Consumer Protection from Irresponsible Mortgage Practices

Congress enacted the Dodd-Frank Act in 2010 in response to the mortgage crisis that led to America’s Great Recession. The two parts that apply closely to homebuyers are the Ability-to-Repay (ATR) and Qualified Mortgages (QM).

A Qualified Mortgage is a category of loans that have certain, more stable features that help make it more likely that borrowers will be able to afford their loan. These loans do not allow certain risky features like an interest-only period when no money is applied to reduce the principal; negative amortization that would allow the mortgage balance to increase; and, “balloon payments” at the end of the loan that are larger than the normal periodic payments.

A debt-to-income ratio of less than or equal to 43% has been established to provide a limit on how much of a borrower’s income can go toward total debt including the mortgage and all other monthly debt payments. However, the Consumer Finance Protection Bureau believes these loans should be evaluated on a case-by-case basis and in some cases, can exceed 43%.

There is a limit for up-front points and fees the lender can charge.

By showing that the lender made an effort to be certain that the borrower has the ability to repay the loan, the lender in turn, receives certain legal protections. Underwriting factors considered by the lender include:

  1. current or reasonably expected income or assets
  2. current employment status
  3. the monthly payment on the covered transaction
  4. the monthly payment on any simultaneous loan
  5. the monthly payment for mortgage-related obligations
  6. current debt obligations, alimony, and child support
  7. the monthly debt-to-income ratio or residual income
  8. credit history

For more information, see the Consumer Financial Protection Bureau fact sheet … protecting consumers from irresponsible mortgage lending.

Posted in Uncategorized | Leave a comment

Quick Plumbing Inspection

No one wants to waste water or money. For that reason, take a few minutes every other month to do the following inspections:

  1. Check to see if cutoff valves on sinks and toilets are working properly.

    Many times, builders will put individual cutoffs on supply lines to sinks and toilets. It is reasonable to expect them to work but after some time, they can corrode which prevents opening and closing. It is a good idea to test them occasionally before you need them in an emergency.

  2. Fill each sink with a few inches of water to see if they drain in what you feel is a normal time.

    A slow-draining sink can be an indication of a clog that builds up around the insides of the pipe. Common causes are food, grease, hair and soap scum. Plunging can take care of some slow-running sinks. After partially filling the sink with water, seal the plunger over the drain and pump it up and down a few times.

  3. Inspect each toilet to see if they are leaking water from the tank into the bowl.

    Toilets that continue to run after being flushed can use a large amount of water in a month’s time. Generally, the problem comes from a flapper that doesn’t seat properly. Sometimes, the chain is keeping it from closing properly or the flapper itself may need to be replaced.

    Another issue could be that the flush valve needs to be replaced. These can be purchased at Lowe’s or Home Depot for about $20.00 and are relatively easy to change out. There are lots of instructional videos on the internet and it can save money if you give it a try.

If you need a recommendation for a good plumber to take care of something you discover, please feel free to call me at (858) 602-9192.

Posted in Uncategorized | Leave a comment

Act Decisively

Whether it is hesitation or procrastination due to uncertainty, it can cost buyers by having to pay more for both the house and the financing. This is one of those markets where most of the experts expect interest rates and prices will continue to rise through 2019.

The National Association of REALTORS® reports there is currently a 4.2-month supply of homes for sale which is close to the same as last year’s inventory. Normal inventory is considered to be a 6-month supply.

If during the period you’re waiting to buy, the price of the home goes up by 5% and the mortgage rate increases by 1%, the payment on a $275,000 home with a 95% mortgage could be $233.80 more each and every month. Over a seven-year period, the delay to purchase would total close to $20,000.

To act decisively, you need good information; a confused mind will not generally make a decision. In today’s market, you need to know exactly what price home you can qualify for and you need to know what kind of home you can expect for that price.

You’ll want a housing and a mortgage professional you can trust to give you the information you need to make good decisions for yourself and your family. We’d like to be your real estate professional and can recommend a trusted mortgage professional.

To get a better idea about what it may cost you for a home in your price range, use the Cost of Waiting to Buy calculator. If you have any questions, call me at (858) 618-5609.

Posted in Uncategorized | Leave a comment

Reduce Refinancing Costs

There is much more than a lower rate and payment to determine whether to refinance a mortgage. Lenders try to make refinancing as attractive as possible by rolling the closing costs into the new mortgage so there isn’t any out of pocket cash required.

The closing costs associated with a new loan could add several thousand dollars to your mortgage balance. The following suggestions may help you to reduce the expense to refinance.

· Tell the lender up-front that you want to have the loan quoted with minimal closing costs.

· Check with your existing lender to see if the rate and closing costs might be cheaper.

· Shop around with other lenders and compare rate and closing costs.

· If you’re refinancing an FHA or VA loan, consider the streamline refinance.

· Credit unions may have lower closing costs because they are generally loaning deposits and their cost of funds is less.

· Reducing the loan-to-value so mortgage insurance is not required will reduce expenses and lower the payment.

· Ask if the lender can use an AVM, automated valuation model, instead of an appraisal.

· You may not need a new survey if no changes have been made.

· There may be a discount on the mortgagee’s title policy available on a refinance.

· Points on refinancing, unlike a purchase, are ratably deductible over the life of the loan ($3,000 in points on a 30-year loan would result in a $100 tax deduction each year.)

· Consider a 15-year loan. If you can afford the higher payments, you can expect a lower interest rate than a 30-year loan and obviously, it will build equity faster and pay off in half the time.

A lender must provide you a list of the fees involved with making the loan within 3 days of making a loan application in the form of a Loan Estimate and a Closing Disclosure Form. Every dollar counts, and they belong to you.

Posted in Uncategorized | Leave a comment

Moisture & Mold

Moisture is mold’s best friend and it thrives between 40 and 100 degrees Fahrenheit which is why it is commonly found in homes. Mold spores float in the air and can grow on virtually any substance with moisture including tile, wood, drywall, paper, carpet, and food.

Moisture control and eliminating water problems are key to preventing mold. Common sources of moisture can be roof leaks, indoor plumbing leaks, outdoor drainage problems, damp basements or crawl spaces, steam from bathrooms or kitchen, condensation on cool surfaces, humidifiers, wet clothes drying inside, or improper ventilation of heating and cooking appliances.

  • Control the moisture problem
  • Scrub mold off hard surfaces using soap and water or other cleanser; dry completely
  • Do not paint or caulk moldy surfaces
  • Discard porous materials with extensive mold growth
  • Avoid exposing yourself or others to mold
  • Periodically, inspect the area for signs of moisture and new mold growth

The EPA suggests that if the moldy area is less than ten square feet, you can probably handle the cleanup yourself. If the affected area is larger than that, find a contractor or professional service provider.

Increasing ventilation in a bathroom by running a fan for at least 30 minutes or opening a window can help remove moisture and control mold growth. After showering, squeegee the walls and doors. Wipe wet areas with dry towels. Cleaning more frequently will also prevent mold from recurring or keep it to a minimum.

A simple solution to clean most mold is a 1:8 bleach/water mixture. Since homes have thermostatically controlled temperatures and water is used all day long in the kitchen and bathrooms, the environment is conducive to mold.

See Ten things you should know about mold written by the EPA.

Posted in Uncategorized | Leave a comment

What to Avoid Before Closing Your New Home

It’s understandable; you’re excited; you’ve found the right home, negotiated a contract, made a loan application and inspections. Closing is not that far away, and you are making plans to move and put personal touches on your new home.

Even if you have an initial approval on your mortgage, little things can derail the process which isn’t over until the papers are signed at settlement and funds distributed to the seller. The verifications are usually done again just prior to the closing to determine if there have been any material changes to the borrower’s credit or income that might disqualify them.

Most lending and real estate professionals recommend NOT to:

  • Make any new major purchases that could affect your debt-to-income ratio
  • Buy things for your new home until after you close
  • Apply, co-sign or add any new credit
  • Close or consolidate credit card accounts without advice from your lender
  • Quit your job or change jobs
  • Change banks
  • Talk to the seller without your agent

The lender and I are working together to get you into your new home. It’s understandable to be excited and feel you need to be getting ready for the move.

Planning is fine but don’t do anything that would affect your credit or income while you’re waiting to sign the final papers at settlement.

Posted in Uncategorized | Leave a comment

Rising Rates Affect the Cost Too

Mortgage rates have risen 0.5% in 2018 on 30-year and 15-year fixed rate mortgages and experts expect them to continue to increase. Buyers paying attention to the market understand the relationship that inventory has on pricing; when the supply is low, the price usually goes up. Rising interest rates can affect the cost of homes also.

When interest rates go up, fewer people can afford homes. Lower numbers of buyers can affect the demand, which could cause prices of homes to come down. The question is how much do the interest rates have to go up to affect demand?

As the rates gradually go up, the affect may not be noticeable at all except for the fact that the payments for the buyer have increased.

A ½% change in interest is approximately equal to a 5% change in price. A $300,000 mortgage at 4.5% for a 30-year term will have a $1,520.06 principal and interest payment. If the mortgage rate goes up 0.5%, it would affect the payment the same as if the price had gone up 5%. The difference in payments for the full term of the loan would be $32,547.

There are some things beyond buyers’ control, but indecision isn’t one of them. If they haven’t found the “right” home yet, it is understandable. However, when that home does present itself, the buyer needs to be ready to make a decision. If they are preapproved and have done their due diligence in the market, they should be able to contract before significant changes occur in the mortgage rates.

Posted in Uncategorized | Leave a comment

Replace It Anyway

If it’s not broken, why would a homeowner consider replacing something as expensive as a toilet when there may be other things in the home to replace that provide more aesthetic appeal. Don’t be too quick to ignore the functionality and the reliability of this basic convenience.toilet.jpg

The first rationalization might take place at the economic level. A water-saving model could easily pay for itself in a few years and then, there is the good feeling of participating in the conservation of our natural resources.

Having to plunge a toilet more than once a week could motivate a homeowner to spend money on a replacement especially, if having made repairs to the flapper and fill valve didn’t solve the issue.

Maybe your existing toilet has ugly scratches that make it difficult to clean. Maybe there are cracks in the tank or bowl that you’re concerned will develop into a leak at the worst possible time.

The average cost to replace a toilet is around $400 with models ranging more and less based on the features and brands. Round toilet bowls tend to take up less room, are less expensive and better suited for children. Elongated bowls generally take more room, have more powerful flushing action, more comfortable, more stylish and cost more.

Replacing the shut-off valve for the toilet could be a good thing to do while you’re replacing the toilet. Generally, it is as old as the toilet and having a reliable valve that works could be very convenient in a future repair or emergency.

There are a variety of videos on YouTube that could give you the confidence to do it yourself or simply, to have a better understanding of the scope of the project

Posted in Uncategorized | Leave a comment

Before You Leave Town…

Along with all the planning of what you’re going to do and where you’re going to stay, consider this checklist to make you feel more comfortable while you’re away from home.

  • Ask a trusted friend to pick up your mail, newspaper and keep yard picked up to avoid an appearance of not being at home.
  • Stop your mail (USPS Hold Mail Service) and your newspaper.29938746-250.jpg
  • Don’t post about your trip on Facebook and other social media until you return; some burglars look for this type of announcement to schedule their activities.
  • Do notify police or neighborhood watch – especially if you’re going to be gone for more than just a few days. Let your monitoring service know when you’ll be gone and if someone will be checking on your home for you.
  • Light timers make it look like someone is home. Set multiple timers for various times to better simulate someone at home. There are plug-in modules for lights and appliances that would allow you to control them from your phone while your out of town.
  • Do unplug certain appliances – TV, computers, toaster ovens that use electricity even when they’re off and to protect them from power surges.
  • Don’t hide a key; burglars know exactly where to look for your key and it only takes them a moment to check under the mat, above the door, in the flower pot or in a fake rock.

These easy-to-handle suggestions may protect your belongings while you’re gone while adding a level of serenity to your trip.

Posted in Uncategorized | Leave a comment

Owning Makes More Sense

When comparing the cost of owning a home to renting, there is more than the difference in house payment against the rent currently being paid. It very well could be lower than the rent but when you consider the other benefits, owning could be much lower than renting.31066694-250.jpg

Each mortgage payment has an amount that is used to pay down the principal which is building equity for the owner. Similarly, the home appreciates over time which also benefits the owner by increasing their equity.

There are additional expenses for owning a home that renters don’t have like repairs and possibly, a homeowner’s association. To get a clear picture, look at the following example of a $300,000 home with a 3.5% down payment on a 4.5%, 30-year mortgage.

net cost of housing.jpg

The total payment is $2,264 including principal, interest, property taxes, property and mortgage insurance. However, when you consider the monthly principal reduction, appreciation, maintenance and HOA, the net cost of housing is $1,218. It costs $1,282 more to rent at $2,500 a month than to own. In a year’s time, it would cost $15,000 more to rent than to own which is more than the down payment and closing costs to buy the home.

With normal amortization and 3% annual appreciation, the $10,500 down payment in this example turns into $112,00 in equity in seven years. Check out your own numbers using the Rent vs. Own or call me at (858) 618-5609. Owning a home makes sense and can be one of the best investments a person will ever make.

Posted in Uncategorized | Leave a comment