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What is a Mortgage Loan Modification and How can it work for Me?

Mortgage loan modification is something that has been talked about a lot over the past year as financial hardships have made it difficult for some to manage their monthly payments. Loan Modification is when your lender agrees to make a permanent change to the original terms of your mortgage loan. This could be in the form of an interest rate reduction, fixing the rate on an ARM loan, extending the amortization (i.e., making the loan a 40 year term to reduce the payment), changing the loan terms to require an interest only payment or even a principal reduction (reducing the amount owed). The purpose of the modification is to make it feasible for the borrower to make the monthly payments on the house.

Why would a lender agree to this and under what circumstances will they do it? Well, the lenders’ goal is to have loans it makes perform and, contrary to popular belief, they do not want to foreclose on anyone as owning homes is not the lenders business. So, if the borrowers’ personal circumstances indicate that a specific change in the terms of the loan will make it possible for them to make on-time payments on the debt then the lender will seriously consider making those changes.

Your specific circumstances are going to be the driving factor in whether or not a loan modification is possible. The lender is going to ask you to document your income so they can determine whether you are capable of making the existing loan payments and, if not, whether a modification of the terms will make it possible for you to make the payments. If you make $10,000 per month and your loan payment is $2,000 it’s not likely that your lender is going to modify the loan because it appears that you should be capable of making the payments. If you and your spouse were both working at the time you took the loan out and one of you has lost your job then a loan modification may be feasible as long as the lender believes making the change to the loan will enable you to make timely payments. If you are unemployed then a modification is not likely as the lender will want to know you have a stable income stream to make the new payments. Each case is different and they are going to be looked at individually.

There are a lot of companies that have popped up over the past year that offer to work as a facilitator to work between you and your lender. Generally, they charge an upfront fee (usually several hundred dollars) and give you no guarantee as to the outcome. Some of these companies are reputable but many are not so be careful. You really don’t need a modification company at all as you can work directly with your lender. However, some folks have reported excellent results working with a mod company. I have referred some of my clients to one which purports to have a 90% success rate. What they do is to review your financial data in advance of charging you a fee and then if they feel that your modification has a good chance of success they move forward. If it does not look like the lender will consider the modification they charge you nothing. This seems to be the best approach in my opinion.

So, a loan modification is one way for people who are experiencing a financial hardship to work with their lender and keep their home and their credit standing. It is a viable option and should not be ignored. If you think that you may be qualified for a loan modification give your lender a call and you may be surprised by the result. Good Luck!

Image courtesy of The Truth About Mortgage.com

Tags: loan modification

Mortgage Rate Update

Mortgage Market Update June 9, 2009
Well, it’s Wednesday, May 27th and I’m cruising along at the office working out various underwriting issues working towards closing a bunch of loans because for the first time in over a year, I’m really busy! Oh happy day! Until today.

On the day I am writing about interest rates had been very stable in and around 5% on a 30 Year Fixed for a couple of months and it did not appear that anything was going to move the rate up for the foreseeable future. That assumption turned out to be very wrong. On May 26th our rate (30 Fixed) was 5.0% with zero points. The Treasury Bond market was a little jittery at the end of the day because the Federal Government was scheduled to be selling a bunch of new debt over the next couple of weeks and if the bond auctions were not well received by investors then the rate on these bonds would rise. An increase in Treasury Bond rates will cause mortgage rates to rise also. The billions of dollars in 5 Year Bonds the fed sold on the afternoon of the 27th were not very well received and by the end of the day, May 27th, mortgage rates had gone up to 5.5%. In one day – Ouch.

The next day I awoke feeling very positive that this little spike in rates was going to reverse itself over the next week or so. Then on the 28th Durable Goods Orders figures were released and orders were up 1.9% – much stronger than expected. Also, released were new claims for unemployment benefits which were smaller than expected. People buying more stuff and fewer people losing their jobs is good news for the economy’s future but bad news for interest rates. Interest rates go up when the economy is doing well and go down when things are bad. By the end of this day the rate was up to 5.75%.

Rates had gone up ¾ of a point in just a couple of days. Since then this rate has held as more positive economic news has been released. Personal incomes and Outlays (consumer spending) were reported at the end of the week and both were stronger than expected keeping rates pegged at the new higher level.

The good news – we may get out of this economic mess we’re in faster than anyone thought. The bad news – a stronger economy will keep mortgage rates above the super low levels that we had been seeing. Overall though, when you can get a 30 year fixed rate mortgage anywhere in the 5’s that is a really great rate to borrow at. We may see a slight pull back in rates in the near term but as the year progresses there is little doubt that interest rates will be rising some more. If you’re in the market to buy a home I suggest identifying a home to buy, making an offer and getting your rated locked in now. Happy house hunting!

Tags: mortgage rates

And the Answer is … HARDWOODS!

I received a call recently from a client to whom I had provided a Home Staging consultation report.

For those not familiar, a consultation involves touring an occupied house for sale, assessing it’s flaws and possible buyer turn-offs, and providing a complete DIY to-do list to the seller. For sellers who have the time and energy, it’s a great low-cost alternative to having the house professionally staged.

A quick note about this client … his regular travels back and forth from Ohio to his elderly mother’s Oakland County house to help her prepare it for market surely put him in the running for “Son of the Year”!

So, in following my list of recommendations, he had one question for me:

“We’re going to replace the carpet, but there is hardwood underneath. Should we recarpet or refinish the hardwoods?”

After giving an enthusiastic “YAY!!!”, I told him that refinishing the hardwoods was DEFINITELY the way to go. He was a bit surprised, and offered the theory that buyers would prefer carpet because it looks “cozier”.

NO!

Carpeting may look warmer, but it also can deter buyers who worry about allergies, previous 4-legged residents and water/mold issues. Even the smell of new carpet can be troublesome. Carpet just isn’t as hygienic (or beautiful) as hardwood flooring, and resale value reflects that.

Today’s buyers want hardwoods. If your property is blessed with hardwood floors under the carpet, sand them down and shine them up! It’s a no-brainer.

Tags: answers to home seller's questions, home stager, Home Sweet Home Staging, Marianne Sweet on Home Staging, Oakland County MI home stager

Michigan: A Great Place to Live!

Michigan on a Positive Note!
Okay, really, I have absolutely had it with some of the doom and gloom we are all hearing about. Sure industry is going through some dramatic changes right now and in my opinion it’s not all bad. The various things happening in the auto industry in Michigan today are going to shape new more efficient entities that will be better positioned for long term survival, growth and prosperity. Nobody likes change but it comes our way whether we approve of it or not, so embrace it. You know the old saying – “when one door closes, another opens.” These changes that are occurring are staging new opportunities that we, as yet, may not even be aware of!

The real purpose of this writing is to talk about all of the various things that make Michigan one of the most desirable places to live in the nation. When a place has all of the amenities that our state has it’s going to attract new residents. Sure, there are some folks leaving the state to seek out opportunities but there are also people moving in to the area to take jobs here (I have financed or talked to a handful of people relocating here this year) and others coming to Michigan to buy vacation homes here to take advantage of the great affordability of that market right now.

Anyway, consider all of the great things our State has to offer; it’s a water wonderland with tons of golf, beautiful destinations, professional sports and cultural activities!

Water Fun Abounds
Did you know that Michigan has over 3,000 miles of beautiful Great Lakes shoreline? Can you imagine the number of different beaches we have to relax on? Take your family to build sandcastles, play Frisbee, do some wakeboarding, maybe some shoreline fishing, or just lie down and read a book!

We have over 11,000 inland lakes! If you’re into waterskiing, tubing, fishing, sailing or just partying on the water where else will you find the abundance of lakes we have all around us?

Into fishing? There are 36,000 miles of rivers, and 12,000 miles of trout waters here in our state. If you’ve never done it, there is nothing like catching, filleting and pan frying a fish the same day you caught it out of a local freshwater stream.

Winter Wonderland
After shoveling snow for most of my life I mostly think of snow as a pain in the you know what, but it also has its fun side with snowmobiling, skiing, snowboarding, sledding and snowman building. We have over 6,100 snowmobile trails and 40 ski resorts in Michigan. If you’re into winter sports this is a great place to land. You have to admit when the whole State is covered in a fresh coating of white snow it is quite beautiful.

Golfers’ Paradise
Michigan is home of more than 800 golf courses – Country Club’s, Golf Resorts, public and private courses all over the State. We are truly the golf capitol of the Midwest.

Beautiful Destinations
I personally travel within the State once or twice every year. Mackinac Island is one of my personal favorite places to go. No cars – the only modes of transportation are your feet, horseback or carriage and by bicycle. What a quiet and peaceful island paradise nestled between two Great Lakes in the Mackinac Straights. Although there are just too many destinations to list here, some of the other places we frequent include Harbor Springs, Saugatuck, Charlevoix and the Glen Arbor area. Don’t forget about the Upper Peninsula. When it comes to wilderness hiking and unbelievable scenery the UP is the place. Are you a UP’er?

Cultural Activities
Finally, Michigan offers some great cultural activities. The newly renovated Detroit Institute of Arts is always a great way to spend the day. Also downtown we have the Historical Museum, Science Center African American History Museum and the Detroit Zoo. In Dearborn the Henry Ford Museum and Greenfield Village are fun for the whole family. Don’t forget we have an abundance of local professional sports teams here and more winning clubs in various sports than anywhere else in the nation! We have a perpetually strong hockey club in the Red Wings, a consistently great basketball team in the Pistons; the Tigers have shown unbelievable strength in recent years, and, well, the Lions. Of course, we also have thousands of fantastic restaurants, night clubs and several casinos if that’s your bag.

What a Great Place to Live!
So, for all of you people out there who think folks are leaving this State in search of greener pastures I say that over time there will be more people coming to the area to enjoy the amazing amenities that Michigan has to offer than will ever leave. Sure in the short run you may see somewhat of a population shift out of the area but in the long run there is just too much here to draw people in. We have a very high quality of life in this State when it comes to recreational activities and isn’t that what life is all about? We work hard so we can play hard and there isn’t another State in the Union that has more opportunities for leisure time fun than Michigan!

The Two Most Overlooked Mortgage Options for Buyers

Many potential Oakland County home buyers in today’s market are looking for creative ways to purchase homes. There are a couple of options which are widely overlooked but present opportunities to accomplish specific goals of buyers in the market. If you want to buy a house that needs minor repairs – perhaps a new roof, an updated kitchen or bath, new appliances, etc – can you incorporate that into the loan to purchase the house? What if you want to buy a home and put zero down? Many people believe that these things are not possible but if you are working with a great lender that has all of the available options at their fingertips and knows how to use them these things can be done!

FHA 203(k)
An FHA loan is a mortgage loan that is insured by the Federal Housing Administration and because the loan is insured lenders are willing to make these loans are more flexible terms than a conventional loan. This means credit standards are not as tight and down payment requirements are lower. Right now the minimum down payment for an FHA loan is only 3.5% and credit scores of 620 are approvable. The 203(k) loan is a variation on the FHA loan which allows you to buy a house with only 3.5% down and borrow extra money to make specific improvements to the home you are buying. These improvements can include roof, electrical system or plumbing upgrades, flooring, remodeling of kitchen or bath, appliances, window or door replacement, etc (structural problem repairs are not allowed and neither are room additions). What you have to do is get a contractor estimate for the specific repairs and then we appraise the home on an “as completed” basis – the appraisal is based on what the home is worth after the improvements have been completed. The homebuyer is responsible for monitoring and completing the work after buying the house and the repairs may be inspected by the lender. The maximum loan amount can be 100 – 110% of the finished value (the buyer still has to make the minimum 3.5% down payment based on the purchase price of the home). The maximum amount available for repairs can be as high as $30,000 and the current loan limit for FHA loans in our area (SE Michigan) is set at $297,500. This is a great way to buy a house that needs some TLC and finance the repairs at the time of purchase!

VA Loans
A VA loan is insured by the Veterans Administration and is made to eligible veterans of the U.S. Armed Forces. Much like an FHA loan, the VA loan guarantee makes lenders willing to offer these loans at more flexible terms than conventional loans. Depending on the eligibility of the individual veteran it is possible to purchase a home up to $417,000 and put zero down! The seller can even pay up to 4% of the sales price to cover the buyers closing costs, property taxes, etc. This could be used to allow someone to buy a home in today’s market with little or no money out of pocket! Wow, I thought somebody told me zero down loans were all gone?

Working with an experienced, well informed lender that has the right tools and knows how to use them is a must in today’s challenging times. I have the experience and the tools to help you make your dream house a reality so feel free to contact me to discuss options to accomplish your goals.

Tags: fha loan, fha mortgages, fha mortgages in Michigan, va loans, va mortgages

Home Stagers Unite to Benefit Habitat for Humanity of Oakland County

This week, five fellow Home Stagers and I donated our talents and furnishings to stage the vacant property at 159 Highland in Clawson. We will be holding a preview Open House tomorrow, April 24th, from 4-6pm for real estate agents and press. A $5 donation at the door includes a tour of the house, refreshments, Q&A with the Home Stagers, classic car display and a chance to win a complimentary Home Staging consultation. Always wanted to take a ride in a ‘61 Caddy or a ‘65 ‘Stang? Here’s your chance, for a small donation. All proceeds go directly to Habitat for Humanity of Oakland County. The house will be open for public viewing on Sunday, April 26th 1-4pm and will also include a benefit lemonade stand featuring my daughter as head cashier! Please join us if you can.

The participating Stagers are all members of the Real Estate Staging Association (RESA), the fastest-growing Staging organization in Michigan. Think “NAR” for Home Staging. These ladies are all competitors, but more importantly, friends. It was a delight to join forces and get creative with them for such a worthy cause. Habitat for Humanity is doing wonderful things in our community.

Tags: answers to home seller's questions, Habitat for Humanity of Oakland County, home stager, home staging benefit, Home Sweet Home Staging, Marianne Sweet on Home Staging, oakland county, RESA

What Really Happens after I “Give it Back to the Bank”?

I have been hearing people saying lately that foreclosure is so common now that being foreclosed really doesn’t have the same negative impact on credit and borrowing ability as it used to. Can this be true? Absolutely not. This article is directed at those folks who are considering walking away from a property they own because it has lost value – not because they are having a financial hardship, like job loss. If you choose to “give it back to the bank” you should understand the long term implications. A foreclosure will have at least 5 potential long term issues associated with it.

Credit Score Damaged
OK, it goes without saying that your credit score will be hammered. This is not an exact science and depending on what your credit report looks like now will affect the score reduction. However, you can expect your score to go down by 100 maybe 200 points or more and stay that way for several years. The foreclosure itself will stay on your credit report for a minimum of 7 years and you’ll be explaining that to creditors any time you apply for new debt.

New Loans Hard to Get
Lenders of all types – automobiles, credit cards, department stores, gas stations, installment loans, mortgages, home equity loans, every lender uses your credit score and credit report to determine your willingness to repay your debts. If you walk away from a mortgage loan every lender you currently borrow from, and those that you may apply with in the future, are going to wonder “If you didn’t repay that loan what’s stopping you from walking away from our debt?” You will not be able to obtain any mortgage financing for approximately 4 years (and only then if you have re-established good credit) and you may even have trouble leasing a place to live because landlord’s look at your credit score.

Existing Credit Cards Limit Reduced and Rates Increased
Surprising to some folks, your credit card companies review your credit report every year and even if you are paying that bill on time they can and will raise the interest rate on your credit card if your credit score goes down. They may also reduce your credit limit or change the terms on your card or even cancel and close the account.

Higher Insurance Rates
Insurance companies also use credit score as one means to determine risk and they may increase your rates if a score reduction occurs. This can impact your auto insurance, home insurance, even your health insurance!

Home Equity Loans and Second Mortgages can continue Collection Efforts
One thing that most people do not understand about foreclosure is what happens to a second lien on the house. If you have a home equity loan or a second mortgage on the property that lender will be forced to release their Lien on the home for the foreclosure to go through. However, this does not mean that they give up their legal ability to collect on the debt. The second mortgage lender will place a collection account on your credit report for the full amount of the debt and that collection account will not go away until you pay them off or settle the debt. This will make the impact of the foreclosure even worse for your credit score and ultimately you may be forced to pay the debt even after the foreclosure is completed.
The bottom line here is that the impact of a foreclosure has not changed. If anything has changed it’s the perception that letting a home go to foreclosure is somehow OK. Foreclosure will have far reaching implications on you and will continue to haunt you for years to come. If there is a course that you can follow that does not involve “giving the keys to the bank” then you should look hard and long at it because the foreclosure may seem like a good short term fix but in the long run it’s going to cost you a lot of money and heartache!

Tags: forclosures, foreclosure

What’s Going on with Rates on Mortgages??

So, you own a house and are wondering if you should refinance? Can you get a new loan? Are rates low and are they going lower? Man, you’ve got a lot of tough questions!

There has been a lot buzz lately about mortgage rates and mortgage availability; Rates are at 5% and the government is going to lower them to 4%. Nobody can get a loan. What’s the real deal? Well, we all know that the federal government does not “set” mortgage rates. Those rates are determined by the supply and demand for Mortgage Backed Securities (MBS) in the market place. When demand is high mortgage rates go down and vice versa. Lately, with all of the foreclosures the demand for MBS has fallen off because when a loan in a portfolio of loans (called a MBS and sold to investors) goes into foreclosure the investors in that pool all lose money, so mortgage backed securities are not the no-risk investment they were once thought of.

In steps the Federal Reserve with a mission to lower mortgage rates in an effort to stimulate the bruised housing market and what do they do? They become a buyer of mortgage backed securities – and a huge buyer to boot. The Fed announced last Wednesday a plan to purchase about a trillion dollars in MBS. The mortgage secondary market was elated and rates went down from 5.5% (conventional loan to $417,000) with no points to a low of 4.875%. Wow! The thing is that this can only be sustained if the Fed continues to support demand by buying and they can’t be a buyer everyday forever. So, as you can imagine, rates started creeping up the very next day and are currently at 5.375%. Still interest rates at or near 50 year lows.

The problem right now with keeping rates low is that the government is creating trillions of dollars of new government debt to pay for all of the various bailouts we are involved in and interest rates have to be attractive enough on this debt to encourage buyers to buy it and that is putting upward pressure on rates in general.

The bottom line on rates is that they are very attractive right now and although there may be some dips the likelihood of a significant drop is not very high.

In terms of availability, if you have good credit and equity in your home (or a down payment to buy) you can still get a great mortgage loan. Contrary to what you may have heard there are even some outstanding Jumbo loans available today. In my office we are doing loans up to $1.5 million at 5.25% on a 7 Year ARM. Granted, you have to have a 30% equity position in the property but if you do 5.25% is pretty incredible on a loan this size.

So, rates are great right now and are probably going to stick around this level for the immediate future, loans are still being made and if you are in the house buying market or considering a refinance the timing may be just right.

Tags: Adjustable-rate mortgage, Business, Federal Reserve System, Loan, mortgage, Mortgage loan, Mortgage-backed security, Refinancing

Home Sellers Top Questions About Home Staging

As I head to Florida for a much-needed vacation and annual Spring Training game (Go Tigers!!!), I leave you with an excellent Q & A reblogged with permission from my staging colleague Cindy Bryant of Redesign Etc, Inc. in Houston, TX.  Her post on Active Rain is spot-on and truly reflects the most common questions that I am asked by potential staging clients.   I apologize for starting my vacation early and taking the easy way out.  Truth is, I couldn’t have said it better myself.

Take it away Cindy …

“There is so much information on home staging, that home sellers are on overload.  With advice coming from all kinds of sources and areas of the country.  Yes, it is confusing, where do you start?   If you watch tv, you may get the impression you can have your home staged for under $2000.  Or another show may stage a home for around $20,000.   Big difference!   Another show has strangers coming to your house picking it apart, to the point that you’re thinking, no way am I going to let someone do that to my home.  You can read articles or books on the internet from people that may be experts or just people with an opinion.  You can also read a book on ”How to Cut Hair”, but would you actually trust yourself to cut your hair or someone else’s?  I wouldn’t!  So, where do you start?  Sure, you have questions … who wouldn’t?

Here are a few questions home sellers have when thinking about staging their homes.

1) How much does it cost? Reasonable question … as a matter of fact it’s the #1 question.  It’s the big mystery.  This is why.  I wish I could say every home stager could give you a standard answer, but we can’t.  Every stager should be their own business entity, and provide different services.  Some charge an hourly rate, by the square foot, per room, a percentage of the list price or a flat fee.  As every property is different, we really need to see the home to assess it and give you a solid number.  Some stagers can estimate it, but shouldn’t be held to that number until the property is viewed.  There are too many variables that go into it. Is is vacant? Do furniture and accessories need to be brought in?  Or is it occupied, and you just need a redesign of existing furnishings? These are just a couple of examples.

2) Who pays for the staging? The 2nd most popular question.  The home seller is ultimately responsible for staging services.

3) Why doesn’t my Realtor pay for home staging, they are making the commission? Again, ultimately a homeowner is responsible for staging costs.  Some, but not all real estate agents will pay for a Home Staging Consultation, as a value-added service, but the actual costs associated with staging (furniture rental, actual hands-on staging) is paid for by the home seller.  It is not the responsibility of a real estate agent to pay for home staging costs.

4) Can I pay at closing? This is up to the stager.  Most, do not do this as we do not know if a property will be on the market for 1 day or 3 months.  Again, we all do it a little differently, some ask for 1/2 upfront, and some charge a monthly fee.

5) What do you do? Again, each home stager is their own entity.  Some offer redesigns only, some offer accessories only, and some offer furniture and accessories.  Some don’t have the inventory to do a vacant home so they will have to use a third party source, and some use their own inventory.  Different services can be offered, such as paint color consultations, personal shopping, organizing, curb appeal, recommendations on cost-effective cosmetic changes such as flooring, counters, lights, fixtures, etc.  The ultimate goal is to help a seller get their home sold faster and in the most cost effective manner.

6) How long does it take? It depends on how much you want done and to what extent.  It can take a few hours or a few days, or maybe longer if there are some cosmetic changes that need to be taken care of.

7) When should I have my home staged? As soon as you decide to sell.  Call a professional home stager and get a Home Staging Consultation.  Once necessary recommendations are completed from your stager’s list, your house is ready to be listed.  Don’t make the mistake of putting up that “For Sale” sign in the front yard before your home is ready.  The first 20 days a home is listed will be when it will get the most interest and traffic.  Make sure your house is show ready.”

Tags: answers to home seller's questions, Cindy Bryant, home stager, Home Sweet Home Staging, Marianne Sweet on Home Staging, Redesign Etc Inc., Rochester Hills Oakland County MI home stager

Don’t Underestimate “The Neighbor Factor” When Selling a House

We know that the three most important factors for a successful real estate sale are location, price and condition.  While the seller can make changes to the price and condition of a property to hasten a sale,  no one can amend the location.

What happens when the location of the house itself is desirable, but the neighbors are not? 

Everyone has a story.  The neighbors who don’t mow their weed-infested yard.  The RV parked in the driveway year-round.  The garbage cans left out for days after pick-up.  The home improvement project that was never finished.  The incessant barking dogs.  The company van.  The boat.  The used cars for sale.  The dumpster.  The broken garage door.  The loud parties.

The smart buyer will scope out the neighborhood before making an offer.  If a house isn’t selling, it may be “The Neighbor Factor” at work.  Here’s where a home stager can help.

In this photo, furniture placement (specifically, a strategically-placed tree) help to block the view of the neighbor’s backyard, so it’s not the first thing a potential buyer will see when they enter the space.

It’s only upon closer inspection, or in this case zooming in, that you become somewhat aware of the Tiki Bar in the neighbor’s yard and the novelty signs that are plastered all over his garage.  Home staging assured that the focus was on the great sunroom itself, and didn’t allow the neighbor’s yard to be a distraction.

As the home stager on this project, I was fully prepared to have a little chat with the neighbor and charm him into toning it down by removing the signs from his garage.  We home stagers go to extraordinary lengths to make sure our clients’ properties show in the best possible light, and that includes talking to unruly neighbors.  Unfortunately in this case, I never found the neighbor home to speak to him.  It turns out, however, that I didn’t have to.  This house sold 7 days after being listed on the MLS.

While there isn’t a silk tree large enough to camouflage an RV in an adjoining driveway, a home stager can do wonders to increase your property’s marketability.  We have a large arsenal of tricks at our disposal, including the power of persuasion and the desire to use it!

Tags: home stager, Home Sweet Home Staging, Marianne Sweet on Home Staging, neighbors preventing sale, selling a house with unruly neighbors