Advantage Lending Corp BLOG

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As our company grows, so does our need to have the most diverse product portfolio available.  Recently Advantage Lending Corp gained approval as an authorized  lender for the Department of Veterans Affairs more commonly known as VA.  This will now allow our company to service our military veterans purchase and finance needs.  As a qualifying veteran, you can purchase a home with no down payment, and if you already own a home you can refinance (even cash out) to 100% of your homes current value.  One additional benefit is the Interest Rate Reduction Refinance Loan or IRRRL.  This loan allows existing veterans the ability to do a rate and term (no cash out) refinance with out credit qualifying or the need for a current appraisal.  We are very excited to be able to offer this very specialized type of financing and servicing the needs of the United States Military. 

Daniel Litvin

President

Lately lenders are not the only ones tightening their belts when it comes to underwriting requirements, PMI companies are pulling in the slack as well.  It use to be that PMI was a given, or just something that a loan automatically got when a borrower had less than 20% equity, but those days are gone.  PMI companies are now underwriting their policies so tightly that even though the bank may approve your loan the PMI company may not, making it impossible for your transaction to close. 

There are six major PMI companies out there. 

1. MGIC
2. RADIAN
3. GENWORTH
4. RMIC
5. UGI
6. PMI

Each one has similar guide lines to follow but some are more stringent than others.  for example, UGI and PMI will not offer PMI on second homes.  Genworth no longer underwrites PMI for any loans that are originated by brokers.  The loans that are being turned down are not your bruised credit, not sure if we’re going to get paid loans.  No sir, they won’t Evin underwrite those kind of loans any more.  The loans that are getting denied PMI coverage are the top of the credit food chain, the good, no, the great borrowers.  Simply having an 800 credit score putting down 5-10% of your own money and having a low Debit to Income ratio may no longer be enough. 

2008 was one of the toughest, most volatile years our financial systems have ever experienced – but we don’t have to tell you that. In some way or another, everyone has felt the effects of this global financial crisis. So, let’s skip the painful details. Let’s avoid as well the impossible task of trying to predict the end of it, and let’s try something different. Let’s spend the first month of 2009 looking at solutions to the mortgage and real estate markets – actual viable solutions that you can use right now to help turn things around. If you’re a homeowner or looking to be one in 2009, keep reading. You’ll be glad that you did.

Face Your Fears
As human beings, we crave certainty, consistency, something we can really count on or believe in. It’s comforting, it’s consoling, and it’s completely natural. But it’s also extremely fragile, and always the first casualty of turmoil, especially in the financial markets.

In 2008, one could argue that the biggest market movers were not just the credit crunch or a pending global recession. It was fear, a sweeping lack of confidence that suddenly gripped everyone, from major financial companies and individual investors, to consumers and governments alike. The result was not only the unprecedented financial turmoil that we’re not going to discuss in this article, but also an amazing opportunity for those who aren’t afraid to face that fear as the real estate and mortgage markets begin to turn – and they will turn. Perhaps they already have.

For instance, mortgage rates are currently the lowest they’ve been in a generation, and home prices have dropped significantly in many areas. For new buyers and homeowners looking to save on monthly payments, this is great news. Homes you might not have been able to afford just 2 or 3 years ago are now well within your reach at a rate that makes much more sense than renting, in many instances. What’s more, the Federal Reserve, the Treasury Department, and even the Federal Deposit Insurance Corporation (FDIC) are using all of their tools to address the ailing economy, which many experts believe could lead to even lower rates in the near future.

For homeowners with enough equity, this means now may be the time to lock in a low rate. At the time of the writing of this article, the Mortgage Bankers Association reported that mortgage applications jumped 2.9 percent in one week in December, 77% of which were refinances with an average interest rate of 5.18% for a 30-year fixed and an average rate of 4.93% for a 15-year fixed mortgage.

If the experts are wrong and rates increase, you made a great deal. If the experts are right and rates continue to drop, just ask your mortgage professional about a “no closing cost loan”. This type of loan allows borrowers to lock in today’s low rate and to refinance again if the rates fall further. Just make sure there’s no prepayment penalty if you’re not going to stay in the home long enough to recoup your investment.

The Waiting Game
Trying to time the bottom of any market is like trying to catch a falling knife with your bare hands. You’re going to lose every time. Instead, consider how long you’re going to be in the home before making any home financing decision. If the home you’re looking to purchase is below market value with rates are near historical lows and you’re planning to stay in your home for more than five years, you owe it to yourself to at least consider your options before it’s too late.

While it may not be the right time to try and flip a home for a quick profit, if you’re planning on a longer-term investment, it makes a lot of sense to take advantage of this rare combination of discounted prices and lower rates – especially for first-time home buyers.

Did you know that a $7,500 tax credit is now available to first-time home buyers? This special tax incentive was created as part of the Housing and Economic Recovery Act of 2008 to help stimulate the housing market, and yet very few people seem to know about it. This program provides qualified first-time home buyers (anyone who hasn’t owned a home in the last 3 years) a tax credit of up to $7,500 on either the 2008 or 2009 return. Add this to the list, and waiting any longer to jump in on today’s buyers’ market just doesn’t make a lot of sense.

There are, of course, income limits and other qualifying factors involved in this special tax incentive, but you can always call one of the mortgage professionals at Advantage Lending Corp and run the numbers. See what makes sense for your individual goals and needs.

Sure, home prices could drop even further, but they could just as easily begin to increase again in the next few months – no one knows for sure. But for those looking to refinance, playing the waiting game could prevent you from moving forward if home prices do continue to show weakness and your home fails to appraise. More importantly, you need to review your credit now, and make sure there are no issues that will force you to miss out on a great deal.

With increasing default rates for mortgage and other consumer debt, great credit management is rewarded with the lowest rates available and higher rates can be expected for others. Take a look at your credit report. Experts state that errors can be found in over 80% of all credit reports which can impact your FICO scores. In many cases, the information can be easily corrected but the time to discover an error is not within 30 days of an expected closing. Be prepared, act early, and seek advice and direction where warranted.

It’s important to note that mortgage rates are based on the performance of mortgage-backed securities (MBS) and rates can change several times throughout the course of a single day. In fact, MBSs have been so volatile recently that movements in the markets that used to take weeks or months now take only days or even hours to make.

The best path to follow is to complete a loan application with an experienced mortgage professional you trust, someone who has experience and access to up-to-the-minute MBS data. Agree on a target rate beforehand and authorize him or her to lock it in when he or she deems appropriate. If rates reach that level or appear to be going higher, he or she can lock it for you without having to track you down first to get your permission.

Remember, buying a home is the largest, most important investment most Americans will ever make. But it is also unlike any other investment available today. After all, you can’t live in a mutual fund, and you can’t raise your children in a money market account. Buying a home is still the best long-term investment you can make today – the turmoil of 2008 doesn’t change that fact. And by buying or refinancing now you could be getting in near the very bottom of the market.

Winning Strategies
The two biggest challenges of buying a new home in today’s market are the same as they’ve always been: qualifying for the mortgage and coming up with the down payment.

Well, that’s not exactly true. From about 2000 to 2007, increasing home prices made financing a home very easy for just about anyone. Even for borrowers with a low credit score, mortgages were available with no down payment, and some programs didn’t require any documentation at all.

Those days are gone. The exotic mortgage products that fueled the last real estate boom no longer exist, for the most part. Also missing from the mix are “sub-prime” loans. Until stability is seen in the housing markets, don’t expect these to return.

Today’s mortgage market looks more like it did ten years ago, before the rise and fall of exotic mortgages and the sub-prime collapse. That means you will have to have a good credit score, be able to fully document your income, and, with the exception of some government loan programs, you will likely need to put some money down.

The good news is that there are options available to help you overcome these challenges and take advantage of today’s buyers’ market. Yes, credit standards have tightened a bit, but with a solid credit score, home financing is absolutely available and affordable to everyone. Documentation will definitely be required, and expect that you will have to provide your last two years’ tax returns, W-2s, paystubs for the most recent 30 days, and three months bank statements.

The following is  details on one mortgage program that will help you succeed in today’s market.

FHA Mortgages
Mortgages from the Federal Housing Administration (FHA) have increased dramatically over the last two or three years – and there’s a good reason. FHA loans are fully backed by the government and offer consumers who qualify the best of both worlds: low interest rates and low down payment requirements.

FHA Benefits:

• Increased loan limits throughout the country
• As little as 3.5% down payment requirement
• Not typically credit-score driven
• Sellers may finance up to 6% of buyer’s costs to close
• Allows many down-payment assistance programs, including gifts
• $7,500 tax credit is available for FHA loans for qualifying buyers

FHA Streamline Refinances
FHA has provided streamline refinances on insured mortgages for almost 30 years. The “streamline” refers only to the amount of documentation and underwriting that needs to be performed by the lender. If you have a qualifying FHA loan, a streamline refinance can help you lower your rate and requires:

• No income verification
• No bank account verification
• No minimum credit score
• No appraisal in most cases

USDA Mortgages
Yes, the US Department of Agriculture is the same governmental agency that certifies the quality of the beef you buy. But it also has a mortgage program that supplies $16 billion in funding to Americans in what they call “rural” areas.

But don’t be fooled by the “rural” part. You don’t have to live on a farm or in the country to utilize this amazingly affordable program. In fact, there are a surprising number of qualifying areas in both large and small states and cities, so this is definitely an option that’s worth investigating if you’re looking to buy a home – and here’s why:

• No down payment is required
• No monthly mortgage insurance
• Seller can pay 100% of the buyer’s reasonable closing costs and prepaid expenses
• No reserves are required

While the mortgage market continues to generate a lot of chatter in both the media and in Washington, interest rates are currently near or at all-time lows. If you or anyone you know are looking to take advantage of these low rates, let me explain why now is the time to act.

Lately there has been talk about the 4.5% 30-year fixed rate mortgage. Will it become a reality though? Right now, no one really knows. Homeowners who could benefit from a lower interest rate need to know that even if 4.5% becomes a reality from Washington’s actions, it would only be available to home buyers, not homeowners seeking to better their rate. If you need to refinance, you may be left out.

You also may have heard about Hope for Homeowners, which is a program approved by legislators to help distressed homeowners. However, regardless of its best intentions, the program has not been embraced by investors, and it is not available to many it could help.

The bottom line is, the Fed announced recently that they are going to buy up to $600 billion in mortgage-backed securities. This has already driven rates to historical lows. In January, the SEC is meeting and information may be released that could have a significant bearing on rates, potentially for the worse.

Waiting to obtain the best rate is only possible for those with loan applications already in process. Interest rates are incredibly volatile and fluctuations that used to take months are now occurring in just days or even hours. If you don’t have an application in process, you could lose out.

We are already seeing lender backlog due to low interest rates. In 2003, with rates at these same low levels, we saw some lenders taking up to 90 days to close a loan.

Home loan rates are currently in the mid- to low-5% range. Home values are currently at 2003-2004 levels, coming down significantly from their high point. If you–or friends and family members you know–are contemplating seeking financing, now is the time to act.

With a first time home buyer tax credit of up to $7,500 and low or no money down programs available for many people today, now is a great time to buy a home.

Freddie Mac has issued it’s newly revised lending guidelines early this November stating that all borrowers will have to have a 45% or less total debit to income ratio.  Further more that all borrowers will have to have a 620 or higher credit score.  The deadline for all deals currently in process will be December 19Th and will have to be closed and funded by this date.  Loans insured by Fannie Mae, Rural Housing, FHA, and VA have not adopted these guidelines as of yet. 

http://activerain.com/gr8r8  

So many banks are requiring more money down, better credit scores and previous home ownership experience.  In this environment many people are wondering “Can I still get a home with nothing down and little to no money out of pocket for closing costs?”  The answer is yes you can! 

Daniel Litvin of Advantage Lending Corp has been a long time advocate of the Rural Housing loan and is the premiere specialist of zero down home loan financing in Michigan.  “I can get some one into a house with no money down and usually $300 out of pocket just to pay for the appraisal”  says Daniel Litvin. 

Advantage Lending Corp, Michigan’s premiere zero down home loan mortgage broker has moved its operation to Rochester MI.  The move came as the result of needing more room to grow as its niche lending of providing no money down home loans has exploded.  We now have a much larger facility to house more employees, processors, and general office space. 

Our new location is 415 S Main St. Suite B  Rochester, MI 48307.  Our new phone number is            248-608-9120. 

We are extremely exicted about our expansion and are currently looking to hire eight new loan officers, and a loan processor.  Please contact Daniel Litvin to apply. 

 The pathways to foreclosure are varied and numerous, especially in today’s tougher economy. Increasing mortgage payments or mounting credit card debt, a sudden loss in income or employment, a serious illness, or a divorce or separation are all unexpected changes that can quickly lead to delinquency and even foreclosure.And whether or not you personally are having trouble with your mortgage, it doesn’t matter, because foreclosures affect everyone. After all, a single foreclosure in your neighborhood will often lower the value of every home – including yours – even if you’ve never missed a single payment.

The good news is that there is hope for you or anyone you know who might be on one of these unfortunate paths. This month Advantage Lending Corp will take a closer look at how foreclosure can now be avoided thanks to loan modifications and new legislation that won’t result in the traumatic loss of your home.

Lenders Really Don’t Want to Foreclose
It’s important to understand that lenders are not in the business of owning real estate, and would much rather help a struggling homeowner than to take possession of their home.

The numbers speak for themselves.

The average loss incurred by a mortgage company on a foreclosure is approximately 40%. In comparison, the average loss on a modification of the mortgage is approximately 20%.

With this in mind, let’s say a $200,000 mortgage is facing foreclosure. A mortgage lender can expect a loss in the area of $80,000. Compare this to just the $40,000 loss it can expect by working something out with the homeowner. Multiply these numbers by hundreds or even thousands of delinquent loans, and it becomes clear why working with homeowners is in a mortgage lender’s best interest – especially in today’s challenging market where foreclosures are reaching record levels in some areas.

RealtyTrac®, a company that tracks foreclosure statistics, recently reported that bank–owned inventory hit the three–quarter million mark in July. Bank repossessions have increased 184% since last year at this time as default and auction notices continue to climb.

In the second quarter of this year, 1 in every 171 households nationally reportedly received a foreclosure filing. While the majority of the fallout is limited to states like Nevada, California, and Florida, states from the Midwest and Sun Belt have not been exempt. In fact, add in foreclosures from states like Michigan, Ohio, and Arizona, and the number of homes in foreclosure increases to as many as 1 in every 43 homes.

With staggering numbers like these, it’s easy to understand why mortgage lenders are so willing to work with homeowners right now to save their homes through loan modifications. 

Why Should a Homeowner Try to Modify?
Just because someone missed his or her last three mortgage payments, triggering the foreclosure process, doesn’t mean that it is necessarily time to start packing up and moving out. As we mentioned earlier, the reasons borrowers may miss a few payments are valid and often understandable. More importantly, not all of the unfortunate scenarios that lead to missed payments are permanent or irreversible. People can and do get back on track very quickly – and lenders know this and, now more than ever, are willing to help these homeowners avoid foreclosure.

According to Hope Now, a non–profit company helping distressed homeowners, mortgage servicing companies have successfully negotiated 522,000 workouts in the second quarter of 2008. In the month of June alone, approximately 76,000 of 105,000 homeowners received loan modifications. With so much on the line, homeowners in financial distress need to be proactive and make every attempt to help themselves.

Remember, with a foreclosure on your record, under most circumstances you will not be able to buy another home with a conforming mortgage for five years. Not to mention the lost opportunities of being a homeowner, which include increased wealth through home price appreciation and decreased income tax liability from deducting mortgage interest and property taxes.

If you or someone you know is facing financial challenges and can’t pay the mortgage right now, don’t just bury your head in the sand. The first thing you need to do is reach out to your mortgage company right away.

What Should You Do?
For a homeowner to be considered for a loan modification, the lender will want to know exactly where you stand financially and what you can afford.

The first thing to do is to find the courage to pick up the phone and call someone for help. Picking up the phone may not be easy, but if you want to avoid the financial ramifications of a foreclosure, you have to do it.

There are three calls you should make right away. The first call could be to the existing servicing company for the mortgage. The second option could be to a non–profit company like Hope Now. The third would be to contact a company that negotiates loan modifications. Either way, for direction on the best path to take, contacting an experienced mortgage professional is also a good idea.

Once you have made contact, let the company know that you would like to stay in the home. Assure them that you are committed to honoring your mortgage, but that you are in need of a little assistance right now to get back on your feet.

To enter into a modification agreement, the company will need to know, in writing, exactly what caused your sudden financial distress – so be prepared to tell your story in writing. This is also known as a “hardship letter,” which will clearly explain the circumstances behind your missed payments and justify why you’re in a good position to continue to make your modified payments in the future.

Be advised, investors or property flippers who were simply caught in a falling real estate market are not usually considered hardship cases. These homeowners may not find the same willingness to help that lenders will offer someone whose home in question is his or her primary residence. That means your chances are much better if you live in the home that you’re trying to save.

Next, you will need to provide detailed financial information to help prove your case, so be prepared once you make that call to provide this information. Documents may include pay stubs, income tax returns, W–2s, liquid assets (bank and brokerage accounts), and current expenses (food, utilities, insurance, and other common expenses).

With this information, a lender may be willing to offer assistance in the form of a mortgage modification. This could include a reduction of your interest rate, a reduction of your principal, or even an extension of your existing mortgage. A combination of these options could also be in the mix, depending on your situation. Remember, the goal of a loan modification is to keep the homeowner in the home, so be open and up front and willing to help this process along in any way that you can.

Another Option for Struggling Homeowners
New legislation was put in place recently that could also assist homeowners whose mortgage balance is higher than the current value of the home – also known as being “upside down” or “under water.” The bill is called the Homeowner Recovery Act of 2008, and it goes into effect October 1, 2008.

This law has provisions that will allow qualified homeowners to refinance their mortgage, with the mortgage company’s approval, at 90% of the newly appraised value. There is one catch, though. To take advantage, the homeowner will have to share in future appreciation with the government. While some may be reluctant to do so, this could be an outstanding option for many homeowners who want to avoid foreclosure and keep their homes.

Details of exactly how this will be accomplished by the government, however, are still a little unclear at this time. But if you’re under water with your mortgage, don’t wait. You don’t have to lose your home. There are many options available to struggling homeowners, but you have to be proactive before it’s too late.

You’ve found the perfect house, you’ve spoken with your lender, you’ve even gotten a pre qualification letter, but are you really approved?

Contacting a lender and getting pre qualified for a mortgage usually consists of not much more than a five minute conversation and a review of the borrowers credit report by the loan officer.  What does this mean to you as a borrower?  It means your application for a mortgage has not been reviewed by an underwriter, checked against the lenders guidelines, or verified any of your income, assets, or employment that you verbally disclosed during your time of your application with the lender. 

Getting pre approved by a lender involves providing your lender or loan officer with a combination of some of the following documents that pertain to your specific loan scenario: signed loan application and disclosures, pay stubs, tax returns, W2’s, bank statements, drivers license, divorce decree, child support verification, etc.  Basically until the underwriter can verify the information you art attempting to state in your application, you are NOT APPROVED. 

Getting from a pre qualification to a pre approval is very quickly and easily achievable.  Simply staying in touch with your loan officer and providing them with the documentation they are requesting to process your loan application is all it takes.  Then they can perform their job of continuing to get you the borrower the mortgage you need to buy your home. 

So before you start shopping for a new home, make sure you have an understanding of whether you have a real approval or just a pre qualification. 

www.AdvantageLendingCorp.com