Greetings and welcome to the new blog created by the Sanford, ME Branch of Reliant Mortgage Company, LLC. Reliant Mortgage Company is currently one of the top privately held mortgage banks in New England and is the exclusive endorsed lender for the Massachusetts Police Association and the Massachusetts Nurses.
We are opening new offices up and down the East Coast and in 2009 we funded over $1 billion in new mortgages.
Our blog will try to bring you information on current market trends, strategies and any other information we feel is relevant to today's current and prospective homeowners.
If you have a particular topic you are interested in learning more about, please don't hesitate to ask and we will post a blog with as much relevant information as we can provide.
Thank you for visiting!!
Dale W Doughty
Thursday, June 24, 2010
A Downsizing Strategy for Retirees
By Dale Doughty, Manager
Reliant Mortgage Company, LLC
Many retirees often find, as they get older, that the home they are in is too difficult to maintain, hard to get around in or simply too large and expensive for their needs.
A more recent phenomenon we have seen is retirees who have had their investment portfolios get decimated while social security incomes remain steady and the costs of food, heat and medical care continue to skyrocket. Meanwhile, fixed incomes from bonds, CD’s and money market funds hover from 0% to 5%.
So, what is a good strategy to combat today’s hostile environment for retirees? The sudden return of the new and vastly improved FHA insured Reverse Mortgage. A Reverse Mortgage is simply a home equity line of credit that allows you to make principal payments, interest payments or even no payments. Each month that you choose to make no payment, the interest simply gets added to the balance of the loan. As long as you live in the home the house is yours, with no further obligation on your part and the title remains in your name. If you sell, the payoff on the home is satisfied (just like a traditional mortgage) and you keep the equity. The mortgage insurance provided by the FHA insures that you (or your heirs) can never owe more then what the home is worth, regardless of how long you live in the home.
In years past many types of reverse mortgages have hit the market. Many required you to give up title on your home and all of them had closing costs that could be $15 to $20,000 or more. The FHA Reverse Mortgages of today (referred to as a Home Equity Conversion Mortgage by the Feds) are far more borrower friendly and often have less closing costs then a traditional mortgage.
So, what does this all mean in a real life scenario? Let’s do a case study on the “Smith” couple:
The Smith’s own a 3,000 square foot home in the North End of Manchester, NH. Mr. Smith is 72 and his wife is 70. The home and yard are too big for them to maintain and Mr. Smith has a tough time negotiating the stairs to the upper floors. The taxes on the home are quite high and the Smith’s fixed incomes are way off from when they first retired back in the late 90’s. They eventually decide that they need to sell the home and find one that is easier to get around in and maintain.
They hire a reputable local Realtor who quickly sells the home for $450,000. The Smith’s had a small mortgage on the property of $90,000 and so they walk away with roughly $340,000 after paying the Realtors and other costs they agreed to.
Quickly they find a nice ranch in Raymond for $205,000 and at the suggestion of their savvy Realtor talk to their Banker about using a Reverse Mortgage to purchase the home to remain more liquid and help increase their fixed income.
The Banker does some calculations and tells them that they can offer a reverse mortgage of $123,000 to purchase the Raymond home. With closing costs, the Smiths pay the $87,000 balance out of the proceeds of the sale of their home.
Here is the Result:
Before Now
$90,000 debt (mortgage) $123,000 debt (Rev Mortgage)
Large Home difficult to maintain Single Story Ranch & Smaller
$1400/month mortgage payment No mortgage payment required
Inadequate fixed income Additional $253,000 Cash
$5500 Annual Taxes $4000 Annual Taxes
Home could be lost if the Smith’s got to a
point where they could not pay the mortgage Home is theirs for life
The Smith’s now have more money and time to spend with their grandchildren and have less stress or chance for injury in their new home. They have increased their annual disposable income by $18,300 (by eliminating their mortgage payment and reducing their property taxes) and added $253,000 to their bond portfolio which currently provides them an additional $7600/year in income for a total annual of benefit of $25,900.
The best way to see if a reverse mortgage is right for your particular scenario is to contact a licensed mortgage banker to schedule a needs analysis. If after this analysis is performed you wish to move forward you will be required to take a short class from an independent, US HUD approved counselor who will reiterate the pros and cons of a reverse mortgage and answer any questions you may have in an unbiased format.
Reverse Mortgages are a highly specialized product in the mortgage industry and not all lenders can or will do them. To schedule a needs analysis with me or one of Reliant Mortgage Company’s Reverse Mortgage Specialists call us toll-free at 1-877-440-2739.
By Dale Doughty, Manager
Reliant Mortgage Company, LLC
Many retirees often find, as they get older, that the home they are in is too difficult to maintain, hard to get around in or simply too large and expensive for their needs.
A more recent phenomenon we have seen is retirees who have had their investment portfolios get decimated while social security incomes remain steady and the costs of food, heat and medical care continue to skyrocket. Meanwhile, fixed incomes from bonds, CD’s and money market funds hover from 0% to 5%.
So, what is a good strategy to combat today’s hostile environment for retirees? The sudden return of the new and vastly improved FHA insured Reverse Mortgage. A Reverse Mortgage is simply a home equity line of credit that allows you to make principal payments, interest payments or even no payments. Each month that you choose to make no payment, the interest simply gets added to the balance of the loan. As long as you live in the home the house is yours, with no further obligation on your part and the title remains in your name. If you sell, the payoff on the home is satisfied (just like a traditional mortgage) and you keep the equity. The mortgage insurance provided by the FHA insures that you (or your heirs) can never owe more then what the home is worth, regardless of how long you live in the home.
In years past many types of reverse mortgages have hit the market. Many required you to give up title on your home and all of them had closing costs that could be $15 to $20,000 or more. The FHA Reverse Mortgages of today (referred to as a Home Equity Conversion Mortgage by the Feds) are far more borrower friendly and often have less closing costs then a traditional mortgage.
So, what does this all mean in a real life scenario? Let’s do a case study on the “Smith” couple:
The Smith’s own a 3,000 square foot home in the North End of Manchester, NH. Mr. Smith is 72 and his wife is 70. The home and yard are too big for them to maintain and Mr. Smith has a tough time negotiating the stairs to the upper floors. The taxes on the home are quite high and the Smith’s fixed incomes are way off from when they first retired back in the late 90’s. They eventually decide that they need to sell the home and find one that is easier to get around in and maintain.
They hire a reputable local Realtor who quickly sells the home for $450,000. The Smith’s had a small mortgage on the property of $90,000 and so they walk away with roughly $340,000 after paying the Realtors and other costs they agreed to.
Quickly they find a nice ranch in Raymond for $205,000 and at the suggestion of their savvy Realtor talk to their Banker about using a Reverse Mortgage to purchase the home to remain more liquid and help increase their fixed income.
The Banker does some calculations and tells them that they can offer a reverse mortgage of $123,000 to purchase the Raymond home. With closing costs, the Smiths pay the $87,000 balance out of the proceeds of the sale of their home.
Here is the Result:
Before Now
$90,000 debt (mortgage) $123,000 debt (Rev Mortgage)
Large Home difficult to maintain Single Story Ranch & Smaller
$1400/month mortgage payment No mortgage payment required
Inadequate fixed income Additional $253,000 Cash
$5500 Annual Taxes $4000 Annual Taxes
Home could be lost if the Smith’s got to a
point where they could not pay the mortgage Home is theirs for life
The Smith’s now have more money and time to spend with their grandchildren and have less stress or chance for injury in their new home. They have increased their annual disposable income by $18,300 (by eliminating their mortgage payment and reducing their property taxes) and added $253,000 to their bond portfolio which currently provides them an additional $7600/year in income for a total annual of benefit of $25,900.
The best way to see if a reverse mortgage is right for your particular scenario is to contact a licensed mortgage banker to schedule a needs analysis. If after this analysis is performed you wish to move forward you will be required to take a short class from an independent, US HUD approved counselor who will reiterate the pros and cons of a reverse mortgage and answer any questions you may have in an unbiased format.
Reverse Mortgages are a highly specialized product in the mortgage industry and not all lenders can or will do them. To schedule a needs analysis with me or one of Reliant Mortgage Company’s Reverse Mortgage Specialists call us toll-free at 1-877-440-2739.
Tuesday, June 22, 2010
Renovation Loans are Here
Want to take advantage of a great bank owned property but a little intimidated by the amount of repairs needed? An FHA 203K Loan or Fannie Mae Homestyle loan can be great products, especially in today's market with a large number of aged properties on the market in various levels of disrepair.
Simply put these loans allow you to add the cost of needed repairs, renovations and upgrades to the purchase price of your new home (or the payoff on a refinance). This is typically the least expensive way to finance renovations and only requires one closing and one set of closing costs. Furthermore, the appraisal is based upon the anticipated value once the work is complete.
To take advantage of one of these loans your first step is to find a qualified contractor and create an itemized "wish list" of everything you would like to do to the property in a perfect world. (Ultimately you may not need to use this or any other contractor and may be allowed to complete some or all of the work yourself however you will still need a professional estimate) Next you need to work with a government approved lender to make sure your credit and income meet the minimum guidelines. Once you have a good idea that you will qualify your lender will order an FHA Appraiser to appraise the property "as-is", provide a list of the repairs that will be required by FHA. Once you and your lender have all of this information you can calculate the loan amount required to purchase the property and make the required repairs. Plus, if your debt-to-income and budget can handle it you can add in some or all of your "wish list" items.
Once you close on the loan the work to the property can begin. Depending on the lender, the contractor will be required to compete the work within 3 to 6 months and in some cases you can finance in the mortgage payments during this time period so you do not have to make a mortgage payment until the work is complete and you are able to move in.
Things to keep in mind when considering these loan products is that not all of them will allow you to contribute any of the labor, only the Fanne Mae option is open to investors/second homes and all FHA loans require mortgage insurance. A mortgage professional with experience in these types of loans can recommend the best one for your needs depending on your specific wants and needs.
If you have any questions I would be happy to answer them. I have several lenders that offer these loans. I can normally be reached at (207) 850-1007 or toll-free at (877) 440-2739. You can also visit my website or contact me through my website www.ReliantSanford.com.
Simply put these loans allow you to add the cost of needed repairs, renovations and upgrades to the purchase price of your new home (or the payoff on a refinance). This is typically the least expensive way to finance renovations and only requires one closing and one set of closing costs. Furthermore, the appraisal is based upon the anticipated value once the work is complete.
To take advantage of one of these loans your first step is to find a qualified contractor and create an itemized "wish list" of everything you would like to do to the property in a perfect world. (Ultimately you may not need to use this or any other contractor and may be allowed to complete some or all of the work yourself however you will still need a professional estimate) Next you need to work with a government approved lender to make sure your credit and income meet the minimum guidelines. Once you have a good idea that you will qualify your lender will order an FHA Appraiser to appraise the property "as-is", provide a list of the repairs that will be required by FHA. Once you and your lender have all of this information you can calculate the loan amount required to purchase the property and make the required repairs. Plus, if your debt-to-income and budget can handle it you can add in some or all of your "wish list" items.
Once you close on the loan the work to the property can begin. Depending on the lender, the contractor will be required to compete the work within 3 to 6 months and in some cases you can finance in the mortgage payments during this time period so you do not have to make a mortgage payment until the work is complete and you are able to move in.
Things to keep in mind when considering these loan products is that not all of them will allow you to contribute any of the labor, only the Fanne Mae option is open to investors/second homes and all FHA loans require mortgage insurance. A mortgage professional with experience in these types of loans can recommend the best one for your needs depending on your specific wants and needs.
If you have any questions I would be happy to answer them. I have several lenders that offer these loans. I can normally be reached at (207) 850-1007 or toll-free at (877) 440-2739. You can also visit my website or contact me through my website www.ReliantSanford.com.
Financing Your First Home (or even your second)
If you are thinking about buying a home in the coming months you are likely asking yourself, “Will I qualify for a mortgage? How much will I need down? Is my credit good enough? What else is the bank going to want from me?”
Probably the most unnerving aspect of buying a home is getting pre-approved by a lender for financing. All lenders are different and what one bank considers an unacceptable risk another may consider absolutely perfect. The trick is to find a mortgage professional with multiple sources of financing and arm yourself with information before your application.
What are underwriters looking for when they are reviewing a mortgage application? They want to make sure the borrowers can comfortably afford the monthly payment, have a history of financially responsible behavior and (ideally) have a little skin in the game. i.e. money down.
First, your credit score. There are three main credit reporting depositories: Transunion, Experian and Equifax. They each issue you a score based on their own internal models and your credit history. When you apply for a mortgage we will pull all three (called a tri-merge report) and will use the middle score for the purposes of evaluating your loan.
How credit scores are calculated is proprietory information that only the credit bureaus. Paying all your bills on time is a big part of your score but it is not the only part. Here are other factors considered:
1. Credit Cards – These are a useful tool and when used properly can improve your score dramatically but the same is true if they are used improperly. Availability of credit is a big part of your score, if you never have a balance of more then $300 on a card with a $1000 credit limit and pay your bill on time, this will give you a great credit score. If you maintain a $900 balance and pay your bill on time, this will bring your score down because you have very little available credit.
2. Car Payments/Student Loans/Other Installment Loans – Paying these payments on time will keep your credit score up, if you are more then 30 days late in any given month, your score will drop dramatically.
3. Collections – These bring your score down (even medical collections) and should be prevented in any way possible.
4. Foreclosures/Repossessions/Bankruptcy – These are all major hits to your credit score and would likely disqualify you from qualifying for a mortgage for anywhere between 2 to 7 years.
5. “Time in the Bureau” – Initially a new debt will typically drop your credit score but it will slowly rise back up as you make monthly payments. If you have several trade lines with a year or more of good payment history and no new debt you will likely have a higher score.
The next thing lenders look at is affordability. Ideally the total of all your monthly debt payments, including credit cards, car payments, student loans and housing expense (Mortgage Payment, Monthly Mortgage Insurance (PMI), Homeowners Insurance, Property Taxes, Homeowners association dues calculated on a monthly basis) should not exceed 41% of your gross monthly income. Exceptions (up to 50% or more) can be made for higher ratios if you have an excellent credit score, money in savings, are borrowing a lot less then the home is worth or an exceptionally stable income.
If you are currently a renter you should always pay your rent with a check, not cash. Most lenders require renters to provide 12 months of canceled checks to show that you have a history of paying a house payment in a timely fashion. If you pay rent in cash or rent from a family member you may not qualify or may be required to take a HUD approved Homebuyer’s Education Course. Lenders also look out for “payment shock.” Payment shock is a concern for someone who (as an example) is paying $450/month in rent but applies for a mortgage of $2000/month. Often payment shock with a first-time buyer will require additional scrutiny and often attendance in a Homebuyer Education Course.
The last part of determining affordability is the stability of income. Typically, to qualify for a mortgage you need two years of stable income. If in 2008 you worked as an Engineer for a company and in 2009 you left to go work for the competitor for a higher wage, that’s alright because you have two years of stable income as an Engineer. Now, if you worked as an Engineer in 2008 and then decided to take the summer off and then change careers and become an Insurance Agent in the Fall of 2009, you likely will not qualify.
Homeownership can be very rewarding and right now it can also be a great investment. If your middle credit score is above 640, you have stable income and a little money saved up then you will likely qualify to buy a home. There are many government and conventional programs available that will allow you to finance as much as 100% of the homes value. To learn more about the various programs available visit www.ReliantSanford.com.
Probably the most unnerving aspect of buying a home is getting pre-approved by a lender for financing. All lenders are different and what one bank considers an unacceptable risk another may consider absolutely perfect. The trick is to find a mortgage professional with multiple sources of financing and arm yourself with information before your application.
What are underwriters looking for when they are reviewing a mortgage application? They want to make sure the borrowers can comfortably afford the monthly payment, have a history of financially responsible behavior and (ideally) have a little skin in the game. i.e. money down.
First, your credit score. There are three main credit reporting depositories: Transunion, Experian and Equifax. They each issue you a score based on their own internal models and your credit history. When you apply for a mortgage we will pull all three (called a tri-merge report) and will use the middle score for the purposes of evaluating your loan.
How credit scores are calculated is proprietory information that only the credit bureaus. Paying all your bills on time is a big part of your score but it is not the only part. Here are other factors considered:
1. Credit Cards – These are a useful tool and when used properly can improve your score dramatically but the same is true if they are used improperly. Availability of credit is a big part of your score, if you never have a balance of more then $300 on a card with a $1000 credit limit and pay your bill on time, this will give you a great credit score. If you maintain a $900 balance and pay your bill on time, this will bring your score down because you have very little available credit.
2. Car Payments/Student Loans/Other Installment Loans – Paying these payments on time will keep your credit score up, if you are more then 30 days late in any given month, your score will drop dramatically.
3. Collections – These bring your score down (even medical collections) and should be prevented in any way possible.
4. Foreclosures/Repossessions/Bankruptcy – These are all major hits to your credit score and would likely disqualify you from qualifying for a mortgage for anywhere between 2 to 7 years.
5. “Time in the Bureau” – Initially a new debt will typically drop your credit score but it will slowly rise back up as you make monthly payments. If you have several trade lines with a year or more of good payment history and no new debt you will likely have a higher score.
The next thing lenders look at is affordability. Ideally the total of all your monthly debt payments, including credit cards, car payments, student loans and housing expense (Mortgage Payment, Monthly Mortgage Insurance (PMI), Homeowners Insurance, Property Taxes, Homeowners association dues calculated on a monthly basis) should not exceed 41% of your gross monthly income. Exceptions (up to 50% or more) can be made for higher ratios if you have an excellent credit score, money in savings, are borrowing a lot less then the home is worth or an exceptionally stable income.
If you are currently a renter you should always pay your rent with a check, not cash. Most lenders require renters to provide 12 months of canceled checks to show that you have a history of paying a house payment in a timely fashion. If you pay rent in cash or rent from a family member you may not qualify or may be required to take a HUD approved Homebuyer’s Education Course. Lenders also look out for “payment shock.” Payment shock is a concern for someone who (as an example) is paying $450/month in rent but applies for a mortgage of $2000/month. Often payment shock with a first-time buyer will require additional scrutiny and often attendance in a Homebuyer Education Course.
The last part of determining affordability is the stability of income. Typically, to qualify for a mortgage you need two years of stable income. If in 2008 you worked as an Engineer for a company and in 2009 you left to go work for the competitor for a higher wage, that’s alright because you have two years of stable income as an Engineer. Now, if you worked as an Engineer in 2008 and then decided to take the summer off and then change careers and become an Insurance Agent in the Fall of 2009, you likely will not qualify.
Homeownership can be very rewarding and right now it can also be a great investment. If your middle credit score is above 640, you have stable income and a little money saved up then you will likely qualify to buy a home. There are many government and conventional programs available that will allow you to finance as much as 100% of the homes value. To learn more about the various programs available visit www.ReliantSanford.com.
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