Richard Woodward Banker / Senior Manager Phone: 972-661-5136 Fax: 972-314-9647 Rwoodward@Envoymtg.com www.Envoy-Mtg.com   Interest Rates on the Rise? For the last couple of years, home buyers have benefitted from an affordable combination of lower home prices and lower interest rates. But if you've been on the fence about buying a home, or waiting for even better buying opportunities, now might be the time to give us a call to see if buying today makes sense for your individual goals and needs. Even though the government's popular Home Buyer's Tax Credit expired on April, 30, 2010, this is still a good time to act, as home affordability is likely to get worse before getting better. Ever since the Federal Reserve's program to help lower home loan rates and stabilize the housing sector ended in March, 2010, after purchasing a reported $1.25 Trillion in Mortgage Backed Securities, the mortgage market has been very volatile. And despite fluctuations, rates remain good overall; but, as the Federal Reserve sells off some of its huge holdings, supply in the market will increase, and likely lead to higher rates. Don't wait until higher rates force you out of the market. Give us a call today.    Extended Warranties  If you're thinking about buying a major appliance, you'll likely be offered an option to purchase an extended warranty. Major home appliances often include dishwashers, free-standing ranges, many types of ovens, many types of refrigerators, washing machines and dryers, microwave ovens and many types of televisions and computers. Extended warranties are basically repair insurance in case something goes wrong after your manufacturer's warranty expires. Before you decide to purchase this insurance, be sure to research your product with Consumer Reports or similar organizations to see if it makes financial sense for your individual needs. Studies by Consumer Reports and JD Power and Associates consistently show that purchasing extended warranties on certain major appliances doesn't make financial sense in many situations, since major appliances generally exhibit strong reliability. There are, of course, exceptions for certain repair-prone brands, which consumer groups define in their specific studies. Extended warranties, however, do offer peace of mind which, for many consumers, is worth the extra cost. And for some appliances with complex electronics and potentially high repair costs, purchasing an extended warranty may make more sense. For the best results, however, do your research before you go shopping, and, before you buy an extended warranty, be sure to read the fine print.   How Long Should You Keep Your Tax Returns? If you're not sure which tax documents to keep and which ones to drop in the shredder, you're not alone. Even the experts disagree. In fact, there are two basic schools of thought on this, and both seem to relate to the IRS' statute of limitations for auditing your tax returns. One school says keep tax returns and accompanying paperwork, including W-2 forms, 1099 forms, other tax reporting statements and end-of-year bank statements that show interest earned, for 3 years. The other claims that holding onto these documents for up to 10 years is the safest bet. For assessment of additional taxes by the IRS, or if you intend to claim additional refunds, the statute of limitations is generally three years from the date you file your return. However, if you fail to report all of your income and the under-reported figure is more than 25% of the gross income provided on your return, the IRS has six years to audit your returns. Additionally, if you claimed a loss on certain securities, the statute of limitations is seven years. Of course, there is no limitation if you filed a fraudulent return or if you didn't file a return at all. With this in mind, consider keeping your tax returns and relevant documents for a minimum of 7 years.   Rethink Your Refund According to USA Today, the average 2009 tax refund through March 12 is $3,036. In good economic times tax refunds are often viewed by many Americans as a kind of financial windfall, "extra" or "free" money that leads to splurge purchases like vacations, down payments for cars or big-screen TVs. But, especially in a tougher economy, it's important to remember that your tax refund is not a gift from the government. It's actually your hard-earned salary that you overpaid to the government throughout the year. In other words, this cash is actually "lost" money, not to mention the average $253 dollars a month in lost opportunity cost. After all, think about what this money could've made for you in your employer-matched 401K or other retirement plan. Imagine the interest on credit cards or your car payment or even your rent that you could've saved by paying an additional $253 a month. With this in mind, before you go out and splurge on big-ticket items, please give us a call. This money could really help you toward reaching your goal of homeownership this year, and we'll show you how. We'll review your finances and help you determine what makes the most sense for your individual financial goals and needs. If you're not sure which tax documents to keep and which ones to drop in the shredder, you're not alone. Even the experts disagree. In fact, there are two basic schools of thought on this, and both seem to relate to the IRS' statute of limitations for auditing your tax returns. One school says keep tax returns and accompanying paperwork, including W-2 forms, 1099 forms, other tax reporting statements and end-of-year bank statements that show interest earned, for 3 years. The other claims that holding onto these documents for up to 10 years is the safest bet.

The Fed is meeting April 27 and 28th, and its actions could impact home loan rates! Don't Wait. Call me before the Fed acts so we can review your situation and determine if there's anything you need to do.

 

Richard Woodward
Banker / Senior Branch Manager
When Trusted Advice Counts

Office: (972) 661-5136

17311 Dallas Parkway Suite 173 Dallas, TX 75248

Visit Us Online - www.Envoy-Mtg.com

Many people today are considering short sale or deed-in-liew of foreclosure as an option to foreclosure.  How does that effect the sellers ability to obtain a mortgage in the future?  Today, Fannie Mae announced an immediate change to it's guidelines that could help some buy a new home sooner than in years past.

According to a letter posted yesterday (April, 14, 2010) written by Marianne E. Sullivan, Senior Vice President at Fannie Mae, borrower waiting periods will be shortened if they put more money down on their purchase.  This move is in an effort to support overall market stability and reinforce the importance of borrowers working with their servicers when they have difficulty repaying their debt.

Here are the changes:

Waiting Period After a Preforeclosure Sale, Short Sale, or Deed-in-Lieu of Foreclosure

Preforeclosure Event	Current Waiting Period Requirements	New Waiting Period Requirements (1)
Deed-in-Lieu of Foreclosure	4 years    Additional requirements apply after 4 years up to 7 years	• 2 years - 80% maximum LTV ratios • 4 years - 90% maximum LTV ratios • 7 years - LTV ratios per the Eligibility Matrix
Preforeclosure Sale	2 years
Short Sale	No policy currently exists specific to short sales
Exceptions to Waiting Period for Extenuating Circumstances  Extenuating circumstances are nonrecurring events that are beyond the borrower's control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations. If a borrower claims that derogatory information is the result of extenuating circumstances, the lender must substantiate the borrower's claim. Examples of documentation that can be used to support extenuating circumstances include documents that confirm the event (such as a copy of a divorce decree, medical reports or bills, notice of job layoff, job severance papers, etc.) and documents that illustrate factors that contributed to the borrower's inability to resolve the problems that resulted from the event (such as a copy of insurance papers or claim settlements, property listing agreements, lease agreements, tax returns (covering the periods prior to, during, and after a loss of employment), etc.). The lender must obtain a letter from the borrower explaining the relevance of the documentation. The letter must support the claims of extenuating circumstances, confirm the nature of the event that led to the bankruptcy or foreclosure-related action, and illustrate the borrower had no reasonable options other than to default on their financial obligations.
Preforeclosure Event	Current Waiting Period Requirements	New Waiting Period Requirements (1)
Deed-in-Lieu of Foreclosure	2 years    Additional requirements apply after 2 years up to 7 years	2 years - 90% maximum LTV ratios
Preforeclosure Sale	No exceptions are permitted to the 2-year waiting period
Short Sale	No policy currently exists specific to short sales

  Based on my experience, exceptions are rarely granted by lenders out of fear of loan repurchase requests by Fannie Mae so I wouldn't count on this as an option.  Overall this is welcomed news as it will help fuel the next round of purchases for everyone.  

Richard Woodward
Banker / Senior Branch Manager
When Trusted Advice Counts
Envoy Mortgage

Office:  (972) 661-5136   Toll Free:  866-430-7767

17311 Dallas Parkway Suite 173 Dallas, TX 75248

Visit Us Online - www.Envoy-Mtg.com

Putting Things in Perspective
Factors to Consider When It Comes to Your Mortgage

In last month's You Magazine, Barry Habib, Chairman of Mortgage Success Source, discussed how home loan rates may well buck the phrase, "March comes in like a lion and out like a lamb" due to the Federal Reserve ending its Mortgage Backed Securities (MBS) purchase program on March 31st. And the last week full week of March did in fact feel the "roar of the lion" as in two days, interest rates increased sharply following financial uncertainty and action within the bond markets.

With uncertainty surrounding the months ahead in the mortgage arena, here is some information to help you put things into perspective.

First Things First
Mortgage rates did rebound a bit from the highs set in March, but one thing was left clear for all watching mortgage and interest rates overall. Volatility and spikes in rates can occur anytime, be it in the U.S. economic arena or the world.

That being said, everyone wants to get the best rate for their mortgage. When the last interest rate wave came across the land in 2003, happy homeowners couldn't wait to brag that they received an interest rate below 5.50% for a 30 Year Fixed, which was then the lowest rate we had ever seen. We are still well below that level.

Would $1 a Day Keep You from Your Dream Home?
Even though 30 year fixed rates starting with the number "4" with no points may be out of reach, a great rate can still be obtained. The other thing to take into consideration is that with a mortgage amount of $200,000, the difference between a rate of 5.00% and 5.375% for a 30 year fixed rate is $46 a month.

While no one wants to pay more for their mortgage than they have to, most people would agree that $46 a month is typically not enough to prevent them from buying the home of their dreams. After all, $46 a month is less than the cost of one tank of gasoline for many people. Combined with the after tax benefits of deducting the interest on a mortgage payment, for many families we are talking approximately $1 a day.

Lower Payment vs. Lower Rate of Interest
With interest rates at phenomenally low levels, an argument can certainly be made for people considering a mortgage for a shorter term. The 15 year fixed rate mortgage is one loan often considered.

Through the first twelve weeks of this year, 15 year fixed rates according to Freddie Mac have averaged a better rate of just over .50% as compared to a 30 year fixed. The greatest benefit of choosing a shorter term is knowing that the mortgage will have a zero balance in 15 years, saving the borrower over $110,000 in interest payments over 30 years.

However, the lower rate and shorter term do come at a monthly cost for borrowers. The difference in monthly payment for a 30 year fixed at 5.00% and a 15 year fixed at 4.50% is $477 a month higher for the 15 year fixed. And in these tough economic times, "cash is king." That is, "cash on hand" is king.

Many people would be better served having a smaller mortgage payment under a 30 year fixed, and then saving or investing the extra money. Note, saving and investing rather than spending the extra money is the key point here. In particular, people who find themselves without a job or who have a pressing financial need would benefit from being able to access these saved funds.

Other Options
While adjustable rate mortgages (ARMs) were touted as a contributor to the mortgage melt down, perspective in this arena is warranted as well. In viewing ARMs as an alternative, the most important thing to consider is how long someone intends to have the mortgage in place.

Many industry experts state the average time a mortgage is in place is seven years. Seven years is a long time. People move to different homes, relocate for employment reasons, and see their children get older, go off to college, or move out completely. It's important to consider these types of factors when selecting a mortgage.

According to Freddie Mac, over the last twelve weeks, the interest rate for a 30 year fixed has been just north of .75% higher than that of a 5/1 ARM (where the interest rate would be fixed for 60 months before incurring an adjustment). If you know that you may be moving either before the interest rate is subject to change or shortly thereafter, that .75% would save approximately $90 a month in the same $200,000 example above.

For those looking for a little more security, a 7/1 ARM (meaning the interest rate would be locked for 84 months before incurring an adjustment), offers an interest rate that is nominally higher than a 5/1 ARM (perhaps .125-.25% in interest) but still quite a bit below that of a 30 year fixed rate.

For people who expect to have shorter time frames for their mortgage, these two loans offers a fantastic rate while still assuring that the monthly interest rate and payment will not change for a specified period.

Best Path for all Prospective Borrowers
Whether you are looking to refinance or buy a home, attractive options remain for anyone seeking a mortgage today. However, as an individual or family's mortgage payment is often their largest monthly payment, obtaining proper advice is paramount to making the best decision.

Richard Woodward
Banker / Senior Branch Manager
When Trusted Advice Counts
Envoy Mortgage

Office: (972) 661-5136

17311 Dallas Parkway Suite 173 Dallas, TX 75248

Visit Us Online - www.Envoy-Mtg.com

Attention Homebuyers: Double-Barrel Stimulus Deadlines
Threaten Rates and Affordability; The Time to Act is NOW!

The great author and speaker Og Mandino once said, "I will act now. I will act now. I will act now."

This is great advice for prospective homebuyers over the next 45 days, as two key government programs that have kept home ownership more affordable than ever wind down to their completion.

First, the Federal Reserve's Mortgage Backed Securities (MBS) purchase program will come to an end on March 31, just two weeks away! Without this program home loan rates could have been at least 1.00% higher...and potentially even higher...over the last year. Throughout 2009, the Federal Reserve was the primary buyer for MBS, purchasing as much as 80% of the supply in a given month. When this program ends, a lack of willing buyers will likely cause MBS prices to drop and rates to rise as a result.

The second shot will come on April 30th, which is the deadline for purchasers to get under contract to qualify for the Home Buyer Tax Credit program, which has been providing a tax credit of up to $8,000 to first time homebuyers and up to $6,500 to repeat purchasers.

Just How Much Will Waiting Cost?
While no one knows for certain what the future holds, two things appear clear. Home loan rates will likely be higher in the future, and free money from the government will be gone. These deadlines will affect both affordability to purchase and the opportunity to refi.

In a recent Wall Street Journal article, it was estimated that 37% of all borrowers with a 30-year fixed rate have interest rates of 6% or higher. The article also quotes Credit Suisse that more than half could lower their rate by nearly 0.75%.

For prospective homebuyers, any increase in interest rates erodes your purchasing power. In other words, a 1% increase in rate represents an approximate decline in purchasing power by 10%. For example, if rates increase by 1%, people who qualify for a $200,000 purchase price today may only qualify for a purchase price of $180,000 afterwards.

If you or anyone you know is looking to purchase or refinance a home, waiting could be costly! Act now...so you can save later

Richard Woodward
Banker / Senior Manager
Envoy Mortgage
972-661-5136
RWoodward@Envoymtg.com

17311 Dallas Parkway Suite 173 Dallas, Texas 75248

Cash Strapped Buyers Could Get Shut Out

If you have buyers in need of 100% financing, take notice! One widely popular tool for funding is about to run out of money. Buyers that need a no down payment loan guaranteed by the USDA are running out of time to get their deal done. This program is a favorite among first time home buyers.

USDA Rural Home Loans have been a phenomenal tool for helping cash strapped buyers get into homes for no down payment. Unlike many other loan programs though, the amount of funds available to fund these loans are set and capped at the beginning of the fiscal year.

Notice was delivered from Washington on March 9 that the funds are nearly exhausted, with expectations that they will run out in late April.

Unlike years past when similar notifications have been delivered, the USDA will not be issuing conditional commitments for buyers as the program awaits new appropriations from Washington. The USDA states they are "not certain when additional funding will be available."

What does this mean for your buyers?

If your buyers need 100% financing and are not eligible for a VA loan, they have to act quickly or they will have to seek other options. Combined with tightening from HUD on FHA loans in April and potentially later this summer, cash strapped buyers may be shut out if they miss this opportunity.  To take advantage of the First Time Buyer Tax Credit and the Step-Up Buyer Credit contracts must be signed by April 30th, 2010.

If you have any questions, call me and let's discuss them.

Sincerely,

Richard Woodward
Envoy Mortgage

Phone: 972-661-5136 or Toll Free:  866-430-7767
www.Envoy-Mtg.com

Important Deadlines on the Horizon

Two years ago, the Washington Post reported that home loan rates shot up to nearly 7% from 6% in less than a week. The volatility demonstrated that week resulted from turmoil in the financial markets and a lack of buyers for mortgage backed securities (MBS).

That volatility continued through November 2008 when the Federal Reserve announced a program designed to lower rates and provide stability to housing. That program has been incredibly successful, driving rates to the lowest levels of all time. However, as this program will end March 31st, people want to know: Where are rates going now?

      Looking for Clarity
This month YOU Magazine turns to Barry Habib, Chairman of Mortgage Success Source, for his viewpoint. Mr. Habib has been very accurate in his assessments of both the financial markets and the direction of mortgage rates, providing education and market information to 30,000 home loan professionals across the country.

Mortgage rates are tied to the price of MBS and like other fixed income vehicles similar to U.S. treasuries, the higher the demand and price, the lower the corresponding rate or yield will be. Therein lies the issue. Throughout 2009, the Federal Reserve was the primary buyer for MBS, purchasing as much as 80% or more of all MBS issued in any given month.

The concern is that when the Fed concludes the program, who will step in to pick up the supply of mortgages for the rest of 2010 and beyond. If investor interest is scarce, look for rates to rise. Also, filling the hole with avid buyers is not the only potential headwind facing MBS and other fixed income investments.

Think About It this Way
Throughout the boom years of real estate, homeowners could just about set any price they wanted when the time came to sell their property. In many cases, simply putting a sign in the front yard would bring multiple offers, driving the price of the home up.

The Federal Reserve has acted in this capacity, supplying heated buying interest for the last fourteen months, in essence, setting the price of MBS and keeping interest rates low. When the Fed stops buying in April, the concern that exists isn't so much that there won't be buyers for home loans but what price those buyers will be willing to pay. The lower the price that new MBS buyers settle on, the higher the rates that consumers will have to pay.

Little Consensus Among Experts
Up until now, the predominant opinion of economists and financial pundits has been that interest rates will rise. The only disagreement has been to what degree and how quickly rates will do so.

On one extreme, David Greenlaw, chief fixed-income economist of Morgan Stanley, expects that rates could climb by more than two points before year end. On the other hand, CNBC has recently paraded people before the camera with the opinion that rates may remain closely unchanged.

Mr. Habib holds fast to his original assertion though that home loan rates are set to rise. "Interest rates for a 30 Year Fixed Rate could rise to 6% by year end and consumers need to be prepared for that." Habib goes on to state that MBS are similar to other fixed income investments that are subject to inflation risk. Inflation erodes the value of bonds and forces rates to rise.

Inflation risk exists not only from the possibility of an improving economy but also increased debt coming from the U.S. Treasury to support stimulus packages and the budget.

One More Thing to Consider
The purchasing of MBS by the Fed does not occur immediately after a loan closes. Several weeks must pass after the consumers close on their mortgages before they can actually be delivered, packaged and sold to investors like the Fed.

Because of this, many people anticipate that any potential move higher in rates may not occur until April 1st, after the conclusion of the Fed program.

Habib states that this is not the case for many reasons. Rates have already started to move higher over the past few months, and will likely increase a bit more after the Fed stops buying - not just because the largest buyer is absent, but because speculators will be less confident and unload their positions ahead of the deadline. This gradual increase combined with what we've already seen will be meaningful, and as the year progresses, rates will oscillate higher still. It's like walking up a long staircase...you don't realize how high up you are, until you turn around and look down.

What Now?
If you are a candidate for purchasing a new home or refinancing your mortgage, call your mortgage professional today to lock in your best opportunity for a low rate. In addition to the potential for rates to rise, there are also other programs in place...that are scheduled to end in June...to assist people who otherwise could not refinance due to loan to value.

For prospective home buyers, any increase in interest rates erodes your purchasing power. In other words, a 1% increase in rate represents an approximate decline in purchasing power by 10%. For example, if rates increase by 1%, people who qualify for a $200,000 purchase price today may only qualify for a purchase price of $180,000 afterwards.

For those who qualify for the tax credit for first-time and repeat home buyers, another deadline also exists. The last day to obtain a contract to qualify is April 30th and closing must occur by the end of June. Miss either deadline and it could cost you up to $6,500 or $8,000, depending on eligibility. 

No matter which way you look at it, waiting could cost you. Mortgage rates are still near the best levels we have ever seen. If you are in the position to move forward with obtaining a mortgage, the best decision would be to act sooner rather than later.

Richard Woodward
Banker / Senior Branch Manager
When Trusted Advice Counts

Office:  (972) 661-5136   17311 Dallas Parkway Suite 173 Dallas, TX 75248

Visit Us Online - www.Envoy-Mtg.com  

   

How to buy a Fixer-Upper   

FHA 203(k) For Purchases

Real estate agents and home buyers are scrambling to adjust to today’s real estate market which is filled with foreclosed homes that have suffered from disrepair and neglect. Many banks that own these foreclosed properties are unwilling to repair them. As a result, many foreclosed properties do not qualify for traditional loan programs. FHA’s 203(k) loan program provides the funds necessary for both the purchase AND the renovation of a home.

Loan Program Advantages:

• Streamline Program, Limited Repairs Up to $35,000
• Low Down Payment
• Credit Scores as Low as 620
• Competitive Fixed Rate Terms
• 1-4 Owner Occupied Homes - Maximum Loans up to $281,000

One of the biggest misconceptions about a 203(k) loan is that obtaining it is a hard and time consuming process. Although there is a bit more involved in completing a streamline 203(k) purchase, most loans can still be closed within 30-60 days from start to finish. It is preferred that a 203(k) loan be written on a 60 day contract; however, 45 days is generally a sufficient time to close these loans.

Have Questions? Call Me!