When should you lock in a loan? Is there a “best time”? What happens if rates go down after you’ve locked? What if you change the loan package from 30 years to 15 years? There are consequences for changing your mind after you’ve locked in a loan, and maybe it’s not worth a switch. As it turns out you are able to switch the type of loan package you want even if you’ve already locked, the lender just goes back to the day you said “Lock in my loan” and looks at the rate for the 15 year loan instead of the 30 year you initially locked with. So whatever the rates where the day you tell your mortgage broker “Lock my loan” those are the rates they use. Rates can change daily so your initial quote from a broker might vary slightly, good or bad, depending on getting in your loan application and when you are ready to lock in.

To learn more contact Arizona mortgage broker, Mike Goblet with United Mortgage Financial Group, Inc. at 408-503-3533 or visit us online at http://www.arizonamortgagenews.com

Matt O’Brien: Welcome back to another segment of Arizona Mortgage News. We’re here with our local expert, Mike Goblet of United Mortgage and Financial Group. Good morning, Mike.

Mike Goblet: Good morning, Matt. How are you this morning?

Matt: Fantastic.

Mike: Great.

Matt: Sounds like we’re going to talk about what’s involved in locking a loan.

Mike: One of the other 10 things you really need to know about the mortgage process, locking is obviously an interesting part of that a lot of people feel that when they go to a bank, or they call me and they say, “Where are our rates?” and I give them a quote based upon the generalized information I have.

A lot of people think, “Well, that’s the rate. That’s what they will get.” The answer is only maybe.

Matt: Why is that?

Mike: It’s for several reasons. One, as everyone knows or I think as most people know, rates can change. As a matter of fact, they can change many times within the day. That’s not unusual. In either direction, better or worse, because they’re tied to the stock market.

Until I really take, myself, or a bank takes a complete application, runs the credit, you really aren’t giving anybody an accurate quote. Even then, until the person says, “Lock in that rate,” you’re floated which meaning you’re subject to whatever is happening to the stock market in rates at that moment in time.

I’ve tried to lock people who said, “Go ahead and lock,” and the lender’s locking desk was closed because of a rate change in either direction.

Matt: I see.

Mike: Until you say, “Lock that loan,” and until the loan officer is able to complete that, your rate is floating and subject to the market circumstances.

Now, that being said, the locking process is actually pretty simple. All I really need is the person’s permission to lock, or acknowledgement that’s what they want to do. I don’t need all the documentation to have received it in order to lock.

I can lock with somebody as soon as they say, “Lock in that rate,” and I’ve completed the application.

Matt: What happens if the rate goes down after you lock in and complete the application?

Mike: There’s two things. Once when you lock, it’s important to understand you’ve locked in to that moment in time of wherever any rates are.

That becomes important because a lot of people going through the process will say they start out with a 15year, or even a 30year then want to switch to a 20, or back to a 30, or whatever. What happens is the loan officer goes back to that time and date when the loan was locked and that’s where they get that information.

Even if you changed terms during the process, you’re still locked in to whatever was going on at that point.

Now, to answer specifically your question, what rates drop? A lock means just what a lock means. You’re locked in to that time and date, whether rates go up or rates go down.

There’s a caveat to that and I’m sure many people have heard, “Well, my bank said I could float down if rates get better.” The answer is those programs exist but they’re not without guidelines and cost, as a matter of fact, whether they’re built in to the initial rate, meaning you start out at a higher rate and it lets you float down to a certain level.

Most of what the industry calls floatdowns mean that the parameters are you need to be changing the rate at least the quarter of a percent from where you locked that and that it has an adjustment or a cost of 0.375 percent of whatever the loan amount is. For example, on a $200,000 loan, that’s a $750 adjustment.

Now, when you look at those two caveats, the situation being you really need a dramatic market change, not just some improve in the rates, to take advantage of the floatdown. The type of change that generally never happens within a 30, or 45day period. It happens over along the period of time. The reality of a floatdown is really seldom viable.

Now, it becomes a question as well as what’s your commitment now that you’re locked? In terms of the client, there really is no real commitment. When a loan officer locks somebody, it’s on the good faith belief that that person is going to proceed with the loan.

If that person locks away from a locked loan, there’s no real consequence to that client. There’s no charge that can or should be assessed against that client. There’s no obligation when you lock a loan to continue with it.

If rates do improve and you decide it’s to your benefit to change lenders within the process, you can do that without consequence. That being said, the loan officer does make a commitment. When we do that, we tell our bank or lender, “We’re going to provide you this loan. You’re going to tie up your money until we complete it.”

The bank takes that seriously because you’re tying up their money. People like myself, loan officers and companies that work through those banks, have the commitment of what they call fallout that if we provide too many loans, that fallout don’t go to completion, some lenders will drop those banks, or loan officers, or mortgage companies.

If their fallout becomes to great or maybe they won’t let them lock until all the paper work is in, there’s different consequences, but there are consequences.

Matt: Very good. As in life, there are consequences.

Mike: My real situation that I say just to client is when you lock, don’t look back. If you took a bird in the hand and that should be your real decision, you’re pretty happy with what you got, it was a good program, take it and only look forward, don’t look back.

Matt: Makes sense.

Mike: Finally, when your loan officer has locked you in, they should be sending you what’s called the locked GFE which, by the way, starting next week, that becomes something different called the loan estimate due to the changes in what’s called TRID which I will talk about in the next series.

Starting next week, there are major changes both to what used to be called the good faith and the closing documents that you sign that used to be called the HUD settlement statement. That’s for another day.

Matt: It looks like I got some funky thing going on here. I didn’t realized that that was going on.

Mike: If you didn’t. I thought you were trying to make me smile. You were very successful.

Matt: As always, great segment, Mike. For those that want to get in touch with you, what is the best way to get in touch?

Mike: You can call me at the office at (480)503-3533, call my cellphone directly at (480)220-2329, or you can email me at mike.goblet, at our company initials, @umfginc.com.

Matt: We look forward to you on the next segment, Mike. Thanks for sharing your wisdom.

Mike: I do too. I hope everybody will come back to learn what the changes that are being imposed on the mortgage industry, the consequences it will mean. By the way, like almost anything the government does, they’ll be good sides and bad sides to it.

Matt: As always. Have a great day, Mike.

Mike: You too. Talk to you soon.

If you own a home you’ve bought Title Insurance, it’s a part of the home buying process. Unlike homeowners insurance that is ongoing coverage, title insurance and the title company works a little differently. Many people don’t understand it entirely just maybe nod their head in agreement or remember they signed the closing papers there. The role of the title company is to check the property for any liens against it and to act as a neutral third party between the insurance company and lender. Incidentally, they also act as a neutral third party holding company at closing between the buyer and the seller. It might seem like a common sense step but we sometimes forget that people commit fraud and leave behind debt or unpaid taxes often. If you fail to have the title checked and cleared then you’d be on the hook for previous owners debt. To learn more about what title insurance and what a title company does contact United Mortgage Financial Group at 480-503-3533 or visit us online at http://www.arizonamortgagenews.com/contact-us/

Matt: Welcome back to another segment of “Arizona Mortgage News Insider Update.” We’re here with our insider, local resident Mike Goblet of United Mortgage and Financial Group. Good morning, Mike.

Mike Goblet: Good morning, Matt. How are you?

Matt: Doing quite well in this fine Arizona weather we have.

Mike: Yes. It’s the monsoon season.

Matt: Yes, indeed.

Our title today looks like a good one. “What Is Title Insurance and Why Is it Necessary?”

Mike: Yeah, title insurance is part of every mortgage transaction, but people rarely understand what it’s about and why it is necessary. I thought it would be a good clarification point.

Matt: Excellent.

Mike: If you’re buying a home, there’s really only one step to the process…excuse me, if you’re refinancing your home, but if you’re purchasing, it’s two step.

Even before we get into those steps, let’s talk a little bit first about the title company and their role. They are designed to be a neutral third party assisting in the transaction. And they end up doing much of the work regarding the title search.

In a purchase, they also provide another role in that as the escrow company between the buyer and the sellers handling the cash. Again, as a neutral third party.

What they do in terms of the title insurance is they do the search for what are called any “clouds” on the title for the ownership of the property. That any liens that might be filed by somebody, they check to see.

Then the title company, they are the ones who issue what’s called a “Loan policy” for the property that assures that the lender, or the new lien holder that number one, there are no clouds on the title and number two, that they are in the first position of that lien.

Matt: Makes sense.

Mike: That’s a consistency to whether it’s a purchase or whether it’s a refinance. But now the next step, if it’s a purchase, there’s also an extended search that needs to be done to make sure going back further in history.

You can picture on a refi, you’re talking about a continuation or retained ownership. There’s lesser things that could have happened to that title. If there’s been different transactions going on, the history needs to be deeper and a stronger amount of research.

Now, in a purchase, this is called an “Owner’s title policy,” and it’s usually paid for by the seller. OK? It’s more in depth and actually costs more, but it’s required before the title company will issue that lender’s policy that insures the lender that they’re in that first position.

The only caveat I might make to that is it seems like in most builder situations, builders usually end up making the new buyer pay for that policy as well. As I said, normally it’s paid for by the seller.

The question is, what are they looking for? And why is this necessary? Well, the obvious is that they’re looking for such things as court filed liens, like a mechanic’s lien for work that may have been done against the property. The mechanic or the person that did the work not getting paid can file a lien.

HOA’s can file liens against homes and properties. Tax liens often happen. These are the most common, OK? And the easiest part.

The title company in its due diligence must go deeper. For instance, they also check that the title and the deed for any omissions or errors. They have to search for fraud or forgery that may have occurred on the policy. Things that we say, “Well, this can’t happen.” No, the mortgage meltdown proved this can happen, and it’s why title policies and the research regarding it become even more important.

But there’s even nuances out there that we never even think about, like conflicting wills against the property that may exist due to just variations that may have happened during the property’s ownership.

Or undiscovered heirs that can come out of the woodwork saying, “I didn’t know about it, and now I have a claim against the property.” The title company will do the research against that, and candidly will even provide an insurance policy, but it’s not the same one that the lender policy is. It’s a separate program that you might want to buy, for instance, as the homeowner, called the “Owner’s policy.”

You can see this can get a little complicated, although at the end, we just go, “No, it’s all clean.” There’s a lot of research that needs to be done to make sure that the ownership of a property is consistent and there’s nothing out…any encumbrances out there that could affect that purchase or the ownership.

Matt: Is this something that the insurance companies do the research on to investigate?

Mike: Well, the title company does the research for the insurance company. Actually, you even remember in a prior dialogue we had here, it’s the underwriter’s job to make sure for the lender that there are no liens, again, that are on there. But the title company is the one who did the work for both the insurance company and the underwriter.

Matt: Got you.

Mike: A lot of people then wonder about the fees. Well, generally it’s a very competitive industry. And the fees are usually very comparable, but title and the choice of title is something you can choose if you want to do the research and pick your own title company. OK?

Usually in a purchase transaction, the buyer’s Realtor chooses the title company. OK? But even sometimes a FSBO transaction or a cash transaction, you’re going to want to use a title company to make sure that everything remains there, whether it’s required or not, because there’s not a mortgage there.

The role of a title company is very important.

Matt: As always.

Mike: Bottom line. It’s a requirement for every new mortgage, even if you’re purchasing, as I said, purchasing for cash you’d be foolish not to get it. I just hope this helps you understand a little bit about what you’re getting for and why you’re paying for it.

Matt: It sure does. Well, if anybody has questions regarding title insurance or just mortgage questions in general, what’s the best way to get in touch with you, Mike?

Mike: Well, obviously you can call me here at the office at 480‑503‑3533. Call my cell phone directly. Happy to talk with you at any time, even after hours. Traditional business hours or weekends. That’s 480‑220‑2329. Or email me at mike.goblet at our company initials, umfginc.com.

Matt: Very good. Thanks for another enlightenment or weekly dose of good information.

Mike: Well, happy to provide. Look forward to our next one. It will be a wrap on the things to know about the loan process.

Matt: Very good. Have a good day, Mike.

Mike: Thanks, Matt. We’ll talk to you soon. I look forward to talking to anybody that has questions.

Underwriting: it’s talked about a lot during the mortgage process but what actually do they do? It’s like a mysterious dimension that a pile of all your financial information just floats around in “Underwriting World”, before getting spit out as approved or denied. Mike Goblet, of United Mortgage Financial Group gives the insight of what actually happens behind the scenes and explains what exactly Underwriting is reviewing and looking to see in your file. To learn more or if you have more questions contact United Mortgage Financial Group at 480-503-3533.

Matt O’Brien: Welcome back to another segment of Arizona Mortgage News: Insider Update. We’re here with our resident expert, Mike Goblet of United Mortgage and Financial Group. Good morning, Mike.

Mike Goblet: Good morning, Matt. How are you this morning?

Matt: Not too bad. Surviving the heat.

Mike: There’s a lot of that going on this past week, hasn’t there been?

Matt: Absolutely. We can’t all understand the weather here, but it sounds like you can help us understand a little more about the process of underwriting.

Mike: This is part of the series that we talked about ‑‑ things to understand during the mortgage process. One of the key things, if you’ve ever done a mortgage or heard about them, you hear about underwriting and underwriters almost being a scary terminology in the process.

Matt: Yes, absolutely. They’re usually pinned as the bad guys.

Mike: They’re often perceived that way. I think it’s important to understand their role, and actually, what are they looking for. Essentially, an underwriter’s role covers two areas ‑‑ verification of the applicant and verification of the property.

Now, the underwriters usually fall into what they call the four Cs of underwriting. The Cs are capacity, credit, cash, and collateral. That’s a simple understanding. Now, three of those reflect the applicant, verification of the applicant. Let’s look at each of them.

What does capacity mean? What capacity is, and what the underwriters looks at, is the ability of the applicant to repay the mortgage. That’s really the term that’s used today, the ability to repay. The underwriter goes in. They check first to make sure that the information on the application is essentially correct.

Number two, that the debt‑to‑income ratios of what was said, and versus what we can prove with income and salary, etc., does meet the ability to meet the ratios that are allowed. Does that make sense?

Matt: Makes sense.

Mike: The credit, from that point, once they’ve verified the income, and etc., they will review the credit report. They really look at that in terms of this determines, as we’ve talked about in the past, the risk level of the client.

That, first and foremost, begins with your credit scores. The higher your credit scores, the less risk you are considered, the lower your credit scores, the greater risk you pose. But there are other things on the credit report besides just your credit scores that we get.

They need to look at, is there anything in your history of late payments, etc., that jump out, that say, “This person could be a risk.” Number two, they look at, are there any bankruptcies or anything showing on your credit report? Even though you might have a good score today, but that could influence or impact your ability to qualify for this mortgage.

They go through the capacity, in terms of the ability to repay, the credit report to view the risk level. And then the third C is cash. To make sure that the income, or the cash that you’re saying for the transaction, is available.

For instance, if it’s a purchase, that the money is there, or will be there. That becomes important, because you can’t just come up with cash for a transaction and all of a sudden say, “Hey, I had it under the mattress. And here it is.”

Money has to be seasoned for 90 days to be part of the transaction, or come from sources that are consistent, like a paychecks now coming up, and that will help provide the cash or the sale of a current home so that you have the down payment.

These are the things that the underwriter looks at when it comes to the cash portion of the transaction. The fourth C gets into collateral. What that means is the property itself, the collateral for the loan. This is where the underwriter is actually responsible to review the title.

They don’t go get the title, but they have a title company do that, but they then review it for the accuracy, make sure there are no liens on it, or what are often called “clouds on title,” that could impact the loan to the lender down the way.

They do that. They also then review the appraisal when it comes in to make sure that the appraiser did the appraisal correctly, that if there are any notes made by the appraiser, how that could impact it. For instance, an appraiser might say, “There is a problem with this,” and so the underwriter has to go in and say, “This has to be fixed before we can approve it,” if that makes sense.

Matt:  It certainly does.

Mike:  They go through the appraisal. And then finally, there are other situations about the collateral that they have to verify. That involves the insurance. Pretty simple, the homeowner’s insurance make sure it’s up to date, and that there’s a year’s coverage paid in advance.

Then actually, a fourth thing that many people don’t consider is a flood certification. We often hear from clients saying, “I don’t need a flood certification or the fee attached to it. I’m not in a flood plain.” It’s the underwriter’s job or task to prove that, not just accept it or think that’s the case. They need to prove it.

Part of every transaction, there will be a flood certification that’s necessary to prove it’s not in a flood plain, or if it is, that flood insurance is needed. It’s not a junk fee. Whether it’s shown or covered with the rebates that we talked about in the past, the flood certification is a necessary part of proving the collateral meets all the responsibilities for it.

The underwriter does all this in the viewpoint of, “Can we sell the loan to the secondary market, Fannie or Freddie, or the private investors that they use, and just make sure that the loan is cleared and prepared for that step?”

This is the person that actually does say, “Yup, everything is in order, and we approve the loan,” or, “No, we don’t approve it, and for these reasons.”

Matt:  Got to pay attention to the four Cs, it sounds like. That flood insurance always throws people in Arizona.

Mike:  Actually, the funny part about that, in Arizona, and I get a kick out of this, that actually, if you look at the hundred year flood plain, almost all of Phoenix is in the hundred year flood plain. If we got the rains that are going on in Texas right now, people who didn’t think they were in a flood plain probably end up in one.

Matt:  For sure. Good stuff to know. You don’t really have any influence over the underwriters other than getting your ducks, your four Cs in a row, before you send it that way.

Mike:  Actually, that’s a very important part. Because part of what we do with Jean, my daughter and processor, is really good at working with underwriters and has worked with them through the years.

She knows how to prepare the file for what they will be looking for, ask for things in advance so that we can make the process go smoother for the underwriter, because Jean works with them on a daily basis and pretty well understands what they’re going to be looking for.

Matt:  That’s a great experience to have. That doesn’t come with all the mortgage crew, does it?

Mike:  No, it does not. We take everybody’s loan very personally and try to make sure that it will get approved when we think it will, at the very beginning, and help the underwriter understand, “This is why it makes sense.”

Matt:  Excellent. This was, as always, great information. If people do have questions about the underwriting or mortgages in general, what’s the best way to reach out to you, Mike?

Mike:  You can call the office, here, at 480‑503‑3533. You can call my cell phone directly at 480‑220‑2329, or email me at mike.goblet at our company initials umfginc.com.

Matt:  Excellent. Stay cool, Mike. Thanks again for another good segment.

Mike:  You, too, Matt. Have a great day. Look forward to the next one.

Matt:  Sounds good.

Mike:  Have a good day.

Matt:  Bye‑bye.

The appraisal of your home is a necessary part of the mortgage process.  It also might be the least understood part.  A lot of nuances are involved of the appraisal process and can be confusing to many people.  The appraisal takes into account square footage, lot size, pool, extra buildings on the land, etc.  It’s important that you all remember that cosmetic upgrades made in the home, which are great selling points, are not considered a part of the appraised home value. Exterior upgrades as well such as a new roof aren’t considered because the appraiser assumes the house comes with a roof, new or not.  When the appraisal comes in it is often the most emotional part of the buying/selling process.  If you are seller and think your home is worth $400,000 and the appraiser comes back with the value of $250,000, its going to disappoint you. It is the appraiser’s opinion of what the home size, lot and area offer is worth comparing them with two other properties of similar descriptions (“Comps”), so try not to take it personally. The appraised value doesn’t stay with the home, its good only for the one purchase.  Any refinancing or selling in the future require their own appraisal and moving ahead it might be better or worse depending on the market.

If you have more questions regarding appraisals or mortgages contact Mike at United Mortgage Financial Group at 480-503-3533 or email at mike.goblet@umfginc.com.

Understanding The Appraisal Process

Matt OBrien:  Welcome back to another segment of Arizona Mortgage News. We’re here with Mike Goblet, our Arizona mortgage expert with United Mortgage and Financial Group. Good morning, Mike.

Mike Goblet:  Hi, Matt. How are you?

Matt:  Pretty good. Understanding the mortgage process. Was that the topic for today?

Mike:  That is the topic. In terms of the things to understand throughout the whole mortgage process, the appraisal becomes one of the key things.

It’s really interesting. As much of an important part as it is, it’s often the most often misunderstood and most emotionally involved, even by many of the professionals within the industry. That almost only happens when they don’t agree with the value being high enough.

Matt:  Very nice. I like this approach. We’re going to step back and take a good 10,000 foot level of the whole process?

Mike:  Of the appraisal process, yes. It’s actually interesting. Did you know not all mortgages need a full appraisal?

Matt:  Did not know that.

Mike:  While every purchase transaction and every cash refinance transaction will need a full appraisal, many times, we’ll be able to get what’s called an “appraisal waiver” if the estimated value comes in on target with what we say.

There’s an automated system out there, similar to Zillow, that says the value of this house is approximately this. If it matches, we’re very likely to get an appraisal waiver and not even need an appraisal.

Matt:  Interesting.

Mike:  Sometimes, they’ll even refine…

Matt:  The Zillow, is that actually something that is a good benchmark to look at?

Mike:  You know what? To me, it’s a ballpark. It really gets down into neighborhoods, the amount of transactions that have happened, the uniqueness of the neighborhood.

It can be a good gauge, because it does track recent sales. It gives a good ballpark range. I’m looking at, on a $250,000 home, it could be 25, 30,000 either side of that $250,000. If somebody says, “No, my house is worth $400,000,” and Zillow says 250, not likely this is going to work.

Matt:  Makes sense. You have a better model?

Mike:  I don’t have a better model, quite candidly. I’m not sure what the better model that exists would be. If a full appraisal is required, there’s a couple of things to keep in mind besides the process.

That’s the first perspective of keep in mind, this is an opinion. That’s really the way it’s phrased. The appraisal is the opinion of value of the person by the appraiser themselves.

It’s not a fact, and don’t take it personal. It’s also important that you understand that the appraisal also doesn’t stay with the house. In other words, when you’re usually done with it, be it a purchase or whatever, a refinance, that transaction is done. That appraisal was only used for that.

The only exception being an FHA purchase, which now, if you tried to get an FHA mortgage, had an appraisal done, that value will stay with an FHA loan for six months, even if it’s a new buyer coming in. It uses that appraised value.

That being said, the process has really changed over the last few years as a result of the mortgage meltdown. Lenders, banks, brokers like myself are not only not allowed to choose the appraiser, we’re not even allowed to talk to the appraiser during the process.

All this must go to what’s called the “neutral third party,” an appraisal management corporation, assigned by the lender off of their website. We go to this third party, this AMC, put in a request for the appraisal.

They send it out to the people on their appraisal list. Then, what happens is the appraisers, the first one that says, “I’ll take that,” gets it. It’s not about selection. It’s not about approving. It’s just reaching out, and you get whoever you get.

Matt:  Makes sense. No more alignment with the appraiser and the financial institution.

Mike:  Yeah, they felt there was collusion going on in the past, and maybe there was. They put in this third intermediate step.

Again, the bank, myself, nobody’s allowed to talk directly to the appraiser during the process. By the way, that’s good in many ways, but it’s also had unintended consequences. I’m not going to get into that debate.

Matt:  Take your word for it.

Mike:  The real key is what does the appraiser do? As soon as they say, “I’ll take that assignment,” they go to the county tax records and pull the records for that house. It shows what the square footage should be, when it was built, et cetera, that’s assigned to it.

Then, they’ll go out, make an appointment with you or whoever to go out and confirm the information on the tax records that they’re right, look at any improvements that were done and upgrades that have been created so that they can get a better assessment of what’s going on in the house.

Keep in mind, when I say upgrades, what we think of upgrades the appraiser may not or it may not have a housing value. If you put a new roof on your house, you say, “Boy, that’s good. I improved the value of my house.” No, the appraised value didn’t improve. The house is expected to come with a roof. If it has a problem, that’s something else.

Carpeting, fresh paint, all good salable points and that will help the sale of the home, but they don’t improve the appraised value of the home. Also, be aware that when the appraiser goes in and does that evaluation, they will make note of any situations that they consider hazardous. Open electrical outlets. Swimming pools, by rule, have to have water in them.

If they believe there’s any health or safety situations, they will note that in their appraisal. Actually, the underwriter reviews it, if you go back to my underwriting piece, and makes sure that anything that’s noted by the appraiser gets corrected.

Matt:  Seems fair. A prepunch list.

Mike:  It’s a prepunch list, yup. In terms of the report itself, once the appraiser goes back with his assessment, takes all the notes about the house, they’ll go back, and look at the marketplace, and find the three most recent comparable sales.

There’s a little bit of different criteria of what’s the most comparable sales that get involved with geography, which get involved with mileage, type of homes at that. There’s specific guidelines that we don’t always agree with as homeowners, but the appraiser has to use them. Once they do that, you understand, all homes are not alike, even though, they may have sold recently.

There are assessments about, for instance, square footage, or lot size, or whether it has a pool that have plus or minuses with the home that’s being assessed. They’re required to use certain percentages to increase or decrease the value of the home. That’s how they get to a true apple to apple, theoretically, comparison of the values.

Matt:  Based on the timing, those sales can really help you or they can hurt you.

Mike:  Exactly. One of the things that isn’t taken into account, for instance, if you have a nextdoor neighbor that’s in a fire sale of a home meaning I’ve got to get rid of it, I don’t owe anything on it, I’m going to sell it for whatever I can, that’s not taken into account in terms of the value should have been. It’s what did they sell it for. That’s is the value.

Sometimes, you need to be careful, as well. You may say a house sells for something up the street without realizing there were sellerpaid concessions. Those get reduced off the value of the house.

It may have sold for 259, but if there were $10,000 in sellerpaid concessions, effectively, it was 249. Those are nuances of the appraisal system that need to be understood or will be considered.

Once the appraiser goes back, does his report, he gives three responses, only one of which is actually used most of the time. They’ll give a sales comparison approach, meaning what’s the value compared to the sales. The cost approach, what would it cost to rebuild it.

The third, which is always used for investment properties, is the income capitalization approach, meaning what would it rent for if it were a rental. Those are the three reports that they get.

What are the most important things to know about an appraisal? A lot of what we talked about. Most importantly, understand it’s a matter of opinion. It’s not a matter of fact, even though it’s going to be used as a matter of fact for that specific transaction. Don’t take the results personally if you don’t like them.

Before you have an appraisal done, make sure all construction work of that type is done or completed. Otherwise, you’ll need a followup appointment. For instance, if there’s electrical that needs to be wound up yet or something, you’re going to force the appraiser to note that.

The underwriter will make them come back with another trip appointment to go out and make sure it’s been done. Therefore, there’s another cost involved in the appraisal.

Another key thing to make sure is if you have a home, has there been any unpermitted work done on it? Meaning, construction work that affected the size of the home that didn’t have a building permit when it was done. If that happens, what’s going to happen is they’ll make you go back, get a work permit, evaluation, and have a permit approval before the loan transaction can go through.

One classic example, to me, is we had this party that put a wall into their home that separated this bathroom, effectively, from the rest of the house. It was unpermitted. It worked for them, but when it was noted by the appraiser, they made the owner go back, remove the wall, because it affected the health or safety in the mind of the underwriter. It had to be taken down.

The real question is can you contest an appraisal? The answer is yeah, you can contest it. However, that being said, you have to be able to provide at least two comps that you feel are better suited for the appraised value than the ones given by the appraiser and why they’re better suited. Then, keep in mind the appraiser has the ability to rebuke and say why his are better choices.

Candidly, the lender is not trying to find reasons to increase the value of the home. We have contested other appraisals and actually won a couple, but they’re few and far between.

Matt:  A lot of energy for a low probability of change?

Mike:  That’s likely to be the case. It happens a lot of time in purchase agreements, particularly, by the selling agent that wants a better value. Like I said, once in a while, we can find reasons on why either better comps or why things were undervalued. It seldom gets done.

The bottom line is the appraisal is a very important part of the mortgage transaction, but you have little control over it. Don’t take it personally.

Matt: Good advice. If there’s people out there that have questions for you regarding appraisals or mortgages in general, what’s the best way to get in touch with you, Mike?

Mike:  Obviously, you can call me at the office at 480-503-3533, or my cell phone at 480-220-2329, or email me at mike.goblet@, our company initials, umfginc.com.

Matt:  Excellent. Thanks for answering the questions on appraisals. It seems like it’s a process that you’ve got to go through, and you don’t have a lot of options. In your hands, it seems like you might have a few more.

Mike:  Again, I’m not in control, because I’m not allowed to talk to the appraiser during the process, either. We’ll help in any way that we can.

Matt:  Very good. Enjoy your Fourth, Mike. We’ll catch you next time.

Mike:  Thanks, Matt. You, too. Take care.

There are a lot of different things to consider when selecting a mortgage.  It’s not as easy as “I’ll take the lowest rate today.”  There are things your loan provider should ask you as everyone’s situation is different and their goals in owning a home are different.  You may have done your “homework” and decided that you want a 15 year mortgage because you want to pay it off at a faster rate.  But what you maybe didn’t consider was taking out the 30 year for a lower rate, paying your monthly mortgage at what the 15 year would have cost you and building in a sort of “safety net” so that if you ever had a period of time that you couldn’t pay the full amount you can lessen the payment without any penalty from the lender.

A mortgage is an investment and you should be able to speak about how you’d like your money to be used.  You wouldn’t go to a financial planner and say, “Hey, I’ve got some money, and I want to buy some mutual funds. Pick something for me.” You would sit down, and you would discuss, “What are your short term goals? What are your long term goals?” Then, buy the appropriate products that match your goals.

Matt O’Brien:  Welcome back to another segment of “Arizona Mortgage News.” We’re here with Mike Goblet, United Mortgage and Financial Group. Good morning, Mike.

Mike Goblet:  Good morning, Matt. How are you?

Matt:  Not too bad.

Mike:  Good.

Matt:  Got another cool wonderful day here, in Arizona, in the month of June. We’re going to talk about how to choose the right rate and program for your mortgage. Is that correct?

Mike:  That’s exactly. I thought would be a very good topic, as part of a series of the 10 things and terms to really know about a mortgage. It’s not as simple as one may think.

Matt:  I’m sure it isn’t, and you’re going to enlighten us.

Mike:  I’m going to try. All to often, too many people simply look at a mortgage as a loan their getting from the bank, but it’s actually much more than that. It’s actually designed to be or should be designed to be a financial management tool to help them manage what is probably, in many cases, their biggest asset.

That’s their home. You wouldn’t go to a financial planner and say, “Hey, I’ve got some money, and I want to buy some mutual funds. Pick something for me.” You would sit down, and you would discuss, “What are your short term goals? What are your long term goals?” Then, buy the appropriate products that match your goals.

A mortgage is actually much the same.

Matt:  Makes sense.

Mike:  While a 30 years fixed is considered the gold standard of the industry, there are a variety of other considerations that should be part of your decision, before you even choose what program to go with. OK? First you should really decide “Is a fixed program the right program for you?”

ARMS got adjustable rate mortgages got a bad wrap, a few years ago, coming out of the meltdown that we all went through, of the mortgage industry, but it got it for the wrong reasons. What happened is the industry got involved with just getting to the lowest rate available for whatever period of time, because housing values were going up so fast, everybody said, “Well, you can just refinance out of this, when it comes to readjusting for you”.

We found out, one, home values quit going up and, in fact, retreated. ARMS were a bad because of why they got into them. OK? But ARMS were designed for a specific purpose and goal and if you follow for that, they’re a good item. Part of that decision is based upon, “How long are you going to be in that mortgage?”

Not just the home but that mortgage. For instance, you might be moving. You’re just in for a job relocation. You know within five or six years you’re going to be moving out. Or maybe you’re planning on refinancing after home improvements are done. You’re taking money out now to get cash. Then going to look to refinance after you’ve improved the value of the property.

So, there can be times that ARMS are good value and actually can save you thousands of dollars over that period of time.

Matt:  Makes sense. Is there are rule of thumb with ARMS over fixed as far as number of years?

Mike:  No. No. It really just gets into your own specific scenario and having someone show you all the options, including about what may happen when your loan goes to readjust. In fact, on the other hand, we recently had a call from a client that was planning on buying a second home here in Arizona from Florida.

They were going to move here but not for three years. Then sell their home in Florida, use that large chunk of cash to pay down the principle on the loan they were going to buy and put down less here than they might have otherwise. So, we considered and ARM, but here’s where it really gets into more strategy.

We also have a lender that will allow a client to do a one‑time recast of their loan while keeping the same rate. Bottom line, this client after they’ve sold their home in Florida, and now had the cash, were able to put down a large chunk, reduce their principle balance, have the loan recast at the new lower loan amount, and still stay in their 30 years fixed.

Matt:  That’s very cool. One recast in a loan? Is that how it works?

Mike:  No. This lender allows it.

Matt:  Wow.

Mike:  You may go to a lot of banks. They may say, “No. What are you talking about?” Well, we only have one lender that I’m assured that will allow that. Again, that’s one of the advantages of being a mortgage broker over a banker in many instances, because I have other loan options available to me and different lenders that have different guidelines.

Matt:  It’s good to know you.

Mike:  I hope so. Once you’ve decided whether a fixed or an ARM is the right. The next question is, “What terms should you use? How many years?” If this is a purchase, and you know you’re going to stay in the home for a long time, a 30 years fixed becomes the obvious goal, if your lowest payment is your objective, because 40 years mortgages don’t exist anymore. If you’re looking to manage that term or that payment 30 years…

That’s why it’s the gold standard or the one used. There are some other decisions to make as well. For instance, say, “You know, I want to pay this off at a faster rate. So, should I take out a 20 years or a 15 years or a 10 years,” and the answer is, “Maybe”. Or, if you want to build in a safety net, let’s take out a 30 years but make a 15 years payment.

On a 200 thousand dollar mortgage if you did that scenario, it would probably take you 15 years, eight months approximately to pay off that loan. Yet, you left yourself the real advantage of, if for any month or period of time you needed to make a lesser payment, you have that ability. Again, it gets into a strategy. OK?

Matt:  It makes sense.

Mike:  We also have a lender who will allow us to choose any number of years that you wanted to do, 21, 17, 15, 12, whatever it is. If you’re doing a refinance, for example, and you don’t want to start over again and don’t want to add years to your loan from where you are, we have a lender that will allow us to do the term based on the exact number of years you wanted.

Matt:  Very nice. I haven’t heard that before.

Mike:  Finally, how do you choose the best rate? It’s not as easy as just saying, “What is the rate today?” As we talked about in other videos, there’s a lot of things that go in, besides daily changes in rates. There’s things like your FICO score or your loan devalue, even the loan amount that goes into the rate.

But probably one of the most impactive and the least understood or explained is YSP, yield spread premium or the term banks use, Service Release Premium. This is the amount of the rebate or cost buy down that a specific rate provides. It is how you get to such things, terms you hear in mortgages, like “No closing costs”, “No origination fee”, “We’ll pay for your appraisal”.

It all gets involved in that. Yet, the majority of banks will never tell you what all of your options are, with that YSP and SRP. I actually provide the lender’s pricing sheet, and you choose.

Matt:  Seems like an honest approach.

Mike:  There’s no right answer. It gets involved to you individual circumstances in a lot of this. But candidly, like any financial tool, if you make the wrong decisions it can cost you thousands of dollars. You need to treat your mortgage like the financial management tool it was designed to be.

Don’t just get a quote from a lender without an in depth discussion of the options available to you depending upon your scenario. Actually even on my card it says “I’m a mortgage planning specialist.” I’m not just a loan provider. I will ask the questions and help you decide what program is best for you.

Matt:  Make sense. Another interesting segment, it really does pay to evaluate a lot of those options. Do you get many people that go with funny years? Like 21 or 25 or 15?

Mike:  Not many. Most people I make it offerable to them, but not many take advantage. They just want it rounded out, because that’s what they’re used to dealing with. But it makes a lot of sense if you’re in 21 years of a 30 years mortgage. Thirty years might get you a new lower rate but starting over again, adds years onto the mortgage which can offset some of the benefits depending upon how long you’re going to stay in that loan.

Matt:  Makes sense. Mike, if people want to follow up with you, have some questions, what’s the best way to get in touch with you?

Mike:  You can call me here at the office, at 480‑503‑3533, or call my cell phone direct, at 480‑220‑2329, or email me at mike.goblet@umfginc.com.

Matt:  Thanks for another great segment, Mike. We’ve got a round of applause for you.

[applause]

Mike:  Thanks. That’s appreciated. Thank you very much. Speechless, Obviously.

Matt:  Speechless. Until next time.

Mike:  You have a good day.

Matt:  You too. Bye Bye.

On this episode of Arizona Mortgage News: Insider Update, Mike Goblet, of United Mortgage and Financial Group discusses DTI.  DTI is Debt-to-Income Ratio. It has to do with how much money you make versus what your bills are. Pre‑mortgage meltdown, people used to be able to do things like just stated income.  Unfortunately, with the Dodd‑Frank Bill and the mortgage meltdown, now lenders need to protect themselves.  Today, mortgages are much more driven by income than by assets. While assets are still important, but they do not outweigh your monthly income. Banks are more interested now in re‑occurring monthly revenue. It has become the driving force of what will make a loan successful. Learn more about the two different types of ratios now by watching the full video:

Matt O’Brien:  Welcome back to another segment of “Arizona Mortgage News: Insider Update.” We are here with our resident expert, Mike Goblet, of United Mortgage and Financial Group.

Good morning, Mike.

Mike Goblet:  Good morning, Matt. How are you?

Matt:  Quite well. I understand we got another acronym we’re going to cover, DTI.

Mike:  Yeah, it’s a very important one that plays a large role and people need to understand it and all the variations of it. DTI stands for debt to income ratios. It has to do with how much money you make versus what your bills are.

Pre‑mortgage meltdown, people used to be able to do things like just stated income, just tell me how much you make if you had great credit, or stated assets. I’d do the loan just based upon your assets. That stuff went away with the Dodd‑Frank Bill and with the mortgage meltdown and lenders looking to protect themselves.

Today, mortgages are much more driven by income than by assets. Now, I don’t want to say assets aren’t important, but they do not outweigh your monthly income.

I have a tongue‑in‑cheek statement I make, but it’s only tongue‑in‑cheek because it’s also true. I say you could have $5 million sitting in a checking account, and the bank would tell you, “That’s really great, nicely done. How much do you make per month?”

Matt:  They want that re‑occurring monthly revenue.

Mike:  Yeah, that becomes the driving force, in their belief and understanding, of what will make a loan successful. Be it accurate or not, it is the way lending is today.

Matt:  Well, if you had $5 million in the bank account, you could lower your PMI and not have mortgage insurance.

Mike:  I think the bank, in terms of the risk, would rather say, “Then why don’t you buy the house outright rather than borrow money?”

Matt:  Yeah.

Mike:  Anyway, I don’t want you to do that. I’m willing to help you borrow money at such low rates today it makes it well worth your while.

Matt:  Are there some magic ratios with the DTI that we need to pay attention to?

Mike:  There are. There are two ratios. It breaks into two components, what they call the front end ratio, and then, the back end ratio. The front end ratio represents the mortgage payment itself versus your income. Now, the mortgage payment means principal and interest, your monthly taxes and insurance, whether they’re being escrowed or not, and any HOA fee. Even though it might be paid quarterly, or however, they figure it in to your total monthly payment, break it down on that.

The number that most banks look for is the maximum of 36 percent, but you can get exceptions up to 38 percent of your income. For example, if you made $3000 per month, you would be capped at a total mortgage of $1140, or 38 percent of $3000.

Matt:  Makes sense.

Mike:  The back end ratio gets very important as well. What that looks at is your total indebtedness versus your income. That really shows on off of your credit report and/or any other contractual debt you may have, even if it doesn’t show on your credit report.

Now, that number is usually considered to be 43 percent, but we can see exceptions based upon a number of other factors, up to 50 percent, and can get an automated approval.

There’s a wide range in there of your total indebtedness. By the way, it also isn’t based upon how much you actually pay, but what your minimum payments are on those debts on a monthly basis.

Matt:  Got you.

Mike:  Like I said, the reason it can run from 43 to 50, 50 percent of $3000 of residual income is not the same as 50 percent of $10,000 a month of residual income. Sometimes you may only get the exception to 45 percent, or maybe held at the 43, depending upon what type of other variables are part of it.

Matt:  Very good.

Mike:  It’s also now how do you figure your income? How do you calculate it? Well, if you’re a W‑2 employee, it makes it very simple, if that’s your only source of income. But, if you receive other income from investments, rental income, or if you’re a self‑employed borrower, now we need to get to what your actual after tax income is, because that’s the number they’ll use.

If you have a great accountant and you’re self‑employed, and they get you every tax advantage you can, it can possibly hurt you, in spite of how much money you actually make because we’re going to end up with net income.

Matt:  You’re not showing the full story, and that can come to bite you.

Mike:  It can. On an everyday basis, when you’re not getting a mortgage, you want to take every tax benefit you can, but when it comes to mortgage, lending today is…There are some things you can back in, and that’s why we look to evaluate, but it’s mostly based upon after your accountant is done with your income that they’ve utilized.

Matt:  Very good. Well, for those that have questions about any of the acronyms, DTI, PMI ‑ what was the other one we talked about?

Mike:  LTV.

Matt:  LTV, loan to value. What’s the best way to get in touch with you, Mike?

Mike:  You can call me here, at the office, at United Mortgage Financial Group. The number is 480‑503‑3533, or you can call me direct on my cellphone at 480‑220‑2329, or email me at Mike.goblet@UMFGinc.com.

Matt:  All right. Thanks again for enlightening us, Mike. Any acronyms on the future to talk about?

Mike:  Actually, I don’t have that off the top of my head where the next one will be.

Matt:  All right. We’ll look forward to the next segment.

Mike:  OK, Matt. You have a good day.

Matt:  You, too, Mike.

Mike:  Bye.

In today’s episode, resident Arizona Mortgage expert Mike Goblet  talks about some tricky acronyms – LTV & PMI.

LTV is “Loan to value.” LTV is one of the key elements in determining a mortgage and what the rate will be.   LTV stands for the percent of ratio of money you are borrowing versus the value of that home. The higher the loan to value ratio, the higher the risk. Banks price mortgages based on that element of risk. There are also many other variables, like your credit score, but loan to value is one of the key elements in determining a mortgage.

PMI stands for “Private Mortgage Insurance.” If you cannot afford to put 20 percent down, you may be required to pay PMI – private mortgage insurance.  This means that a third party becomes involved.  They provide the insurance that protects the lender on that portion of the loan greater than the 20 percent equity.

Watch the video for all the details.  When you are done, contact Mike Goblet at United Mortgage Financial Group in Arizona at 480-503-3533 or at http://www.arizonamortgagenews.com/

Matt OBrien:  Welcome back to another segment of “Arizona Mortgage News, Insider Update.” We have our insider here, local resident expert, Mike Goblet of United Mortgage and Financial Group. Good morning, Mike. How’s it going?

Mike Goblet:  Good morning, Matt. It’s good to see you again. It’s going great. Thank you.

Matt:  Thank you. Today, you’re going to talk about some funky acronyms. LTV and PMI. Can you tell us what those are all about?

Mike:  These are important terms to know and understand their relevance in the mortgage process. LTV is “Loan to value.” PMI stands for “Private Mortgage Insurance.” Let’s start with loan to value as the first. You’re really going to hear it in the process, simply said as LTV. Actually, LTV is one of the key elements in determining a mortgage and what the rate will be.

What LTV stands for is the percent of ratio of money you are borrowing versus the value of that home. What the lender sees is the higher the loan to value, the higher the risk. Risk being interpreted as, for instance, if you don’t borrow any money, you have a hundred percent loan. Your risk of defaulting on that loan if something goes wrong in the future is greater than if, for instance, your loan to value is 50 percent.

They price that in as an element of risk. That’s also tied to other variables, like your credit score, which will affect it, as well, but loan to value is one of the key elements in determining a mortgage.

Matt:  Are there some ratios that you need to be aware of or you need to hit to be in the ballpark?

Mike:  There really are. Usually, the maximum a lender wants to go to is 80 percent, or if you’re buying a home, it’s putting 20 percent down. This is as high as they really want to go. Now, that doesn’t mean you can’t go put less down and have a higher LTV. I’ll get to there in a moment.

At 20 percent or less than 20 percent equity, that’s where the other acronym kicks in, PMI, private mortgage insurance. If you have less than 20 percent equity in the home, the lender will require, of one sort of other, PMI or mortgage insurance. Now, what that is, is another third party that comes in and protects the lender on that portion of the loan greater than the 20 percent equity.

Let’s say you only put down 10 percent. This other lender comes in and says, “I’ll tell you what. I will cover that portion between 20 percent and the 10 percent down and protect you from default.” Bottom line, it’s not you. It’s the bank lending you the money they’re protecting. That’s why you pay private mortgage insurance.

You’re paying for the privilege of that lender to come in and protect the bank against your default above that 20 percent.

Matt:  I would imagine that that insurance is relatively high. I hear people talking all the time about getting that 80‑20 so that they don’t have to pay insurance.

Mike:  It’s determined by a number of factors. There are different breaks, in terms of the costs. Meaning if you put 15 percent down or 10 percent down…Actually, you can put as little as 3 percent down on a conventional and 3.5 percent on an FHA, but obviously the private mortgage insurance gets higher.

There is another option, which you should really ask about if you need MI or PMI. That is what’s called lender paid MI. It’s a little bit of a shell game, but bottom line, it can save you money on a monthly basis by having the lender cover that difference themselves with the lender paid MI.

You end up with a slightly higher rate for the life of the loan, but it can save you thousands of dollars on a monthly basis for the first X number of years, until you might be able to get out of MI.

Learn both those terms and understand your options. They aren’t cut and dried. Bottom line, too many lenders won’t explain the options you have. They’ll only tell you what they’re trying to sell you.

Matt:  Mike, do you know someone that would be willing to explain those options to someone in more detail?

Mike:  Actually, I only know of myself that would be willing to do that. There are, obviously, other good mortgage brokers, but I am happy to explain at no charge or obligation, what the options are on any of the cases or just to provide the knowledge for people to go forward.

Matt:  What would be the best way to reach out to you, Mike?

Mike:  You can call me at the office, at United Mortgage Financial Group. Our number is 480‑503‑3533. You can call me directly on my cell, at 480‑220‑2329. Or email me, at mike.goblet at ‑‑ our company initials ‑‑ UMFGINC.com.

Matt:  Thanks for enlightening us with the acronyms. I’m glad you didn’t cover things like LOL and BFF. These were ones we actually care about.

Mike:  These fall in the category of OMG.

Matt:  Always a pleasure, Mike. We’ll look forward to your next segment.

Mike:  I look forward to providing you, as well. We may even deal with another acronym, DTI.

Matt:  DTI. Looking forward to it.

Mike:  Take care.

Matt:  Bye‑bye.

If you want to qualify for a mortgage in Arizona, the best place to start is at United Mortgage Financial Group. First, there is an application.  Then, a credit report is pulled to determine your eligibility and DTI.  DTI is debt to income ratio which should not be more than 38%.  Once everything is reviewed, it is sent to underwriting for pre-approval. Once pre-approval is completed, more paperwork is required to finalize your approval including pay stubs, investment income reports, tax returns, and more.  Overall, you can expect a mortgage process that takes about 30 days.

Mike Goblet explains the entire process in this episode:

Matt O’Brien:  Welcome back to another segment of Arizona Mortgage News. We’re here with Mike Goblet, our resident expert from United Mortgage and Financial Group. Today, we’re going to cover the second part of a 10‑part series on what you need to know about mortgages.

Mike, what’s today’s topic?

Mike Goblet:  Today’s topic is qualifying for a mortgage, what’s the process to qualify for a mortgage. It really starts with an application, which actually, I can do over the phone in about 15 minutes generally or can email a copy of the interview form that I use to somebody to complete and then re‑submit.

Once that happens, I then need to take the information I gather, pull the person’s credit so that we can tie it to a couple of factors. Number one, I need to determine the income ratios versus the debt. It’s called DTI, debt‑to‑income ratios.

Number two, to find out if there are any derogatories on the credit report that would not only just give me the score, which I need, as we talked about the prior segment, but derogatories that could impact the ability to qualify a BK, mortgage lates that we’ve talked about in that information.

There are two key ratios in terms of the DTI that I talked about. That is, number one, what they call the front end ratio, and that’s your new mortgage including all that’s attached to it, meaning principal, interest, assets, and insurance. Even HOA3s, if there are any to that property, should not exceed more than 38 percent of the person’s gross income.

The back end that they call, that’s your total debt‑to‑income ratio. That’s where we go in, look at everything showing on your credit report, plus the mortgage, so credit cards, any other mortgages or anything you have showing, and that should not exceed 43 percent, technically. But with enough variables, the automated system will often let you go up to 50 percent.

The generalized is 43, but there can be some exceptions that may let you get to 50 percent of your total debt‑to‑income ratio.

Matt:  What are some of those variables, Mike?

Mike:  Reserves, your credit scores. The reserves, meaning your assets backing, your credit history, how long you’ve been established. You can also picture…you might get to 50 percent, but 50 percent of a $2,000 a month is not the same thing as 50 percent of $10,000 a month. Your disposable income makes a factor in those as a variable as well.

The next step, if you’re purchasing, is you need to get pre‑qualified or pre‑approved through this process of the application. Pre‑approval or a pre‑qualification is what I just mentioned about. We generally look at the information and say, “Yeah, based upon everything you’ve told me and what’s on your credit report, it looks like you’ll qualify for this mortgage.”

That’s different than a pre‑approval, which means we take all that plus all the support material that will come about. We’ll talk about that in a moment, and send it to underwriting to get a pre‑approval.

We can even do a pre‑approval if you’re purchasing on a to‑be‑determined property, meaning you can come to us saying, “I want to get pre‑approved, but I don’t have a purchased offer in place.” We can do that with many lenders that will allow TBDs, to‑be‑determined properties, to go through the process. That makes you a stronger buyer, having a pre‑approval over a pre‑qual because you’ve already been through the underwriting review.

Now, we just catch it to the property.

Matt:  Good point. That makes a lot of sense. Obviously, the seller is going to look much more favorably on that.

Mike:  Exactly. It’s stronger reason to consider your offer.

Once we have the cursory pre‑approval, we need full documentation. What they mean by full documentation is, we need to see your pay stubs if you’re W2 employed. We need to see the W2s, usually from the previous two years, bank statements for the previous two months, photo ID, tax returns, particularly if you’re self‑employed or receive a lot of income from investments or other sources that may take you higher on a tax bracket.

They want to see all that and see what you write off.

If you’re not a citizen, they want to see the documentation that will allow you the green card, H1, all the different variables in terms of that, so the legal documentation.

If you have a history of a BK but now fall into the category, for instance, that allow you to qualify, they’re going to want to see your discharge information, what was included in the BK.

If you have child support payments or a divorce that often will require copy of the decree, the divorce decree, so all the particulars can be seen and that the underwriting can make sure there’s nothing being hidden that could come up in the future.

Matt:  What is the time frame for BK before to go again?

Mike:  That really is going to be dependent upon the mortgage you’re trying to qualify for. A conventional mortgage after a BK is…What is it? BK is four years. A foreclosure is seven years. You can often qualify for government support programs earlier than that, a VA, an FHA. It gets reduced. We have the ability to marry you to the proper program that you then qualify for.

Underwriting, which is part of what we’re talking about, generally, the initial will take three to five days to have an underwriter review it. Then they come back with, “Everything looks good, but we want to see this additional documentation. These things have to happen.”

For instance, it might be, in some cases, if you have collections, sometimes they make you pay off those collections. That’s where an underwriter comes back and says, “I need these things to happen.”

The other piece in getting qualified, we used to talk and you brought up what’s the time frame, if you’ve had a history of a BK or foreclosure and now you’ve fallen into the window of qualifying, you want to start that process usually about six months ahead of when you actually want to qualify.

Sometimes, you’re prohibited from making an offer before the exact time period by day from when the discharge was or the foreclosure sale date, but you want to begin the process of knowing where you are, what your credit is about six months in advance.

Matt:  Seems reasonable.

Mike:  Overall right now, you can expect a mortgage process that takes about 30 days. Uniquely coming up, August 1, the government is adding into it what they call thread. It has to do with the new restful laws and disclosures and everything that will be attached. The expectation is it will take no less than 45 days starting in August 1 with the implementation of the thread laws and the new disclosure laws.

I’ll talk about that more in the future.

Matt:  I’ll hold the questions.

Mike:  OK, Matt.

Matt:  Mike, as always, great information. We’re part 2 into a 10‑part series. What do we have in store next?

Mike:  My next topic was going to be a very important term that a lot of people don’t understand. That’s LTV, loan‑to‑value ratio.

Matt:  Mike, for those that have questions who want to reach out to you, what’s the best way to get in touch?

Mike:  You can call me here at the office at United Mortgage Financial Group, 480‑503‑3533. Call me direct on my cellphone, 480‑220‑2329, or email me at mike.goblet@, our company initials, umfginc.com.

Matt:  As always, a pleasure, Mike. We’ll look forward to the next segment.

Mike:  Thanks, Matt. I look forward to talking to you in the near future again. Take care.

Matt:  You’re welcome.

The first of a 10 part series on what you need to know about mortgages. Today, Mike Goblet talks about the impact your credit score has on qualifying for a mortgage.  Banks use your credit score as the first determination of risk you pose to them of defaulting.  It becomes the foundation for the whole mortgage process and the costs associated with it that the banks create. Banks assume everybody has the ability to default, and now, like an insurance company, they want to rate that risk. The higher your credit score, the less risk you pose to them. The scores range, in terms of your credit scores, of 0 ‑‑ some people actually have no credit scores ‑‑ to 850, as the perfect score.

The three bureaus of Equifax, TransUnion, and Experian are what they use, but what banks do is they don’t take the highest score or the lowest score. In fact, they throw them out and say the biggest risk with, “Let’s go with the mid‑score.” Whatever your mid‑score is out of the three becomes your FICO score for a mortgage. Get all the details on how your credit score impacts your mortgage rate and ability to get a loan with the full video:

Matt OBrien:  …welcome back to another segment of “Arizona Mortgage News.” We’re here with our resident expert, Mike Goblet of United Mortgage and Financial Group. Today, we’re going to start the first of a 10‑part series on what you need to know about mortgages. Mike is going to hit hard with the first topic, which is the impact of your credit score. Good morning, Mike.

Mike Goblet:  Good morning, Matt. It’s good to see you again.

Matt:  You, too.

Mike:  I think starting with your credit scores is a great first topic because it becomes the foundation for the whole mortgage process and the costs associated with it that the banks create. Banks use your credit score as the first determination of risk you pose to them of defaulting.

They assume everybody has the ability to default, and now, like an insurance company, they want to rate that risk. The higher your credit score, the less risk you pose to them.

Matt:  And the better interest rate you get, which is cool.

Mike:  It leads to significantly, potentially, a better interest rate. You are correct. Actually, more importantly, the lower you get, the more risk you pose to them, so the higher your rate becomes, as a result of that. The scores range, in terms of your credit scores, of 0 ‑‑ some people actually have no credit scores ‑‑ to 850, as the perfect score.

Candidly, I’ve never seen anybody with 850. I don’t even think Bill Gates has an 850 credit score. There are three bureaus that report to the banks. That’s what makes it a little bit different than if you were applying for a car loan or insurance or even a credit card, which often only pull one.

The three bureaus of Equifax, TransUnion, and Experian are what they use, but what banks do is they don’t take the highest score or the lowest score. In fact, they throw them out and say the biggest risk with, “Let’s go with the mid‑score.” Whatever your mid‑score is out of the three becomes your FICO score for a mortgage.

Matt:  Do they vary that much, the three

Mike:  They actually can. Because it’s a snapshot in time between all three, and because some of them, strangely enough, report things or may have not caught up with what the other lenders have, I’ve seen them range as much as 50 or 60 points between the different bureaus, depending upon what they’re reporting. Seldom are they actually all the same.

Matt:  Interesting.

Mike:  The real key is a 740 mid‑score. That seems to be the biggest safety net for lenders. If you get higher than 740, they go, “Job well done, but you don’t get any more advantage.” Once you stop dropping below 740, that’s when they put in the adjustments and they start taking things away, in terms of the rebate, et cetera, and your risk improves.

They break down in 20‑point increments. By the way, if 740’s the break line, 739 falls into the next category. They don’t round up. The difference between 720 and 739 is exactly the same. Now, you can usually do conventional loans down to 640, although obviously, the adjustment becomes higher, and you can do FHA and VA usually down to about 580 with a mid‑score in those ranges.

That’s really the bracket of it. The real question becomes, “How do you check your credit score in advance of the process?” Candidly, if you’re buying a home, you really should. As a matter of fact, you should check what the credit bureaus are reporting regularly. There’s a website you can go to ‑‑ it’s www.annualcreditreport.com ‑‑ and pull a free copy of your credit report.

Matt:  Now, does running your credit score have an impact on your credit score?

Mike:  The answer is, if you’re having a lender, a bank or an automotive, yes, it will impact your credit score. But you can shop for any of the items you’re doing, like a car and a mortgage, and for a period of time within that window ‑‑ generally about 30 days ‑‑ all pulls towards that category only count as one. It’s just the initial pull, so that you can shop.

Matt:  Good to know.

Mike:  You should go to the annualcreditreport.com, pull a copy from each bureau differently. In other words, do one every four months, so you can see what’s reported. You’re allowed to do three per year, one from each bureau. If you rotate them that way, it’s a good way to get at it.

The real key, now, is also, people often wonder, “What’s in my credit report? How do they get their percentages? What creates your FICO score?” Actually, I almost think nobody really knows for sure. It’s really about mathematical algorithms that they use to determine the credit score.

The five variables they use are your length of credit history, your credit payment history, the percent of your credit being used versus the limit on each open line of credit. New credit, if you’re opening it up, has an impact, actually negative, as we’ve just mentioned.

Then, there’s something called mixed credit, which candidly, I haven’t been able to find anybody that can define what mixed credit is, but it’s a variable that the system uses.

Matt:  The X factor.

Mike:  It is an X factor, which probably lets them go, “No, that’s how we got there. It was the X factor. We can’t tell you anything else.” Now, one of the questions most consumers have is, “Can I get my own scores?” As a matter of fact, many will tell me, “No, I have a service that gives me the scores.”

Candidly, they do, but don’t necessarily think that that’s the score that a bank or myself are going to get as to what your Discover card is giving you or Credit Karma is giving you. What happens is, they don’t use the same information to get you that score. I think you can realize that the risk factor of a credit card default is not the same as a bank for mortgage.

They really put many more tough scrutiny on it than a credit card will or insurance or even automotive. Generally, I find when you go to Credit Karma or whatever, those scores are significantly higher or have the potential to be significantly higher than the scores I’m going to get.

Matt:  Making you feel good.

Mike:  It makes you feel good, and it is accurate for whatever they may be utilizing, but it isn’t across the board of what your credit score is. What I really actually get frustrated with is many people pay for that service, find out when they call me, “No, I have a 740 credit score,” and I find out it’s 680. They go, “How can that be?” It’s a different algorithm that’s being used to calculate.

There’s also something to keep in mind. You can have a reasonable credit score and still not qualify for a mortgage.

Matt:  Why would that be?

Mike:  It’s because that banks look at different levels of risk, like I just said. If you have two mortgage lates in a 12‑month period, or one 60‑day late, those are Fannie‑Freddie guidelines, or the traditional guidelines, for qualifying for a mortgage that says, “You don’t qualify.”

One 60‑day late in a 12‑month period, regardless of your credit score, will disqualify you from a mortgage. Something to keep in mind, as well, that it’s the impact of what you do, not just your score.

Matt:  Very good.

Mike:  Actually, another thing that many people, when they call about credit, and we’re going through it, they say, “I want a copy of my credit report. I paid for it, and I deserve it.” Unfortunately, the credit laws are not written that way. I’m prohibited from law from sending you a copy of that credit report. That’s how much the credit bureaus protect it.

I can share your credit scores. I can even identify specific accounts that are causing problems, but I am prevented by law from sending a copy of that report. Every bank is.

Matt:  Got to protect the data.

Mike:  Or it actually keeps them much more important, I think is part of what it also is. The impact of your credit score becomes the foundation for the rest of the process and the evaluation. Know your credit score, and protect it when you can.

Matt:  Very good. Very enlightening, Mike. If people have questions about their credit score and interested in talking to you about mortgages and opportunities, what’s the best way to get in touch with you?

Mike:  Obviously, I can be reached at our company phone number, of United Mortgage Financial Group, at 480‑503‑3533. You can call me direct on my cell phone, at 480‑220‑2329, or email me at mike.goblet@ ‑‑ our company initials ‑‑ umfginc.com.

Matt:  Excellent. Always interesting, and enlightening, as always. Look forward to the next segment.

Mike:  I look forward to providing another short update on getting qualified for a mortgage. Thanks, Matt.

Matt:  Thank you, Mike…

The first thing you should always do when you start looking for a mortgage, is to shop for it. Checkout other lenders and see what the programs are.  Don’t ever assume the first offer your getting is likely to be your best offer.  It is important to get to the bottom line.  To do that, you need to evaluate three things.

1. What’s the rate you’re getting and that they’re quoting you?
2. What are the closing costs?
3. What’s the loan amount?

Wholesale lenders have a great advantage over retail banks, because doing mortgage lending is their entire focus.  They’re not distracted by commercial lending, or by savings accounts, checking accounts, and other situations. So all of their energies are going towards doing the best mortgage loan they can.

At United Mortgage Financial Group, we offer loans as a broker versus a bank.  We are often called a “Correspondent lender,”  which means that we are not limited to one bank’s guidelines or rates, because they really do vary.   Some have greater overlays in addition to protect against foreclosure, or people defaulting.  We’re able to take a finance situation, and match it to the lender that best fits their needs. That really gives us a nice advantage.  Get the loan that best meets your needs.  Let us help you shop for the best mortgage. Contact us today at our website site or call our office at 480‑503‑3354.

Transcript:

Matt OBrien:  Welcome back to another segment of “Arizona Mortgage News Insider Update.” We’re here with out local expert Mike Goblet of United Mortgage and Financial group. Today Mike, you’ve a pretty interesting topic on how to shop for a mortgage.
Tell us a little bit about that, and good to see you again.
Mike Goblet:  Thanks, Matt. I thought it would be a good topic because the housing market, the refinance market being hot, and unfortunately too many people go in with preconceived ideas about Mortgages. As a result don’t always end up with the best loan for them.
How should you shop for a mortgage? I’d like to actually start with…I think that there are three common assumptions, or questions that people have.
Matt:  This is going to be more fun than shopping for a car, correct?
Mike:  [laughs] Yes it certainly should be. Although both can seem very tiring at the time, because both are very important decisions that people are making. So, that actually makes it more important to shop.
The common questions or assumptions is, “Are banks better than non‑banking lenders for a mortgage?” Non‑banking members meaning they don’t have retail outlets but they’re simply wholesale lenders that only do mortgages.

Second question is, “Are credit unions better than either banks or non‑banking lenders?” The third is ‑‑ that I think it’s a very common assumption ‑‑ “If I have money in a bank even a lot of it , am I going to get a better deal or better treatment?” A lot of people make those assumptions.

Before you make any of those assumptions, the first thing you should always do when you get going for a mortgage, is to shop for it. Checkout other lenders and see what the programs are.
Don’t ever assume the first offer your getting is likely to be your best offer. That being said, second in my opinion wholesale lenders have a great advantage over retail banks, because doing mortgage lending is their entire focus.
They’re not distracted by commercial lending, or by savings accounts, checking accounts, and other situations. So all of their energies are going towards doing the best mortgage loan they can.
The third thing is having money in the bank actually gives you no advantage whatsoever, because literally the entities that do wholesale lending versus retail banking are completely different in the bank, and bottom line all the mortgages end up getting sold in the same secondary market, Fannie, or Freddie, or wholesale investors that do the buying.
All the mortgages have to meet the same guidelines. A bank can’t give you different breaks. Simply because you have money there even a lot of it.

Matt:  That would seem to make sense that banks would most likely be a higher cost, because they’re going to need to make something by being a broker in that transaction.

Mike:  It isn’t so much in being a broker, in that transaction that they’re making the money, but they usually have significantly higher overhead of managing the retail branches, or greater staffing and doing more than just mortgage loans. So, their overhead inherently becomes higher.
How do you shop for a mortgage? Unfortunately, you really can’t shop for it by line item. Saying, “I’m going to this lender and these are the charges they’re showing.”
That’s because the banking laws set up today do not require banks, or banking entities to provide full disclosure of what all the fees and costs are. Not even what all of the rebate is. So, you can’t really just say, “This lender is charging me this verses you’re charging me this,” because they won’t match up.
In almost any of the cases. Unless your doing two mortgage brokers against each other.

Matt:  They’re not going to like that.

Mike:  No. The other becomes really then…”How do you really shop?” Go to the bottom line. I mean the true bottom line. Number one, “What’s the rate you’re getting and that they’re quoting you?” Number two, “What are the closing costs?” By that I don’t mean including the escrow account, because those are not considered closing costs although it’s still money needed for closing.
The third thing is, “What’s the loan amount,?” because whether your doing a purchase, or a refinance you need to make sure particularly in a refinance that you didn’t get to zero closing cost simply, because they raised the loan amount greater than the payoff amount.
So those are the real keys. “How much money am I bringing to the table and how’s it being used?” Actually as a broker we often end up with closing costs being in a negative number, meaning that the lenders rebate not only covers all of the closing costs, but will even provide you additional money toward the escrow account. That’s something you really want to look for if you can. To at least see if it makes sense for you.

Matt:  You’ve seen a lot of rebates still being offered these days?

Mike:  There’s a rebate offer on every loan. I won’t say at every rate because sometimes it’s not a rebate, but it is a charge buying down to that rate. For example, a $200,000 loan today based upon today pricing, assuming good credit that’s there, you could probably do a no closing cost loan at 3.75 percent, or 3.875 percent. Meaning the rebate will cover all of the closing costs at that point.
Your APR’s going to be slightly higher of course. So I’m going to guess 3.75, might even be 3.81. Some thing along that line.

Matt:  Sounds like there’s still great rates and great opportunities that are …

Mike:  There are. One of them that we offer as a broker versus a bank, or even what’s called a “Correspondent lender,” is that we’re not limited to one banks guidelines or rates, because they really do vary, some have greater overlays in addition to protect against foreclosure, or people defaulting.
We’re able to take a finance situation, and match it to the lender that best fits their needs. That really gives us a nice advantage.

Matt:  As always sound advice. What’s best way to get in touch with you, Mike, for those that need to learn more about getting the best rates, and how to better shop around. Probably just call on you is the best way to shop around.

Mike:  That’s a good place to start. I’m happy to provide the information, provide a fees worksheet. Traditionally even provide all the different pricing that goes out at the different rates that you can choose, because candidly, whatever rate you choose and rebate, doesn’t impact me directly affecting the fees or rates.
It’s really up to you, but I can be reached…our office number is 480‑503‑3354, or you can call me directly on my cell at 480‑220‑2329, or email me at mike.goblet and our company initial umfginc.com. Look forward to trying and help anybody, and provide the information they’re looking for.

Matt:  Thanks again for some enlightening tips on what to look for when shopping for a mortgage. We’ll look forward to our next session, Mike.

Mike:  I look forward to it too, Matt. You have a good day.

Matt:  You too. Thanks.

Mike:  Bye now.

There are three questions that everyone should ask when thinking about renting or buying.

1. How long do you think you’ll be in that place that you’re going to move into? If you’re only going to in your new home for two years or less, in most cases, it’s probably more beneficial to rent than to buy.

2 Do you even have the disposal income to be thinking about buying? There are costs to taking a home mortgage that aren’t associated with renting. You need to decide. Do you have the disposal income to afford to buy?
3  What type of lifestyle, and comfort are you looking for, and want to enjoy on a daily basis? For example, an apartment and a condo do not provide the same type of lifestyle as a home with a patio, and different things.  Do you want your own back yard or shared amenities that a condo may have?

Watch the full video for more information

Matt OBrien:  Welcome back to another segment of “Arizona Mortgage News Insider Update.” We have our resident expert, Mike Goblet, of United Mortgage and Financial Group. Mike, I understand that there are three questions that everyone should ask when thinking about renting or buying.
Mike Goblet:  Well, there’s probably more than three, Matt. But I think there are three critical questions that need to begin with, and then add the others that pertain specifically to you. But before we begin, the one thing that I want to say is I’m not here to try and convince somebody to buy. I don’t think that’s my job.
It’s to help somebody that has decided to buy, but I’m not going to try and convince you that buying is the right time right now, because it may not be for everybody. Then number two, the important thing to keep in mind. It’s not as simple as, “What is cheaper?” It’s a lot more complex for everybody to ask, or to think about.
Matt:  That makes sense. It sounds like we need to get out the Ben Franklin, and do the reasons to buy, reasons to rent, and what are your options.
Mike:  That’s exactly what somebody needs to be doing. In my opinion, the first question you need to ask is, how long do you think you’ll be in that place that you’re going to move into? I think that becomes very critical. For instance, if you’re only going to be there two years or less, you know what, in most cases, it’s probably more beneficial to rent than to buy.
But now if you’re looking at three to four years, that’s a borderline of there can be advantages or disadvantages to both. Then, if you’re five years or more, now it’s about more stability. That’s an important factor to consider. Knowing how long you’re planning on being there when you start out, becomes a very important first question to ask.
Matt:  Seems logical.
Mike:  The second question is do you even have the disposal income to be thinking about buying? There are costs to taking a home mortgage that aren’t associated with renting. You need to decide. Do you have the disposal income to afford to buy?
Now what’s important to think about that is it isn’t just, do you have 20 percent to put down? You don’t need to be putting down 20 percent anymore to buy a home. Particularly, if you’re going to be there for a shorter time, it may make more sense to use less of your own cash.
You can actually get a mortgage with as little as three percent down. You can get a conventional loan without MI, with as little as five percent down. Knowing whether you have

If you are in the market to buy a new home, now is the best time to buy. All indications point to the first half of 2015 being the best time to buy a new home or refinance. With rates now close to the lowest levels they were in 2013, makes it better in terms of getting a new mortgage. There are three main reasons to buy a home in the first half of 2015.

1. What’s really helped the marketplace is the turmoil the stock market has been going through at the beginning half of this year. Although it dropped over various days as much as 500 points, that has had a very positive effect on the mortgage‑backed securities.
2. Projection of the housing market, specifically for Phoenix. Phoenix is rated in the top 10 projected growth markets for housing in 2015. That means the market is going to gradually keep increasing in value as the year goes on. You’re going to get your best home values at the beginning of this year, and the values should be continuing to increase throughout the year. Which is great for home buyers in Arizona
3. We have the best programs available. In recent changes Fannie and Freddy allow for as little as three percent down on a conventional loan and you can now use 100 percent gift money. If you’re a first‑time home buyer, and in a fortunate enough position where a family member can gift you the down payment, you can take advantage of the lower marketplace.

For those buying a home, even if you’re selling a home, you’re going to get more. If you’re refinancing, your loan to value ratio should be improved. Those who didn’t think they could refinance before should be able to, or drop into a better ratio than they even were before.

For those who want to take advantage of these three good reasons to get into their housing, mortgage, and refinance, United Mortgage Financial Group, Inc. can be reached at 480‑503‑3533 or at our website.

Transcript:

Matthew O’Brien:  Welcome back to another segment of Arizona Mortgage News. We’re here with Mike Goblet, our Arizona expert on mortgages and all things you need to know about the residential housing market. Happy New Year, Mike!

Mike Goblet:  Thank you, Matt. Happy New Year to you, and anybody listening to this show.

Matthew:  You bet! Mike, it seems like you have a pretty good feeling about the first half of 2015. What is your topic? You seem to think that people should be talking to you right now.

Mike:  All indications right now are the first half of 2015, is really going to be the best time to do anything you want for the mortgage. By that I mean, buy a new home or refinance. The opportunities will be served during these first six months, rather than the second six months.

Matthew:  It makes sense. Lay it honest, you’ve got three reasons why we should be thinking about this.

Mike:  What’s really helped the marketplace, actually, is the turmoil the stock market has been going through at the beginning half of this year. Although it dropped over various days as much as 500 points from where we were, that’s had a very positive effect on the mortgage‑backed securities as we’ve often talked about.

In fact, the rates right now are back to near the lowest levels that they were in 2013. The rates are really good at his point in terms of getting a new mortgage. What really supports that is the Fed is also talking about, in April or mid of this year, beginning to raise the primaries, the borrowing rate, and while not directly attached to mortgage‑backed securities will have an impact, particularly on ARMs.

Also, it will drag up the other rates as well, because what will raise the Fed is their control of inflation that they feel will begin to happen, and that’s the arch enemy of mortgage‑backed securities.

Matthew:  It makes a lot of sense. Rates are going up and they’re at and they’re at an all‑time low.

Mike:  They’re back to the newer lows, not quite to the lowest of the lows, but darn close. They’re looking pretty good right now.

Matthew:  It’s a good way to start up the New Year.

Mike:  A second reason is really the projection of the housing market, specifically for Phoenix. Phoenix is rated in the top 10 projected growth markets for housing in 2015. Again, that means they’re going to gradually keep increasing in value as the year goes on. You’re going to get your best home values at the beginning of this year right now, and the values should be continuing to increase throughout the year.

Matthew:  That’s great news for us in Arizona.

Mike:  For those buying a home it’s great. Even if you’re selling a home, you’re going to get more. If you’re refinancing, your loan to value ratio should be improved. Those who didn’t think they could refinance before should be able to, or drop into a better ratio than they even were before.

This gets really important to people who’ve bought recently and have MI insurance, Mortgage Insurance. This might be a really good time to try and get out of that mortgage insurance.

Matthew:  Good news. Do you have another good news point for us?

Mike:  The third reason is, right now we have the best programs available in recent changes the Fannie and Freddy allow for as little as three percent down on a conventional loan. You can now use 100 percent gift money.

If you’re a first‑time home buyer, and in a fortunate enough position a family member can gift you the down payment, so you can take advantage of the lower marketplace. That’s now allowable. Actually today, which this, the President is going to be announcing that the FHA loans are reducing the MI factor, by about half a point.

What does that mean? That means the MI rate, I’m not saying a loan of about $200,000, the payment for MI will drop about $80 per month, from 217 down to 136. Again, it’s going to be a favorable encouragement for many people to take advantage of where the market is today.

Matthew:  Trying to spark some momentum into our economy.

Mike:  Yeah. That announcement hasn’t been made yet; it’s going to be made later today. That’s what it’s supposed to be about.

Matthew:  All right, spoiler alert.

Mike:  Yeah, spoiler alert.

Matthew:  That’s great. Very interesting. Some good things to kick off the New Year right! Mike, for those who want to take advantage of these three good reasons to get into their housing, mortgage, and refinance, what’s the best way to get hold…

Mike:  You need to call the office, United Mortgage Financial Group, at 480 5033533, you call me directly on my cell phone at 480 2202329, or email me at mike.goblet, just like the glass, G‑O‑B‑L‑E‑T, @ our company initials, umgfinc.com, mike.goblet@umfginc.com.

Matthew:  Excellent. Thanks for sharing the good news with us, as always.

Mike:  Thanks, Matt. Looking forward to a good year. Give me a call if you have any questions or anything at any point.

Matthew:  Sounds good!

Mike:  OK.

Matthew:  Bye‑bye.

Mike:  Happy New Year, again, and good luck to you.

Matthew:  Thanks, Mike. You too.

Mike:  Bye.

Some changes have come into effect for 2015 that might make home buying easier in the Phoenix area. Earlier this year Fannie and Freddy changed their guidelines that almost all lenders use. Which is, they allow gift money from a family member to be used up to 100 percent of the down payment. So, for many firsttime homebuyers they might have a family member that’s willing to help.

In the past, first-time home-buyers had to have a certain percent of their own cash, even with the gift money, but now it can be up to 100 percent of the down payment. On December 15th, Fannie and Freddy also changed their guidelines as well to allow three percent down payment instead of five percent. Meaning, firsttime homebuyers that have been saving up cash, can now get into the market at an earlier stage while housing values are still more affordable than they’re going to be.

Freddie and Fanny are stepping up to help keep the momentum moving in the housing sector, making it easier for the 2015 year.

If you are a Phoenix first-time home-buyer or looking to buy a new home, United Mortgage Financial Group, Inc. can be reached at (480) 503-3533 or at our website.

Transcript:

Matt O’Brien:  Well, welcome to another segment of Arizona Mortgage News. We’re here with our resident expert, Mike Goblet, of United Mortgage and Financial Group. Today we have a topic on a couple men’s names. Actually, a man and a woman, Fannie and Freddy. You say there’s some changes that are going on that might make home buying easier. I’m interested to hear that.

Mike Goblet:  Yeah. Actually, I think this is an opportunity that will help many get into homes that might have had difficulty in the past and changes that they’ve made. One was a little bit earlier this year that Fannie and Freddy made to their guidelines that almost all lenders use, and that is they allow gift money from a family member to be used up to 100 percent of the down payment.

So, for many, particularly firsttime homebuyers in many cases, they might have a family member that’s willing to help. In the past, they had to have a certain percent of their own cash, even with the gift money, but now it can be up to 100 percent of the down payment.

Matt:  I remember that one.

Mike:  Yeah, that came out this summer. But just recently as a matter of fact, effective December 15th, they’ve changed their guidelines again as well to allowing three percent down payment instead of five percent.

So, again, this can help many, particularly firsttime homebuyers that have been saving up cash, thought they had to save thousands more before they could enter the market, get into the market at an earlier stage while housing values are still more affordable than they’re going to be.

Matt:  Very nice.

Mike:  So I think this will really help for 2015. Now, there are some out there, some people, that are saying, well, these new guidelines are going to put us right into our same old ballpark. Are we going to see more foreclosures now because of less down payment and being able to be gifted the money? But I think the market has changed in such a way that that’s not more likely at this case.

Put into effect at the start was what they call ATR or ability to repay that every lender must assure the investors, so that’s why the scrutiny for home buying has gotten tougher. The underwriting guidelines is to make sure they still qualify for the ability to repay the loan. That’s all still in effect.

Matt:  They got our back.

Mike:  They have our back a little bit. It does stop part of the old problem was if you just had a good credit score, you could use stated income, stated assets. That’s not part of it. All the guidelines, the debt ratios and everything else are still in effect.

Matt:  Very nice. Well, Freddie and Fanny making it easier for the 2015 year.

Mike:  Well, they’re stepping up to help the housing market, which has slowed down a little bit and that’s one of the reasons that they have made these changes, to help keep the momentum moving in the housing sector.

Matt:  And keep us all feeling confident, right?

Mike:  Well, we’re going into a new year shortly, so it’s good to have some confidence.

Matt:  Big time. Well, very good, Mike. So people with questions on just about anything, how can they get in touch with you?

Mike:  Well, I can be reached at our office at United Mortgage Financial Group, Inc. The phone number here is 4805033533. Call me on my cell as well at 4802202329 or email me at mike.goblet at our company initials umfginc.com.

Matt:  Excellent. Well, we going to talk to you. You have your cell phone. Merry Christmas.

Mike:  You, too. I appreciate it, Matt. Merry Christmas. Happy New Year. Happy holidays to everybody who is watching, and I wish everybody a great and wonderful New Year.

Matt:  All right. Thanks, Mike.

Mike:  OK, have a good day.

Matt:  You, too.

Mike:  Bye.

There are things people should be doing before making the decision “I want a new home.” There are things that will make the process easier for them, to help them overall in finding the right home, and equally as important, the right mortgage product. It is important before you even begin to look to:

1. Know what you credit report says
2. Know what you can or want to afford in a home
3. Know what your down payment will be

Transcript

Matthew O’Brien:  Welcome back to another segment of “Arizona Mortgage News.” We’re here with our expert in the field of mortgages, Mike Goblet, of United Mortgage Financial Group. Today we have a listener‑inspired topic, which is the three most important things a new home buyer should be doing before they even look.

Hey, good to see you, Mike.

Mike Goblet:  Good morning, Matt. Good to see you again.

Matt:  What’s up with this? This is stuff to do even before you start talking to anybody, I understand?

Mike:  There are things people should be doing before making a decision “I want a new home.” There are things that will make the process easier for them, to help them overall in finding the right home, and equally as important, the right mortgage product.

Matt:  Makes sense.

Mike:  What I think the number one thing somebody who wants to buy a new home, whether they’re a first time home buyer, or just simply buying a new home even though they own one, is know what your credit report says.

Matt:  Got you.

Mike:  Particularly with all the breaches that have been happening with the Targets, the Home Depot, and other companies online, it’s really important for you to pull a copy of your own credit report to see if there’s any unusual activity that’s been happening on it. Or maybe something that’s happened in the past, and you aren’t aware it was there.

Matt:  That’s good. Or maybe even subscribe to a service that gives you quarterly updates, so that you aren’t surprised.

Mike:  You can do that. They give it to you online. Those cost you money, but there are actually things you can actually do for free.

The credit bureaus actually allow you…Each bureau will allow you to pull your credit one time a year for free. If you space it out between each credit bureau, you can do it three times during the year.

Matt:  Ah‑ha! Good little trick.

Mike:  Yes. Get it free. That tells you what they’re reporting. You can go to annualcreditreport.com to get a free copy of your credit report.

Matt:  Very nice.

Mike:  Keep in mind this won’t give you a credit score, but it will tell you what’s being reported by each bureau on that credit report. It’s also a little misleading.

A lot of people subscribe to companies like you said, or even the credit bureaus themselves. They give you credit scores.

The interesting thing about that is, that may actually reflect the score you’re going to get on your credit report when a mortgage company pulls it, or it may not. In fact, usually it’ll be lower. Because what happens is, when you want to know your own credit, and they pull it, it’s what’s called the softer pull.

The algorithms that are set into the system to indicate what you’re trying to sign up for, in this case a mortgage, are much more stringent than say, the algorithms if you just want to know what it is in general. You’re buying insurance, a car, they all have different guides that give them the report.

That’s what makes the numbers different.

Matt:  Ah‑ha. OK.

Mike:  Just to be aware that if you have the services, the score may or may not turn out to be the same for the reason I just mentioned.

What’s the most important thing number two? That is, know what you can or want to afford in a home. That isn’t as simple as what’s the price or what’s my payment. There are a number of factors that tie into that that you should understand.

The first is probably what is called debt‑to‑income ratio. The debt‑to‑income ratio breaks out into two standards.

The first number, which tells you what is your mortgage payment, including PITI or mortgage insurance if you need it. What is your total payment versus your net income.

If you’re self‑employed, it’s just versus your W‑2 income, if you’re a W‑2 employee. The first number needs to be no greater than 38 percent, so that if you’re making, I’m just going to put $1,000 a month, your total payment can’t be greater than $380.

Matt:  Makes sense.

Mike:  Yes, so just do the multiples to get where you want. The second number is equally as important in your debt‑to‑income, and that second number is 43 percent. What that represents is your total debt that shows on your credit report, like your credit cards, your car payments, any mortgages or student loans.

Anything you would have, added together with your mortgage payment, should not exceed 43 percent. That gives you another guideline. Also be aware that Fanny and Freddy give you a little bit of leeway in there.

If you run through what’s called the automated services of Fanny or Freddy, they may allow you to go up to 45 percent, depending upon, for instance, how much assets you have in reserves. What your debt looks like, based upon other things.

You can, in some cases, go higher than 43 percent, up to 45 percent.

Matt:  Very good. What’s our final point?

Mike:  There’s actually one more point to what you can afford. That’s the down payment.

This is equally as important. Because a down payment, how much you have to bring to the table, can vary from zero money down, if you choose to, on a VA, to 3.5 percent down on an FHA, or a minimum 5 percent on a conventional.

A really good change that’s happened with the loans recently is, gift money is allowed even up to 100 percent of the down payment value. In the past, you had to have a certain amount of your own.

If you’re in a situation where a family member can provide you gift money, to help you get into a better home, the entire down payment can be provided if necessary or desired. That’s an important part.

Matt:  Interesting.

Mike:  The final piece that you wanted to know is, learn what your options are. Learn that from a professional.

Go online and do some studying. But come to somebody like myself or a mortgage broker that can get you, number one, a pre‑qual and tell you how much technically you’re qualified for.

There are different programs out there that, many times, a bank and other places won’t even tell you about. Like whether an ARM can work for you, or a lender‑paid MI, which can actually save you money by choosing even a higher rate, as I indicated in a prior blog. Talk with a professional that’s interested in your best interests, in getting you into the best program, rather than just quoting you a loan program.

Matt:  Very good. There’s a lot of pre‑work to do if you really want to do things right.

Mike:  Start early. You should start two to three months before you begin to actually look. That would be the best suggestion I can make.

Get pre‑qualified. Again, there’s no obligation with a pre‑qualification. You can get it from anybody. Usually, they’re free. Like I said, there’s not even an obligation.

Matt:  Makes sense. Mike, what’s the best way for our listeners here to get in touch with you?

Mike:  Obviously, reach me at the office. The phone number for United Mortgage Financial Group is 480‑503‑3533. You can call me on my cell, 480‑220‑2329. Or email me at mike.goblet@umfginc.com.

Matt:  Excellent. Thanks for sharing your wisdom once again, Mike. We’ll look forward to the next segment.

Mike:  OK, Matt. You have a great day. I look forward to talking with you again.

Matt:  You, too. Thanks.

Mike:  Bye now.

In August of 2014 this year, Fannie May changed their guidelines. For homeowners who have had a short sale, in the past, the guidelines made homeowners wait two years if the were putting down 20 percent and four years if you were putting down 10 percent.  However, this August, the guideline has now been changed to four years regardless of how much you are putting down.

Watch the full video to learn more:

At United Mortgage Financial Group, we are happy to answer any questions only on short sales and these new guidelines by Fannie May.  Also, if you have questions about foreclosures, bankruptcy, or conventional loans call our office number which is 480‑503-3533. email Mike at mike.goblet@umfgimc.com

Matt O’Brien:  Welcome to another segment of Arizona Mortgage. We’re here with our resident expert Mike Goblet of United Mortgage and Financial Group. Good morning, Mike.
Mike Goblet:  Good morning, Matt. How are you this morning?
Matt:  Not too bad, looking forward to a little rain in the Arizona area here. How about you?
Mike:  Yes, very much so, but obviously rain in Arizona at this point is becoming scary at times.
Matt:  Yes, exactly, biblical in nature.
Mike:  Yes, we’re having once in 500 years floods like every other week now.
Matt:  Just don’t have a house in a flood zone. So, speaking of real estate, you have a question that was brought in regarding new changes to guidelines if you’ve had a short sale.
Mike:  I’ve talked in the past about if you had of got a short sale in your background, about how quickly you get back in the market.
In August of 2014 this year, Fannie May changed their guidelines. The old guideline was you had to wait two years if you were putting down 20 percent and four years if you were putting down 10 percent, before you would qualify for a Fannie or Freddy loan, which is essentially a conventional loan.
They have changed that in August and now the wait there’s four years regardless of how much you are putting down. It didn’t get better, it got a little tighter.
Matt:  What do you think that’s because of?
Mike:  Not really sure, just another thing of a loop that they want to close in terms of what they call risk factor. Anybody who’s had a short sale, they rate as having being a greater risk to do it in the future. It’s just a risk management thing on their part.
Now, if you’ve had a short sale, that still doesn’t preclude you from maybe qualifying for an FHM loan, where the wait is three years, or VA loan, if you qualify for those parameters, where the wait is two years. There are still actions available, but the conventional low guideline got a little tighter.
Matt:  Make sense, seems to be the trend in the banking industry these days.
Mike:  Actually, it’s interesting that there are some changes going on that are getting a little looser. This has really caught a lot of people by surprise that they were tightening it, because of how long they’ve been doing the two years with 20 percent down.
It should make it a lot riskier, but there’s no necessary accounting for their decision making.
Matt:  Are these changes in full effect now or are they hitting on a certain day?
Mike:  They are in full effect now. A conventional loan, the wait is four years regardless of how much money you’re putting down. You got to be putting down 70 percent, but it still going to be a four year wait if you’ve had a short sale. But, let’s look at VA or FHA if that’s still something you want to do.
Matt:  That makes sense. People out there have a question, Mike. What’s the best way to get in touch with you?
Mike:  I’m happy to answer any questions only on short sales, but foreclosure, bankruptcy, or more importantly just a good conventional loan first loan borrower or if you have any questions, reach me, you can call me at our office number which is 480‑5033533. Call me on my cell at 480‑2202329 or email me at mike.goblet@umfgimc.com.
Matt:  Excellent, thanks for enlightening us once again, Mike. We look forward to another segment. Hopefully you stay dry and clear of the cyclone coming through.
Mike:  You too, Matt. Don’t drive up too any washes that are running.
Matt:  No. I don’t want to get the idiot driver locked onto my face.
Mike:  Take care and look forward to talking to you soon.
Matt:  You too, Mike. Thanks.
Mike:  Bye.

Being a veteran provides a lot of benefits that the government supports. One of the real advantages that has been around for many, many decades has been the VA mortgage loan.  The VA loan is one of the best programs out there.  The pricing is significantly better with a VA loan than that of a comparable conventional because the VA loan is a government-backed loan, There are a wide variety of terms available too, including a 30 year fixed, a 15 year fixed, even ARMs and even jumbos can be done under VA. Also, t’s not limited to a certain dollar factor.

Whether it’s a home purchase or refinancing, you can do a VA loan. With a VA loan, one of the best advantages is that it has a no money down option. It doesn’t matter if you are purchasing a new build, a resale, even a manufactured home.  Also, because the government backs the loan, there’s no private mortgage insurance.  That can save veterans thousands of dollars.

If you have served in the military or are currently serving and would like to purchase a home, refinance your home or do a home equity loan, please contact United Mortgage Insurance in Arizona at (480) 503‑3533, or you can call Mike Goblet directly at (480) 220‑2329 or email him at mike.goblet@umfginc.com.

Matt O’Brien:  Welcome back to another segment of Arizona Mortgage News. We’re here with Mike Goblet, our Arizona expert in mortgage and all things that are important to you when it comes to your business in mortgages.

Mike, today’s topic was a write in. It sounds like we’re talking about vets today. The question was, “What are the advantages of a VA mortgage?”

Mike Goblet:  Yeah, good morning, Matt. I thought this would be a great topic, timely for a lot of reasons. As we all know and are learning, being a vet provides a lot of benefits that the government supports the vets on.

Now, there’s obviously been some downside on the medical side, but that’s being rectified. One of the real advantages that has been there for many, many decades has been the VA mortgage support, the home loan, the VA mortgage home loan program.

Matt:  All right. Well, our veterans have a benefit here. Do they have better pricing and options than the rest of us civilians?

Mike:  There are many advantages. I think it’s one of the best programs out there, the VA loan. Let me say, first of all, if anybody listening is eligible for a VA mortgage, thank you for your service.

Matt:  Absolutely.

Mike:  I greatly appreciate it and now it’s time to reap the benefits of that service as well.

Matt:  So what are the benefits, I’m excited to hear.

Mike:  You asked right away, is it better pricing, the answer is because it’s a government backed loan, yeah. Actually, the pricing on a comparable conventional loan is significantly better on a VA. So that’s a good place to start.

But it doesn’t end there. You still have a wide variety of terms, meaning a 30 year fixed, a 15 year fixed, even ARMs and even jumbos can be done under VA. It’s not just limited to a certain dollar factor.

Matt:  Oh, wow.

Mike:  Also, whether it’s a purchase or it a refi, you can do a VA loan. One of the real advantages of a purchase is that it’s not money down. You can do as little as no money down or, obviously, you can choose to put money down. That’s on either a new build, a resale, even a manufactured home.

I can tell you, I did my first home in 1972 on a no money down VA loan and it really helped me get my family established. More importantly, into the housing market at a time when just coming back from my tour of duty and I didn’t have a lot of savings. It provided a huge benefit, having no money down.

Matt:  The no money down, does that also apply for jumbo loans?

Mike:  The answer is, yes. Now, there’s a little different situation, meaning when it gets into a jumbo it has to be calculated differently and there is money involved. But it’s not specifically designed as money down. It has to do with certain ratios.

Matt:  Ah, very cool.

Mike:  It’s a great place and I can tell you, as I said, my first my home was that and it allowed me to not only get my family established into a home, but to leverage that asset into purchases throughout the rest of my life. It was a wonderful start, and it’s still available even after the loan is paid off.

I can do a VA loan today if I chose to.

Matt:  Very cool. There are benefits to this wonderful VA loan.

Mike:  There are. If you want to do a refi, you can do a rate and term. You can do a cash out, to 100 percent loan to value. If you’re already in a VA loan and want to refi, you can do what’s called an interest rate reduction loan and that’s from one VA loan back into another, without additional proof of income.

Basically it’s saying, “If you’ve been making the payments, you should be able to keep making the payments if it’s actually a lower rate.”

Matt:  It’s really a really good program whether it’s a purchase or refi.

Mike:  Very cool.

Matt:  I’m going to go back, I think the fourth and most important part is, no MI. Regardless of the loan to value on the purchase or on a refi, there’s no private mortgage insurance, even if there’s less than 20 percent equity.

Mike:  Wow. All right, well, this is a great government program here for our veterans. Active, retired, part time, reserve, all eligible.

Matt:  That’s really the real key. Obviously, you have to be or have been in the service and be able to prove your eligibility with what’s called the DD214. If anybody in the industry or within the military will know what that is. It’s only on primary residence. It’s not there to help people get rich off an investment property or even a second home. It can really only be used on primary residence.

There’s one other downside that needs to be factored in. That is that there’s a guarantee fee on the part of the government. Now, the good news is that guarantee fee ‑‑ and it’s similar to one that’s there on an FHA loan ‑‑ but it can be rolled into the loan amount or it even be paid for with the yield spread or YSP that I’ve talked about from the lender rebate, if the right rate is chosen.

There are even some real options there.

Matt:  Very nice. Well, those are some good opportunities. It sounds like there are some veterans out there, active, reserve, retired, they need to get in touch with you, Mike.

Mike:  Yeah. If you think you’re eligible or know somebody that’s eligible, give me a call and let’s talk about it and see how the program can work for you. Whether you want cash out, rehab for home improvement, debt consolidation, or buy a new home. There are great opportunities behind the VA loan.

Matt:  Mike, what’s the best way to get in touch with you.

Mike:  The number here at the office is (480) 503‑3533, or you can call me on my cell phone at (480) 220‑2329 or email me at mike.goblet@umfginc.com.

Matt:  Excellent, well, this is a cool segment. I hope all the veterans out there will take advantage of this opportunity if they haven’t already. We’ll look forward to our next segment with you, Mike.

Mike:  Thanks, Matt. I look forward to it as well. You have a good rest of the day.

Matt:  You too. Thanks Mike.

Mike:  Bye now.

Wouldn’t it be nice to choose your own rate?  Well, you can.  In this edition of Arizona Mortgage News, local expert Mike Goblet of United Mortgage and Financial Group discusses what banks provide you during the mortgage process and why being armed with information prior to getting a mortgage can save your thousands of dollars.

Mortgage Rates today trade in a wide range of different rates. For instance, a 30‑year right now will trade from anywhere from 3.7 percent up to 5 percent. In a 15‑year, you could have an option of going down to 2.75 or up to 4 percent.  The real differences between all of those rates are some of them have a buy-down cost to get to them. Others have what are called an incentive rebate, YSP or banks will call it SRP, that is provided for choosing a higher rate.

Against those, there are some factors that weigh against what they turn out to be in terms of either their costs or their rebate, things like the loan, the value, your credit scores, how much money the bank or the broker is making. All get adjusted against those different rates. But the real key is shouldn’t you know what those rates are, and you make the choice, not the bank?

Actually, there are philosophies of financial planners that can help with that. Really what you need to know is the best use of your money. For instance, if your break‑even point, most financial planners will tell you if it’s more than three to five years, you’re better off taking more money from the banks today on that incentive rebate than you are to take the lower rate with the additional cost.

There are factors of how long are you going to be in the loan, is it a 15‑year? At United Mortgage Financial Group, we provide the lender’s a pricing sheet. This shows the lender exactly what all the rebates or costs are to the loan, so they can make the decision as to the best program. It isn’t always the lowest rate.

Transcript

Matt O’Brien:  Welcome back to another segment of Arizona Mortgage News ‑‑ Insider Update with our local resident expert Mike Goblet of United Mortgage and Financial Group. Hey, Mike. How’s it going this evening?

Mike Goblet:  Good, Matt. How about yourself?

Matt:  Not too bad. Your topic today is interesting. I guess everyone would like to pick their own mortgage rate. You question is, “Why is it that banks don’t let people pick their own mortgage rates?” Is that like the peanuts thing where everything should be five cents?

Mike:  [laughs] Everything isn’t five cents in this case, but picking your own rate, yeah, there’s really no reason why you shouldn’t be able to. The real key to that is providing you with enough information so you can choose the best rate for yourself. But it is strange.

Actually, I found it strange for years that when you go to a bank or any lender, they will give you a quote and say, “Here’s your rate. It’s 4.5 percent. And here are the costs, or there’s no cost to it.” That’s all they tell you. Shouldn’t you really be able to choose your own rate? Wouldn’t that be nice?

Matt:  It sure would be nice.

Mike:  Matt, actually, you can, because, even with them, there are other rates available that they’re not telling you about, that have advantages or disadvantages to them. Interesting?

Matt:  That is interesting. Tell us more.

Mike:  Actually, mortgage rates today trade in a wide range of different rates. For instance, a 30‑year right now will trade from anywhere from 3.7 percent up to 5 percent. In a 15‑year, you could have an option of going down to 2.75 or up to 4 percent.

The real differences between all of those rates is some of them have a buydown cost to get to them. Others have what are called an incentive rebate, YSP or banks will call it SRP, that is provided for choosing a higher rate.

Against those, there are some factors that weigh against what they turn out to be in terms of either their costs or their rebate, things like the loan, the value, your credit scores, how much money the bank or the broker is making. All get adjusted against those different rates. But the real key is shouldn’t you know what those rates are, and you make the choice, not the bank?

Matt:  That would make a lot of sense, but it gets confusing when you factor in all the present value of money and long term value down the road.

Mike:  That’s a real factor. Actually, there’s philosophies of financial planners that can help with that. Really what you need to know is the best use of your money. For instance, if your break‑even point, most financial planners will tell you if it’s more than three to five years, you’re better off taking more money from the banks today on that incentive rebate than you are to take the lower rate with the additional cost.

There are factors of how long are you going to be in the loan, is it a 15‑year? Candidly, my job, and what we do here at United Mortgage Financial Group, is I provide the lender’s pricing sheet. You can see exactly what all the rebates or costs are to the loan, and then make the decision as to the best program. It isn’t always the lowest rate.

Matt:  That makes a lot of sense. I’ve worked with you on those and that is something that’s unique about you guys. You give us four different scenarios that give you a snapshot of today and down the road.

The question you keep asking is, “How long are you going to be in this house? What is your exit plan?” Those are good questions. Most people are probably going to look at the short term versus the long term, especially in today’s market.

Mike:  You’re talking thousands of dollars in most cases, in difference of costs or rebate money, or money you can keep in your pocket. It should be your choice. Banks aren’t giving you that choice. By the way, they operate within the same framework I do. They’re just not working with you like the trusted client or like a financial planner, in my opinion, as they should be.

Matt:  That makes a lot of sense. You’re 100 percent right. You’re pretty much playing the role of a financial planner at that stage. As a bank, they don’t want you to know what the best option is for you. They’re looking for the best option for the bank.

Mike:  A lot of reasons they don’t do it…You bring up an interesting point. Nothing changes for me, and actually nothing changes for the bank regardless of the rate you choose. There are different factors involved.

What they don’t want to disclose to you is how much money they’re actually making on the loan, from the back side. They don’t want you to see that and they don’t want you to know how much they’re making. I know the industry average runs from 2 to 2.5 percent in terms of their cost.

Although they may disclose to you there’s no origination fee, that’s because they’re making it on the back side, but not telling you about it.

Matt:  It makes a lot of sense. Those are good things to consider when picking your mortgage rate, as you say.

Mike:  If you want to learn more about it, give me a call. I’m happy to walk you through the process, even give you questions to ask your bank if you’re going through the process right now. Put them on the spot. They should have the answers and there’s no reason they shouldn’t give them to you.

Matt:  That makes sense. Mike, what is the best way for people to reach out to you?

Mike:  Our phone number at the office is 480‑503‑3533. Call me on my cell at 480‑220‑2329, or email me at mike.goblet@umfginc.com.

Matt:  Excellent. Thanks for another informative hangout with you.

Mike:  My pleasure. Again, I love the questions, would love to talk with clients, even if it’s just to make them a more informed shopper. I look forward to the opportunity of helping them.

Matt:  Very good. Have a great Fourth weekend, Mike.

Mike:  Thank you, Matt. You too. Have a very good one.

In the past, obviously, one of the biggest problems that people have had is saving enough money for the down payment. Particularly, for first time home buyers, that’s a big obstacle. As home prices have risen, the amount of money that’s needed has always gone up proportionately as a result and become an obstacle for many. In the past, on a conventional mortgage, though you could put down as little as five percent, it had to be money from your own funds.

Recent changes are now allowing lenders and the mortgage companies to allow the down payment to gift money. Gift money can come from any relative to be used towards the down payment. The down payment no longer needs to be 100% from your personal funds. This will allow many first time home buyers a greater chance at owning their new home.

United Mortgage Rule changes in down payments that may help many buy a home sooner

Matt: We’re here with Mike Goblet and another segment of Arizona Mortgage News Insider Update. Today, we’re going to talk about rule changes in down payments that may help many to buy a home sooner. It sounds like good news, Mike. Good to see you again.

Mike Goblet: Hi, Matt. It’s good to see you again. There’s been some recent changes in the rules governing down payments that I think are very encouraging and will help many get into the market sooner rather than later, which is really important for many today.

Matt: Absolutely.

Mike: In the past, obviously, one of the biggest problems that people have had is saving enough money for the down payment. Particularly, for first time home buyers, that’s a big obstacle. As home prices have risen, the amount of money that’s needed has always gone up proportionately as a result and become an obstacle for many. In the past, on a conventional mortgage, though you could put down as little as five percent, it had to be money from your own funds.

Even if you were putting down 20 percent, you had to put down at least five percent of your own money and prove that it was yours. On a $200,000 home, particularly, for somebody starting out, the need for that $10,000, and then, the reserves when you own a new home, there are many additional costs that get added it became very large. What’s been changed?

Actually, as a result of some of the stricter laws that came out at the beginning of the year about the qualified mortgage…I don’t know if you remember me talking about that?

Matt: Sure.

Mike: They got stricter with DTI and, actually, the big focus became on the ability to repay, that they had to make sure the consumer had the resources. That’s actually the positive that has now allowed Fannie Mae, in particular, lenders and the MI companies to allow the down payment to become gift money.

Matt: Gift money, what’s that?

Mike: Gift money can come from any relative towards the down payment. A relative, or a fiancÈe, or a domestic partner, in terms of people. It can’t just come from anybody, but they can give you the money. Your parents, for example, can give you the money for a 100 percent of the down payment. Whereas before, you needed at least five percent of your own funds.

Matt: Very cool.

Mike: Now, when you think about it, you can do a loan with just five percent money down. This now creates the opportunity for many to get into the market, that couldn’t get there before.

Matt: So long as they’ve got a rich uncle or cousin to help them out, right?

Mike: Exactly the case. Now, there are some qualifications about the gift money that has to be sourced. By the way, a gift money means it can’t be required to be paid back. It is truly a gift. But as soon as that criteria is met, the money becomes very viable and can be used at any time during the process as going towards the down payment.

I think that’s really exciting news in terms of getting particularly first time home buyers into the market that have the family members or a significant other that they’re dealing with that has the money and can now make that home purchase possible.

Matt: Could that also come from a family trust?

Mike: Entities, that gets a little more difficult. But I guess if they’re one of the trustees on it, the answer is it could. It gets a little more cloudy when you start dealing with entities like that. I’m going to guess the detail can be worked out. The answer is yes.

Matt: Got you. Like a REAP, but within a family confines, set that up to do something like that.

Mike: I never tried to do that. We are dealing now, because this has only been the last few months that the MI companies and the lenders have allowed this. I haven’t had any that came from a family trust, but I’m sure it’s going to be based upon how the trust is structured.

Matt: Very cool.

Matt: Are there any other gems and nuggets of wisdom to share with us?

Mike: Rates are still really holding and been very positive. While they’ve been a little bit up and down, rates are still actually in the mid to low fours, depending upon how you want to approach it.

Were you trying to do a totally no closing cost loan, or just do what’s called the part pricing that we’ve talked about in the past that provides no money towards closing cost? Rates a still great. They’re holding in the low fours, depending upon a lot of the different criteria.

Matt: That’s good news.

Mike: Excuse me?

Matt: Good news. Time to get out there and get active.

Mike: It is, particularly, with this down payment change. Home prices have stabilized for a bit. They’re not rising as fast as they have been in the Phoenix market. There’s a little more inventory coming on. I think now is a great time to be looking for a home.

Matt: With that lead in, Mike, what’s the best way to get in touch with you for those that have questions and want to get started?

Mike: Our full number at the office is 480 503 3533. Call me direct on my cell phone, as well, at 480 220 2329. My email address is mike.goblet@umfginc.com, mike.goblet@umfginc.com.

Matt: Good deal. Thanks for sharing another good segment on Arizona Mortgage News. We’ll look forward to the next go around with you.

Mike: I look forward to it, too. I’ll bring an update on what’s going on with a lot of things, mortgage rates, and, obviously, any new changes that come along.

Matt: Beautiful. Have a great weekend, Mike.

Mike: You too, Matt. Take care.

Matt: Thanks.

In the last edition of Arizona Mortgage News, local expert Mike Goblet of United Mortgage and Financial Group covered the changes in qualified mortgages.  Today he addresses, among other things, what will happen to rates in 2014.

The short answer: rates are going to go up. In this video, Mike will shed light on why, and how long it’s going to take to see those changes. Mike explains that, while it’s not an absolute, generally when the stock market’s going up, mortgage rates are getting worse, and when the stock market’s going down, mortgage rates are improving or, at least, staying the same.

Mike will also address the proposed “g-fee” and why the date of its implementation is still uncertain, as well as the doubling, or even tripling cost of flood insurance across the U.S., and the unexpected benefit of an adjustable rate mortgage in this market.

Learn all this and more in this informative video, or contact United Mortgage at 480‑503‑3533, or visit www.unitedmortgagefinancial.com.

Matt O’Brien:  Well, welcome back to another segment of Arizona Mortgage News “Insider Update.” We’re here with our resident expert, Mike Goblet of United Mortgage and Financial Group.

Good to see you, Mike.

Mike Goblet:  Good to see you, Matt.

Matt:  We’re hitting these new topics in 2014. I know you wanted to discuss some of the changes and things that we need to be aware of in this wonderful new year.

Mike:  Yeah, we covered in the last video about what the changes are with regards to a qualified mortgage and what it will mean to guidelines and things, but I’m sure people are wondering, “Where are rates going to go in 2014?”

Matt:  Well, that’s a good question. I’m thinking rates are going up.

Mike:  You’ve heard the old saying, “If only I had a crystal ball.” Everybody falls back on that, particularly, old‑mortgage people. Candidly, on a day‑to‑day or hour‑by‑hour basis, you need a crystal ball because you don’t know what’s going to happen, but trends are there and indicators are there of what’s going to happen on a long‑time basis.

Candidly, you don’t need a crystal ball. You’re 100 percent correct, rates are going to go up, but understanding why and how long it’s going to take is part of the key.

Matt:  We’re concerned and intrigued. Enlighten us.

Mike:  You and I both have felt that rates will continue to rise. But let’s go back for a moment and remember, where do rates come from? They really come from this stock market, if you recall, but they operate in what’s called mortgage‑backed securities on the bond market.

Bonds are a safety venue for investors and where they go to protect their money. When stocks are doing poorly, it takes little incentive to get people to put money into bonds. There’s little they have to do in order to get people calm.

Rates have been going up, for instance, today, because the stock market is down 100 points, so there’s no need. But when the stock market’s doing well, like it has been doing in the past, to bring investors over, they have to increase the yield. That comes from the yield spread and everything that they have to give investors, and that’s what causes rates to fluctuate up.

It’s not an absolute, but generally, when the stock market’s going up, mortgage rates are getting worse, and when the stock market’s going down, mortgage rates are improving or, at least, staying the same. That’s a generalization in terms of where they come from.

What we’ve been seeing in the past… Again, the stock market’s been doing well, so rates have been going up, but we’ve also had an artificial influence with the QE3, or the quantitative easing, that the Fed has been doing. As everyone’s probably aware, they’ve announced they’re slowing that down. They’re slowing down their purchases and, candidly, that’s going to cause an increase in rates just by itself.

Matt:  Interesting.

Mike:  As they keep doing the quantitative easing as the economy shows to be healthier, rates are going to be inching up to a more natural level. Don’t forget, the average over the past history of mortgages, seven percent is what the average rate is in the history of mortgage rates. We’re still in the fours, incredibly low.

Matt:  Well, it’s still a good time to think about it. Overall, if there’s going to be less purchases going on, that would mean that there’s going to be more inventory on the market?

Mike:  That’s a positive sign. I’ll get into that as well, but there are other things that are going to effect mortgage rates.

Actually, one thing that was supposed to go into effect already this year was what’s called the g‑fee increase. This is space by Fannie and Freddie, additional basis points they were going to put into mortgages to protect themselves with their guarantee. That’s why it’s called the g‑fee.

Candidly, this was supposed to have happened, but the head of the Consumer Financial Protection Bureau, Matt… Bottom line, he’s put a temporary hold on this. So it did not take effect as it was supposed to, because he wanted to see what this impact was going to be. Mel Watt, that’s the name I was looking for. Mel Watt. He’s put a hold on that until he can evaluate it. That’s the good news.

But the fact is that it’s likely to be coming, so rates will go up, not only because of quantitative easing but also because of the g‑fee increase that Fannie and Freddie are going to put on loans.

Additionally, all lenders and Fannie and Freddie are going to put on what they call loan‑level pricing adjustments that get into DTI, that get into how much money you’re putting down, that get into what your FICO scores are. Those are scheduled for an increase, as well. Those are going to increase rates.

Where will rates go? They’re going to go up. Don’t forget, I talked about those loans that don’t hit a qualifying mortgage and fall into a different venue. Those are going to be called high‑price mortgages. The expectation is, those are going to have a one to one and a half rate above whatever a conventional conforming loan will be that hits the qualified mortgage or the QM. That’s going to add.

Candidly, to show you where it’s going, Wells Fargo has projected that 40 percent of their new loans are going to be non‑qualified mortgages or those high price mortgages. There’s going to be a thing where…

[crosstalk]

Matt:  [indecipherable 6:24] has not gotten any better through all these wonderful changes.

Mike:  No, they’re not meant to be. They’re designed to protect the industry from collapsing, but they will definitely affect the consumer on where rates will be.

Another big issue, if anybody needs flood insurance, it’s doubling and tripling in terms of cost for 2014. That’s going to be huge.

[crosstalk]

Mike:  Say that again. 

Matt:  I said, look out for those in the Midwest.

Mike:  Yeah, any place. Talk about New Jersey, just anywhere along the Mississippi, all the way down to New Orleans. If you need flood insurance, expect to pay significantly higher rates.

The ultimate question, besides going up, where do I think rates will be? It’d be easy to evaluate that by the end of the year, rates will be up to about 5.5 percent. Still very good, but that’s about a point higher off of par pricing than where we are right now.

What does that mean, a point? If you had a $250,000 loan at today’s pricing, assuming 4.5 being close to par pricing, that would have a principle and interest payment of $1,267. If at the end of the year rates are 5.5 percent, that same loan at 5.5 would have a principle and interest payment of $1,419. That’s $152 a month increase, or 12 percent higher than what it’s currently at now. That’s going to affect a lot of people.

Matt:  Locking in to a fixed rate would seem like the best option.

Mike:  It would. If you’re going to get into a mortgage, obviously, try to do it as soon as possible. Whether you’re looking at purchasing or whether you’re looking at refinancing, if you have the capability of doing it early, do it as early as you can.

I’m going to throw something else out there, too, that might sound a little counterintuitive. Also, if it makes sense, if the consumer’s in the right circumstance, look for an adjustable rate mortgage or non. What I say makes sense, not just because it’s a lower rate, because they’re about a point or even a point and a half lower than what a conforming loan is.

If you think or are very confident that you’re only going to be in that mortgage anywhere less than 5 or 10 years, then it could make a lot of sense to be looking at the adjustable rate and saving interest money, because that’s what it’s all about.

Matt:  Makes sense.

Mike:  Even the period of time after it adjusts, depending upon the particular the ARM you’re in, it can still be very safe. Adjustable rates mortgage, particularly as the 30‑year fixed rates climb, may make even more sense as we go along. But again, it has to make sense to your circumstance and not just go for it because it’s the lowest rate available.

Matt:  This is interesting. That seems a little counterintuitive to concerns of rising interest rates and doing adjustable rate, but then again, if you’ve got more of a short‑term plan, then you’re going to put some money in your pocket.

Mike:  Exactly. A good window is 5 to 10 years. If you expect to be out of that mortgage within 5 to 10 years, a consideration an ARM can make sense.

If equity is important to you, make a fixed‑rate payment. In other words, I always use the example, the difference between taking out a 15‑year term mortgage versus a 30, but making a 30‑year payment or making a 15. Take out a 30‑year but make a 15‑year payment adds about eight months onto the life of that loan.

You have the protection of making the lower payment, but you all these advantages, or most of the advantages, of taking out a 15‑year term. Even if you take out an ARM and you want to worry about equity and everything, make a bigger payment, but you’re not forced to make it.

Matt:  Good advice. I like it. Might have to use that.

Mike:  Very good, Matt.

Matt:  Mike, this is good information. For those who want to get in touch with you, what’s the best way to reach out?

Mike:  Our office number here at United Mortgage Financial Group is 480‑503‑3533. If you want to call me direct on my cell, I’m happy to take your call at 480‑220‑2329. Of course, we have email available at Mike.Goblet@ our company initials, @umfginc.com.

Matt:  Very good. Well, thanks for sharing some of the forecasting and things to look for in 2014. We’ll look forward to our next session with you.

Mike:  Thanks, Matt. Let’s talk about where the housing industry is going to go and what will that mean to rates and to potential buyers and sellers.

Matt:  Sounds good.

Mike:  Talk to you later, Matt.

Matt:  Thanks, Mike. Bye.