Costs and Fees category archives

Zillow Mortgage Marketplace recently launched a unique Break-Even Point graph on every loan quote borrowers receive from lenders.  This graph helps borrowers who want to refinance determine their “break-even” point, which is when they would start saving enough from a new loan to offset the costs of refinancing.

After anonymously submitting a refinance request, borrowers are presented with custom quotes from a network of thousands of lenders.  When borrowers click on an individual quote to get more information, they can view this new graph which indicates how long they need to live in their home to offset the costs refinancing.

In addition, the graph shows the cumulative savings that would occur over the entire life of the loan.  Borrowers can use the interactive feature to scroll across the graph to see the accumulated savings in each year.

On Zillow Mortgage Marketplace, the average borrower gets 24 quotes in 6 seconds.  With the launch of this new feature, Zillow calculates and creates an interactive Break-Even Point graph on each refinance quote instantly, something that would be very difficult for borrowers to do manually.

Given the historically low mortgage rates we’ve seen this year, refinancing a mortgage is something that many homeowners are considering right now.  This new graph helps borrowers quickly and easily compare the break-even point on all the refinance quotes they receive to determine which loans make the most financial sense for them.

If you are looking to refinance and want to try it out, submit a refinance loan request — anonymously — on Zillow Mortgage Marketplace.

I am working on a deal that was originally with another lender as a purchase 203K, the other lender ended up dropping the ball to the point the borrower switched lenders in the 11th hour to close the loan on time as a regular FHA loan.

The borrower purchased the home and has started the renovation on his own, mainly demolition (I don’t recommend doing this prior to closing on a renovation loan).  So few lenders are actually doing these renovation loans….. he ended up back with the original lender trying to do the 203K loan as a refinance. 

While going through the process he came across some of my posts and blog on Zillow.com (thanks for the referral Zillow) and reached out to me.  Because he was so far along in the process I answered a few questions and coached him a little as to how to deal with the current lender to try and expedite his loan closing.  Three weeks go by and he is no closer to closing than he was when I spoke with him originally.  So he decided to apply with me.

I was walking through the project with him when I noticed the house was going to need to be painted and also knew that the proposed budget only had about $250 in it for minor painting.  I knew by looking at it that it was going to cost more than that!  I have to admit that I don’t go out and see every house I write a renovation loan on, although I do need to have a complete understanding of the project so I can spot potential hiccups and delays and address them up front.

Having done these loans for years I have a ton of experience with them and my customers get the benefit of that experience.  It is really tough to explain all the benefits of experience.  Much of what we have learned through experience is 2nd nature and you just do things differently. 

I have a three year old daughter and I am amazed almost moment to moment as I watch her develop.  It is the things that we take for granted I find the most interesting, the way she eats, gets dressed, walks up and down the stairs, climbs over under and on whatever gets in her way, and a zillion other things.  At some point we learn what works best.  We learn that walking around the table, although it may take a little longer than going over or under (or not), may be the most efficient way to get to the other side.

When working with an experienced lender and or experienced renovation lender their experience will make your experience much less stress full!

Below are some of the things I try and walk around:

1.      Self Help – These are almost always a recipe for disaster and I really discourage anyone from attempting to do these projects as self help

2.      Streamline Renovation – 203K streamline although less expensive by about $800 in costs, I have seen too many issues arise as a result of half the funds being disbursed upfront and contractors disappearing or demanding additional payment upfront to finish. 

3.      Cutting corners – eliminating $5,000-$15,000 from a project because you are spending more than you want.  The difference in your payment is usually minimal, and to go through a renovation project and settle for less than what you want tends to do nothing but generate regrets.  If you are going to do it…do it right!

4.      Hud Consultant - Make sure you are working with a good 203K consultant.  I have been working with AM Consults in Malden MA for well over a decade and am extremely hesitant to work with any other consultant.

5.      The Loan Officer – Choose a loan officer that has the experience actually writing these loans rather than the loan officer that just has access to the program.  The loans are more expensive than a standard loan so expect to pay a slightly higher premium for the loan, but don’t get taken advantage off.  I have seen on more than one occasion an LO charge a ridiculous amount for these loans…The Mind set being if the customer is willing to pay that amount I’ll figure out how to write the loan…They may figure it out but you don’t want to over pay to be a guinea pig (sorry animal lovers).

Before you start working with a Realtor and spend your weekends at open houses, you’ll need to get your “financial house” so that when your perfect home appears, you’ll be ready.

Consider these factors before making the leap:

Check your credit
It all starts with your credit report.  You can obtain a credit history at www.annualcreditreport.com. For about $7, you can get your score from one of three credit bureaus, providing you with a balance history for credit cards, checking accounts, and loans – and will display outstanding bills.  If you don’t have any lines of credit (such as credit cards), it’s wise to open an account.

How much can you afford?
When considering your financial options, focus on the proposed monthly payment – not just the sales price. Assess your monthly expenses to determine how much you’d like to spend on your home. Your debt-to-income ratio should be less than 60% (in other words, your proposed monthly housing payment + any other recurring monthly payments must not exceed 60% of your monthly income). However, you may want to keep your mortgage expenses lower and put any extra money into savings to build a surplus for home maintenance, repairs or general emergencies.

Prepare for a down payment
In today’s market, you’ll need to provide at least 5% of the final purchase for a down payment. Think about possible resources and start saving. Keep in mind: a financial gift can apply towards your down payment (as long as you have matching funds available). The same applies for money in a CD, 401K, or IRA account.  Government-funded programs providing down payment assistance are becoming more popular and widespread.

Find a job
It’s tough to obtain a mortgage if you don’t have a job (unless, of course, you have a small fortune tucked underneath your mattress). However, an employed co-borrower can join you on your loan. An underwriter will need to verify their income in order for you to qualify.

Plan your search
Consider these questions: How long do you plan to stay in your home? Are you looking for a fixer-upper, or a move-in ready home? Know your goals before you start looking at every home on the market – this will save you time, and allow you to jump on key properties when they become available.

What are your financial goals?
Are you looking to pay less over time – or pay less on a month-to-month basis?

The bottom line
Buying a home will be one of your most rewarding experiences – and, in the end, should be a straight forward process involving a series of important steps.  Successful homebuyers begin with a clear plan, set realistic expectations, and ask questions.  Remember: your real estate team will be there to help you every step of the way.

Good luck!

I have been in mortgage lending since 1993, and until recently, I had never actually had a short sale close successfully.

One of the real estate agents I work with regularly, Rachel Hillman of Realty Executives, introduced me to Mike Ouellette of Loss Mitigation Specialist Group ( LMSG). For those that have followed me on Zillow, I am a bit of a skeptic when it comes to these types of things.
Rachel called me about a deal she had that was falling apart and she was hoping that I could pull the deal back together.

Basically, the way this company works is that they sign an agreement with the current owner of the home to essentially buy the home in a short sale. The current owner gives them permission to deal with the current lien holders. While they are negotiating with the current lien holders the property is being marketed. In most cases the property is listed and marketed by the agent that has introduced the seller to LMSG.

Unlike most short sales with this company LMSG actually buys the property after negotiating the short sale, then turns around and sells the property to a third party — the best offer that the listing agent is able to find.

The reason that Rachel called me in on this transaction is that many lenders have adopted the FHA anti flipping rule and are requiring 90-day title seasoning.

Reducing the length of time they need to hold the property increases the profit margin but also allows them to list and market the property at a more competitive price generating more interest and multiple offers.

Nobody works for free and I don’t begrudge anyone for making a living. Many lenders shy away from these transactions, some will even say that Fannie Mae and Freddie Mac have the same title seasoning requirements that FHA have.

Currently that is not the case. The concern is fraud and you can read Fannie Mae’s guideline on these transactions here and Freddie Mac’s here

Essentially both agencies have the same concern that the sales price is over inflated. It is critical that the underwriter and the loan file support the sales price from LMSG to the end buyer.

It is no secret that is costs the banks real money to foreclose on a property.t is also no secret that the property value is…. what it is! The bank has no guarantee, that if they foreclose on the property, that they will be able to sell the property for its current value.

If you know what you are doing you can essentially cut a deal with the bank for an amount less than the property is worth and likely a little more than what the bank estimates it will cost to foreclose on the home.

If the bank agreed to a short sale, before they foreclosed, and sold it for $195,000 rather than the $250,000 they would reduce their losses by $5,000 and eliminate the risk of the property value decreasing further and increasing the banks losses. For this to work you have to know what it costs the bank to foreclose, I just told you so that’s not such a big deal.

The real trick is knowing who to call and how to negotiate the short sale or you end up in lender limbo waiting for a response that you may or may not ever get! All the while stressing about what is going on!

I have closed 2 of these transactions and it almost seems too good to be true! These are the real numbers….

Property One: Purchased for $207,000 Appraised for: $225,000
Property Two: Purchased for $220,000 Appraised for: $255,000

Both appraisals were done post-HVCC so I know if anything, these appraisals are on the low side.

How many transactions have you seen recently that are appraising 15-20 thousand more than the sales price?

If you want more info on short sales you can read Mike’s Blog. Mike works with Realtors, Lenders, Attorneys, and Sellers.

Well….I figured I would give YouTube a whirl… I finally got around to putting some before and after photos together from a K loan I closed on 12/28/2008.

Purchase Price $192,000

Cost of Renovation $32,642

After Improved Value $260,000

Equity After Renovations $35,000+…..$33,000 can make a HUGE Difference!
I sent my clients a link to my blog when I posted it….This was her response:
“Wow, so cool that you used my pics :)   A month ago another lady was driving by and said she was an appraiser using my house as a comp.  She came in to see the improvements and then when we queried her on what she thought we’d be able to get for this house today she hemmed and hawed, then said, prices have dropped since we bought so we’d probably lose money…. because she can see we’ve put in a ton of money (not true, but that’s what she thought).   Then she said in this market with the economy so bad, I’d be able to get $350,000
That made me very happy :)”     -Owner of the home in the video

It is not just people who own a home that are becoming victims to the foreclosure problem, people who are currently renting a property are beginning to see foreclosure impact their lives as well.

Is your landlord in foreclosure?

Are you sure?

According to the National Low-Income Housing Coalition, one in five homes in foreclosure nationwide is occupied by a tenant.

One of the common stories about landlords in foreclosure that is happening all across the US is where the landlord allows a property to go into foreclosure and then the tenants are “surprised” when they find out they have to move.

Thanks for a federal law that was passed on May 20th, in some states, the lender will be forced to honor a lease agreement of a tenant, but not in all cases. For example, if a lender forecloses on a property and then sells the home to someone who will occupy the property as their primary residence, the tenant in place then has 90 days to vacate the property.

But no matter what, if your landlord goes into foreclosure, you will incur extra moving expenses that you are not likely to get back from your landlord.

Foreclosures can create expenses for tenants, such as moving costs. If the foreclosure forces you to move before your lease expires, you can demand that the landlord pay your moving expenses. If the landlord refuses, you can sue in small-claims court, said Janet Portman, managing editor of legal self-help publisher Nolo Press and author of several books on landlord-tenant law.

Finding out if your landlord is in foreclosure is easy to do - once. But going back and keeping an eye on your landlord by seeing if a foreclosure notice has been filed can be time consuming. At least one new startup has a solution to this problem - LemonLandlord.com — where you can monitor whether or not your landlord has had foreclosure proceedings start.

More About Landlords in Foreclosure:

• Tenants evicted because of landlords being foreclosed upon
• Renters too can face the hit of foreclosure
• Tenants suffer when landlords are in foreclosure

Zillow Mortgage Marketplace today launched two unique graphs and tables on every loan quote borrowers receive from lenders.  These graphs give borrowers an unprecedented amount of information presented in a dynamic, visual way that allows them to fully understand the details of each quote, including the makeup of payments over the life of the loan, and how much they will pay in cumulative costs over time. 

Payment Schedule 

The payment schedule graph shows the payment for the first month for every year of the loan. By hovering over any bar, borrowers can see how much of the monthly payment will go toward the principal, interest and mortgage insurance (if applicable). Clicking on any of these payments expands the year to display the complete monthly payments for that year. Clicking again returns borrowers to the year-by-year view.

Below the graph, a detailed amortization table lists the total monthly payment (also broken out by interest, principal, and mortgage insurance), the outstanding principal, and the interest rate for every month throughout the life of the loan. 

Cumulative Costs

The cumulative costs graph allows borrowers to see how their principal grows relative to the interest, fees and mortgage insurance over the life of the loan. Hovering over any year will give the cumulative costs paid up to that year.  This graph enables borrowers to see the grand total they will pay over time.  The table below the graph breaks down the costs paid each year throughout the life of the loan.

To use these graphs to find the right loan for you, simply submit a loan request on Zillow Mortgage Marketplace, and then click through to see the Quote Details on the quotes you receive from lenders.

I for the life of me cannot understand why the Government or Consumers care about YSP (yield spread premium) or broker compensation!

The Challenge—-Can anyone name a product or service that the consumer buys based on the profit margin and not the cost to them?

Why Consumers get hung up on what the par price is or what the YSP or SRP just baffles me!

Knowing what the profit margin is, may help you negotiate better with a loan officer that is trying to take advantage of you.  I would bet most if not all good loan officers know what they charge and the rates and terms they offer will change not based on how much they can get from an unsuspecting borrower, but by how the market moves. A loan officer that is willing to negotiate is a loan officer you want to avoid!

Personally I would be wary of any lender or broker that tries to Spin the compensation positively or negatively in order to convince you to choose to work with them. Cost and service will vary between lenders….What you the consumer value most will vary so the lender/broker you choose will be different based on what you value most.

When comparing mortgage quotes, most borrowers focus on two important factors: interest rate and lender fees.  While these two numbers together describe the cost of a mortgage, making apples-to-apples quote comparisons can be difficult because every quote may have different rate and fee trade-offs.  Should you choose the mortgage with a 0.25% higher rate but $1,000 less in fees?  Or should you pay a point for a lower rate?  This decision can become even harder when you receive 40 or more competitive quotes on Zillow Mortgage Marketplace.

The Problem with APR
An initial solution, the Annual Percentage Rate (APR), was devised as way to help borrowers compare quotes.  However, the APR calculation for Adjustable Rate Mortgages (ARMs) assumes interest rates remain constant at their current level and loans are held full-term.  Since rates vary and loans are held only for 3 to 4 years on average, these assumptions can be misleading and may cause borrowers to select an unnecessarily expensive loan.   What borrowers need is an accurate cost calculation based on the amount of time they plan to keep their loan.  For example, a lower rate with higher fees may make the most sense if you keep a loan for 20 years, but a higher rate with low fees may be a better way to go if you are only staying for 4 years.

True Cost
The best way to directly compare quotes is to look at the actual price of the loan (interest paid + upfront fees) over a specific time period.  This True Cost comparison is what we now offer on the custom Quotes Received page in Zillow Mortgage Marketplace.  You select how long you plan to keep your loan, and we calculate how much you will pay in interest and fees over that time.  True Cost incorporates interest rate, fees, points, and time so you can compare loans apples-to-apples!  Since True Cost allows you to identify the cheapest loan over the selected time period, we think it is the best way to start your loan shopping experience.

Remember, even with the new True Cost column, you should still filter out loan quotes with monthly payments or fees you cannot afford.  You should also consider your risk tolerance (learn more about ARMs) and the reputations of the lenders providing your quotes.  Help articles, lender ratings, and lender profile pages on Zillow Mortgage Marketplace continue to be great resources for helping you decide which loan is best for you.

Notes regarding True Cost:

• True Cost does not include principal because principal is not an outright cost, but rather, it is equity that you will likely get back when you sell your home.
• The calculated interest amount for ARM loans assumes the worst case interest rate scenario.  This means ARM loans will look worse after their initial fixed period ends.
• If you select different years in the True Cost drop-down, you will notice the quotes with the lowest True Cost may change due to their combinations of rate, fees, points, and loan program.

The government’s $8,000 first-time home buyer tax credit has been a source of some confusion by those who might be eligible, but aren’t quite sure if they fully meet the criteria.

Now you can take a simple, 5-question quiz to find out if you qualify:

Do You Qualify for the $8,000 First-Time Home Buyer Tax Credit?

The great thing about this new quiz is that it was developed as a widget that you can put on your own blog or Web site.  Just copy and paste the code, and anyone who visits your site can then take the quiz and get instant results.

When you’re done taking the quiz, make sure to check out all of the other real estate and mortgage widgets Zillow offers.  Here are some of the latest widgets that are among my favorites:

• Mortgage I.Q.
• Market Bottom Poll
• Most Expensive Homes