David's Blog

Mortgage News You Can Use 5/21/2008

David Crisp (Ann Arbor Mortgage) — Wed, 21 May 2008 14:45:20 -0500

Mortgage News You Can Use

David Crisp (Ann Arbor Mortgage) — Fri, 16 May 2008 11:05:53 -0500

Mortgage news you can use

David Crisp (Ann Arbor Mortgage) — Fri, 04 Apr 2008 15:26:24 -0500

Mortgage Insurance Bad or Good?

David Crisp (Ann Arbor Mortgage) — Tue, 04 Mar 2008 15:31:48 -0600

I have been a mortgage lender since 1995 and have heard every negative comment, story, rant, and opinion about Private Mortgage Insurance (PMI). I never really understood why people had such strong negative opinions about PMI. I would, from time to time, try and explain that without PMI most people wouldn't have been able to buy there first home. Mortgage insurance, in my humble opinion, is great. That's right I said great. Without PMI I would never have had the ability to buy my first home, which would also have stopped me from buying my second home. Yea, sure I didn't like paying for it every month but I also didn't like paying the interest on my mortgage. Come to think of it I don't like paying the light and heat bills, greens fees, gasoline, or most bills. However without them I would be sitting in a cold, dark cardboard box dreaming about the days long ago when I played golf on Sundays instead of digging through dumpsters for dinner. Ok my rant is over.

For the past five years I would rarely close on a home loan that had PMI. With the availability of Two-step or Piggy Back loans (the 1^st mortgage for 80% and the 2^nd loan for 5%, 10%, 15%, or even 20%) the PMI option was more expensive. Well with the Sub Prime meltdown that has been changing quickly. Many of the nation's largest mortgage lenders have closed there 2^nd mortgage operations which makes it difficult to find inexpensive 2^nd mortgages. Over the past six months I have found that more time then not when I run the numbers for a client, offering them a mortgage with PMI is less expensive then doing a Two-step loan.

Below I have explained the four types of PMI offered for conventional loans. I hope you find this informative.

Monthly Paid PMI is considered the old standard and most commonly used PMI option. Monthly PMI charges a fee every month for the first five to seven years of the loan. After the five to seven years (which is the amount of time required to pay down the loan to less then 80%) the PMI payments stop. The amount of time before the PMI payments stop depends on the amount of down payment made when the loan was made as well as if any extra principle payments were made. The amount of the monthly PMI payments depends on the amount of the original down payment as well as the credit score of the borrower. This monthly fee is based on a percent of the loan amount. The more down payment made will reduce the percentage. Wither or not the PMI payments can be tax deductable will depend on the income level of the borrower.

Lender Paid PMI is were the full amount of the PMI is charged at closing and the lender pays the premium. The lender in return provides the client a slightly higher interest rate to recoup the cost. We have found in most situations this option has the lowest monthly payment and lowest total expense then other PMI programs. Lender Paid PMI also has the benefit of being completely tax deductable for all borrowers regardless of income. While this program has been available for many years it has only recently become popular because of the diminishing availability of good equity loans for Piggy Back loans (one mortgage loan at 80% and a 2^nd mortgage loan at 5%,10%,15% or 20%). The adjustment to the interest rate for this program depends on the down payment made, the borrower's credit score, the loan program, and the loan amount.

Single Premium PMI is very similar to Lender Paid PMI in which the full amount of the PMI is charged right at closing. The main difference between these two programs is who pays the fee. With Single Premium PMI the barrower is responsible for the fee. Once this up-front amount is paid at closing, there are no monthly charges. This program is very rarely used because the other options tend to have lower costs. The amount paid for the policy is used up over five to seven years depending on the down payment. If the loan is paid off sooner then the allotted time then a portion of the premium is refunded back to the borrower. In most cases, and especially in our current market, the Lender Paid PMI is usually the better option, however in certain situation the Single Paid Premium should be considered.

The forth and perhaps least used program is a combination of the Monthly and Single Paid PMI programs. This program has both an upfront fee at closing and a monthly fee for the first five to seven years. Both of these two fees are lower then other programs however to total expense is higher then any of the other options.

I believe that, at least for the near future, PMI will play a larger roll in the real estate financing picture. So for all of you PMI haters out there I recommend you put aside your for-gone conclusions and look at all your options. You just might find that if you don't have a 20% down payment then using one of the above PMI programs will be the least expensive way to get into that dream home.

David Crisp

Senior Loan Officer

Ann Arbor Mortgage Company

Mortgage News You Can Use

David Crisp (Ann Arbor Mortgage) — Mon, 19 Nov 2007 12:55:53 -0600

Mortgage News You Can Use

November 16, 2007

The Good News That Does Not Get Reported:

1. Thirty-five percent of the homes in the U.S. do NOT have a mortgage.

2. Some 94.88 percent of the loans ARE performing.

3. The foreclosure problem in this country is really a story about seven states.

4. The biggest foreclosure problems are in Michigan, Ohio and Indiana. These are manufacturing states that had horrible job losses. Since 2001, our fair state has lost 300,000 jobs. These states would probably have had problems no matter what the market was doing.

5. The other four states-California, Florida, Nevada and Arizona-experienced significant overbuilding. Twenty-five percent of the foreclosures in these states are on properties that are held by investors who were speculating.

6. Only 25 percent of all mortgages are subprime, and of these, 75 percent are performing.

7. In the other 43 states, foreclosures have fallen in 2007 from 2006.

There's no question about the fact that there is bad news in some markets. Frustrating to me is that there is also a lot of good news that is either being buried or is not being reported at all.

Rate Update: For the week ending November 15, 30-year fixeds averaged 6.24%, down from 6.26% the week before. A year ago 30-year fixeds were at 6.33%.The rates for ARMs fell following the Federal Reserve's interest-rate cut.

Some timely and important tips from an underwriter that spoke at the Michigan Mortgage Brokers annual conference last week:

· Make your time to closing longer in your contracts-at least 45 to 60 days. The rest of the country is busier, the lenders have reduced their staffs and the time a loan spends in underwriting has been lengthened.

· Make your inspection dates shorter-5 business days

· Make sure your lender uses local appraisers who use realistic comps-underwriters go to www.zillow.com to check values and distance between comps used by the appraiser.

· If the underwriter asks you/your lender for more comps "consider yourself fortunate"! The underwriter's other option is to decline the appraisal or lower the value they will accept for that home.

· And, a big item-PICTURES TELL A 1000 WORDS. The pictures the appraiser uses tell the underwriter the whole story about the house-The pictures are the first thing the underwriters look at and give the most weight to. So, spruce up the house before the appraiser arrives!

Mortgage News You Can Use October 4th, 2007

David Crisp (Ann Arbor Mortgage) — Thu, 04 Oct 2007 14:53:54 -0500

The hubbub over the sub-prime mortgage meltdown has abated a bit. A month ago 151 major U.S. lending operations had imploded since late 2006. In the last month the number has increased to 161 operations. We have seen the Federal Reserve cut the Federal Funds Rate by .5% causing short-term rates to dip a bit and long-term mortgage to rise a bit. The stock market has seen a new high in the last two weeks. Jumbo rates had jumped up and have now moderated back down. The Federal government is still debating on how to intervene to stave off a high number of foreclosures. There are still billions of dollars of ARMs yet to reset.

So there have been some good and some bad developments in the past few weeks. Tomorrow's job report is important beyond the Fed and interest rates.

If the September jobs report is again much weaker than expected, especially if it shows another drop in employment, it will be very bad news for the economy. The specter of recession may be looming on the horizon. Economists surveyed by Briefing.com are forecasting a 100,000 gain in payrolls in September. That's close to their forecast a month ago that proved to be wrong. David Wyss, chief economist for Standard & Poor's, and many other economists say they're expecting job growth to be sluggish all the way into next spring and summer.

Be very careful if you are setting up Leases With An Option To Buy-

As the market slows down a number of sellers may want to sell their home through a lease with an option to buy. Typically, the seller will tell the lessee (the buyer) that they will devote a portion of the monthly lease toward the buyer's down payment. Example: Lease fee is $1,500 per month with seller agreeing to credit $200 per month toward the buyer's down payment a year from now (equating to $2,400 down payment credit a year from now). A year later the option is exercised. The lender will require that the appraiser determine the fair-market rental of the property at that time. If the fair-market rent is determined to be $1,300 per month, $200 (or $2,400 aggregate) may be applied to the down payment. However, if the fair-market rent is determined to be $1,500 at that time,

then no monies may be applied toward down payment. So be careful because the fair market rent a year out may be different than it is today!

Rate Watch-Long term mortgage rates during the previous week did not respond at all to the drop in the Federal Funds Rate announced by the Federal Reserve a little over a week earlier (as forecasted to you in an earlier communiqué). Shorter term rates did decline slightly. The 30-year fixed-rate mortgage averaged 6.42% for the week compared to the previous week at 6.34%.

Disclaimer: The information contained in this newsletter has been gleaned from various sources and is intended to be current and accurate, however we cannot and do not warrant or guarantee as such. This newsletter is for informational purposes only and is not intended to be, nor should be considered as, investment advice. It does not take into consideration the financial circumstances, needs or investment objectives of any specific person who may receive this newsletter. Individuals should seek financial advice with regard to specific circumstances before making any investment decision.

The Truth About the Mortgage Market

David Crisp (Ann Arbor Mortgage) — Tue, 11 Sep 2007 11:17:22 -0500

By David Crisp, Senior Loan Officer

Ann Arbor Mortgage Company

ANN ARBOR, MI - Subprime mortgages have now been credited for bankrupting well over 110 lenders and seriously damaging operations at many major mortgage firms. They've reportedly wiped out 5 hedge funds, tens of thousands of jobs, and have led to millions of foreclosures with millions more on the way. And, as if that weren't enough, subprime mortgages are also blamed for massive volatility in the stock, bond, credit, futures, and real estate markets here in the US and around the globe. Some say losses in the mortgage securities market alone could reach hundreds of billions of dollars this year.

This means that, for any Americans looking to buy, sell, or refinance a home, they are confronting a very different market from the one that existed just 6-12 months ago.

How did this happen?
The recent real estate boom was fueled by a period of record home appreciation and historically low interest rates. Banks, in order to compete, loosened guidelines and began offering more funding to more borrowers through riskier, non-conforming or "exotic" mortgages.

These ideal lending conditions persisted for several years, supported by high demand, historical real estate data, home prices, and massive trading volume/profits on mortgage-backed securities and other financial instruments on Wall Street.

Then, in 2006, a slowdown in real estate led to a deterioration of home values, an increase in inventories, and ultimately to today's tightening of credit guidelines, leaving many investors unable to sell or refinance out of their existing positions. Many Americans who had tapped into their equity were suddenly tapped-out and overextended as home values fell. Foreclosures followed in record numbers and a re-valuation of mortgage bonds and other financial instruments created the credit/liquidity domino effect we're now experiencing.

Unfortunately, it's going to get a lot worse before it gets better. According to the latest estimates, over 2 million subprime and Alt-A adjustable rate mortgage (ARM) holders will face payment increases of up to 30%-100% when their loans reset in the next 2 to 18 months. These loans make up less than 40% of the total mortgage market, but the negative effects, as we have seen, of increased foreclosure activity can have a ripple effect throughout the industry and around the globe.

What does this mean to you and your mortgage?

Sellers: If you're planning on selling your home, be prepared for an even smaller pool of qualified buyers. While some experts predict a settling of this credit crisis over the coming year, tightened credit guidelines and diminishing mortgage products could knock out as many as 15%-30% of potential qualified buyers. Now is not the time to sit and wait for the best possible price. Have a serious talk with your real estate agent. Having experienced buying/selling transactions in your area, he or she can help you price your home accordingly. He or she can also help ensure that your buyers are pre-approved and stay pre-approved throughout the entire transaction.

Buyers: Get pre-approved by your mortgage professional. While there are a lot of great deals out there, getting credit is becoming tougher and tougher, and it's taking longer and longer to complete a transaction. Remember, what you qualify for today could change tomorrow in a volatile market. For those looking to refinance, keep this in mind. There is no time to delay! Communicate with your lender. Don't do anything that could negatively affect your credit, and make sure you get all your documentation in on time.

ARMs Borrowers: If your ARM is scheduled to reset in the next 2-18 months, you need to schedule an appointment with a mortgage professional right away. Whether your ARM is subprime, Alt-A, or even if you have a pre-payment penalty, don't let a default or foreclosure situation sneak up on you. Did you know that your monthly payments can increase anywhere from 30% to 100% once your loan resets? At the very least, give yourself the peace of mind of knowing what your adjusted payment will be.

Borrowers with less-than-perfect credit: Each week it seems lenders are shedding more and more mortgage products. Many lenders have stopped offering No-Doc loans and are reducing all forms of Stated-Income loans. While it might be challenging, borrowers with credit issues need to see a loan expert. Often they have credit repair resources and other strategies to help you reach your financial goals.

Finally, there's an important concept to embrace: all markets, while cyclical in nature, are self-correcting, be it credit, real estate, stocks, or bonds. For the last 6 or 7 years, real estate was booming and riding high. The correction we're experiencing now - while it seems harsh and could get much worse - is, in a sense, "natural" and directly related to the extremely loose guidelines and perhaps overzealous lending and leveraging during the boom cycle.

www.AnnArborFinancing.com

Reverse Mortgages: Financing the Golden Years

David Crisp (Ann Arbor Mortgage) — Tue, 11 Sep 2007 11:10:09 -0500

Seek a Qualified Mortgage Consultant to Ensure the Best Results

Ann Arbor, MI - Until recently, seniors 62 years of age and older have not had the best choices when it came to getting cash from their homes. Traditional home loans only offered the option of either selling one's house or borrowing against its equity.

With reverse mortgages coming on the scene, seniors now have some additional cash-flow alternatives. This type of loan allows mature borrowers to convert their home equity into tax-free income without leaving their current home or making mortgage payments - and they do not need an existing income to qualify.

How a Reverse Mortgage Works
Reverse mortgages are probably best understood when compared side-by-side with traditional home mortgages, otherwise known as "forward" mortgages. The following table shows the differences between the two:

FORWARD MORTGAGE	REVERSE MORTGAGE
Uses income to pay debt	Uses home equity to get cash or credit
Monthly mortgage payments	No payments; debt is due when the borrower(s) pass away or relocate.
Falling debt, rising equity	Rising debt, falling equity

Both loans incur debt against your home, and both affect equity, but they do so in different ways. Traditional home mortgages require making monthly payments to a lender. With a Reverse Mortgage, payments are made to you.

What a Reverse Mortgage Involves

Here are some important points to know when considering a reverse mortgage:

Eligibility: To qualify for a reverse mortgage, you must be at least 62 years of age. All owners who are on the title deed must meet this age requirement. You must also have paid off all, or most, of your home mortgage. Lastly, the home you reside in must remain your principal place of residence.

Mandatory Counsel: In order to ensure that homeowners are fully aware of the financial ramifications of obtaining a reverse mortgage, you must undergo counseling with an unbiased third party before completing a loan. HUD and AARP oversee a network of counselors who can provide this service, and it should be offered for either a nominal fee or at no charge.

Tax-Free Income: One of the advantages of a reverse mortgage is that the money you receive will not be taxed. The amount you'll obtain depends on several factors including the plan you select, the type of cash advances you choose, your age, and the value of your home. Typically, the older you are the larger the loan, as you will have more equity in the house.

Cost: The cost of a reverse mortgage varies considerably from one type to the next. However, you can typically use the money you receive to offset the loan fees. The costs will be added to the loan balance and must be repaid with interest once the loan terminates.

Repayment: Reverse mortgages do not require any payment as long as the borrower(s) remain in the home. Should the borrower(s) pass away, sell the home, or permanently relocate, then the loan would be due in full, along with interest and additional costs. If two borrowers are on the loan and one dies, the loan would not be due since one of them still occupies the home.

Home Equity Conversion Mortgage - The Federally Insured Loan

The most common type of reverse mortgage is the Home Equity Conversion Mortgage, otherwise known as a HECM mortgage. This is the only reverse mortgage program that's federally insured and backed by the U. S. Department of Housing and Urban Development (HUD). This type of reverse mortgage is popular for a few reasons:

Ability to choose your own interest rate.
You can select one that changes annually or one that changes every month.
You have several payment options.
You may receive monthly loan advances for a fixed term or for as long as you live in the home. You may also choose to receive a line of credit or combine monthly loan advances with a line of credit.
The loan can be used for any purpose.
With a HECM, you don't have to designate the loan to a specific use; you can apply the funds to anything you choose.
Protection.
This is one of the most attractive features of a HECM. This plan protects you by guaranteeing continued loan advances even if your lender defaults.

Sell or Stay?

The main reason people choose a reverse mortgage is to gain financial independence and maintain an adequate standard of living without leaving their current home. The best way to decide if a reverse mortgage is right for you is to compare it to the other option of selling your house. To do this, ask yourself these three questions:

How much cash can I get by selling my home?
How much will it cost to buy or rent a new place?
Is it worth my moving now, or do I prefer to do something else with the money?

Perhaps you'll confirm what you knew all along, where you now live is the best place to be.

David Crisp is affiliated with Ann Arbor Mortgage Company, a Licensed Broker in the state of Michigan. If you would like to receive a FREE CD containing an interview with Sarah Lyons and John Lucas, the co-authors of Reverse Mortgages for Dummies, please contact David Crisp at (734) 669-5860 / dave@a2mc.com / www.AnnArborFinancing.com

Mortgage News You Can Use

David Crisp (Ann Arbor Mortgage) — Wed, 29 Aug 2007 15:15:00 -0500

August 29, 2007

Update: 100% financing is still available. The availability is dependent upon credit score, reserves after closing, and income levels. Appraisal are being scrutinized very carefully as we are in an area with declining values.

Rural Development Loans-We participate in the program and it's a great product once you get outside of Ann Arbor and Ypsilanti. In fact, the rest of Washtenaw County, all of Lenawee and Livingston Counties are eligible for Rural Housing loans. These are 100% loans with no mortgage insurance. Please contact us for more information.

Private Mortgage Insurance-The use of pmi is rapidly expanding as combination loans become increasingly difficult to obtain. Remember, there is nothing wrong with pmi, so please do not tell your buyers to avoid it. They may not be able to if they want that house!

Encouraging Signs-It's too early to say for certain, but there are signs that the panicky U.S. credit market is beginning to get a grip. If so, most Americans should escape relatively unscathed from this month's financial anxiety attack.

One sign that things are calming down: Smart players are starting to look for bargains on Wall Street. The Bank of America, for example, agreed to invest $2 billion in the ailing Countrywide Financial, the nation's biggest mortgage company.

The Bank of America move gives it the equivalent of about a 16% ownership stake in the company, suggesting that the bottom hasn't fallen out of the mortgage business, that good borrowers still will be able to get loans, that lenders still can make money and that smart people are aware of all these things.

Gary Thayer, chief economist at A.G. Edwards, sees other signs that the crisis is easing a bit. Investors are starting to venture beyond ultra-safe Treasury bills and move back toward corporate bonds and other forms of debt. If things keep going as they are, Mr. Thayer said he thinks the credit crisis will produce only a slight hiccup in the economy's overall growth rate.

Are we out of the woods? No, we still have a way to go but encouraging signs are beginning to surface. Hang in there!

David Crisp

www.annarborfinancing.com

dave@a2mc.com

Reverse Mortgages

David Crisp (Ann Arbor Mortgage) — Wed, 15 Aug 2007 15:04:12 -0500

There is a lot of talk about reverse mortgages. What is true and what is false about this program. In this Blog I will try to clear up some common myths and help you, the reader, to have a solid understanding.

A reverse mortgage is a FHA insured, government regulated home loan. Only seniors 62 years old and older qualify. Reverse loans differ from regular home finance in the following ways;

There is no credit requirements
There is no income needed
There is no asset requirements
You never make a monthly payment for the life of the loan

The loan is based on two factors;

Your age
The value of your home

What a reverse mortgages allows you to live the rest of your life with out ever making another house payment. Sounds too good to be true? Well it isn't. This mortgage is a financial tool and can be a powerful way to reduce your monthly expenses. Here are some points to ponder.

Reverse Mortgages are taken by thousands of seniors every year. That means that someone you know, a friend, a neighbor, or family member has probably taken advantage of this wonderful opportunity?
Reverse Mortgages allow you to create a safe way to take care of yourself (and your spouse) while having the financial independence you've worked for all of your life? No matter what happens in the future, your home will NOT be at risk.
A Reverse Mortgage can give you the liquid cash when you need it to maintain your current lifestyle, or for you to be able to have a security blanket so you can cope with the rising costs of everyday living?
Often a Reverse Mortgage is less expensive than a traditional home mortgage or home equity loan?
Many seniors who take a home equity loan have difficulty making the monthly payments within the first 5 years? AND, many of those eventually take a Reverse Mortgage to pay off the equity loan to relieve the financial pressure.
The federal government regulates Reverse Mortgages? This means that the amount of money available to you, and the costs you pay are primarily the same with every lender in the United States.
Smaller, independent lenders who specialize in working with seniors provide the majority of Reverse Mortgages across the United States?
At first, many people are afraid of Reverse Mortgages until they find out exactly how they work? When all of the "myths" are dispelled and they see how they can benefit from a Reverse Mortgage, they are no longer afraid.

Some of the myths of a reverse mortgage are

If I have a Reverse Mortgage I can lose my home and all of my remaining equity to the government or the bank.

False: A Reverse Mortgage is only a lien on your home. You still own your home. When you leave the home, the loan balance is repaid in full with the remaining equity passing to you or your heirs.

A Reverse Mortgage will use up all of the equity in my home and there will be nothing left for my heirs.

False: Because you still own your home, and because it will continue to appreciate in value, it is very difficult to use up all of your equity. In fact, in many cases, depending on how much money you use, the amount of equity you have may increase.

Selling my home is better than doing a Reverse Mortgage.

False: If you sell your home, you lose one of the largest and most secure investments you probably have. You would lose 6-10% of your home's equity in sales costs alone. After selling, you would most likely have to pay rent or some other type of monthly payment that would eat away at your savings. For most seniors, moving from their home is physically and emotionally difficult.

I should shop around for the best interest rate on my Reverse Mortgage.

False: The federal government determines the interest rate for HUD Reverse Mortgages. This means that no matter where you go for your Reverse Mortgage, the rate will be exactly the same. You want to work with a lender that is helpful, knowledgeable, professional and that doesn't try to pressure you.

I already have a mortgage, so I won't qualify for a Reverse Mortgage.

False: You can use the Reverse Mortgage to pay off the balance of your current mortgage or equity loan. By doing so, you will "free up" the money you used to use for monthly payments on the old loan.

I have bad credit, so I won't qualify for a Reverse Mortgage.

False: There are no credit, income asset or health requirements to qualify for a Reverse Mortgage. If you are 62 or older and you own a home - you qualify.

Reverse Mortgages are expensive.

False: Even though a Reverse Mortgage has up-front costs that are folded into the loan, there are NEVER any monthly payments. Compared to other traditional types of home loans that have monthly payments, a Reverse Mortgage is much more economical - especially for seniors.

I have to fix up my house to qualify for a Reverse Mortgage.

False: Your home doesn't have to be in perfect shape, however if there are minor repairs that are required by the lender, they can be done after the closing in most cases.

A traditional mortgage loan with monthly payments costs less and is always better than a Reverse Mortgage.

False: Even though a traditional loan with monthly payments might work well in some cases, in general a traditional loan will cost more. In fact, over a 10 year period, a traditional loan of $75,000 will cost you an average of $30,000 more than a Reverse Mortgage. In addition, the traditional loan has the risk of foreclosure, which a Reverse Mortgage does not.

We are not eligible for a Reverse Mortgage because my spouse is not 62 years old yet.

False: While it is true that both borrowers must be 62 years or older, if one spouse is not 62, there are still strategies that can be employed that will enable you to obtain a Reverse Mortgage. These strategies can be very safe and practical.

I have found that for some seniors a reverse mortgage can fit into their long and short term financial goal very well. The interest rates on a reverse mortgage can be lower then the regular rate some people are paying now. Whether a reverse mortgage is in your future or not, knowing you options is the best way to make an informed and intelligent decision. For more information or if you have specific question feel free to contact me at (734) 669-5860 or e-mail me at dave@annarborfinancing.com or visit my web site at http://www.annarborfinancing.com/

David Crisp

Senior Loan Officer

Ann Arbor Mortgage Company

Mortgage Bonds got some good inflation news

David Crisp (Ann Arbor Mortgage) — Wed, 15 Aug 2007 12:43:18 -0500

Mortgage Bonds got some good inflation news by way of the Consumer Price Index: the CPI for July was reported at 0.1%, and the more closely watched Core CPI at 0.2%. The Report was in line with expectations and suggests that Core Inflation is stable to moderating. This is good news for Bonds and the Fed.

Yesterday, Bonds were able to make a successful bounce higher off of the 25-day Moving Average. For the moment, I advise cautiously floating, but be ready to take action if Bond prices turn lower.

An idea to sell to first time home buyers

David Crisp (Ann Arbor Mortgage) — Wed, 06 Jun 2007 10:16:02 -0500

A few weeks ago a realtor friend of mine asked me if I had any ideas how she could make her listings more attractive to potential buyers. Most of her listings were under two hundred thousand so she was looking for first time home buyers. I put together a flyer marketing the home with a zero down program (special community home buyer program with low PMI and rates in the six's). My Realtor friend would talk to her sellers and get them to agree to pay 3% to 4% of the sales price to cover all the costs and tax prorations as well as monies need to set up the escrow account. We could advertise this home with a relatively low payment and less then five hundred dollars out of pocket. We have advertised this type of home selling strategy and have had some success. Our main goal is to find people that aren't currently looking to buy a home and entice then to become home owners.

David Crisp

www.annarborfinancing.com

Mortgage News You Can Use 5/31/07

David Crisp (Ann Arbor Mortgage) — Wed, 06 Jun 2007 10:12:45 -0500

May 31, 2007

Rate Watch- Mortgage rates rose again this week on strong economic growth outside of the housing market. The average rate on 30-year fixed-rate loans climbed to 6.41% for the week ending May 31, up from 6.37% the previous week. Last year at this time, 30-year mortgage rates averaged 6.67%. The rate on 15-year loans averaged 6.12%, up from 6.06% the previous week.

Why are rates increasing at the present time? This past week rates moved to their highest levels of the year.

A few possible explanations for rates moving up include:

· The markets are now anticipating that the economy will rebound in the second half of the year. Certainly higher numbers for consumer confidence, durable goods and new home sales are helping to fuel that speculation. The numbers for existing home sales depict a real estate market that will be a drag on the economy for the next several months.

· Gas prices keep rising and high energy prices are keeping the markets convinced that the Fed will not lower rates this year because of the threat of inflation.

One reason that the short-term rates have been equal to or higher than long-term rates for most of the past year (known as a flat or inverted yield curve) is that the markets have been anticipating that the Fed would eventually lower rates. Well, the markets may be tired of waiting and watching no action as we are coming to the one-year anniversary of the Fed's last rate increase.

According to David Seiders, chief economist of the National Association of Home Builders, the new home market may not return to normal until 2011. He said it will be three or four years before the oversupply of finished but unsold houses is worked off and housing starts move back up to the 1.8-1.9 million-units-a-year trend line.

Rising rates, among other factors, have caused the Mortgage Bankers Association (MBA) and NAR to push back their forecasts for a home-price recovery. Both groups are now looking to early 2008, compared with a previous outlook for mid-2007.

Mortgage rates are based on the yields of 10-year Treasury notes, which have also risen substantially this month, as strong global stock market returns have lured investors away from bonds, lowering their prices.

As mortgage rates rise, they add to the size of a borrower's monthly mortgage payment. Rates had been at 6.16% as recently as May 3. The 0.26% increase since then represents a jump of $30 a month on a $200,000 loan.

Doug Duncan, chief economist for the MBA, expects rates to top out near 7% by the end of the year.

Remember, the worse the housing market gets, the more likely the Fed will begin aggressively cutting rates.

From USA Today: Chinese citizens opened +160,000 new investment accounts each day last month (i.e., 4.8 million new accounts for the month) in an effort to participate in their rising stock market.

600 days from today-The next President of the U.S. (#44) will take office on 1/20/09 or 600 days from today.

Disclaimer:The information contained in this newsletter has been gleaned from various sources and is intended to be current and accurate, however we cannot and do not warrant or guarantee as such. This newsletter is for informational purposes only and is not intended to be, nor should be considered as, investment advice. It does not take into consideration the financial circumstances, needs or investment objectives of any specific person who may receive this newsletter. Individuals should seek financial advice with regard to specific circumstances before making any investment decision.

Mortgage News You Can Use

David Crisp (Ann Arbor Mortgage) — Thu, 26 Apr 2007 15:29:17 -0500

April 26, 2007

Rate Watch - Mortgage applications ended their five-week decline last week, helped by a decline in interest

rates. Mortgage applications have slipped in recent weeks, hurt by the recent crisis in the subprime mortgage

sector, which has fueled concerns that lenders may clamp down in loans to borrowers with weak credit.

Borrowing costs on 30-year fixed-rate mortgages averaged 6.13%, down from 6.22% the previous week.

The New Home Sales Report showed some strength. The Median Price nationwide rose 6.4% to $254,000

and the monthly inventory of new Homes fell to a 7.8 month level from last month's reading of 8.1 months.

The amount of new home sales units was 858,000, which was a little less than expectations. With Spring

now here, there could be some more strength in the upcoming months. In the Midwest, existing-home sales

dropped by 10.9% in March to a level of 1.39 million, and are 13.7% lower than a year ago. The median price

in the Midwest was $160,400, down 0.2% from March 2006.

Buying foreclosures can make good financial sense, but it's not as easy as the "If I can do it, you can do it"

television infomercials would make it seem. "This is hard work," says Daryl White, a foreclosure investor in

Valencia, California. White uses a spreadsheet to figure the costs associated with investing in a particular

property. The goal, he says, is to buy at 30% below the after-repaired market value. Half of the discount allows

him to cover such expenses as holding costs and repairs, while the other half earns him a profit. The

formula is taught through Foreclosures.com, a foreclosure listing service. In the "changing market" White is

in, he has to factor in that houses are taking three to five months to sell, which adds to his holding costs, he

says. Never rely on appreciation to make a foreclosure deal work, White and others advise. Source: Market-

Watch

Home Sweet Home-A single-family home went on the market for sale at $125 million early this month in Los

Angeles. The 45,000 square-foot home is owned by a 46-year old woman. Source: Wall Street Journal

According to NAR: 45% of the first-time home buyers in 2006 purchased a home with no money down.

Credit Tips of the Week-Pay your bills on time! I know it sounds too simple to mention, but some derogatory

information like late payments can haunt you for the next seven years from the date of the delinquency, none

of us can afford such an ugly specter lurking around on our reports.

Diversify the types of accounts you maintain. Make sure that your file reflects a well-rounded blend of credit

card, charge account, and installment loans. A diverse credit profile is read as healthier than a credit file constituted

primarily by only one type of credit extension.

Answer: U.S. prices in 1940 were roughly the same as in 1800, so this is a fairly recent problem.

Question: What is inflation?

Disclaimer: The information contained in this newsletter has been gleaned from various sources and is

intended to be current and accurate, however we cannot and do not warrant or guarantee as such. This

newsletter is for informational purposes only and is not intended to be, nor should be considered as,

investment advice. It does not take into consideration the financial circumstances, needs or investment

objectives of any specific person who may receive this newsletter. Individuals should seek financial advice

with regard to specific circumstances before making any investment decision.

2200 Green Road, Ann Arbor, MI 48105
Phone: (734) 669-5860 • Fax: (734) 669-5881 • Email: dave@annarborfinancing.com• Web: www.annarborfinancing.com

Credit Score and what effects it

David Crisp (Ann Arbor Mortgage) — Wed, 04 Apr 2007 13:56:23 -0500

Many people don't realize how their credit score is created. It is so important today to realize what effects your credit for the good and the bad. Below are the basics.

The Five Factors of Credit Scoring

There are five factors that comprise the credit score. They are listed below and in order of importance, just as an underwriter would look at the score:

Payment History: 35% Impact

Paying debt on time and in full has a positive impact. Late payments, judgments and charge-offs have a negative impact. Missing a high payment has a more severe impact than missing a low payment. Delinquencies that have occurred in the last two years carry more weight than older items.

Outstanding Credit Balances: 30% impact

This factor marks the ratio between the outstanding balance and available credit. Ideally, the consumer should make an effort to keep balances as close to zero as possible, and definitely below 30% of the available credit limit when trying to purchase a home.

Credit History: 15% impact

This marks the length of time since a particular credit line was established. A seasoned borrower is stronger in this area.

Type of Credit: 10% impact

A mix of auto loans, credit cards and mortgages is the ideal mix compared to a concentration of debt from credit cards only.

Inquiries: 10% impact

This quantifies the number of inquiries that have been made on a consumer's credit history within a six month period of time. Each hard inquiry can cost from 2 to 50 points on a credit score, but the maximum number of inquiries that will reduce the score is 10. In other words, 11 or more inquiries in a six month period will have no farther impact on the borrower's credit score.

Remember, a computer that's not taking any personal factors into consideration calculates these scores. When a credit report is generated, it is simply today's snapshot of the borrower's credit profile. This can fluctuate dramatically within the course of a week, depending on the individual's own activities. The borrower should be made aware of this when they enter into the loan process, and know that it's not in their best interest to go out on a shopping spree. They need to make sure they are not creating a negative impact on the score while the lender is reviewing their file.

Secondly, it is often beneficial to compile a Tri-Merge Credit Report. This combines the scores provided by Fair-Isaac (FICO) with the score generated by TransUnion (Empirica) and the Beacon Score produced by Equifax. The lender should be provided with this rounded profile because these three scoring systems can vary in their results. The lender is going to look at the middle score and throw out the other two. In many cases, this works to the borrower's advantage.

Sub Prime Drama

David Crisp (Ann Arbor Mortgage) — Tue, 20 Mar 2007 15:33:23 -0500

Wow

Between Anna Nichole and the Sub Prime Market trouble you would think there was not very much else going on in the world. Is the media blowing the sub prime issue out of proportion? Well lets look at it. 20% of all mortgages last year were sub prime loans. 40 % of those were new home purchase so that would mean that 8% of all the loans last year were purchase sub prime loans (about 100,000 homes). They figure about 20% to 30% of those borrowers won't qualify with the new changes to the sub prime guidelines. That would mean that an increase of a ½% would have hurt the market more then this change.

Why has this happened? Well I would say that investors got a little to greedy. These low credit score, high interest rate (= high rate of return) loans looked great to investors so more and more money flowed into them. The more money available to these sub prime companies the looser their guideline became. They had to loan the money. As a mortgage broker I always felt like I was in the middle. If I had a client that wanted a zero down loan and the client had a credit score of 580 and had trouble paying their rent (which was lower then their new payment) I would have to give them the loan (even if I knew they would most likely not be able to make the payments) or I could get sued. Soooooooo I guess what I am saying is that I am glad that the sub prime companies are going back to their old guidelines because even though I make more money with the old rules, it is bad for some of the people.

Mortgage News You Can Use

David Crisp (Ann Arbor Mortgage) — Tue, 20 Mar 2007 15:03:40 -0500

March 20, 2007

The Subprime Dilemma-These loans have been around for years-so why all the drama now?

Many subprime and other adjustable home loan rates have moved dramatically higher, due in part to the Federal Reserve Boards recent rate hike cycle. So as these rates are adjusting higher-and the payment right along with it-the homeowners are finding that they are unable to keep up with the dramatic increase in payment.

In the past, homeowners in this situation would just throw the house on the market, realize enough of a profit to cover any prepayment penalties, and quite literally move on. A soft real estate market isn't making this quite so easy any more-houses are not selling as quickly, and the home appreciation rates enjoyed in the past have moderated.

So the subprime homeowner is stuck-and many of these homes are falling into foreclosure, causing even more problems. As more and more loans are defaulting , mortgage lenders are forced to tighten up their lending standards across the board in response...making it tougher for a troubled homeowner to even refinance to get out of trouble. Many subprime lenders are feeling the pain, and in some cases, actually being forced to close their doors as they are hit with all the defaulted loans and foreclosed properties coming back home to roost.

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The Perfect Storm? - Has the real estate market just had the perfect storm? Let's take a look at what's happened. It's been five years since the beginning of the real estate boom which heated up after 9-11. It has now also been over one year since the boom came to a halt. When will the next hot real estate market occur? The consensus is that it will be at least at a year before we start seeing price appreciation again. This week we will start a two-part series that will analyze the components that affect this market. The first will deal with the components of the rise -

· Demographics-A boom cannot happen without demand. The 1990s was not the best decade for the housing market and as it ended there was pent-up demand. At the same time, the population of the nation was experiencing an immigration boom as well as the effects of the maturing of the baby boomers.

· Interest Rates-After 9-11, the slowing of the economy and the response by the Federal Reserve brought both short-term and long-term rates down to record levels. Lower rates helped qualify more borrowers.

· New Programs-The aftermath of the savings and loan crisis of the late 1980s brought among other things, an explosion of the secondary market. This brought more programs to the consumer, including no-money down programs, interest only, stated income, option adjustables and more.

· Loose Credit Guidelines-There was a concerted effort by the government to bring homeownership to as many as possible. First time buyer and low-to-moderate income programs proliferated-even into the subprime world which was part of the "new program" revolution.

Homes skyrocketed in value. This caused even more demand as investors poured in with a "get rich quick" attitude. When the stock market experienced this around 2000, the Chairman of the Federal Reserve called it "irrational exuberance." Next week we will talk about what factors have changed.

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Mortgage News You Can Use

David Crisp (Ann Arbor Mortgage) — Tue, 27 Feb 2007 14:22:04 -0600

February 27, 2007

Rate Watch - Mortgage rates fell in the past week. The 30-year fixed rate mortgage averaged 6.22%, down from 6.30% last week, according to Freddie Mac's Primary Mortgage Market Survey. Last year at this time, the 30-year averaged 6.26%.

What happens overseas has an impact on our interest rates. Last Wednesday, Japan's central bank-the Bank of Japan, announced a 25 basis point rate hike (.25%) boosting their benchmark interest rate to 0.5% - the second increase in the last 7 months. The USA's Federal Reserve has its benchmark interest rate currently set at 5.25%. Their economy is second only to the US economy in global size, and the new higher trend in their rates means that their yield becomes more attractive and may eventually lure some money away from US debt instruments. That may lead to higher rates in the US. On Friday, Germany released economic data that was worse than expected. The weak data is seen as lowering the risk of a possible interest rate hike by the European Central Bank, and US bonds enjoyed the news.

The S&P 500 has gone almost 1,000 trading days without suffering a 10% decline, the second longest stretch in history. This also means that Stocks are ripe for some profit taking-and if this occurs, Bonds may benefit as money flows out of the Stock market and into Bonds. That results in lower interest rates.

About half of all single-family homes on the market are now vacant, according to the National Association of Home Builders. (That's a 30% increase that occurred during the third quarter from a year earlier to a whopping 1.9 million homes).

A National Association of Realtors survey of 7,548 home buyers from mid-2005 to mid-2006 reveals that close to half obtained mortgages for 100% of the sales price. During this period, NAR says the median down payment for first-time buyers was 2% while the median for trade-up buyers was 16%. The emergence of piggyback loans that involve an 80% or 90% first mortgage and a 10% to 20% second mortgage enabled these buyers to contribute less than the traditional 20% down payment; and in the midst of a housing slump, many now owe more than their homes are presently worth.

Freddie Mac announced today that they will no longer buy subprime mortgages that have a "high likelihood" of payment shock and foreclosure. Freddie Mac will invest only in mortgages that assume a borrower can make the highest possible mortgage payments and will introduce new products to help troubled mortgage borrowers. The company will limit the use of low-documentation mortgages to "help ensure that future borrowers have the income necessary to afford their homes," the company said in a statement.

My Bio for Michigan Loans

David Crisp (Ann Arbor Mortgage) — Mon, 19 Feb 2007 22:14:46 -0600

I have been helping people buy and build homes since 1995. I care about my clients and I make sure they are in the best possible loan program for there situation. When deciding on a home loan I look at the needs of the client such as:

How long will they live in the home.
Will there be any major financial changes in the future (kid's collage, home improvements or additions, starting a new business or buying additional properties).
How much Money do they want to spend on the purchase.

I believe it is vital to find out what type of needs a client has and then offer them financing options that best suits there situation. Because of this commitment to my clients and the very wide variety of loan programs I am able to be one of the best sources for home loans in Michigan.

Areas of Expertise

First Time Home Buyers

I have been helping first time home buyers achieve the owning dream for many years. I am always searching and finding the best zero down loans with the best possible rates and fee's. I also hold educational seminars teaching people how to buy there first home.

Investors / Rental Property

I have extensive experience helping real estate investors purchase and refinance rental properties. The rules are always changing for investor loans and I am always studying new and existing loan programs to insure I am able to act as a consultant as well as a lender for my investor clients. I work with people that own 1 to 80 rental properties thought out south east Michigan.

Log and Modular Construction

Since 1998 I have been helping people build there dream homes. Building and financing a log home is a very unique project. Most lenders won't touch them and the ones who say they will are sometimes unaware of the intricacies that in a log home project. I found that I had a knack for these types of projects and have found the best lenders in the country for log homes. Because I was set up to do log home I found that I could finance modular for much less then most lenders were offering. I have gained a reputation in these markets as being one of the fairest priced lenders who offers some of the best terms and service. I am committed to walking my clients through the process to ensure there complete comfort with he construction financing process.

Cookie Cutter Loans

I call the cookie cutter loans because these are the easiest mortgages for use to process and close. We work with a dozen lenders in the country to ensure that no one beats our fees and rate. If you are looking to buy, build or refinance I highly recommend you get a quote from me. It will help you guaranty that you are receiving the best rate and terms that you are entitled too.

Testimonials

Hi David,
The tile is going well.. I still have to do the molding, but the floor is pretty much done! I love it... and thanks so much for lending the saw... a big help!
It's been kind of hectic moving in and I don't really feel settled and comfortable yet, but owning a home really is amazing. It's been a wonderful experience, and it feels so great to actually own it and be able to do whatever I want without answering to a landlord. Also, working with you was really great... I felt very comfortable and confident that I could trust you (especially with the overwhelming amount of forms!). Thanks for making it a smooth process and as stress-free as possible...
Best,
Becky
_______________________________________________________________________________
Dear David:
          Pat and I want to thank you for the excellent service you provided in arranging both a first mortgage and home equity line of credit on our recent condo apartment purchase. It was a particularly complicated transaction with the property and two owners all in different out-of-town locations, and you managed the closing process extremely well.
          We were also pleased with your creativity in finding the interest-only three-year ARM coupled with the HELOC that fit our situation perfectly. Homestead has so many mortgage choices, it allowed you to tailor-make a program for us.
          Thank you again for your professionalism in arranging our financing package for the condo.
Sincerely,
R. Griffith McDonald
President
_______________________________________________________________________________
We have doing business with Homestead Mortgage for the past three years. Our mortgage representative is David Crisp, from the Ann Arbor branch. We started what seemed like and overwhelming task building a home. Mr. Crisp made the building loan process seem pain free. From start to end my husband and I felt at ease with the whole loan process. David Crisp was able to transfer our construction loan into a conventional loan without any trouble. We are now going thru a loan process with Mr. Crisp so we may achieve a vacation home. We would highly recommend Mr. David Crisp from Homestead Mortgage anytime.         Thank you, Rick and Kathy Meyer, Pinckney, MI
_______________________________________________________________________________
Dear Dave Crisp,

From all of us at Heritage Log Homes of Michigan, we would like to say thank you for your support in making our business a success and also in helping making our client's dreams come true. The services that you provide to our clients are very important to us. It's nice to know that once we have turned over a signed client's information to you that we know the ball is rolling and certain timing expectations are being met. The way you work with us and in the way you follow up with our clients in a professional manor shows a direct reflection on our company. You are an intricate part of selling log homes. Not many clients are in a position to pay cash, nor are two clients alike. You have been able to find financing programs for our clients with great services and good rates. Our builders also like your programs, because they can create their own draw schedules, which means they don't have to go long periods before receiving their draws. I'm looking forward to continuing our relationship in the future between our two companies.
Thank you,
John Kacic
Heritage Log Homes of Michigan, Inc.

First Time Home Buyers (FTHB) Advice

David Crisp (Ann Arbor Mortgage) — Fri, 16 Feb 2007 17:54:38 -0600

Are you thinking about buying a home this year? Very cool! Owning a home is such an awesome experience. You get your own space, you can paint and decorate anyway you want to. If you want orange walls with green shag carpet you can have it (although you may be stuck in the 1970's). You will receive a large income tax benefit because you can deduct the mortgage interest and property taxes you pay. You also stop paying into your landlord's investments and start paying into your own.

This is one of the best times in the past thirty years to buy a home. Interest rates are very low and there are ton's on homes to choose from. Sellers are more motivated then I have seen them in the past twelve years. Buying a home can seem overwhelming and a little confusing at times. Because of that I'm going to give you some very good advice in this article. I have been providing mortgages for first time home buyers since 1995. The mortgage programs have changed so much in the past 12 years. In the 1990's you had to have some money in order to buy a home. The minimum down payment was around 3%

Most first time home buyers have very little money saved to invest into a new home. As a matter of fact a new home buyer that has a down payment (5% or more) is as rare as an IRS agent finding more deductions for you in an audit. Because of that, zero down payment loans have become very popular. So popular in fact that 30% of all mortgage loans made in 2006 were 0 down payment loans. That's an amazing number to me. In 1995 I had one loan program that was a 0 down payment loan and that was for veterans only. Today it is the norm and the terms (interest rates and fees) are great.

OK, so we come back to you and what you need to know. Well first be aware that there are five areas that will dictate what kind of home loan you can get.

What does your credit look like? At the foundation of every home loan is credit. That doesn't mean that if yours is bruised you can't get a good rate but it does mean your options are more limited. So what makes up your credit? Well it has five major factors;

Number of late payments and how old they are.
Length of time the account has been open.
Collection, Judgments, bankruptcies, foreclosures...
How much of your credit limit you have used up ($5,000 limit and you have a balance of $4,788 = not good / $5,000 limit and $1,500 used = great).
Number of accounts open (the number of accounts open doesn't hurt you if they are managed well (balances less then 30% of the credit limit is best).

What is you income. This can affect you in two different ways. The first is that you have to have enough income every month to make your payments. How lenders determine this is they take a percentage of your monthly gross (before taxes) income and subtract you monthly debts which include the following;

•· Loan payments for cars, student loans and any other loan you make payments on monthly bases.

•· Child support and alimony

•· Credit Card minimum payments

•· We don't count items like cell phones, insurance, rent, utilities, groceries, day care, etc...).

Example

Income is $4,000 a month

45% of $4,000 is $1,800 for house payment and debts

Debts are

•· Car $340

•· Credit Card $100

•· Student loan $111

•· Best buy (TV) $44

$595 per month in debt payments

$1,800 - $595 = $1,205 for a house payment

The percentage we use will depend on the loan program and the strength of your credit.

If you are self employed or have other sources of income you can't document then you may need to use a Stated Income loan program. This program is exactly like it sounds, you tell us you income and as long as it make sense for you profession and you have at least a two year history at the job you may qualify. The program was created mostly for self-employed people who tend to have a large amount of write offs on there taxes which reduces thier income.

Who are you going to get you home loan from? This is a very important factort to the type of loans you will have available to you. Choosing the right lender is so important that it can save you thousand of dollars. Ok so you have heard the commercials and radio ads and all that noise we tend to drowned out about this loan is the best and this loan allows you to buy a 1.5 million dollar home for as little $150 a month (maybe a bit of an exaggeration on my part). Well we all know there is a catch and there is. These ads give you 5% of the information in order to get there phones to ring. In my opinion 99% of the people that call are very bad candidates for those loan programs. There are loan programs that are perfect for you and there are programs that are perfect for the banks. Finding the best one for you will be up to the loan officer you work with. I would recommend you find a solid mortgage broker and this is why. I have been a mortgage banker, mortgage lender, and now a mortgage broker. I have done it all and being a broker gives me the best programs and tools to ensure I can offer my clients the best deal. When I worked for a bank I was limited to the loan programs they had. At times some of the loan programs had some good interest rates but I didn't have many to select from. When I worked for a mortgage lender, which is a company that lends there own money like a bank but only does mortgages, I had a larger selection and could broker out (use other lenders programs) to a few other lenders for specialty loans. This was a much better situation then a bank because I wasn't limited to just one set of programs. After 11 years in the mortgage business I decided to go work with one of the best mortgage brokers in Washtenaw County and this is what I found: As a broker I can provide loans from hundreds of banks and mortgage companies. If they have a program that is better then anyone else I use them. I can also provide the same loans from mortgage lenders all across the country and choice the best ones. I have so many options to choose from that I am able to offer the best rates and lowest fees at all times. That's the power of the mortgage broker, but don't forget that the quality of the loan officer is just as important. If you choose someone who is inexperienced and doesn't have a wide and though knowledge of the mortgages that are available to you it could cost you a lot of money. Choose wisely.
How much money do you have? Some loan programs want to see that you will have some money after you close. We call this having reserves. Not all programs require reserves but many do. Usually these programs want to see two months of house payments as a reserve. You can use moneys in a 401K, TIAA CREF, mutual fund, stock, money market or a Checking / savings account as your reserves. We don't use this money in any way except to show you will have a financial cushion if you need it after you purchase your new home.
What type of home do you want to buy? Do you want you standard single family home / Condo? Or do you want to buy a multi unit home (duplex, 3 or 4 units) and plan to live in one of the units and rent out the other/s. This is rare that someone buying there first home would decide on an investment property but it does happen. In that situation it is important that you have a large cushion (6 months of house payments in the bank) after you buy the home.

Those are the five aspects we look at with new home buyers. There are many different types of mortgage that don't require a down payment. There are basically three configurations these programs come in.

The first is what we call a Combo Loan or 80/20 loan. This is actually two separate mortgages. A 1^st mortgage for 80% of the purchase price and a 2^nd loan for the remaining 20%. The loan would look something like this;

House price $200,000

1^st loan is $160,000 for 30 years with a fixed rate of 6%

2^nd loan is $40,000 for 30 years with a rate of 7.75%

The second type of 0 down payment loan is a single loan for 100% of the purchase price. This loan would also have a monthly fee called mortgage insurance or PMI. Lenders don't want to lend more the 80% of the purchase price unless an outside company guarantees the loan. The mortgage insurance guarantees the lenders loan even if they foreclose on the property. You can have the PMI removed once you can show you have 20% equity.

The third type of loan is a single loan for 100% with no PMI. This is generally a specialty loan for stated income borrowers or borrowers with low credit scores and will tend to have a higher interest rate.

Deciding on the best program for you will be the one with the best combination of low monthly payments and low costs. A good loan officer will run the numbers and help you understand your best options.

My last piece of advice is to get a Good Faith Estimates (GFE). The Good Faith Estimate will be your best friend. I talk to people on a daily that have been pre-approved by a mortgage company and have never seen a GFE. The GFE is so important because it will show you;

•· How much your being charged in closing costs

•· How much money will be collected for your escrow account (account set up to pay your property taxes and home owners insurance).

•· How much money you will need to bring to the closing (if any).

•· What your interest rate will be (the rate can change a little).

•· What your monthly payment will be (again this can fluctuate a little).

This is the only way you will be able to get a solid idea if you are getting a good deal. Now with that said please remember this is only an ESTIMATE. The closing costs and escrow set up amount should remain close to the original estimate however the interest rate is a different story. Rates can change daily and you can't lock in the rate until you find a home and have a contract in place to buy it. It is a good idea to get a new GFE right after finalizing your contract on your new home and before you apply for your home loan.

So there you go, I hope you will use some of my advice when shopping for your mortgage. If you are thinking about buying a home in the next year then go get pre-approved. Most lenders will pre-approve you for free and you are in now way obligated to use that company. Find out what your credit score is and see if there are any issues with it or your income. If you have banged up credit and are worried you won't qualify keep in mind that I had a client the other day with a credit score of 582 (low) that I was able to pre-approve with a zero down loan with an interest rate of 6.5%. You don't know until you try. Buying a home has never been easier then right now. Congratulations on taking one more step toward owning your own home. For more information and some very cool home buying tools go to http://www.annarborfinancing.com/.

Dave Crisp

Senior Loan Officer

Ann Arbor Mortgage

Realtors...what do you love and what do you hate about loan officers

David Crisp (Ann Arbor Mortgage) — Wed, 31 Jan 2007 15:49:44 -0600

To all the realtors out there.

I was reading a blog from Mariana Wagner about how she hates the perception some people have of real estate agents. As in all profession there are good agents and there are bad agents (there are also great agents and horrible agents). There seems to be so many part time agents that sell a few homes a year that it is hard to judge the whole profession together. The same is certainly true for loan officers. I am always interested in the opinions of the realtors I work with as to what I could improve. So with that in mind what are the things loan officers do that you love or hate? What is the biggest problems you face when interacting with lenders? What are the best lenders doing to knock off your socks?

Mortgage News You Can Use!!

David Crisp (Ann Arbor Mortgage) — Wed, 24 Jan 2007 14:10:13 -0600

Rate Watch - For the week ending January 19th, 30-year fixed rates averaged 6.22%, edging up 0.03 percent from the previous week. The average for 15-year fixed mortgages rose slightly to 5.93%. A year ago 30-year fixed rates were at 6.04%.

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Not much on the economic calendar until Friday's New Home Sales report is due. There is some concern that the home sales numbers may come in stronger than expected showing the housing sector continues to turn around and further indicate a stronger than expected economy.

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Starting this year Equifax and Experian - two of the nation's leading credit bureaus - will charge a fee each time a prospective borrower's credit file is accessed. The policy is intended to improve the ratings agencies' compliance with the federal Fair Credit Reporting Act. Given that "reissue" fees will be imposed each time a mortgage broker shops an application to a lender, with applications from marginal-credit and low-income borrowers generally going to a half-dozen or more lenders, National Association of Mortgage Brokers President Harry Dingham says some borrowers could wind up paying $100 to $200 more.

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Ann Arbor Buyer and Seller Tidbits - From the 2006 Profile of Home Buyers and Sellers prepared for Ann Arbor Area Board of Realtors by the National Assoc. of Realtors.

In our marketplace first-time home buyers constituted 42% of all home buyers (36% nationwide).

65% of buyers who purchased a home in Ann Arbor used the internet frequently to aid in the search for their new home (59% nationally). 36% of the buyers that purchased a home from 1997 -2006 found the home they purchased through a real estate agent (25% from the internet and 18% from a yard sign). That number, 36% who found the home through an agent has dropped steadily from 50% in 1997. The number using the internet has grown from 2% in 1997 to 24% in 2006 (nationally).

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An update on engaging appraisers: A reminder regarding OCC (Office of the Comptroller of the Currency) Regulations. In a purchase situation the appraiser is provided a complete copy of the purchase contact and is required to analyze it. In refinance situations, to promote independence in the appraisal process and to avoid pressure on appraisers for values, no expected or estimated property value is to be communicated to the appraiser. We are not able to give the appraiser any loan amount, borrower's estimate of value, or any indication of direction of value for a refinance transaction. This has been instituted on refinances to help the appraiser arrive at an unbiased value for a home.

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The Mortgage Bankers Association reports that upwards of 80% of outstanding mortgages were made since 2002, as scores of homeowners refinanced to take advantage of lower interest rates. The group adds that the youngest mortgages are in the subprime category and that a "measurable number" of borrowers owe more than their properties are worth.

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The odds of an average golfer making a hole-in-one are 12,000 to 1. Good luck!!

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Mortgage News You Can Use 1/11/07

David Crisp (Ann Arbor Mortgage) — Thu, 11 Jan 2007 15:05:07 -0600

MORTGAGE NEWS YOU CAN USE

Rate Watch - Mortgage rates rose on solid job news after holding steady the previous week. The 30-year fixed mortgage rate averaged 6.21% for the week ending Jan. 11, up from 6.18% the prior week, according to Freddie Mac. 15-year fixed mortgages also rose slightly to 5.96% from 5.71% the prior week. A year ago, the 30-year fixed-rate mortgage averaged 6.15%.

The economic calendar for this week is light with no high-impact releases until tomorrow's Retail Sales report.

Ann Arbor Buyer and Seller Tidbits - From the 2006 Profile of Home Buyers and Sellers prepared for Ann Arbor Area Board of Realtors by the National Assoc. of Realtors.

The median age of all buyers (first-time and repeat) was 40 years old - 31 for first-timers and 47 for repeat buyers in Ann Arbor (roughly the same nationwide). The median household income of all buyers in A2 was $78,300 (for the U.S. $71,800). 42% of home buyers in A2 were first-timers. The median price of all homes purchased in A2 area was $224,500 vs. $214,000 for the U.S.

Casting their predictions for the New Year, many independent analysts say the US economy will remain on a bumpy course in 2007 as fallout from the housing downturn continues. Global Insight chief economist Nariman Behravesh concedes that the residential property slowdown has not much affected consumers - who continue to pump their dollars back into the economy, encouraged by a healthy jobs market. However, the housing slump will likely mean higher unemployment numbers; Goldman Sachs economists figure that realty agents, mortgage brokers, construction, and other housing-related industries will shed more than 1 million jobs over the next two years as the housing market powers down after a five-year run. Hopes for a "soft landing" are not dead, however; and observers say that, barring unexpected jolts to the economy, the economic slowdown is not likely to turn into a full-blown recession

A new study from the Consumer Federation of America reveals that 38.8% of borrowers who took out subprime loans last year were women, a group that accounts for 30% of overall mortgage borrowers. The report also reveals that women with high incomes were 46.4% more likely than men with comparable incomes to have the more expensive mortgages.

According to a nationwide poll conducted by the Pew Research Center, which queried approximately 2,000 homeowners, about 55% of US homeowners expect the value of their homes to rise a little, while 26% expect those values to go up a lot. About 34% of home owners say their homes account for all or most of their personal financial worth, while another 34% say it represents half of their worth. The survey also found 75% of all home owners say they are currently paying a mortgage, with 20% carrying either a second mortgage or a home equity loan. That percentage rises to 28% among younger home owners ages 30 to 49. The survey found 24% of all home owners have a second home or an investment property they own. Researchers found that the degree of optimism is contingent on both the respondents' location as well as the value of their residences.

MORTGAGE NEWS YOU CAN USE

David Crisp (Ann Arbor Mortgage) — Thu, 21 Dec 2006 14:18:04 -0600

Rate Watch - Freddie Mac reported on Dec. 14 that 30-year fixed-rate mortgages averaged 6.12%, up from 6.11% two weeks back. 15-year loan rates increased from 5.86% from 5.84%. With mortgage rates remaining near their lowest levels, exotic mortgage borrowers are now jumping into the safety of fixed-rate loans.

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As expected, the Federal Reserve decided to keep short-term interest rates steady at 5.25% for the fourth consecutive time in a 9-1 decision. The lone dissenting member, the President of the Federal Reserve Bank of Richmond Jeffrey M. Lacker, voted for a rate hike. The Fed's statement following the last meeting in October, 2006 was almost the same: economic growth is slowing, and the risks of inflation remain, although the risks are expected to moderate over time. The only change form the October statement is emphasizing the "substantial cooling of the housing market."

From the Federal Reserve: The last time the Fed began a series of rate cuts designed to stimulate a slowing economy was on 1/03/01 or nearly 6 years ago. During the course of calendar year 2001, the Fed dropped short-term rates 11 times, including 2 rate reductions in January alone. Before its first rate cut, the Fed had last raised rates in mid-May 2000 or 7.5 months earlier. (A repeat of this scenario would certainly be a help!)

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A borrower recently asked us how to estimate property taxes for a new purchase. The Assessor's Office in Ann Arbor stated that they base SEVs on a two-year rolling average, and that the data they use is one-year old. So right now they are using a two-year rolling average with data from 2004/2005. They encourage people to use the appeals board to make their case.

How Long Does it Take to Pay Off a Credit Card? The answer may surprise you! The following chart shows how much interest is charged, and how many months it takes to pay off a credit card balance by just making the minimum payment each month. Keep in mind that this illustration assumes that no additional purchases are made with the card.

$500 Balance

•· 14% interest rate = 43 month payoff / $136.91 total interest paid

•· 17% interest rate = 46 month payoff / $181.49 total interest paid

•· 19.8% interest rate = 49 month payoff / $231.90 total interest paid

$1,000 Balance

•· 14% interest rate = 80 month payoff / $455.04 total interest paid

•· 17% interest rate = 89 month payoff / $626.80 total interest paid

•· 19.8% interest rate = 100 month payoff / $843.05 total interest paid

$3,000 Balance

•· 14% interest rate = 140 months / $1,727.89 total interest paid

•· 17% interest rate = 158 months / $2,418.29 total interest paid

•· 19.8% interest rate = 181 months / $3,287.43 total interest paid

Four, eight and fifteen years to pay off consumer debt. Who says that credit cards offer short-term financing? And look at the total interest paid, in some instances more than the original debt. In addition, there are many cards that charge even higher interest rates than what are illustrated here - imagine how long it takes to pay those balances off!

We wish you all a safe and happy holiday season!

Disclaimer: The information contained in this newsletter has been gleaned from various sources and is intended to be current and accurate, however we cannot and do not warrant or guarantee as such. This newsletter is for informational purposes only and is not intended to be, nor should it be considered as, investment advice. It does not take into consideration the financial circumstances, needs or investment objectives of any specific person who may receive this newsletter. Individuals should seek financial advice with regard to their specific circumstances before making any investment decision.

Option ARM and Interest Only Loans

David Crisp (Ann Arbor Mortgage) — Thu, 14 Dec 2006 14:34:16 -0600

According to data from Loan Performance, one in three homeowners refinancing today is choosing the financially riskier Interest Only and payment options ARM's loans. For years I have provided both loans to my clients. I love interest only loans for financially responsible people. I like the idea of spending the least possible on mortgage debt as long as the extra money is being used to improve there financial position more then the increased equity they would have paying down there mortgage.

The Option Arms are a totally different monster. I have provided those loans for two types of clients in the past. The first would be real estate investors. This is the cash flow king loan in my opinion. It will allow the highest cash flow on a monthly base and carries a much higher risk. I also think it can be a good short term loan for someone who is starting a business or has some short term debt they need to focus on. In my opinion this is a short term solution for anyone who isn't using it for rentals.

I hear so many stories of irresponsible lenders that sell these loans to people who are looking for the lowest payment so they can afford a bigger house. This is a really risky move for most clients and we are already seeing a large foreclosure rate on these loans. Most of the lenders giving these loans do not educate there clients on how these loans work (in my opinion). I believe (based on news reports and my personal experience) many of these people in these loans are unaware that there true rate is in the sevens and changes monthly. Many don't realize that the payment will increase quickly and they will be backwards with equity.

In my opinion lenders who promote this as a super low rate choice for new homebuyers (which unfortunately we have one of the largest violators here in Michigan) should be investigated. This is were being a professional loan officer (keyword Professional) has its responsibility to educated and counsel clients. Don't get me wrong, it isn't that I don't think there is a need for these programs. I just believe it is up to the lender to make sure the clients knows what they are getting into.