A larger than expected increase in hiring, according to the private ADP report put some selling pressure on bonds. But mortgage rates remain near their lowest level of the year with conforming no point 30 year fixed rates averaging 4 1/8th and 15 year rates closer to 3 1/8th. Meanwhile the housing recovery continues with foreclosures down substantially and May pending home sales up by 6.1% and year over year, home prices up by 8.8%. This according to NAR and CoreLogic.
And now for something completely different: Mount Everest is growing at almost ½ an inch a year, that’s why a person today has to climb 27 inches higher to reach the peak compared to 1953.
For more information on a home purchase, refinance, or a reverse mortgage, visit our website at www.ARAMCO.Biz or call me at (877) 700-0942.
This is Mehran Aram with today's ARAMCO Report.
There was very little change in the mortgage rates following the release of the minutes from the Fed’s last meeting as it revealed nothing new. The good news is that mortgage rates remain at their lowest level of the year with conforming no point 30 year fixed rates averaging 4 1/4 % and 15 year rates closer to 3 1/4 %. Meanwhile Fannie Mae cut its outlook for home sales for this year and for 2015.
And now for something, completely different: Did you know that the popular game Bingo was originally called “Beano” because players used beans to cover the numbered squares.
For more information on a home purchase, refinance, or a reverse mortgage, visit our website at www.ARAMCO.Biz or call me at (877) 700-0942.
This is Mehran Aram with today's ARAMCO Report.
While some things never change, the opposite is true for the Reverse Mortgage program during the past few years.Even though there has been considerable debate about the abundance of changes to the program, the consensus is that these changes have resulted in a strengthened program and allows borrowers to be further protected.
On the immediate horizon of change to the Reverse Mortgage program, is the HUD Financial Assessment. For Baby Boomers contemplating Reverse Mortgages both now and in the future, these new rules will transform and enhance the program even further. Borrowers, prior to application, will have a clear picture of their current financial situation and how it will change as a result of using a Reverse Mortgage for retirement planning or other financial goals. This is change that is definitely for the better.
From a Borrower’s and an Originator’s point of view, the new rule is both a challenge and an opportunity. The challenge for the borrowers would be presenting more information, questions and paperwork up front, and resulting in longer presentations and further borrower education for the Loan Originators. Ultimately, the opportunity is invaluable and worth the challenge as it produces increased clarity and certainty that a Reverse Mortgage is the right long-term choice for the Borrower. It’s a sustainable decision that the homeowner can rely on to serve them well, accomplish their goals, and also gives the Loan Originator a feeling of truly serving the needs of their client.
An additional benefit of the financial assessment is the choice to bring your advisors into the decision making process. Whether it be family, mentors or professionals that you have relied on for guidance over the years, don’t be reluctant to include them in the equation. A Reverse Mortgage can be a powerful tool in financial planning. While it may not be for everybody, it can be perfect for some--even financial planners and investment advisors are quickly discovering its tremendous value.
The bottom line is that this financial assessment is not a pass-fail. Unlike in the forward market, it won’t cause a denial but rather, it will simply determine whether or not the borrower will need a "set-aside" payment for future property taxes and homeowners insurance. Think of it as the “New, Improved Reverse Mortgage”--A safer, more attractive option for all prospective consumers who are considering using their home equity in planning their retirement.
For more information on Reverse Mortgages, refinancing or on a home purchase contact us at www.ARAMCO.biz or call 877-700-0942.
Later this year, the FHA will begin a financial assessment on borrowers looking to obtain a Reverse Mortgage. The purpose of the assessment is to evaluate the mortgageor's willingness and ability to meet their financial obligations.The assessment will also be used to calculate whether a portion of the Reverse Mortgage proceeds will need to be held back in order to cover property taxes and insurance in future years. According to HUD, the new financial assessment guidelines will focus on:
•performing credit history analysis and cash flow/residual income
• evaluating extenuating circumstances and compensating factors;
• evaluating results of the financial assessment to determine eligibility
for the HECM;
• determining if funding sources for property charges from HECM proceeds
will be required;
• completing a financial assessment worksheet;
• verification requirements and documentation standards for credit, income,
Additionally, underwriters will look at the borrowers current monthly obligations (found on their credit report) and property charges that include property taxes, home owners insurance, and HOA payments. HUD will require a calculation based on the square footage of the home and is similar to the VA calculation of $.14/sq. ft. If a home is 1800 square feet, an assessment of $252/month would be included in the calculation when determining if a borrower qualifies.
Another component of the calculation will be based on the geographic region the borrower resides in. In the Southwest region, $589/month for a single person and $998/month for a couple would be added to the equation when calculating the financial assessment. For example: a couple living in Southern California who have a 2000 square foot home, $350/month in credit card debt, property taxes of $3000/year and paying $1200 for homeowners insurance would need to make $1978/month to qualify according to the new financial assessment. For many couples living in Southern California $1978/month may not seem like a lot of money however, many senior borrowers looking at a reverse mortgage are doing so because they are on a very tight budget and possibly living month to month.
Unfortunately, the few that do not pass this financial assessment may not qualify for a reverse mortgage and may be forced to sell their home. On a positive note, most borrowers will pass this new policy imposed by FHA.
For more information on purchasing a home, reverse mortgages or home financing contact us at www.ARAMCO.biz or call 877-700-0942.
As less Americans file for unemployment benefits, and layoffs slowly stabilize following weeks of volatility, the overall health of the U.S. workforce appears to be slowly improving. This is evidenced by consumer confidence which remains at its second-highest level in over six years, demonstrating an increased optimism among households. Interest rates remain quite low, with 30-year fixed rates at around 4.25% and 15-year rates averaging 3.25%.
And now for something completely different. Although he was deaf, Beethoven stimulated the ears of millions of people. Beethoven’s 74 minute long Ninth Symphony continues to affect our daily lives, as CDs were designed to contain exactly 74 minutes of music in order to play his final masterpiece in its entirety.
For more information on a home purchase, refinance, or a reverse mortgage, visit our website at www.ARAMCO.Biz or call me at (877) 700–0942.
This is Alexander Aram filling in for Mehran Aram with today’s ARAMCO Report.
Downsizing? Refinancing? Wanting a change of scenery? It is a common misconception that you can’t use a reverse mortgage to purchase a home. That is entirely false!
Many of our elderly clients live in homes in which they’ve raised their families and some are looking to downsize or move into a retirement community. This move allows them to take advantage of less upkeep of a home and to enjoy their time doing other activities. With a Home Equity Conversion Mortgage (HECM) they are able to accomplish this, and can avoid moving into costly retirement homes.
Downsizing is not the only way to reap the benefits of a HECM Reverse Mortgage. With many of our clients, we are able to list and sell their home so they can go on to purchase a new home. This is accomplished by using some or all of the proceeds they received from selling their home as a down payment on a new home. We simply finance the purchase of this new home with a HECM Reverse Mortgage for purchase, and the homeowner enjoys their new home with out the usual burden of monthly payments. If the property purchased is a home of equal or lesser value than your existing home, you in most cases can transfer the current taxable value to your new property (of course it's a great idea to consult your tax professional, we're just the real estate and. Mortgage pros). This means that property taxes WON’T go up AND, with the Reverse Mortgage, you will have NO mortgage Payment (just be sure to follow the terms of the loan)! Even with these benefits, you are not restricted from purchasing a higher-value home if you so choose.
Owning a home is also not a prerequisite to get a Reverse Mortgage. Many seniors that are currently renting and may have saved money over the years or came into an inheritance, can use some of their savings to purchase a home using a Reverse Mortgage. This provides a tremendous amount of freedom and security for the senior. With ownership, the housing payment is essentially fixed and you, the owner, are no longer subject to ever-increasing rent payments.
While being a homeowner means being responsible for property taxes, insurance, and maintenance, this option provides a freedom that renting does not. With owning a home, YOU are in charge, allowing you to make changes to the space, etc. without having to worry! With no mortgage payment, the costs of owning a home can be very manageable and the benefits of owning far out-weigh the uncertainties of renting.
Call The ARAMCO Group at 877-700-0942 for more information on how a HECM for Purchase Reverse Mortgage can help you!
According to the National Association of Home Builders, 59 metros have fully recovered from the last housing market crash and 300 saw year over year gains. Meanwhile a Trulia survey showed that 41 percent of Americans would prefer a new home while 21 percent preferred an existing home and 38 percent had no preference. In the mortgage market, conforming no point 30 year fixed rates average 4 1/4 percent with 15 year rates closer to 3 1/4 percent.
And now for something, completely different: New Yorkers have some of the longest commutes, averaging 40 minutes, well above the national average of 20 minutes.
For more information on a home purchase, refinance, or a reverse mortgage, visit our website at www.ARAMCO.biz or call me at 877-700-0942
This is Mehran Aram with today's ARAMCO report.
When purchasing a home, one of the main things to consider should be a pre-approval
letter from a reputable mortgage company. A pre-approval letter will help guide one of the largest financial decisions you will make in your life. One of the first questions that should be addressed in the qualification process is the down payment. There are many loan options with varying down payment requirements. These vary from a VA loan with a $0 down payment, to an investment property needing a minimum of 20% down.
One of the most common loan options for first time borrowers has been a FHA loan. This has been the product of choice for many homebuyers that are restricted to a limited down payment. The down side to a FHA loan is the mortgage insurance. Although FHA allows a low down payment of 3.5% the cost of mortgage insurance can sometimes divert borrowers to another loan product. FHA has an upfront mortgage insurance fee of 1.75% and an annual mortgage insurance fee of .40% to 1.45%, depending on the loan amount.
Another popular loan product is the “Lender Paid Mortgage Insurance” loan where the down payment can be as little as 5% with no upfront or annual mortgage insurance charged to the borrower. In exchange for not being charged mortgage insurance, the LMPI loan has an interest rate of about .40% higher than a conventional interest rate if the borrower was going to have a 20% down payment.
An option that has become even more popular ever since FHA increased the term of mortgage insurance from 5 years to the full 30 year term, is the conventional loan with mortgage insurance. The conventional loan with mortgage insurance allows the borrower a choice to pay the mortgage insurance upfront or pay as part of the monthly payment. One of the nice features of this product is once a borrower has 20% equity, either by appreciation or paying down the loan, the borrower can order an appraisal and have the mortgage insurance eliminated.
The most attractive interest rates and loan products are available when a borrower has 20% for the down payment however these three loan products can be great financial tools when looking to purchase a home with a limited amount of available funds for the down payment.
Homeownership is a rite of passage many of us dream of. Owning a home means putting down roots and having a space that is truly yours. It’s a significant moment of your life when you finally own a home.
But owning a home can be daunting because of the responsibilities and obligations that come with it, combined with the initial process it takes to get there. When done properly, though, buying and owning a home is a process that limits your financial risk, increases your investment power, and saves you tons of money over the long term—and it can even save you money immediately.
Renting has little to no ROI. Renters don’t have to worry about maintaining a residence or paying the mortgage. But if you’ve been renting long term, chances are you’re already performing home maintenance on some level and you’re at your landlord’s mercy when it comes to major repairs. And when it comes to paying the mortgage, there are many advantages over rental payments, which don’t provide any return on investment beyond securing a place to live through the end of the month or lease.
How much is rent actually costing you? Consider the amount one pays over a 10-year period. A $1000/month rental payment adds up quickly to a whopping $120,000 over 10 years, when the same amount of money could have gone toward reducing 1/3 of the debt on a 30-year home mortgage by essentially making the payments to yourself instead of a landlord. Wow!
Here are 9 more benefits to owning your own home:
1. Homeownership is an investment. Unlike a car and many other purchases that decrease in value, a home is a purchase that appreciates over time. While each local market has its own unique factors, the national median home price goes up each year, even in times of recession. As you pay your mortgage each month, your debt amount goes down, while the value of your home continues to rise. This creates the buying and reinvestment power better known as equity.
2. Gain equity. When it comes to homeownership, investment and equity are directly related. As you make mortgage payments each month, part of the payment goes toward the interest, while the rest pays down the principal balance. Equity can be better defined as the part of the principal balance you’ve already paid, or the percentage of your home you already own. Paying the principal is like depositing money in the bank, because that money becomes available for reinvestment in the home itself or a new home.
3. Take advantage of tax benefits. The federal government encourages homeownership (which in turn encourages economic growth) by offering tax incentives for homeowners. The biggest one is the option to deduct interest from mortgage payments on your income tax return, especially at the start of a mortgage when most of the payment is applied to the interest. Payments on private mortgage insurance (PMI) and certain home-related purchases also qualify for tax benefits.
4. Stabilize your housing costs. A fixed-rate mortgage means you’ll have the same mortgage payment for the term of the loan (usually 30 years), while monthly rental payments will continue to climb. And even adjustable-rate mortgages (ARM) have a fixed cap on them. Homeownership also stabilizes other home-related expenses like utilities and gives you more control over your ability to make investments in your property that keep those expenses down.
5. Gain control over your living space. Renting doesn’t usually come with a lot of options for modifying your living space to better suit your needs. Renters with changing needs must also deal with changing residences. Homeownership means you can make improvements to your home, and home improvements usually lead to increased home value, both financially and in daily home life. The power of equity can give homeowners the extra financing they need to reinvest in their homes when cash funds aren’t an option.
6. Increase your own sustainability. Homeownership can help you create a sustainable future in many different ways. Long-term renters lack sustainability because a high percentage of their income usually goes toward housing expenses that are constantly increasing. Locking yourself into a mortgage payment helps level out living expenses, so when income goes up it can be budgeted elsewhere. Paying off a mortgage allows homeowners a long-term plan to significantly reduce their living expenses as they move toward a retirement budget.
7. Stop moving. Homeownership increases sustainability and stability. Moving from rental to rental is a major inconvenience and a financial and emotional burden. Renting can mean that you never really know where you’ll be living next or what your expenses will be. Staying in the same home allows a financial and emotional investment in both your living space and your community.
8. Social benefits. Staying put for longer periods of time also creates social benefits that range from friendships with neighbors to community involvement and consistent educational opportunities for children.
9. Use your investment to make another investment. The equity that comes from paying a mortgage is what allows many individuals and families to make future investments in the same home, a higher-valued home, or second home. A home equity line of credit helps homeowners use the part of their home that’s already paid off to obtain financing for investments apart from the home itself, such as purchasing a boat or RV.
Homeownership comes with a bevy of benefits; these are only a handful. What other benefits have you experienced with homeownership? What makes you want to own your own home?
On July 30, the Reverse Mortgage Stabilization Act of 2013, a House of Representatives bill, was approved by the Senate. The next stop for the legislation is the President’s office, where it is expected that he will sign it into law.
For seniors who already have reverse mortgages, nothing should change—you shouldn’t have anything to worry about. Butfor those considering the option, it is important to understand what the potential ramifications of this bill could mean in terms of loan eligibility and cost. For those who’ve already had an analysis but haven’t moved forward with the reverse mortgage, you may need to get an updated analysis, and quickly (more on this under “What Does it All Mean?”).
What is a Reverse Mortgage?
This financial solution that taps into the equity of your home is only available to people over the age of 62. By taking out a reverse mortgage, the homeowner no longer makes a mortgage payment in principal or interest. The loan, plus interest, is due when the homeowner dies or decides to move. It is an attractive option for people who have built up strong equity in their home and want to tap into that cash for retirementor other expenses. The reverse mortgage process is overseen by the Federal Housing Authority and must follow guidelines that call for proper home maintenance, among other details. Before this bill, there were virtually no credit or income requirements for seniors wanting the reverse mortgage option but that could soon change.
Background on Legislation
In a 2012 audit of the FHA’s insurance fund, it became clear that the reverse mortgage program needed some modifications to prevent government losses. The Reverse Mortgage Stabilization Act was introduced in May by Representative Denny Heck, a Democrat from Washington, and Representative Mike Fitzpatrick, a Republican from Pennsylvania. Instead of calling for a sweeping overhaul of the entire reverse mortgage program—a move that could negatively affect senior citizens who rely on it—the bill instead gives the U.S. Department of Housing and Urban Development (HUD) the authority to take a closer look
at losses and where to specifically make changes.
HUD has until September 30th to decide if it needs bailout help from the U.S. Department of the Treasury, or if some adjustments to the reverse mortgage program will be enough to keep the initiative financially stable. Some financial experts say that the reverse mortgage program has lost money simply because of property value decline and that tighter restrictions will only hurt the seniors who need the low-cost financial help. Whatever the reason for the financial squeeze, it is clear that HUD has some decisions to make, and quickly, to avoid asking the U.S. Treasury for help for the first time in nearly 80 years.
Possible Reverse Mortgage Changes
Seniors who apply for and already benefit from the reverse mortgage program are likely to see some changes, including:
No Fixed Rate Standard option. This change actually took place back in April, but is important to note for seniors planning to apply for a reverse mortgage. The Fixed Rate plan allowed borrowers to take out a larger amount of money upfront at a higher interest rate (2 percent). Instead, borrowers can opt for the Standard Adjustable Rate or Saver programs, which both limit the amount of withdraws but also come with a much lower interest rate. In the case of the Saver Program, interest is only .01 percent.
No lump-sum payouts. In the past, seniors had the option to take all of the value of their loan out upfront. This bill will place limits on the amount that is initially available to reverse mortgage borrowers. The exact details of payment amounts and percentages will not be known until HUD sends out official Mortgagee Letters.
Creation of escrow and impound accounts. In order to cover tax and insurance costs, HUD is considering a requirement of impounds or escrow accounts. The bill passage gives HUD this authority, though no official decision has yet been released. If this mandate goes into effect, borrowers will have less money at closing and there could be a significant delay in when the borrowers see the money. It could also mean no equity to the borrower when all the numbers are crunched.
Stricter qualifications. Before the Reverse Mortgage Stabilization Act, seniors did not have to meet traditional financial loan requirements. There were no credit or income checks and the program hinged simply on the equity in the borrower’s home. HUD is now considering the addition of a “financial assessment” portion of the application process. If implemented, prior credit and current income could impact a senior’s ability to obtain a reverse mortgage.
Higher loan costs. A side effect of all the other possible HUD changes to the reverse mortgage program is that it will all add up to higher costs for borrowing seniors. Before this legislation, reverse mortgage lenders were often willing to take on the initial costs to the borrower, like closing costs or origination fees. Lenders were able to do this based on calculating how much they could get for selling the loans on the secondary market. With more limits on the loans, lenders cannot receive as much for selling them so they do not have as much money to put toward borrowers’ costs. This means more money out of borrowers’ pockets to pay for their loans.
What Does it All Mean?
If you are a senior and considering a reverse mortgage to help improve the quality of your retirement years, the terms of your loan may no longer reflect earlier estimates. If you have already had an analysis completed but haven’t moved forward with a reverse mortgage yet, you’ll need to get a current analysis from reverse mortgage professionals like The ARAMCO Group. Be sure to do this before the secondary market worsens (as the experts predict will happen) and before the changes proposed in this bill are implemented.
The seniors who will most be hurt by any or all of the potential changes are those who may have eligibility issues. Seniors may also soon have to pay more in borrower’s costs, and not have a lump-sum payment option. If you feel like a credit or income requirement could hurt your chance at obtaining a reverse mortgage or to make the most of the equity in your home, do not wait to reach out to a reverse mortgage professional. If HUD changes eligibility requirements, the money you had planned to use may no longer be available to you.
Again, make sure you consult reverse mortgage professionals like the ARAMCO Group if you’re concerned about your own unique situation. The ARAMCO Group’s president and CEO is a Certified Reverse Mortgage Professional (CRMP)—a designation that comes with passing numerous classes and a comprehensive exam, and that has been given to less than 50 reverse mortgage brokers nationwide. The benefits of working with a CRMP are numerous—stay tuned for our next blog post to learn them!