condos in a V.A. approved project. The loan can also be used to build a home or refinance an existing home to take cash-out, reduce the interest rate (“IRRRL”) or convert and adjustable rate mortgage to a fixed rate mortgage.
Some of the advantages the V.A. loan provides the Veteran are: 1) 100% financing – no down payment; 2) No cash reserves required; 3) More leniency on derogatory credit; 4) Sellers can contribute up to 4% of the purchase price toward Veteran’s closing costs; 5) No monthly mortgage insurance; 6) Low interest rates – in most cases near conforming levels.
One thing many Veterans are surprised to learn about is the up-front funding fee associated with every V.A. loan. The funding fee is a one-time, up-front charge applied as a percentage to the “base loan amount”. The funding fee may be financed into the loan provided the entire loan amount does not exceed current limits of $417,000.
A Veteran purchasing a home who has never used their eligibility is charged a 2.15% funding fee. The percentage of subsequent entitlement usage is 3.35%. The percentages are slightly higher for Reservists and National Guard Veterans. The same percentages apply to first time and subsequent cash-out refinance loans. But if the Veteran is simply reducing the interest rate on their home loan the up-front funding fee is only .50% and if the Veteran receives V.A. disability benefits, then the funding-fee is waived for all home loan transactions.
If you need a copy of your certificate of eligibility there are two ways to get it. The quickest and easiest way is to meet with your mortgage lender. In most cases when Veterans come to my office, I am able to access their certificate on-line in a matter of minutes and there is no charge for this service. On the rare occasion when the certificate is not available on-line I can provide the form the Veteran must complete and mail to the Department of Veteran Affairs Eligibility Center P.O. Box 20729 Winston-Salem, NC 27120.
For a comprehensive government website please go to: www.homeloans.va.gov.
Which is Better? A Will or a Trust?
His cell phone rang and he pulled it out of his pocket. Before pressing the green button he checked the display to see who was calling. “MOM.” He pressed the send/end button, “Hey You!” he said, giving her the greeting she had grown accustomed to. “What are you doing?” Her usual response was “Oh, nothing. Just coming home from…” She was always coming or going somewhere. But this call was different. She sniffled and called him by the name every mother calls her son when the purpose of the call was serious, “Son.” He braced himself. “Your Uncle Joe is gone.”
Uncle Joe had been in the hospital for several weeks and his condition had steadily declined. Uncle Joe’s wife had died several years earlier and Joe had lived alone supported by the daily phone calls and irregular visits from the three children. The next visit the kids made would be to a house filled with stuff but missing its most important asset, the occupants who had made the house a home.
The children got along well enough, but then each one had their own idea of how best the “stuff” could and should be distributed. To further complicate matters, no one was quite sure whether their dad had drawn up a will or if he had used a trust. They knew their father had drawn up some papers shortly after their mother’s death, but they didn’t know what type of documents to expect. He had put the papers in the safe deposit box at the bank but it was Saturday evening and they wouldn’t have access to the papers until Monday morning.
This kind of suspense does no one any good. So to help my readers avoid undue stress and to answer some of the questions that surround the differences between these two legal instruments, I spoke with Richard Harris of the Oklahoma City firm Walls, Walker, Harris, & Wolfe (harrisr@wwhwlaw.com). “Regardless of the instrument chosen, the most important thing is to communicate with your loved ones where these documents are stored and the name, if any, of the attorney who will be overseeing the distribution process” says Harris. “It can be very disturbing to the heirs when they walk into a meeting expecting a will but being told that a trust was prepared.”
A will is the most common document used to convey ownership of property or assets to the heirs. Wills can be prepared by an attorney for around $500.00. Self-help will packets can be purchased on-line for even less. “Extreme care should be exercised” Harris says, “before this type of document is chosen. Although many of these sites say they are legal in your state, the requirements for a valid will vary from state to state, and it’s always a good idea to have an attorney review the will to make sure everything is in order and that your last wishes are fully and properly stated.”
Using a will can cost less up front than a trust, but almost always costs significantly more in attorney fees down the road. In most situations a will must be probated. This requires hearings in front of a judge, newspaper notices and a public inventory of your assets at the time of death. A trust bypasses probate altogether.
Preparing a trust may seem more costly up front ($2,000 plus) when compared with a will, but administering the trust typically incurs fewer attorney fees than does the execution of a will. Choosing which instrument is better for your circumstances will require you to do some research or perhaps seek the counsel of an estate planning attorney.
Talk with a trusted friend or co-worker who has already prepared their will or trust. Ask them how they made their decision. Then contact an estate planning attorney and take an hour to discuss your specific situation. Most attorneys, including Richard Harris, provide these consultations at no charge. Once you make up your mind which instrument is in your best interest, communicate your choice with your loved ones. You and your family will be glad you did.
(Trey Bowden is a licensed Mortgage Professional in Edmond)
Uncle Joe had been in the hospital for several weeks and his condition had steadily declined. Uncle Joe’s wife had died several years earlier and Joe had lived alone supported by the daily phone calls and irregular visits from the three children. The next visit the kids made would be to a house filled with stuff but missing its most important asset, the occupants who had made the house a home.
The children got along well enough, but then each one had their own idea of how best the “stuff” could and should be distributed. To further complicate matters, no one was quite sure whether their dad had drawn up a will or if he had used a trust. They knew their father had drawn up some papers shortly after their mother’s death, but they didn’t know what type of documents to expect. He had put the papers in the safe deposit box at the bank but it was Saturday evening and they wouldn’t have access to the papers until Monday morning.
This kind of suspense does no one any good. So to help my readers avoid undue stress and to answer some of the questions that surround the differences between these two legal instruments, I spoke with Richard Harris of the Oklahoma City firm Walls, Walker, Harris, & Wolfe (harrisr@wwhwlaw.com). “Regardless of the instrument chosen, the most important thing is to communicate with your loved ones where these documents are stored and the name, if any, of the attorney who will be overseeing the distribution process” says Harris. “It can be very disturbing to the heirs when they walk into a meeting expecting a will but being told that a trust was prepared.”
A will is the most common document used to convey ownership of property or assets to the heirs. Wills can be prepared by an attorney for around $500.00. Self-help will packets can be purchased on-line for even less. “Extreme care should be exercised” Harris says, “before this type of document is chosen. Although many of these sites say they are legal in your state, the requirements for a valid will vary from state to state, and it’s always a good idea to have an attorney review the will to make sure everything is in order and that your last wishes are fully and properly stated.”
Using a will can cost less up front than a trust, but almost always costs significantly more in attorney fees down the road. In most situations a will must be probated. This requires hearings in front of a judge, newspaper notices and a public inventory of your assets at the time of death. A trust bypasses probate altogether.
Preparing a trust may seem more costly up front ($2,000 plus) when compared with a will, but administering the trust typically incurs fewer attorney fees than does the execution of a will. Choosing which instrument is better for your circumstances will require you to do some research or perhaps seek the counsel of an estate planning attorney.
Talk with a trusted friend or co-worker who has already prepared their will or trust. Ask them how they made their decision. Then contact an estate planning attorney and take an hour to discuss your specific situation. Most attorneys, including Richard Harris, provide these consultations at no charge. Once you make up your mind which instrument is in your best interest, communicate your choice with your loved ones. You and your family will be glad you did.
(Trey Bowden is a licensed Mortgage Professional in Edmond)
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