I am now on Twitter! Yet another way to stay updated (when I remember to post updates)…

http://www.twitter.com/tsgoodwin

Now you can follow my blog on ThomasGoodwin.com, subscribe via RSS Feed and stay up to date on Twitter. As always you can get ahold of me using the Contact page on this website.

I welcome any feedback and comments you might have!

I’ve tried a few of the other online mortgage and installment loan calculators, e.g. Yahoo! Finance has a decent one, but none of them that I’ve found have a place where you can find out what kind of impact adding additional principal payments will do to paying off your loan early.

So I created the following calculator in Microsoft Excel that you can easily use to compute the monthly payments on anything with a regular installment loan, whether it’s a mortgage, car, boat or similar amortized loan.

You can enter information in any field labeled with green. You will notice there’s a column entitled “Additional” in the amortization schedule. This is where my spreadsheet is different from the online calculators that just show you monthly principal and interest! Any amount that you type into this “Additional” column will show you the impact of paying down your loan faster. Whether it’s adding $50 to each month, or making one extra payment in the 1st, 12th, or 24th month, etc. you will instantly see the difference that it will make in how quickly your loan gets paid off.

When you add in additional principal payments you will notice that the loan balance will go to zero or even negative sometime before the last scheduled payment. The month that the loan goes to zero or negative is the point where it will be paid off! Leaving the “Additional” column empty will cause it to take exactly the number of periods to pay off the loan that you took out, so a 30 year mortgage would take all 360 months but adding in one extra principal payment in the 12th month and suddenly you knocked the last 7 years or so off of the loan!

I added in a Second Mortgage field and amortization schedule but this could just as easily be used to compare two loans side-by-side or to compare the effects to paying differing amounts of additional principal on your loan.

Give it a try! Without further ado, here is the spreadsheet in Microsoft Excel! If you are prompted to put in “Authentication” Information such as user name and password just hit the cancel button next to the user name and password fields and it will then download the spreadsheet. I don’t know why it’s asking for that! I don’t have the document password protected! You may also want to right-click on the link and select “Open in New Window”. I apologize for any technical difficulties!

As always, I appreciate your comments and feedback!

That’s right, welcome home. It’s more than just a door mat saying. That’s the name of the government program that will help pay your closing costs to buy a home if you meet the following criteria:

1. You do not currently own a home.
2. Your household income is at or less than 80% of the average income for the area where you are looking to buy a home.

So it’s not clear who qualifies because you could very well qualify in one area but not another. If you are looking to buy a home in Hamilton County, Ohio (which is essentially Cincinnati), you would qualify for the 2nd requirement listed above if your household income was at or less than $52,960 for a household of one or two people. That maximum amount of income allowed to qualify for the program is increased to $60,904 for a household with 3 or more people.

In more rural areas, such as Adams County, Ohio (some 3 counties east of Cincinnati and Hamilton County) a couple making $56,640 or less would qualify and a family of 3 or more people would qualify with $66,080 or less in income.

You can see the maximum income amounts allowed by the program as they pertain to all 88 counties in Ohio by visiting the Federal Home Loan Bank of Cincinnati’s website.

If you meet the above requirements, the government (a.k.a. The Federal Home Loan Bank) will let you have up to $5,000 of downpayment assistance. It’s yours for the taking, first come, first serve! It must be used for a home that you occupy, so no rental properties.

The only catch is that if you sell the property within 5 years of taking this downpayment assistance, you will have to repay it to the government on a pro rated basis. For instance, if you sell the home after two years and had received $5,000 of assistance, you would have to repay $3,000. The loan from the government becomes a gift to you at the rate of $1,000 per year. After 5 years, the government says congratulations! You will need to discuss any tax implications of taking this assistance with a tax professional.

This is a grant program, and like most grant programs there isn’t an endless supply of free money to go around… so this is not like the free money that the government is sending out to tax payers as part of the economic stimulus that Congress passed. Once the money for this grant has been dispursed, that’s it… no more money. So if you are thinking of buying and meet the eligibility guidelines above, tell your Realtor and/or Loan Officer to get you into this program right away!

I, unfortunately, cannot take credit for discovering this good news. I found an article about this grant/down payment assistance program in my May 2008 Ohio Realtor newsletter. Therefore, I also cannot accept blame or responsibility for any errors or omissions in this article. I would encourage anyone that is interested in the program or has questions about it to visit the Federal Home Loan Bank of Cincinnati’s website or talk to your mortgage loan officer. That is my disclaimer! I’m just sharing news that I found in my trade publication.

As always, I welcome your comments and feedback…

But there are fees that can chip away at that happy, responsible home owner feeling. If you see these fees listed on the Good Faith Estimate (that every lender is required to provide to you), you should ask to have them removed or shop around for better deals;

Underwriting Fee
Processing Fee
Non-refundable Loan Application Fee
Document Preparation Fee
Appraisal Review Fee
Loan Origination Fee or Mortgage Origination Fee

There are probably several others that I just haven’t come across. In fact, some of the above can be called different things. What’s important to know is that the lender is trying to pass costs along to you and you are trying to get the loan for as little cost as possible.

For instance, if the lender charges every borrower a $300 underwriting fee, what they have essentially done is used your money to cover their overhead expenses, especially since most underwriting is automated to a great extent and the underwriters only review marginal cases in many banks.

You probably will not be able to get out of paying any of the following fees:

Flood certification fee
Recording Fees
Title Insurance (for the lender)
Title Exam or Title Search
Appraisal Fee
Credit Report fee

The recording fees are those that the bank incurs to “go down to the courthouse” and file the mortgage/lien on the property. It’s essentially a tax that county governments charge, or tax, to keep track of who owns property and who has a loan on the property. When you go to sell property you will pay a conveyance fee (at least in Ohio you will) and it’s usually based on the sale price. Some lenders will waive the credit report fee, I listed it under the “non-negotiables” because it’s usually only about $16. And when the bank is trying to sock you with $175 underwriting fees and $300 processing fees, why fight over the $16 charge… go after the bigger ticket items.

I recently went to refinance and I liked my new interest rate, but I didn’t like that it was going to take over two years to recoup my closing costs in the reduced monthly payment. (What I mean is, if my payment went down $100 by refinancing but I had to incur $2,400 in closing costs on the loan to refinance, it would take me 24 months to recover my closing costs in that lower rate loan and lower monthly payment.) The loan officer was able to knock off the $175 underwriting fee without even going to his manager or consulting with anyone… so the loan officers have some say in the fees. Just make sure you tell them you will be shopping around for the best deal (and stress to them that by “best deal” you mean in terms of lowest closing costs AND lowest rates).

As always, I welcome your comments and feedback…

Happy filing!

I recently touched on banks and lenders wanting to diversify and seek out other types of loans in my blog on January 3rd, 2008 (Banks Ditch Home Loans for Student Loans). Just three short months later, on Wednesday, April 9th, 2008, I opened up the Wall Street Journal and found an article on the front page of the Personal Journal page (D1) entitled “Credit Crunch Hits Private Student Loans.” Now, these aren’t your government-backed student loans; rather, these are the kind you get when you’ve maxed out the amount that the government will loan you. These loans help students that otherwise would be putting payments for books and tuition (in addition to the usual beer and pizza) on credit cards.

It seems that lenders are suddenly finding these loans aren’t the instant savior to the banks’ balance sheets that they thought they were, for a myriad of reasons. Money is becoming more expensive. The banks have to pay interest to the source of funds that they turn around and loan out, i.e. the capital markets. If a bank does not want to pass along increased costs to its customers it can instead choose to restrict the issuance of loans to higher credit customers, and thus the customers that represent a lower default risk. Regardless which path the bank pursues, or if it’s some combination of the two, we are still seeing a contraction in the credit market for student loans that is only being somewhat offset by the federal government increasing the amount that students can borrow in the federally-backed loan program.

What will be next? We’ve already seen higher costs or restricted lending practices with respect to real estate. Now private student loans are feeling the sting.

Car loans? Yes, car loans should be an interesting line of credit in the market considering all of those 0% new car loans that were freely available a couple of years ago. Car loans are still quite cheap considering the terms of the loan are often 36 months to 60 or 72 months. But I fully expect auto loans to climb at least 1 point but up to 3 points in the coming quarter to six months as credit markets tighten across the board.

With the auto industry is already hurting, higher interest rates on loans won’t help that sector recover anytime soon. Regardless whether you’re Toyota, GM, or Ford, you still don’t want to be in a business where consumers’ have less buying power and will therefore think twice before pulling that new sedan off the lot.

Steer clear of the auto industry related stocks for a while. These stocks won’t be a buy until credit becomes more readily available and incomes start to rise again.

As always, I welcome your feedback…

I have also posted the required bond to be a licensed Surplus Lines Insurance Agent in the state of Ohio.

I will continue to update this as often as possible. I apologize for my recent absence in blogging. I hope to get back into my routine soon!

As always, I appreciate your comments and feedback…

This loan was unique in the respect that it allowed first-time home buyers to borrow 100% of the sale price of the home on a competitive 30-year, fixed rate mortgage WITHOUT having to pay PMI (private mortgage insurance). To qualify as a first-time home buyer the applicant had to not own a home within the last two years. There was also an income limitation (cap, not minimum) so it was great for young professionals, newly weds, recent college graduates, or just your regular working stiffs. The closing costs were very reasonable, too. I want to say that the numerous closings that I had as a Realtor where the borrower used this loan program, the closing costs to the borrower were usually $1,200 to $1,600. Also, the seller could help pay some of the buyer’s closing costs (up to 3% of the sale price I believe) so the buyer could almost walk in and buy the home with no cash at closing.

Now I realize that with the rise in foreclosures and everything you hear on the news about subprime loans and banks having problems with liquidity that this program sounds horrible to a bank for the same reasons it sounds great to buyers! But this wasn’t for your subprime borrower… the buyers had to have good credit to get these loans, conforming loans as opposed to non-conforming. This loan program gave Fifth Third a nice competitive edge in the first-time home buyer market and I can only assume helped build loyalty and helped sell additional products and services. The borrowers were given a half a point reduction on the interest rate of their loans if they had the monthly payment automatically drafted from their Fifth Third checking account. Hence, borrowers then started doing more and more banking with Fifth Third.

I would like to see Fifth Third bring back this loan program. If you bank with Fifth Third and if you are ever in a position where you’re asked by an employee or manager what you like or don’t like about the bank, I hope you will mention that you’d like to see them bring back The Good Neighbor Home Loan Program. In the meantime, there are still many loan programs out there to help first-time home buyers - such as FHA loans. If you have questions or need specific advice, call or stop by the bank of your choice to talk to a lender that you know and trust.

As always, I welcome your comments and feedback…

As a quick aside for those readers out there who have never shopped for a mortgage or did not realize there are different types of lenders, we have mortgage bankers and mortgage brokers. A mortgage banker is typically an employee of the bank, “the loan officer” in your friendly neighborhood branch, whereas the mortgage broker is like an independent agent that takes your loan application and sends it to multiple lenders to (supposedly) try to find you the best deal that they possibly can in the market. Mortgage brokers of course charge you a fee to do this service and/or they receive a fee from the lender that makes you the loan.

As the number of foreclosures ticks higher and banks tighten credit standards so fewer people qualify for mortgages, I have noticed an increase in the advertising for non government-backed student loans in the media and especially on tv.

First there were the ads for Astrive, which only caught my attention because they continued to run similar ads with different website addresses. The website address at the bottom of the tv screen always starts with Astrive and then ends in some three-digit number and the usual .com suffix. In the financial world, seeing a company use multiple websites with similar addresses always throws up a red flag in my mind. I am not saying Astrive is a bad company; at this point, I don’t know enough about them. But I am curious why they have multiple website URLs and why they are so similar.

I didn’t think much of the Astrive ads (aside from the various - and seemingly frequently changing - website addresses) because this is the business that Astrive is in. But then I saw a commercial for student loans from Chase Bank. I haven’t seen a commercial for home loans through Chase in quite some time so seeing the commercial for student loans caught my attention immediately.

It is interesting to see that as the mortgage and real estate market has taken a downturn, lenders have turned to student loans, which are repaid over many years - up to 20 in most cases - similar to the 30 years that a home loan is amortized over.

Only time will tell if student loan defaults will become a crisis in our society similar to the foreclosures. Some news commentators and talking heads on tv have speculated that the auto industry may be next with its flat sales and low (or zero) interest loans. Certainly the default risk on a zero percent interest loan is still higher than zero and those loans, when packaged with other interest-bearing loans and sold to investors, would sell at a steep discount.

As always, I appreciate your comments and feedback…

So, what is the article about you ask?! Well it seems the Erlanger, KY police chief wants to charge a fee for officers’ time in order to respond to accidents. The article cites statistics that a majority of the wrecks in Erlanger’s jurisdiction involve people that are not residents of the municipality. I didn’t think it mattered where you were from, if you caused an accident you get a citation. If you get caught speeding, you get a citation. I know plenty of people that have received speeding tickets in their home town as well as other cities and states. If Erlanger does not want to help non-residents because of the cost involved, perhaps it should have the decals on the side of their police cruisers amended to read “To protect and serve our community only.”

The article also addresses (from one side) the notion that you can bill an insurance company for responding to an accident. I don’t see how you can levy fees on motorists that have insurance that will cover such a response but not your own community members as the article suggests that Erlanger will do. If you levy the fee on out of town motorists, you would also need to assess community members.

Here is my letter to the editor, just in case The Enquirer decides not to print it:

In response to the article about charging a response fee to drivers involved in a wreck, I want to clear up an inaccurate statement made by Cost Recovery Corp and also respond to the police chief’s comments.

First, for Cost Recovery Corp to assert that insurance companies cannot raise rates in certain areas and that companies will not increase rates if they’re required to pay first responder fees is simply not true. Any actuary that incorporates those added fees into the rate modeling will in fact use these costs to affect rates. Insurance companies will file with the state for higher rates and justify the rate increase by pointing to the evidence that higher claim dollars are being paid out. Insurance regulators want these companies to remain solvent just as much as they want the market to be competitive. First responder fees affect all of the insurance carriers competing in a given market so this will affect everyone, not just those who have accidents.

Police Chief Marc Fields questioned why his community should fund the cost of his officers responding to accidents. My response is quite simply, “isn’t that what fines and citations are for?” Sure fines are to punish someone for wrongdoing and to deter future behavior, but the fines also help fund the municipal government’s operations. Perhaps Chief Fields should have read the article entitled Don’t Speed Here on the front page of The Enquirer about Arlington Heights being a speed trap. That village also responds to a number of accidents on I-75 that don’t involve its own residents. But that village also actively patrols that stretch of I-75 to deter speeding and issue citations to generate revenue. Unlike adding first responder fees, which drives up insurance cost for everyone in a given area over time, issuing citations drives up insurance cost to those that committed the violation.

As always, I welcome your comments and feedback…