New Challenge for Jumbo Loans

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Will It Be Harder to Get a Jumbo Loan?
The high price of Massachusetts real estate means that it is not unusual for buyers to turn to jumbo mortgages for financing. Jumbo mortgages are loans that are larger than the “conforming limit” – the maximum loan amount that qualifies for government backing through Freddie Mac and Fannie Mae.The conforming limit varies by county. In many areas of the country, jumbo mortgages are any loans in excess of $417,000. In higher priced markets, the conforming limit goes up. For example, in Middlesex County the limit is about $465,000.

Jumbo mortgages are more expensive than conforming ones. Rates are typically 1/2-3/4 a percentage point more than on conventional fixed rate loans. The higher rate compensates lenders for taking on greater risk. Since jumbo loans typically can’t be sold on the secondary market, lenders usually keep them in their own portfolios.

The jumbo market dried up in the recession but had started to regain energy. Now there is a concern that the new qualified mortgage rules issued by the Consumer Financial Protection Bureau could deal the jumbo market another blow.

The new rules prevent lenders from issuing loans to borrowers who can’t afford them through some stringent requirements for “qualified mortgages”. Lenders of qualified mortgages are protected from lawsuits filed by borrowers. The Wall Street Journal reports that two key criteria mean that some jumbo mortgages won’t be considered qualified:

  • Interest-only loans aren’t considered qualified, yet about 14% of jumbo loans start out as interest-only
  • A borrower’s total monthly debt payments may not exceed 43% of his or her income on a qualified mortgage. This restriction would exclude about 15% of jumbo loans. Often jumbo borrowers have considerable assets, but steady income that is hard to document because they own businesses or are self-employed.

If a jumbo mortgage does not qualify under the Consumer Financial Protection rules, a lender will not receive immunity from lawsuits. The big question is whether they will decide the risk is too great and tighten the reins on the jumbo market. The impact may not be felt in today’s cautious lending environment, but the new rules could affect the market in the future.

Want to know more? Please give me a call at 617-965-1236 oremail me for information or help.

March’s Home Value Improver

Quick Home Makeovers

After a tough winter, it’s time to celebrate spring’s arrival!House Beautiful offers these fast and easy spring makeover ideas for your home:

Paint Your Front Door – Welcome the season by refreshing your front door with a new color and a seasonal wreath.

Create a Colorful Entry – Clear the clutter and greet guests with eye-catching storage that lifts the spirits.

Reorganize Bookshelves – Create visual interest by sorting books by color or arranging them artfully in both vertical and horizontal stacks.

Style your Closet – Take advantage of the change of season to give your closet a facelift. Wallpaper the inside for a fun change of pace and arrange your spring clothes by color for an artistic touch.

Paint the Ceiling – Who says a ceiling has to be white? Try painting it a very pale blue or gray to make you feel as if you are looking up into the sky.

 

Refinancing in Cautious Times

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Customer Story: Refinancing in a Cautious Climate
John had a good salary, perfect payment record, he wasn’t underwater on his mortgage – but he couldn’t get a lender to refinance his home. John needed to refinance to remove his ex-wife from the mortgage as a term of his recent divorce. Yet his new alimony obligation was part of the reason why three lenders had turned him down.

“I work for salary plus bonuses. Lenders couldn’t fit my bonuses into their formula so they didn’t count them as income,” John explains.

John turned to Westchester Mortgage for help. We located a lender who could count the bonuses – and then the real work began.

First, John needed to provide three years worth of complete financial records. Then his 1830s home tripped up appraisers and resulted in falsely low appraisals. Next, the lender found John’s name in a deed for undevelopable land in Connecticut that he had received from his father. That discovery led to a round of title searches and reviews of tax records. Finally, so much time had passed since the beginning of the process that the lender pulled John’s credit report again. The report reflected an unpaid gas bill for a statement that John had never received. John paid the bill and was then was required to jump through hoops to provide proof of payment.”

From start to finish, the process took 4 ½ months. “Debbiereally earned her money on this one,” John says. He adds: “My advice is to batten down the hatches unless you have a very simple financial situation. It’s going to be a long, drawn-out process.”

February’s Home Value Improver

Prepare Your Home for Snow

Let’s keep our fingers crossed that we don’t experience another snowstorm like the blizzard earlier this month. If we do, are you prepared? The Institute for Business and Home Safety (IBHS) says that heavy snow accumulation is the biggest threat, both as it builds up and as it melts.

IBHS recommends that every homeowner take the following steps:

  • Watch for snow accumulation on the leeward (downwind) side of a higher-level roof, where blowing snow will collect. For safe removal that won’t endanger you or damage your roof, consult a roofing contractor for a referral.
  • Remove snow from basement stairwells, window wells and all walls. Melting snow can lead to water damage and moisture intrusion.
  • Keep your attic well ventilated to maintain a temperature close to that of the outdoors to minimize the risk of ice dams forming. A warm attic melts snow on the roof, causing water to run down and refreeze at the roof’s edge, where it’s much cooler. If ice builds up and blocks water from draining, water is forced under the roof covering and into your attic or down the inside walls of your house.

 

Tips for Getting the Best Mortgage Rates

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January Fiscal Fitness Tips
Are you thinking of refinancing or buying a new home in 2013? January is the perfect time to plan ahead to maximize your chances of getting the best possible mortgage terms. Set aside time at the start of the year to: Review
Take a good look at your finances. Is your debt under control? Is your job secure? Do you have a strong credit rating? How much equity do you have in your home? To qualify for the best rate, you’ll need to have a rock-solid financial foundation.Revise
If you recently bought a car, got a new credit card, or had your credit report pulled for another reason, your credit score may dip. To qualify for the best rates, change your plans so you are applying for a new mortgage when there is less activity on your credit report. Similarly, the value of homes typically dips during the winter when the market is quieter. Try to avoid refinancing early in the spring when appraisals will be based on sales of comparable homes during the winter months. Be prepared to revise your timeline to qualify for the best rates!

Revisit
If you refinanced recently or explored refinancing within the past six months, you may feel that you don’t need to take action now. You may be all set, but it is a good idea to revisit rates and your qualifications annually to make sure that a better option is not available.

If you take a little time in the beginning of the year to review, revise and revisit your mortgage financing, you can increase your ability to qualify for great terms and save thousands of dollars over the life of the loan.

Want to know more? Please give me a call at 617-965-1236 or email me for information or help.

January’s Home Value Improver

Quick Tips for Decluttering

Are you struggling with the winter blahs? Scientists say that getting rid of clutter will help you feel more focused and energized. A Princeton University study found that a cluttered environment even limits your brain’s ability to process information.

Here are five quick tips to help you get rid of clutter:

1. Take photos: We are so accustomed to our environments that sometimes it is hard to see the clutter. Take photos of rooms and imagine you are viewing them in a magazine. You will see your rooms in new ways!

2. Everything in its place: Everything that you want to keep should have an assigned spot. Start by picking up five things and finding good places for them. Train yourself to always put those items back in their assigned places. Once you have mastered the first five, try it with five more items, and so on.

3. The hangar trick: This idea originated for clothes but, with adaptation, could be used for everything. Hang all your clothes with hangars pointing the same way. When you wear an item, return it to the closet with the hangar pointing the opposite direction. At the end of a season, discard any clothes that have not been worn.

4. Set a time limit: Tackle one room or closet at a time. Grab a trash bag or box, set a timer for 30 minutes and try to fill the bag or box within that time. Anything you haven’t worn, used or enjoyed within the past year is fair game to be given away.

5. Play mind games: Sometimes we have a hard time giving things away because we think we will use the item or that we like it more than we really do. A columnist for Psychology Today says to use your imagination to overcome roadblocks. Find out how much a similar item costs on ebay or Craigslist. Would you pay that much to own it? If not, get rid of it.