In a World Full of Acronyms

Acronyms are Good For You

OK, not all acronyms are good, like when the FBI comes knocking on your door.  The good acronyms we are talking about today are LPMI (Lender Paid Mortgage Insurance) combined with FHLMC (Freddie Mac) or FNMA (Fannie Mae) – the two big GSEs (Government Sponsored Entities).  Together they are a thing of beauty for your high FICO (720+) buyers. 

Private mortgage insurance (PMI) is required on conventional loans over 80% loan to value.  LPMI removes the monthly mortgage insurance for the life of the loan.  It’s done by slightly raising the interest rate and having the lender pay for the mortgage insurance upfront.  Not only does the typical high FICO buyer save more on their monthly payment, but we have had two buyers lately qualify for the house they really wanted where they would not have with standard mortgage insurance. 

FHLMC, or Freddie Mac, has a great purchase program called Home Advantage.  FNMA, or Fannie Mae, has an excellent purchase program called HomeReady. These products go up to 97% and offers reduced mortgage insurance rates.  Combine them with LPMI and you’ve got a winning combination!  Home Advantage and HomeReady are not a first time home buyer programs, but guidelines require that the buyer not own another home at the time of purchase.  Call us for details.

The Easterbrook Team

916.850.6050

Wait a Second... It's Still Tax Deductible

Wait a Second…It’s Still Tax Deductible

There has been some confusion surrounding the new tax laws enacted December 22, 2017.  We were told that the sky was falling, and they were right – but it was just a Chinese space station that didn’t hurt anyone – kind of like the changes to the tax laws.

The IRS sent a memo out recently (click here for memo) that read:

·         “Taxpayers may only deduct interest on $750K of qualifying home mortgage deduction.”

·         Taxpayers may deduct qualifying interest if it was ”used to buy, build or substantially improve the taxpayer’s home that secures the loan.”

·         “Despite newly-enacted restrictions on home mortgages, taxpayers can often still deduct interest on a home equity loan, home equity line of credit (HELOC) or second mortgage, regardless of how the loan is labelled.”

The Easterbrook Team
916.850.6050
EasterbrookTeam@spmc.com

Rates are Still Historically Low!

Rates are Still Historically Low!

It’s easy to forget how good we still have it when rates on a 30 year fixed rate mortgage were in the low 3’s.  One of the most significant ways the Fed stimulates the economy is lower and raise rates based on a variety of factors, such as the unemployment rate (which is currently at record lows).  Since the US economy has had a good run lately, the Fed has started to steadily increase the rate at which lenders borrow money.  We pass the cost on to the borrower in the form of higher interest rates.

As 30 year fixed rates climb back into the 5’s however, ARMs will be a tool that many buyers will consider to lower their monthly payments.  Call the Easterbrook Team for other options as well. 

The Easterbrook Team

916.850.6050

EasterbrookTeam@spmc.com

"We Make the Loan Process Easy!"

Planning on Staying a While? Avoid ARMs

Planning on Staying a While?  Avoid ARMs

ARMs are not usually a smart option for people who have limited income and plan on staying in their home for many years. 

A borrower that has limited assets or a high debt to income ratio should also avoid ARMs.  A good rule is that if you cannot afford the house without the ARM, then you should not get the house. An ARM is a shared risk between the lender and the borrower. If you cannot risk it – then an ARM is not a good option. 

The Easterbrook Team

916.850.6050

EasterbrookTeam@spmc.com

"We Make the Loan Process Easy!"

Some Borrowers could Benefit from an ARM

Some borrowers could benefit from an ARM

ARMs may make sense for borrowers that typically do not plan to stay in their home for a long enough time for the introductory rate to expire. 

Another group of borrowers that could benefit from an ARM are those with the means to pay off the mortgage before it adjusts allowing them to take advantage of the low introductory rate. 

The Easterbrook Team

916.850.6050

EasterbrookTeam@spmc.com

"We Make the Loan Process Easy!"

As Rates Rise, Is an Adjustable Rate Mortgage a Good Idea?

As Rates Rise, Is an Adjustable Rate Mortgage a Good Idea?

It’s pretty tempting – that that lower rate on the ARM in a rising interest rate market.  Is it a good idea?  That depends…read on.

An ARM starts with an initial period that has a fixed interest rate.  Different loan terms vary and the low rate can usually last from one year to ten years.  After the introductory period expires, the interest rate moves up and down with another interest rate called the index.  Most ARMs have one of three major indexes: one year treasury yield, COFI, or LIBOR.  ARMS also have limits, or caps, that restrict the amount rates and payments can change.

 

 

The Easterbrook Team

916.850.6050

EasterbrookTeam@spmc.com

"We Make the Loan Process Easy!"

Down Payment Hurdles

Down Payment Hurdles

Home ownership percentage has dropped to its lowest rate since 1965. Rates are decent, there's an incredibly strong job market, but renters continue to struggle coming up with a down payment. Rents have gone faster than any other component of the Consumer Price Index, which hasn't helped, student debt payments impact many, and other bills add up. Interestingly, in areas around the nation, a mortgage payment is less expensive than a rent payment. There's general agreement that potential buyers are more than capable of affording a monthly mortgage payment but saving for the down payment is a problem.

EASTERBROOK TEAM gives your buyers a leg up: John and Patty are down payment coaches.  We can assist your buyers with a wide variety of programs to assist them, such as: conventional HomeReady and Home Possible, CalHFA MyHome, ZIP, grant, and more.  We can investigate funds that buyers didn’t even know they had available to them, such as 401K borrowing, gift, and asset conversion.  Get them in front of us and we’ll get them excited about jumping over their home ownership hurdles!