Jason Price

Homeowners and prospective homeowners of Eustis, Mount Dora, and Tavares, Florida could see, as early as next week, rates on 30 Year Fixed Rate mortgages in the 4% range. This move could come about as a result of a push by Republican lawmakers to include this provision in President Obama’s $900 Billion stimulus package.

The strategy has two main objectives to help stimulate the economy. The first being to stop the falling housing market. By dropping rates below already historic low rates, prospective homeowners may jump on them to buy matching historic low housing prices. The second would stimulate consumer spending. Existing homeowners will be able to refinance (provided they are not already upside-down), thus lowering their monthly obligations.

The provision is aimed towards Fannie Mae and Freddie Mac, not FHA. Hope for Homeowners... click here to read more.

Residents of the Golden Triangle (Mt Dora, Eustis, and Tavares) of Florida will be losing more than "Hope" if they choose to act on the government's newest mortgage bailout program that HUD introduced through FHA last year. The "Hope for Homeowners" (H4H) was designed to help homeowners keep their homes by renegotiating a lower mortgage payment through this unique refinancing program.

FHA (Free?! Ha, Assumetheposition) will refinance your home based on the current appraised value. They will only lend up to 96.5% of the appraised value. Yes, the lender will assume a loss on the difference between the current, existing mortgage and the new one. (Note: I said assume.) With the new, lower mortgage principal balance, a homeowner will have lower monthly payments that they should now be able to afford.

As with anything, there is a catch. First, you have to qualify for the H4H mortgage program. But I am not going to cover the qualifications. The second catch is the lender's assumed loss. (You honestly did not think the bank was just going to walk away from all that money they were supposed to make off of you and let you get away with it... did you?)

Here is where the bank makes up for its assumed loss. The philosophy behind this program is called "shared equity." Put quite simply, any equity that you make through appreciation from the time of the refinance to the time of sale is split between you and the bank. And if you are thanking that share means 50/50, you are sadly mistaken. Here is a link to HUD/FHA talking about the H4H program. Notice that it quickly talks about the "shared equity," but never mentions the splits. Probably because if it did, no one would really do it.

Here are the splits:

• 1st Year - Bank gets 100% of the equity (Yep, they are getting 3.5% equity right off the bat because they only lent to you 96.5% of the appraised value.)
• 2nd Year - Bank get 90%
• 3rd Year - 80%
• 4th Year - 70%
• 5th Year - 60%
• After 5th Year - 50%

Now you can see that the bank is not going to really loose any money. Oh, one more thing... the bank is going to make you pay almost 3 points (3%) of the loan amount to take out mortgage insurance. That is insurance that the bank will receive in case you default on your mortgage... AGAIN. Who is really losing out on this deal? Sure the homeowner gets to keep their house, but at what cost... losing equity?

I would rather give up my house through a short sale or walk away and let it go to the bank. Then I would rent for a year or two, so I can save up some money and re-build my shot credit. After 1-2 years, I would go house hunting again, use the money I saved up, and buy a new home. Or I would go USDA (100% financing), and save my money for a rainy day. In this case, I get to keep 100% of my equity from that point forward. With H4H, I am only getting 10-20% of the equity from my home with a maximum of 50% should I choose to stay there for over 5 years.

Moral of the story: sometimes we have to do the opposite of what we are taught to do or want to do, so we can better ourselves in the future.

Yes, I just said Option Mortgage… but I did not say Option ARM Mortgage.

I have talked to clients about this in the past and 9 times out of 10, my client has listened to my suggestion. And I am willing to bet that in today’s economic situation, they are thanking me a million times over.

So, what is this Option Mortgage? Quite simply it is a 15-year Fixed Rate Mortgage (FRM) with a 30-year FRM payment option. Whaaaaat? Whenever I have a client that wants a 15-year FRM, I suggest to them a 30-year FRM that has NO PRE-PAYMENT PENALTY and give them an amortization schedule with a 15 year payoff.

As of lately, the rate for a 15-year FRM... Read more.

When was the last time your bank guaranteed that you would be approved for a loan or a mortgage? If you were denied, did they work with you to get you to where you need to be to be approved? Or did they just send you a letter in the mail? If this applies to you, then you should know that we will get you approved.

How can we say this? Well, here is how the program works. If when a borrower first applies for a home mortgage loan (refinance or purchase) and they are not approved (or bankable), we will begin our part of the program - The KMS Plan.

The KMS Plan: We will... read more.

When applying for a commercial mortgage, there are many financing options that are available. Just like with residential loans, commercial borrowers can choose between fixed rate or adjustable rate, construction or permanent, and even interest only or fully ammortized. However, it is not just that simple.

There are many factors that come into play that are similar to residential mortgages, yet different from them. Some of these items DSCR (or Debt Service Coverage Ratio), Rent Roll, Operating Expense, and read more...