“Liar Loans” Return

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When it comes to dealing with risk, America’s housing market struggles with balance. How can lenders offer affordable home mortgages for more Americans and still maintain proper safeguards?

The Great Recession was driven in part by overly risky loans that were packaged as securities and sold to investors who were unaware of the underlying risk. The resulting housing market collapse led to the Dodd-Frank regulations that regulated mortgage lending and applied credit-tightening safeguards.

Most of those safeguards are still in place, but loan offers are starting to creep back into risky territory – and investors are happy to buy up those loans looking for returns.

Dodd-Frank instituted qualifying mortgage rules – a set of lending restrictions that must be met before loans can be purchased by the mortgage loan backers Fannie Mae and Freddie Mac. Riskier unqualified loans may still be granted, but lenders don’t receive protections associated with qualified …

You Still Need A High Credit Score To Refinance

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Times aren’t great in the mortgage refinancing market. According to the October 2018 Origination Insights Report from mortgage application software provider Ellie Mae, refinancing homes make up 32% of October’s closed mortgages – continuing a drop in refis that began five to six months prior.

It’s likely that mortgage rate increases are to blame for the decline in refis. The drop roughly corresponds to 30-year fixed mortgage rates breaking the 4.5% mark in May for the first time since January 2014.

Refinancing generally only makes sense when you can acquire a better interest rate than your current rate. After years of historically low interest rates, it’s less likely that you can find rates suitable for refinancing – unless you have improved your creditworthiness since taking out your original mortgage.

Lenders might be tempted to ease refinancing stand…

VA Loans 101

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Veterans Affairs (VA) loans are invaluable for homebuyers. Their advantages include little or no money down, qualifying with a lower credit score, competitive interest rates, potentially lower closing and auxiliary costs, and no private mortgage insurance requirements.

VA loans are administered through approved lending institutions, and backed through an entitlement of up to $36,000. This entitlement can guarantee a home loan of up to 453,100 without a down payment and possibly higher in some high-cost counties.

You may qualify for a VA loan if you’re an active duty service member, a veteran in good standing, a current or discharged National Guard or Selected Reserve member, a spouse of a service member who died on active duty, or a spouse of a veteran who died as a result of military service. Your lender will require a Certificate of Eligibility, which requires different ev…

HARP Ending… Again… For Good?

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Since 2009, the Home Affordable Refinance Program (HARP) has helped qualified homeowners with limited equity in their homes find affordable refinancing. After seven program extensions, HARP is scheduled to end December 31, 2018, when new assistance programs from the mortgage-loan-backing agencies Fannie Mae and Freddie Mac will take its place.

In the wake of the housing crisis and plunging home values, too many Americans were left owing more on their homes than the homes were worth – leaving them “underwater” with loan-to-value (LTV) ratios greater than 100%. HARP stepped in to help homeowners with LTV ratios greater than 80% refinance loans and find manageable monthly payment terms.

To be eligible for a HARP loan, your mortgage must have originated no later than May 31, 2009. You must be current on your payments – no payments late by thirty days or more in the last six m…

Don’t Let A Refi Hurt Your Credit Score

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By Tracy Scott

Do you have a loan payment that is squeezing your monthly budget a bit tighter than you’d planned? When you borrowed the money five years ago, you may have been in a different job, childless or paying less on other household expenses. Refinancing may provide the needed relief for your financial situation. It may also prevent you from needing to make bad money choices such as maxing out your credit card for groceries or opening new lines of credit to pay your bills.

What Does Refinancing Mean?

Refinancing is paying off a current loan by originating a new one. The old debt still exists, but it is now in the form of a new loan, quite often with a lower payment and interest rate. You need good credit to qualify for a refinance. Just as when you applied for the original loan, approval is often based on your ability to repay the loan, your employment history, and your current credit score.

HARP To End This Year

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The Home Affordable Refinance Program (HARP) has arguably been one of the most successful programs to assist homeowners affected by the subprime mortgage crisis. According to HousingWire, almost 3.5 million homeowners have been assisted by the program, with around 1 million of those homeowners having been underwater (owing more on their home than it was worth).

HARP was created to help homeowners who were in decent enough financial shape to avoid foreclosure, but who were unable to secure refinancing because the drop in their home values left them underwater or otherwise unable to meet traditional criteria. HARP does not reduce the amount of principal owed, but it does rework the terms in order to secure better interest rates, lower monthly payments, or save on collective interest.

Many homeowners who can take advantage of HARP refinancing have already done so. However, ther…

Construction Liens 101

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A construction lien, otherwise known as a mechanic’s lien, is a claim that is made against a property by a contractor, subcontractor, or other professional party involved in a construction project. These liens exist to protect construction professionals from non-payment for materials or services rendered.

If you are withholding payment to a contractor for a construction project of any sort for substandard work or another dispute, the contractor has a right to file a construction lien on your property. Unfortunately, the same principle allows a subcontractor to file a construction lien on your property if the contractor did not pay the subcontractor. You, as the property owner, are still potentially on the hook.

Do not ignore a construction lien filed against your property. In the best case, the lien makes it virtually impossible to sell or refinance your property. If it is …

All About Real Estate Disclosures

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You want to know exactly what you are getting when you make any large purchase, especially when you are buying a home – the largest purchase that many Americans will ever make in their life. That’s why a real estate disclosure statement is a fundamental part of any real estate transaction.

By law, home sellers must provide a disclosure statement in writing regarding the condition of their home. The contents of disclosure statements vary by state and municipality, but they must disclose known hazards and defects of the home, as well as any important information that may affect the seller’s decision.

As a seller, you must make sure that you compile a thorough list of disclosure items. Your agent should be able to help you determine if each item must be disclosed.

Sellers are not required to search for any unknown defects, but failing to disclose a reasonab…

Don’t Let A Credit Dispute Blow Your Mortgage

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“Always check your credit report for errors, and dispute any errors as soon as possible.” We normally give this advice, but there are a few exceptions to this rule – including when you are preparing to apply for a mortgage loan.

Errors in credit reports should generally be disputed because of the potentially detrimental effects on your credit score. Matt Schulz, Senior Industry Analyst at CreditCards.com, puts it this way: “The thing about a credit score is it’s not really important every single day, but when it’s important, it’s really important.”

Mortgage loans are one of those important occasions where a high credit score is essential – you want your credit score to be as high as possible in order to qualify for the best interest rates and save thousands of dollars over the life of a loan. Unfortunately, if a loan officer sees that items on your credit report are …