It just got a little easier to navigate the complicated mortgage process.
New disclosure rules went into effect in the mortgage world Saturday that require lenders to provide home buyers two new forms that clearly detail their loan terms.
"For consumers, it's going to be viewed as an improvement in what can be a somewhat scary and intimidating process in the biggest investment of their life," said David Stevens, CEO of the Mortgage Bankers Association.
The rule, formally known as the TILA-RESPA Integrated Disclosure rule, reduces what used to be four forms from two different government agencies to two forms: the Loan Estimate and Closing Disclosure.
Here's what buyers can expect:
read more: http://money.cnn.com/2015/10/05/real_estate/new-mortgage-disclosure-forms/index.html?iid=ob_homepage_money_pool&iid=obnetwork
Showing posts with label mortgages. Show all posts
Showing posts with label mortgages. Show all posts
Tuesday, October 6, 2015
Monday, September 7, 2015
A risky type of mortgage, back with a twist
Don’t call it a comeback.
Interest-only mortgages got a bad reputation in the aftermath of the housing bust, but they’ve managed to stick around as an option for homebuyers who can meet stricter lending guidelines enacted by the government in recent years.
The loans can lower monthly mortgage payments by letting borrowers put off paying the principal on their loan for several years. When the interest-only period ends, the borrower’s monthly payment spikes as they begin to pay a combination of principal and interest until the loan is paid off.
That monthly payment shock, often accompanied by a higher interest rate on adjustable-rate interest-only loans, is what got many borrowers in trouble a decade ago.
One reason is that many of those borrowers qualified for their loans on the basis of their ability to repay the lower, interest-only payment. When their monthly payment reset higher, many couldn’t keep up.
That’s no longer the case. Now lenders are required to determine whether borrowers qualify for any interest-only loans, or other adjustable-rate mortgages, based on whether they can afford to make the eventual bigger monthly payments that await them once the initial interest-only period ends.
As a result, such interest-only loans now make up only about 0.2 percent of all adjustable-rate mortgages, or ARMs, which account for about 4 percent of all home loans for purchase and refinancing, according to data from CoreLogic.
Use of interest-only mortgages peaked 10 years ago at the height of the housing bubble at around 10 percent of all ARMs.
“The big difference here is interest-only loans are back to being the niche product that they traditionally had been,” said Greg McBride, chief financial analyst at Bankrate.com. “The go-go days of the housing boom were the exception.”
Still, rising home prices can make interest-only loans a tempting option for borrowers who are interested in a lower mortgage payment and can qualify for such a loan under today’s stricter guidelines.
At least one lender is looking to expand access to interest-only loans to a broader range of homebuyers, not just the affluent buyers who typically take advantage of such loans.
In July, United Wholesale Mortgage began making interest-only home loans through its network of mortgage brokers. The loan program covers mortgages as low as $250,000. That’s just above the U.S. median home price of $236,400.
Even with today’s stricter guidelines aimed at ensuring borrowers can handle interest-only loans, they carry potential financial risks. Here are some things to consider when weighing whether such a loan is right for you:
PAYMENT CHANGES
Interest-only mortgages can come with a fixed or variable interest rate and an initial period when the borrower pays only interest on the loan. That’s usually three, five, seven or 10 years. After the interest-only period, the monthly payment can increase sharply as the borrower begins to also pay down the principal.
In addition, the borrower is left with 20 years to pay off the balance of the loan.
LENDING REQUIREMENTS
To ensure borrowers can afford an interest-only mortgage, lenders often require large down payments compared to what one can find with a traditional 30-year, fixed-rate home loan backed by the government.
read more: http://www.watertowndailytimes.com/curr/a-risky-type-of-mortgage-back-with-a-twist-20150906
Interest-only mortgages got a bad reputation in the aftermath of the housing bust, but they’ve managed to stick around as an option for homebuyers who can meet stricter lending guidelines enacted by the government in recent years.
The loans can lower monthly mortgage payments by letting borrowers put off paying the principal on their loan for several years. When the interest-only period ends, the borrower’s monthly payment spikes as they begin to pay a combination of principal and interest until the loan is paid off.
That monthly payment shock, often accompanied by a higher interest rate on adjustable-rate interest-only loans, is what got many borrowers in trouble a decade ago.
One reason is that many of those borrowers qualified for their loans on the basis of their ability to repay the lower, interest-only payment. When their monthly payment reset higher, many couldn’t keep up.
That’s no longer the case. Now lenders are required to determine whether borrowers qualify for any interest-only loans, or other adjustable-rate mortgages, based on whether they can afford to make the eventual bigger monthly payments that await them once the initial interest-only period ends.
As a result, such interest-only loans now make up only about 0.2 percent of all adjustable-rate mortgages, or ARMs, which account for about 4 percent of all home loans for purchase and refinancing, according to data from CoreLogic.
Use of interest-only mortgages peaked 10 years ago at the height of the housing bubble at around 10 percent of all ARMs.
“The big difference here is interest-only loans are back to being the niche product that they traditionally had been,” said Greg McBride, chief financial analyst at Bankrate.com. “The go-go days of the housing boom were the exception.”
Still, rising home prices can make interest-only loans a tempting option for borrowers who are interested in a lower mortgage payment and can qualify for such a loan under today’s stricter guidelines.
At least one lender is looking to expand access to interest-only loans to a broader range of homebuyers, not just the affluent buyers who typically take advantage of such loans.
In July, United Wholesale Mortgage began making interest-only home loans through its network of mortgage brokers. The loan program covers mortgages as low as $250,000. That’s just above the U.S. median home price of $236,400.
Even with today’s stricter guidelines aimed at ensuring borrowers can handle interest-only loans, they carry potential financial risks. Here are some things to consider when weighing whether such a loan is right for you:
PAYMENT CHANGES
Interest-only mortgages can come with a fixed or variable interest rate and an initial period when the borrower pays only interest on the loan. That’s usually three, five, seven or 10 years. After the interest-only period, the monthly payment can increase sharply as the borrower begins to also pay down the principal.
In addition, the borrower is left with 20 years to pay off the balance of the loan.
LENDING REQUIREMENTS
To ensure borrowers can afford an interest-only mortgage, lenders often require large down payments compared to what one can find with a traditional 30-year, fixed-rate home loan backed by the government.
read more: http://www.watertowndailytimes.com/curr/a-risky-type-of-mortgage-back-with-a-twist-20150906
Tuesday, August 25, 2015
Double-Edged Sword for Mortgages as Market Fears Drive Rates Down
The recent global market turmoil could be good news for banks and mortgage lenders if a further drop in long-term interest rates sparks another wave of refinancing.
It also could spell trouble for lenders that have not properly hedged the value of their servicing rights, however, and the benefits of lower rates are far from assured.
U.S. Treasury yields, which mortgage rates are tied to, slumped to a four-month low Monday, as investors remained anxious about China's woes and the slower pace of global growth and sought a safe haven in government bonds. The 10-year Treasury yield fell as low as 1.95% during the session, down six basis points from late Friday.
For now, mortgage rates would have to drop at least 25 basis points or more from recent levels to spark a major wave of refinancings.
"A big chunk of 2013 and 2014 loans are just out of the money to refinance," said Scott Buchta, head of fixed income strategy at Brean Capital.
The stock market plunge has some investors assuming that the U.S. economy is heading into a recession, with the potential for massive layoffs at manufacturing firms that could be crippled by lower commodity prices.
Ivy Zelman, the CEO of Zelman and Associates, a housing analytics firm, said the sell-off hitting homebuilders, mortgage insurers, title companies and financial stocks, is an overreaction. With yields on 10-year Treasury notes falling to 2%, the market is assuming much slower economic growth ahead, she said.
"It's more about slowing economic growth than about rates," Zelman said. "There's a lot of knee-jerk reactions."
The biggest concern is that manufacturers would start laying off employees, resulting in job losses.
"If people lose their jobs, they can't buy a house," Zelman said.
Uncertainty about whether the Federal Reserve will raise short-term rates in September or delay a rate hike until December or early next year has contributed to the market volatility.
Some nonbank mortgage servicers will be aggressive at soliciting borrowers to refinance. Since most banks and mortgage lenders are seeing a steady flow of home purchase and refinance volume, they may be loath to lower mortgage rates much further, since doing so would cut into profits.
read more: http://www.nationalmortgagenews.com/news/origination/double-edged-sword-for-mortgages-as-market-fears-drive-rates-down-1059696-1.html
It also could spell trouble for lenders that have not properly hedged the value of their servicing rights, however, and the benefits of lower rates are far from assured.
U.S. Treasury yields, which mortgage rates are tied to, slumped to a four-month low Monday, as investors remained anxious about China's woes and the slower pace of global growth and sought a safe haven in government bonds. The 10-year Treasury yield fell as low as 1.95% during the session, down six basis points from late Friday.
For now, mortgage rates would have to drop at least 25 basis points or more from recent levels to spark a major wave of refinancings.
"A big chunk of 2013 and 2014 loans are just out of the money to refinance," said Scott Buchta, head of fixed income strategy at Brean Capital.
The stock market plunge has some investors assuming that the U.S. economy is heading into a recession, with the potential for massive layoffs at manufacturing firms that could be crippled by lower commodity prices.
Ivy Zelman, the CEO of Zelman and Associates, a housing analytics firm, said the sell-off hitting homebuilders, mortgage insurers, title companies and financial stocks, is an overreaction. With yields on 10-year Treasury notes falling to 2%, the market is assuming much slower economic growth ahead, she said.
"It's more about slowing economic growth than about rates," Zelman said. "There's a lot of knee-jerk reactions."
The biggest concern is that manufacturers would start laying off employees, resulting in job losses.
"If people lose their jobs, they can't buy a house," Zelman said.
Uncertainty about whether the Federal Reserve will raise short-term rates in September or delay a rate hike until December or early next year has contributed to the market volatility.
Some nonbank mortgage servicers will be aggressive at soliciting borrowers to refinance. Since most banks and mortgage lenders are seeing a steady flow of home purchase and refinance volume, they may be loath to lower mortgage rates much further, since doing so would cut into profits.
read more: http://www.nationalmortgagenews.com/news/origination/double-edged-sword-for-mortgages-as-market-fears-drive-rates-down-1059696-1.html
Sunday, August 2, 2015
The Risks of Refinancing Student Loans, Credit Cards and Mortgages
Refinancing high interest rate debt to a lower interest rate can be a great way to save money. While this strategy can make a lot of sense, there are some risks. Before signing on the dotted line, make sure you consider those risks carefully.
Student Loans
The student loan market has experienced dramatic growth, and Americans now owe a staggering $1.2 trillion, which is more than credit card debt. If you are making student loan payments today, your interest rate could be above 6%. The leaders in student loan refinancing offer variable interest rates as low as 1.90% and fixed rates as low as 3.50%. Refinancing to these rates could save borrowers more than $10,000.
But there are two big risks that you should consider before refinancing.
If you have a federal loan, you will give up federal protections when refinancing to a private loan. The most important protection currently offered for federal loans is income-based repayment, which can cap your monthly payment to 15% of your discretionary income. If your income stays low, the federal programs even have principal forgiveness after 20 years.
If you switch from a fixed interest rate to a variable interest rate, you will be taking significant interest rate risk. The last five years have made many of us believe that interest rates will always be low. However, history reminds us that rates can be a lot higher. Look for lenders that offer interest rate caps as a protection.
Refinancing private student loan debt makes a lot of sense. For federal student loan debt, you need to gauge the likelihood that your income could drop dramatically over the term of your loan. There are a number of lenders out there offering to refinance student loan debt, and you should shop around for the best deal. I keep an updated list of student loan refinance options, and interest rates, at my website MagnifyMoney.
Credit Cards
Americans still have a lot of credit card debt. According to NerdWallet, the average US household debt stands at $15,863. And the average interest rates on credit cards remain above 13%.
Marketplace lenders like Lending Club and Prosper are helping people refinance their credit card debt. On average, borrowers at Lending Club are receiving interest rates that are 31% lower than their credit card rate.
However, borrowers should consider two risks before proceeding.
Most lenders charge an origination fee, which will not be reimbursed if you pay off your loan early. Although there are no prepayment penalties, the origination fee is a kind of prepayment penalty in disguise.
see more: http://www.forbes.com/sites/nickclements/2015/08/01/the-risks-of-refinancing-student-loans-credit-cards-and-mortgages/
Student Loans
The student loan market has experienced dramatic growth, and Americans now owe a staggering $1.2 trillion, which is more than credit card debt. If you are making student loan payments today, your interest rate could be above 6%. The leaders in student loan refinancing offer variable interest rates as low as 1.90% and fixed rates as low as 3.50%. Refinancing to these rates could save borrowers more than $10,000.
But there are two big risks that you should consider before refinancing.
If you have a federal loan, you will give up federal protections when refinancing to a private loan. The most important protection currently offered for federal loans is income-based repayment, which can cap your monthly payment to 15% of your discretionary income. If your income stays low, the federal programs even have principal forgiveness after 20 years.
If you switch from a fixed interest rate to a variable interest rate, you will be taking significant interest rate risk. The last five years have made many of us believe that interest rates will always be low. However, history reminds us that rates can be a lot higher. Look for lenders that offer interest rate caps as a protection.
Refinancing private student loan debt makes a lot of sense. For federal student loan debt, you need to gauge the likelihood that your income could drop dramatically over the term of your loan. There are a number of lenders out there offering to refinance student loan debt, and you should shop around for the best deal. I keep an updated list of student loan refinance options, and interest rates, at my website MagnifyMoney.
Credit Cards
Americans still have a lot of credit card debt. According to NerdWallet, the average US household debt stands at $15,863. And the average interest rates on credit cards remain above 13%.
Marketplace lenders like Lending Club and Prosper are helping people refinance their credit card debt. On average, borrowers at Lending Club are receiving interest rates that are 31% lower than their credit card rate.
However, borrowers should consider two risks before proceeding.
Most lenders charge an origination fee, which will not be reimbursed if you pay off your loan early. Although there are no prepayment penalties, the origination fee is a kind of prepayment penalty in disguise.
see more: http://www.forbes.com/sites/nickclements/2015/08/01/the-risks-of-refinancing-student-loans-credit-cards-and-mortgages/
Thursday, July 16, 2015
Bank of America says it’s No. 2 for mortgage customer satisfaction. So does Chase.
In the competitive U.S. mortgage market, bank giants are battling to be runner-up in customer satisfaction for home loans.
On Wednesday, Bank of America BAC, +0.83% boasted of earning the No. 2 spot in J.D. Power’s customer-satisfaction study for mortgage originations. On Tuesday J.P.Morgan Chase JPM, +0.51% proclaimed it was No. 2 in J.D. Power’s customer-satisfaction study for mortgage servicing.
Both claims are true, with a caveat: USAA out-scored Bank of America in the origination study, but it wasn’t included in the ranking because its mortgages are only available to those who have been or are in the military, plus their families.
So, who is No. 1 for mortgage-customer satisfaction? That’s Quicken Loans, an online lender based in Detroit. Quicken nabbed top spots last year in customer satisfaction for both originations and servicing.
For the origination survey, Quicken has ranked No. 1 for five consecutive years, with good marks for loan offerings, the application and approval process, and problem resolution, among other categories. For the servicing study, 2014 was the first year that J.D. Power included Quicken, which promptly beat its competition. Quicken performed well in categories such as billing and payment process and escrow-account administration.
source: http://www.marketwatch.com/story/bank-giants-battle-to-be-no-2-for-mortgage-customer-satisfaction-2015-07-15
On Wednesday, Bank of America BAC, +0.83% boasted of earning the No. 2 spot in J.D. Power’s customer-satisfaction study for mortgage originations. On Tuesday J.P.Morgan Chase JPM, +0.51% proclaimed it was No. 2 in J.D. Power’s customer-satisfaction study for mortgage servicing.
Both claims are true, with a caveat: USAA out-scored Bank of America in the origination study, but it wasn’t included in the ranking because its mortgages are only available to those who have been or are in the military, plus their families.
So, who is No. 1 for mortgage-customer satisfaction? That’s Quicken Loans, an online lender based in Detroit. Quicken nabbed top spots last year in customer satisfaction for both originations and servicing.
For the origination survey, Quicken has ranked No. 1 for five consecutive years, with good marks for loan offerings, the application and approval process, and problem resolution, among other categories. For the servicing study, 2014 was the first year that J.D. Power included Quicken, which promptly beat its competition. Quicken performed well in categories such as billing and payment process and escrow-account administration.
source: http://www.marketwatch.com/story/bank-giants-battle-to-be-no-2-for-mortgage-customer-satisfaction-2015-07-15
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