Mortgage Mailers: Am I really pre-approved?

Isn't it annoying to get all that junk mail from companies trying to get you to apply for a home mortgage? This is a typical letter from our readers:

I keep getting pre-approved mortgage offers in the mail (several a week), and this makes me very uncomfortable. Many of them are from out of state banks or companies I have never heard of. I have been told there is a way to keep these companies from sending me these offers or inquiring about my credit, but no one has been able to tell me how I should go about this. Is there an address or phone number I can contact to take care of this?

Getting off a Telemarketer’s List

When a telemarketer calls, document when and where they are calling from and ask them to please put you on their “do not call list” (use those exact words). According to federal law they are not allowed to call you again. If they persist and continue to call you, you can make a report to National Fraud Information Center.

Junk Mortgage mailers:

You can write to Experian Consumer Opt Out: 701 Experian Parkway, Allen TX 75013 or call (800) 353-0809 (one call or letter gets you off all three bureaus).

I have received numerous calls from my readers claiming that they had just gotten a loan from a telemarketer or from mortgage mailers. One of them had given me full details of what occurred when she applied for a loan thru them. A call was initially received from a telemarketer and when the client replied, a representative got some information and advises that a service loan representative would call her back. One did, and after getting all necessary information they offered her a rate that she thought was good. Their processing time was very quick, within about a week and a half, the loan representative called again and said that she had been approved and that the papers are ready for signing. They scheduled a signing date, once all documents are laid down; the borrowers noticed that her closing cost was sixteen thousand dollars ($16,000). She then refused to sign; a manager called and threatened to sue the borrowers for a commission. The borrower then thought she did not have a choice and followed his instructions and signed. Now, they are closed and the commission was paid to the mortgage company from Michigan.

One lesson to be learned from this, Real estate lending law varies from state to state. Not only that, a mortgage company could be governed by Department of Real Estate or Corporations. There are major differences is all governing bodies.

I tried to inquire about mass mailing myself for my business, I found out that it is not important what you can offer the clients but how you can draw them in to you and then close them. These companies sometimes sell your information for pennies, they send out millions of mailers and when someone calls, they have professional closers to tell you anything you want to hear just to get your business. The percentage of closing if very low because most of the people hate telemarketers and mass mortgage mailers. That is why these companies always try to come up with innovative ways to send you mailers or call you.

With mortgage business slowing down, I am sure the telemarketer and the mortgage mailers will increase.

I recently got a call from a telemarketer who does not know I was in the business; I played along with their sales pitch and wanted to see how good they are in trying to get me a loan. They were offering a 1% loan with no discount points. I started asking deep questions like, what are the margin, indexes and the life cap. The representative tries to stir me into mostly the low payment that this loan offers. I ask if there was a negative amortization (increasing principal balance) on this loan. They clearly said “NO” and said that I have options and again tried to focus on the low payments again. I then ask for a good faith estimate to be sent to my fax number, I got it after 3 days. I then noticed that they are charging me an origination fee of 2%, I ask the representative about this and he said that he already gave me a discount for not charging me a discount points.

In my business, they are the same fees and that is a huge deception. I then went down the list of other closing costs: there are about $1800 in other miscellaneous fees. I then called and said I was not interested anymore, the same scenario happened, another person came into the picture and tried to talk me into this loan. He gave me some discount and said that we are ready to close. I asked this person about the negative loan, he explained it a little better but kept directing me to the minimum payment that is low. I then said I am not interested. The person I spoke with was a manager and got frustrated in trying to close me and then hung up on me.

Don’t believe your mailers or telemarketers; they are just trying to talk you into putting money into their pockets. Be very careful, so far I have not heard of a good deal with one of those specialty marketing strategies. Best to always get all details of the loan in writing and not verbal.

SPECIAL NOTE: first time buyers, I am attending a seminar to help first time buyers with no money, bad credit to buy or refinance home, please call me if you would be interested in attending it with me. It’s free and it’s going to be held in LA on March 11, 2006 10 AM to 2 PM.

Please send me your feedback if you have gotten any information from me that might have helped you. Thanks so much for your inquiries, for you next purchase or refinancing needs call Ken at (888)822-5363 or write to kennethgo@verizon.net. There is more information available at my California Home Loans web site.

Getting a loan from the builder due to their incentives program?

Builders are becoming more dominating than ever. They almost always require the buyers to go thru their own lender. Here is why I feel that builder incentives are not beneficial for the homebuyers.

• The builders control the prices of homes and could offer any amount as an incentive for homebuyers to go thru their own lenders.


• Home prices of newly constructed homes are at times inflated due to the differences in upgrades between similar homes. This tells me that your neighbor might have paid more for their house only because of the improvements that are added to the sales prices. Is the amount they claim the true value of those improvements?


• Builders offer closing costs paid if you choose to go with their own lenders. Is that included in your sales price or your interest rates? Most of the time yes. Still, compare them with your conventional lenders or brokers and you will be surprised at the better services you will get from conventional lenders and brokers.


• They forced you to use their own lender in order to start the purchase transaction and reserve you a home, sort of like twisting your arm until you give up.

Now a major home mortgage industry group wants the federal government to take a closer look at these deals, calling some of them clever violations of real estate settlement and antitrust regulations. The National Association of Mortgage Brokers, the principal trade group for the country's more than 40,000 independent home loan brokers, says builder financing incentives frequently steer buyers to mortgage deals more costly than those competing, nonaffiliated brokers could provide. A delegation of mortgage brokers recently complained to the government's real estate settlement rules officials, asking for a nationwide investigation of builder incentive financing programs.

For Example, if you are offered carpet incentives, get the exact dollar amount that is being credited and get a detailed report on the cost of your rates and fees. Shop around and compare. Show your lenders these incentives. If they offered you an amount that might exceed a normal closing cost, find out where the difference is going to be applied to.

Good luck in your house hunting, I am currently involved in a non-profit organization helping homebuyers with absolute no money for down payment and closing cost. As soon as more information is available, I will write about it for our readers that might avail of such programs. Please call or send your questions to (888) 822-5363 or send it to kennethgo@verizon.net. Visit my newly constructed California home loans website: www.1stinnovative.com.

Buying Pre-constructed Homes

Buying Pre-Construction? Can your Real Estate Agent help you?

It might not seem necessary to involve a real estate professional in a transaction where a buyer can deal directly with a builder. Think again! A real estate professional representing the buyer’s interests can guide you along the right path and smooth the rough places to help ensure you make a decision you can live with (and in) for many years. Here’s how:

• First and foremost, my concern always for streamlining a transaction is your conflict of interest. If the builder (seller) is also representing you as a buyer. They will have too much interest into the transaction that might hinder their judgments into your benefits. Builders are also requiring buyers to go thru their own lending company which I believe is a big negative.


• Just as a real estate professional calls on experience and knowledge of an area to help buyers locate pre-owned homes in a community, he or she can also direct buyers interested in newly built homes to developments and communities that match client specifications.


• An agent can suggest builders based on their reputation for delivering a high-quality product, responding quickly to issues, and being financially sound.


• An agent may be familiar with how a builder prices his products and where there may be room to negotiate price or upgrades.


• Without agent representation, you are one buyer purchasing only one home. But an agent can significantly impact a builder’s bottom line by providing a steady supply of customers. The agent’s leverage may work in your favor at the negotiating table.


• When relocating to a new area, agents can be particularly valuable resources. In addition to providing local area information regarding schools, day care or elder care services, public transportation, proposed development, and so on, once construction is under way, an agent can periodically stop by the work site; supply you with progress reports, and photograph or videotape phases of the construction.


• An agent can assist you as you face hundreds of design choices and consider which upgrades could potentially add value to the home when it comes time to sell.


• An agent can accompany you at the site while you okay the plumbing and electrical locations prior to dry walling, as well as on the walk-through or builder orientation.

By now, you should be convinced of a real estate professional’s value as you search for and purchase a newly built home. You should always know and have enough knowledge of how real estate transactions are occurring on a day to day basis. Remember to trust only information that you have verified and researched. You then can enjoy individual attention and support at no cost to you. What a great way to start life in a new home!

Frequently Asked Questions about Mortgages

I'm Scott Supak, Ken's webmaster. I just wanted to point out a great resource for anyone who is new to the home loans process. If your eyes roll back in your head when people start talking about APR, FICO scores, or PMI, we suggest you check out these Mortgage FAQs from these New York Mortgage brokers.

And for those of you who like to use Ezine Articles, we're posting Ken's mortgage articles over there. They have a handy RSS feed, and lots of free information about all kinds of things, including mortgages and home finance.

Are Reverse Mortgages Good for Me?

A reverse mortgage is a loan against the equity in the home that provides tax-free cash advances, but requires no payments during the term of the loan. Since there are no monthly payments during the life of the loan, the balance grows larger and the equity gets smaller. Meaning the interest in accrued to your balance.

The loan is not due and payable until the borrower no longer occupies the home as a principal residence, e.g. the last surviving borrower sells, moves out permanently or passes away.

You must be at least 62 and own your own home or condominium in order to qualify for a reverse mortgage. There are no income or credit requirements to qualify. Based on the amount of benefit, which you qualify for, you may be eligible for a reverse mortgage even if you still owe money on your first mortgage.

Another benefit of these loans is that they are "non recourse," which means that no matter how high the loan balance grows, the borrower or their heirs never owe more than the home's market value.

The proceeds from a reverse mortgage can be used for anything: daily living expenses; home repairs and home improvements; medical bills and prescription drugs; pay-off of existing debts; education; travel; long-term health care; retirement and estate tax planning; and other needs you may have.

The proceeds from a reverse mortgage are available as a lump sum, fixed monthly payments for as long as you live in the property, a line of credit; or a combination of these options. The amount of benefit that you will qualify for will depend on your age at the time you apply for the loan, the type of reverse mortgage you choose, the value of your home, current interest rates, and, for some products, where you live. As a general rule, the older you are and the greater your equity, the larger the reverse mortgage benefit will be.

The costs associated with getting a reverse mortgage are similar to those with a conventional mortgage, such as the origination fee, appraisal and inspection fees, title policy, mortgage insurance and other normal closing costs. With a reverse mortgage, all of these costs can be financed as part of the mortgage. In other words, fees are collected at the back end or when the property is due. The interest on these mortgages are typically adjustable, so be clear with which types of ARM loans you are tied to.

You must first meet with an independent reverse mortgage counselor before applying for a reverse mortgage. The counselor's job is to educate you about reverse mortgages, to inform you about other alternative options available to you given your situation, and to assist you in determining which particular reverse mortgage product would best fit your needs if you elect to get a reverse mortgage. This counseling session is at no cost to the borrower and can be done in person or over the telephone.

Advantages of a reverse mortgage :

a) Avoid having to make mortgage payments and managing the account.
b) Cash out money upfront and still collect a monthly distribution of your equity.
c) No qualifying loan.

Disadvantages:

a) Slightly higher closing fees.
b) Fewer choices on the terms of the loan.
c) Have to qualify for the loan.

In this situation, most of the borrowers have plenty of equity and the thought of not having to worry about mortgage payments might be a strong deciding factor on which way to go. Please visit our California Home Loans web site, call me at (888) 822-5363, or email at : Kennethgo@verizon.net.

Refinance your ARM loans before rates go any higher

Should I refinance my 2 years fixed loan now?
By: Ken Go (888)822-5363

There have been a good number of inquiries as to whether it is time to refinance home loans. Of course, the answer definitely would depend on the whole scenario for each borrower. Our company policy is very different from other mortgage companies. We make sure we get all income/asset/credit information from the borrowers and then make sure that the appraisal value is acceptable to the program selected. Then we formally approve the loan and issue a commitment to the borrowers with a guaranteed rate lock and a guaranteed closing fees. All these processes are done in a matter of minutes, as long as all income information and appraisal value are verified.

With this process, I am able to make sure that the clients fully understand how the process of the loan works. We make sure that you are happy with the whole transaction and advise you with options that will benefit you the most. I wish I could say yes to everyone who wants to refinance their loans. My policy might be conservative, but it is guaranteed that if we take your loan, you will close on schedule and on the rate and terms that we first disclose to you. The only thing I cannot control in a transaction is the title insurance. There are instances when a property has been recorded incorrectly with the county and it could take months to resolve that problem. We would normally know about these things in 3-5 days.

Here are some of the reasons for refinancing:

*If you have an adjustable rate loan where the payments are due to increase, it would be wise to do it now while the rates are low and you can get a fixed rate option loan where you still pay the same amount.

*If you are interested in cashing out money to pay off credit card debts and consolidate your loan. Even if you have those 0% credit card offers, remember you still owe that amount of money and it has to be repaid. Consolidate your debts into one payment and you will be surprised at the savings, not to mention the tax benefits. Remember, credit card interest is always non tax deductible while mortgage interest is tax deductible. Wouldn’t it feel great if you paid Uncle Sam less and had more money in your pocket to enjoy?

*Rates over 7% or higher fixed rate mortgage are also due for refinancing; the current rates as of February 14, 2006 is about 5.75%. You should refinance to a better rate and you might even be able to refinance the loan with no cost. Your rates would be based on your current loan balance. If you have high rates but only have a few years remaining, then we would have to analyze your loan, it might not be worth refinancing. Call me for advice.

*Loans with Negative Amortization are also being converted to fixed rate mortgage. Negative Amortization--where your principal balance increases for the first three years of your loan--must be fully understood. I am surprised with how many callers ask me about their Negative Amortization loan or Option loan payment program and don't understand how they adjust. These loans have their share of disadvantages if you are not aware of them.

*Interest Only loans that are adjustable are definitely the first to go, with the way the market is going it is better to be safe than sorry. A low payment option does not always mean interest only program. There are other fully amortized loans that can offer a lower payment and yet you are paying both interest and principal.

*Combo Loans, paying a first and a second mortgage. If there is enough equity in your property it might be smart to combine both payments into one. A second mortgage is always higher in rates compared to your first loan. A line of credit is even scarier if you took out a large amount and plans to pay it off within 5-10 years. Lines of credit are adjustable loans that were 9% in year 2000, it climbed up 2 full percent in less than a year. It has increased a full 2.00% in the past year. We are currently at 7.50% and anticipating at least another .50% increase in the coming year.

One key point in refinancing is to always get the best value from your appraiser. You can assist your lender by doing a little of bit of investigating yourself. It's always beneficial for you to keep track of your neighborhood properties sold recently. An appraiser can only use comparables that are similar to your property and within a mile radius, so if you happen to see a sold sign or closed escrow sign please inform us that might help us bring more value to your property. Also, the appraiser's information is normally behind by two to three weeks, so if there are very recent closings in your area the appraiser might not be aware of it yet, let us know and we can use that as a comparable for your property.

Another note you should be aware about is that the value for refinancing and selling your property is slightly different. For refinance values, we always need to use closed comparables while in selling your property, you can always go higher than the last closed sale.

Being in the business for the past 18 years makes me confident that I can give you the best advice for your mortgage needs. Please feel free to call me at anytime (888) 822-5363 is my office number and anytime else you can call me at (562) 508-7048 cell. I will be more than happy to answer your questions and I hope that I can be of service to you soon.

Don’t wait! Pick up the phone now and call 1st Innovative Finance! Take advantage of the low rates today! See our California home loans website: www.1stinnovative.com.

Pay No Closing Costs for Refinancing

Advantages of a no closing cost loan

If you hear the term "Absolutely No Closing Cost," you would assume that there are no closing costs (lender, escrow and title) involved in the loan. But actually this is really just a creative way of marketing or selling this type of loan. Is there really a absolutely no closing cost loan?

No, there is none, because when you buy or refinance your loan mortgage brokers and lenders have to make a living. And if they don’t charge you anything, that is not because they are doing it for “free.” They need to get compensated and they charge it to you one way or the other. Typically, they will charge you a slightly higher rate, maybe .250-.500% higher than the best prevailing rate. The higher rate will cover for all the closing cost that the Mortgage brokers needs to pay for.

This doesn’t mean, though, that this kind of program is not beneficial for you. Actually, I always recommend this loan especially for those who have just paid closing cost to purchase their home or refinance their home. This is to avoid paying closing cost over and over again, wasting all that cash on closing costs that could have added to your equity.

Plus, if you do not pay any closing costs, then you can keep refinancing and refinancing without decreasing the equity of your home. Of course, not every borrower is eligible for this no-closing-cost program. Normally, to be able to lower your rate by .500% without having to pay any cost, potential candidates have to have a loan amount of over $200k.

You always have to consider how many times you have refinanced in the past and figure out how much you have paid already. In the past two years, we have numerous clients that have refinanced their loans even only reducing it by less than .50%. Why did they do it? Because there is absolutely no cost involved and if your loan balance is over $400K that could be almost $100 difference in the payment every month, without any cost.

I always recommend that if you are to refinance your loan, do it sooner and try to get a more stable loan to avoid having to start your loan over again. Why right away? If you think you will have to refinance, that means that the payments you made to your existing loan are all gone and you will have to start over again. For example, if you have a 2 year fixed rate loan, you know that this is a temporary loan, why not do it right away to avoid paying any more payments to your current lender? If you had paid 12 payments and have to refinance to a new loan, that means you had paid a total of 31 years after all is said and done. I am sure a lot of you are starting loans over and over again for many reasons, but these rates have stayed low for you to take advantage of, so grab it while you can.

If you have a lot of equity and feel that you will live in your property for the rest of your life, and you are also being offered a really low interest rate, then you may consider paying closing cost to get this loan. But if it's short-term, then we will need to calculate to see how long it will take you to break even from the closing cost that you paid upfront. Sometimes it will take you 5-10 years to break even and most of the time, by then you are already ready to move on to your next home.

In every loan program, the key is to understand what you are being offered and getting into. Let me explain a little more regarding the two different types of closing cost.

One is “Re-occurring Closing Costs.” These are your interest, taxes and insurance costs of the loan. When you are buying a house, the lender will always require you to buy a year of hazard insurance, to be paid with your closing. When you are refinancing, you will also be required to prepay a year at closing, if there is an overlapping of premium due dates, your insurance carrier will usually credit the balance back to you. Interest payments are also collected for both purchase and refinance loans, we always pay our interest in the rear of the month of our mortgage payments. When someone offers you a free month of mortgage payment or for you to skip a month of mortgage payments, they are not explaining the loan to you properly. Again their are no free rides.

Another common “Re-occurring Closing Cost” is your taxes. Again, for purchase and refinance, you will always have to prepay property taxes that are due.

The second form of closing cost is the “Non-reoccurring Closing Cost” (NRCC). These are your points, lenders costs, escrow and title charges. When you are purchasing a house, your NRCC are typically tax deductable in the first year of purchase. While a refinance transaction will allow you to write off the closing costs over the term of your loan. That means if you had paid $5,000.00 in closing costs on a refinance, you will write off on about $166 per month on a 30 year loan.

I read an article in the LA Times a few weeks ago with startling statistics that people now are thinking of not paying their loan off, and would rather borrow as much as they can and as long as they can. To me, that is a trap just like your credit cards, how many people have fallen victims to that credit card money pit. Keep in mind, we are all enjoying high home values and equity, which I suppose should be called “High fly on borrowed Sky.” Once the correction on property values occur (and they will if what the think tanks are predicting comes true), you're going to need some cushioning for emergencies. Lines of credit again are to be use for short term only and not for buying cars, boats or doing major improvements to your home. They are adjustable rates that have only one direction, and that is to the roof. Please also try an fully understand your 1% loans. I just spent at least two hours explaining to a client who wanted to apply for these 1% loans. In her case, it was beneficial for her and I am putting her in with a good index adjustable loan that is tied to “COFI.” I will keep you informed on the outcome and have this client comment on her loan in the future.

Thanks for your support. Please feel free to call me at the office and I will be happy to evaluate your situation for you and give you the best possible advice. My goal is to make sure that you fully understand your loan program and get you the best possible rate. See my California home loans web site for more info.

P.S. I made a comment about the 1% loan per request from a recent reader/caller. Hopefully that would answer your question and make our readers aware of how they should review all loan papers and all cost prior to closing a deal. For further assistance, please call (888) 822-5363 or send an email to kennethgo@verizon.net.

Things to avoid when applying for a home loan

FIVE DONT'S TO GET THE BEST MORTGAGE

The good news is that more people than ever can buy a home. Now for something a little less palatable: it’s going to take a lot of patience, restraint and some careful planning to get there.

Here are some warning tips on what to avoid doing right now so you can get the best mortgage later on. If you are not qualified because of credit issues right now, never lose hope for you can always plan for the future. It is very possible that in a few months time you will be able to buy a home if you follow these tips.

THE FIVE BIG DON’TS

1. First off, don’t make any big purchases over the next couple of months. Besides the obvious fact that it makes less money available for the down payment, it might require to get yet another loan. A significant debt such as a $15,000 auto loan will look bad to the mortgage lender’s credit scoring systems. Plus. The human underwriter won’t want to see you adding a couple of hundred dollars per month to your monthly expenses. Generally, as a rule of thumb, you want your total debt obligation to be no more than 36% of your gross monthly income. You certainly don’t want to load up on consumer debt if you’re anticipating purchasing a home and you’re unsure of what your mortgage payment is going to be and if you think you’re within the range of exceeding that 36% requirement.

2. Don’t try for a much more expensive home if its going to be too much of a stretch in your current budget. Lender’s consider what’s known in the industry as “payment shock” when approving loans. Somebody who goes from relatively small monthly housing payment to a huge one either won’t qualify for a mortgage or will end up having to cover too much loan with too little money. You have to make sure you’re comfortable about that kind of a debt load.

3. Don’t just get prequalified for a mortgage, get preapproved. To get prequalified, a borrower need only submit credit, income and et information voluntarily to a mortgage broker or lender. That means the resulting estimate of the maximum mortgage and home that’s affordable is exactly than – an estimate. Before they can get preapproved, however, home buyers must allow their lenders to pull credit reports, check debt-to-income ratios and perform other underwriting steps. That puts a borrower much closer to obtaining a loan and locking in a rate and term.

4. Don’t forget what kind of money personality you have when getting a mortgage. By taking out a 30-year fixed rate loan rather than a 15 year mortgage and investing the money saved on monthly payments, you might earn a higher return on your money in the long run. But that approach won’t work for people who spend any extra cash laying around on dinner and a movie twice a week. They can force themselves into saving and accumulating equity faster by going with the shorter term and higher payment.

5. Last but not least, don’t forget that homeownership brings with it many burdens. The cost of defaulting on a loan is much greater than the penalty of missing a rent payment. Too many black marks on the financial history and it will be 23% interest credit card mailers that show up in the mailbox rather than the 9.9% ones your neighbor gets.


We are going the feature some tips on what to do to make sure you get the best mortgage in our next article. Watch out for it. In the meantime, call us for free advise on your credit issues, whatever financial/credit situation you may be in right now. Our office phone number is (888) 822-5363 available even in the evenings and weekends. Or contact me at (562) 508-7048 on my cellphone. You can always visit our California home loans web site for more information. Hope to hear from you. Thank so much.

Avoid Paying Prepayment Penalties

Here's a home loan question I get a lot: How can I avoid the prepayment penalty when I want to refinance my home prior to the penalty terms?

Prepayment penalty loans are on the rise, which means mostly everyone who is buying or refinancing their loan with high loan to value or a maximum 100% financing will be required to take a prepayment penalty. Conventional lenders usually don’t require borrowers to have a penalty. Mostly, these loans are investor loans, direct lender loans, and portfolio lenders that either offer low adjustable rates or qualifies borrowers with minimal documentation. 100% (no money down) loans are usually attached with a prepayment penalty.

How to avoid mortgage prepayment penalties: always remember to ask for an option not to have it. The lender will then buy down the prepayment option by increasing your rates or your fees. Some lenders offer no prepay penalties for 100% financing if your credit meets their minimum required scores and if you can provide income documentation to fully qualify for your loans. No income, stated income, or no ratio loans typically will have a prepayment penalty.

It is very important for you to take this seriously. The penalty will play a huge factor when you want to sell or refinance your loan. When the market is going up in value and prices are rising to the tune of 20-30% per annum. Nobody thinks anything about these penalties, its invisible as far as some people are concern. But keep in mind that the prepayment penalty will cut into your future net proceeds when you sell your house. It will decrease the amount you can take out on a refinancing loan in good or bad times and the most important factor is if the property value starts to see earth you might not be able to do both, especially if you had bought your property this year and it has not appreciated as much. Mostly, all the analyst agree on one thing: all these aggressive loans that carry an interest only payment or an option loan (negative amortization) payment normally carries a prepayment penalty. That might be the most valid reason why properties will go into foreclosures and default.

Lenders are starting to have more stringent guidelines for loans that have a negative amortization feature. This means the principal balance on your loan will actually go higher each month if you choose the option that requires the minimum payment.

How can you request for the prepayment penalty to be waived by lenders?

This gets pretty tricky--and it's actually something I have not done too much--but I always suggest it, because the reward could be very much worth the effort. Recently, we have been asking lenders to forgive the prepayment penalty portion of the loan if we were refinancing our clients' loans. We have only been successful twice and it's much less effort for us and the escrow company. I believe it's pure luck because the lender actually can show you proof that you agreed to a penalty if you were to payoff the loan prior to its due date. But I would like to share something with you that might be very helpful to some readers.

If you are in a situation where you have to refinance or sell your house prior to the penalty term due to hardship, some lenders will require you to prove that you are actually in that state and cant continue further to pay your loan. Hardship comes in many forms: you have too much debt and can't make the payments due to your current income status, property values have not gone up as much as you have thought they would and you have to payoff the loan, or maybe you have lost your job or gone on a disability status where you income has decreased. The lender will evaluate your whole situation and look into your complete financials and decide whether you qualify for the prepayment penalty to be waived.

If you are to sell your property it works a little differently. They will ask for listing agreements and they want to see some comps to justify why you are selling your house for a certain amount. You could also list things that needed to be repaired to the house, or other defects if there are any. A full disclosure of all costs of the sale will be required to show the lender that the net proceeds will come to a negative with the prepayment penalty in there, therefore you need to request for the penalty to be removed.

Remember, we are all enjoying a borrowed equity, due to prices of homes sky-rocketing. But there are signs of a slowdown. You should know that nothing will ever only go one way--it's always a two way street. As for the real estate market, it's always a cycle and it's just a matter of when the next cycle will come.

I am getting more and more email questions now that I've started this home loans blog. I hope that I have answered them. Every situation is so unique and I don’t mind if readers call and ask me questions in regards to their financial status. Preparation is the best policy when you're getting financing for buying a house, keep that in mind.

Thanks for your support, Ken Go with 1st Innovative Finance Group, please call at your convenience (888) 822-5363. Good luck to all.

Learn from other people's mistakes

Learn From Other Peoples Mistakes...Why Make Them Yourself?

I thought this might really help my readers in making smart choices in their next quest for a home loan. Not to brag, but I have been told that I was very straight-forward when I speak, I did not take it the wrong way because it is absolutely true. My theory for my business is that the more true information you teach people about your business, the easier it will be practicing it. Again, I have been in this business for over 18 years and the last thing I want is someone calling me in the wee hours of the evening crying about their loan not closing on time or their payments going up without warning. Here are some Q & A’s from our readers that I thought might be informative to everyone.

Caller: I am currently applying for a home loan refinancing and it has taken longer than expected and I don’t even have any type of disclosures on fees and rates. What is going on?

Ken Go: In all fairness to all agents, first you have to ask yourself if you have provided all information to your lender, such as complete income information, have they pulled your credit report or have you given them your credit scores (3). Basically, with your complete income information (only if going full documents) and a completed credit report, any lender should be able to quote rates by phone or fax immediately. Even if you have issues with your credit, a loan officer (experienced) should know where to place your loan and be able to give you a confirmed rate for the day. Now, about all the fees and miscellaneous closing cost that should also be disclosed asap. If you have not been given these disclosures I would not pay them any appraisal fees until I am satisfied with a written quotation. Remember always ask if the rates are locked.

---

Caller: Another refinancing question. I had a late on my mortgage because when I was refinancing my loan, the loan officer advise me to not pay the following months mortgage and they claimed that we should be closed before the payment is due.

Ken Go: Please be aware that the loan officer who is refinancing your loan has no relations to your existing lender, even if you are refinancing with the same bank you still need to be sure yourself that your payment or the payoff meets your mortgage due date. Can you blame your loan officer, Yes of course, but that might be after the fact and your lender will hold you responsible for the payments not your loan officer. I have received multiple calls on this and in some cases the loan dragged on for almost three months and the property is currently in foreclosure.

---

Caller: I got turned down by Countywide because I am buying a new house again with in a 8 months period and the new house is only less than 4 miles away from a house I bought in January 05.

Ken Go: Actual case that we closed for this client. We immediately assessed the entire situation and found out that there is a valid reason why these clients are buying another home close by and within such a short period of time. They have just relocated from another state, bought the first home they saw and was not happy with it, they were also living with an elderly parent who cant go up the stairs and the new home has a room on the ground floor. This buyer was able to buy this house, with no money down and we were able to close within 3 weeks that avoided them a penalty from the home builders. They acted early enough for us to save their deal. Reminder, if you sense a slight problem with your loan, maybe you are not getting return calls from your lenders and or you are getting the run around and still don’t know what is going on. Look else where chances are something is wrong. Typical loan approval now a days are within 24-48 hours of your initial interview, with completed loan packaged you should close your loan within 2 weeks maximum 3 weeks.

---

Caller: My loan balance is increasing and I am not sure why?

Ken Go: A very common call nowadays. These are your 1% loans that are now called “Option payment” or “Pick a Payment” use to be called “ Negative Amortization Loan” which is all the same program. There is a lot you need to understand before choosing a loan like this, I refer to this loan as a cheating loan. If you are not cheated to get into this loan, you are cheating yourself getting this loan. Now, again this could be a loan for you if you fully understand it. Make your loan officer explain this program to you in full details before getting it. Your key question to ask when getting this loan program is what type of index is this loan tied to and what is the margin ( the lower the better ), I like the 11th District Cost of Funds index, its very stable and does not move as fast and much as a LIBOR. Go to the ARM Indexes 11th District Cost of Funds web page and study and understand how they operate.

---

Caller: I paid a company $450.00 six months ago to clear my credit and have not heard back from them.

Ken Go: In my 18 years experience doing home loans, I have only met one person in the early 90’s who can erase bad credit and he has disappeared a few years after, my guess is he is probably either hiding somewhere or in jail. No one can erase bad credit legally (I would like to know if anyone might have any good experience with a credit clearing companies, pls call me so we can share the info to other readers). I have develop a simple way to send the bureaus a letter if you have a dispute with your credit. Call me and I will fax it over to you for free. As far as your funds are concerned, its probably a no guarantee service contract and non-refundable fee.

---

Caller: I have been offered a low interest rate loan by a Lender (do not prefer to discredit) but I am being charged close to $15K for the entire closing cost.

Ken Go: Another actual case, when I got the estimated closing statement from this lender the caller was not sure of why they are paying so much for the closing cost. It turned out that they were charge a “Origination Fee” and another “Discount Points” totaling almost 9K for a $350,000.00 loan. I was shocked, both are actually the same fees, the terms were originally use for Government loan (FHA) and this is a conventional loan. Not only that, there is a miscellaneous fee for $1500.0 and a couple of junk fees that is not common. I told the caller to compare that estimate with one we gave her and she was able to save $9500.00 of cost and I was able to actually save her $26.00 on the payments too. This lender finally called the client back and said they would discount another $1500.00 in order for her to go with them. Even if you might not see all the cost that is factored into the loan, you will feel it when you sell because that is less money to your pocket later. Check everything little cost on a loan.

---

Interest rates are certain to go up this month, per investigations from different real estate offices there seem to be more listings and prices of homes are being drastically reduced. Take that with a grain of salt and please shop smart. Visit my California Home Loans web site, or call me for any further inquiries by phone (888)822-5363, or email me: kennethgo@verizon.net.

California Home Loan FAQs

RECENT CALIFORNIA HOME LOANS QUESTIONS AND ANSWERS WITH KEN GO:

Dear Mr. Go,

I just acquired a house last June 2005. I’m very ignorant about realty and mortgages; I don't even know how to translate those mortgaging words in my own language (Tagalog). I had a friend who helped me find a loan officer whom I was not even able to talk to. We send information’s all through e-mails and fax. When I saw my loan, it was already in front of the title company, due for signing. I wanted to back out but the realtor said that I will loose my down payment and also the house because the 30 day grace period is ending.

The house note came with a pre-payment penalty, 30 yrs to pay with an interest of 6.500%. They say this is fair enough. On the 2nd loan, which they say is a home equity loan costs $33,900.00, with variable rates, started at 6.000%, and now at 9.1250%. I know this will go up more.

One friend told me to refinance, I don't know what that is and how it is? Is it advisable for me to refinance at this early? I was wondering why they did not give me a 100 % financing .What is that home equity loan? How could I get rid of this? Is there a chance of lowering my monthly payments? When refinancing do I have to go over with those so many papers to sign and go with the title company again? Do I have to pay all over again those that I paid in the closing costs? I am still paying for my car and motorcycle and much more I’m the only one working in my family of six. I hope you can help me resolve my problem. Thank you.

Dear Caller, after our phone interview here are my recommendations. We have concluded that you have made some appreciation in your property and we could get your payments lower than what you’re paying now with a 5 year interest only loan no prepayment penalty. There would be closing cost to buy down your rates and you would have to re-sign a whole new set of documents, if you were communicated properly on the whole transaction it should be very easy understood and much less intimidating. You would still have a split loan due to the loan to value exceeding 80% to avoid PMI ( Private Mortgage Insurance). Your benefit would be to lock into a longer term fixed rate mortgage on both loan and not worry about these rates increasing due to the Feds raising prime lending rates.

---

We are currently in escrow and it’s been over 30 days and my loan still has not closed. I have been promised by my loan officer that the loan docs are going to be in the escrow department since three weeks ago. I am being charged 7.5% on my rate and a total of $14000.00 in fees. My wife is the only one on the loan and I may loose my initial $5,000.00 deposit if we don’t close this loan due to my lender not performing.

Dear Caller: After analyzing the whole situation. The first thing the caller told me was that he has been following my articles for quite some time and he only went to that lender because the lender was a friend of theirs, and the caller told me that he wants me to take care of everything (IKAW NA BAHALA SA LAHAT). I told him first that never to trust anyone in this situation, even myself, because you have to first understand what goes on in a loan transaction. First mistake this person made was to buy a property without a Real Estate Agent. He was lead to sign a loan contingency waiver that loses his chance to take back his initial deposit in case he can't qualify for this house.

His second mistake was he entrusted the lender and was mislead and dragged along because they were having problems getting the loan approved. Instead of explaining everything to the borrower, the lender is not returning calls. I was also told that they initially agreed on a $7,000.00 closing cost that increased to $14,000.00.

After reviewing his situation, I told him I really could not do anything for him because of their current employment status. I advise him to keep trying to call the first lender and negotiate down the closing fees. Always know what you are paying and all the terms of your loan.

---

I just got divorced and bought two properties with my divorce settlement. But now I don’t have enough money to pay for the mortgage payments due to the loan payment is higher than the actual rents for both. Could I apply for a line of credit or a second mortgage?

Dear Caller: After our interview, here are my recommendations. Fortunately one of the two properties purchased have some equity build up. This person purchased the properties with minimal to no down payment. All the funds from the divorce settlement went into a small portion of the down payment and the rest mostly closing cost. I advise this person to sell one property because taking more money out is only going last another six months then they would be in the same position again. I would recommend selling both but the other property still has not gained enough equity. I also told her that if she did not buy these properties she would have had the money to enjoy and not be in this situation.

---

Please contact me through my website, send an e-mail or call me with your inquiries. Good luck with your ventures and I hope everybody learns from these experiences to be better California home loan shoppers. Call me at (888) 822-5363 or email: Kennethgo@verizon.net

What is the 1% or 1.250% mortgage interest rate all about?

By Ken Go, 1st Innovative Finance Group, (888)822-5363

Is this real, are you kidding? Yes and No. There really are programs such as this available but a report issued by a Wall street firm suggests that some low-payment loans in today’s hot market could cause problems for borrowers who don’t really understand the risks they are going into. This low start rate or what we call a “teaser rate” is an option payment that the lender will allow you to pay for the first year you have the loan. But what they have to fully explain to you is that, if you choose that 1% mortgage rate option, you will have a deferred payment that will be added to your mortgage balance. That is called a “Negative Amortization Loan” which means if you choose the low payment option there is an ability to increase to 115% of your loan balance. For example, if you have a $300,000 loan and you choose the 1% monthly mortgage payment of $ 1,125, you will owe the lender the difference between the low start rate and the actual pay rate of an estimated $ 1800.00 monthly( depends on the index ) that is also known as the “Note Rate” which is adjusting every month based on several indexes and most importantly a fixed margin which hardly anybody has heard off. In one year’s time your balance will actually be around $8,000 over your mortgage balance which means that in 5 years time you will be owing around $40,000 more.

My 18 years experience in the mortgage business has gave me full understanding in the movements and volatility of these adjustable rate mortgages. There are several types of Adjustable rate mortgages that will make you sleep better at night. Such as, the 3/5/7 or 10 adjustable rate mortgages, the 6 month no negative adjustable rate mortgages. Our web site has information about the various types of California home loans we offer. Mind you that every loan should have its purpose and here are some of the advantages and disadvantages of different types of ARM ( Adjustable Rate Mortgages).

Advantages of “Negative Amortization loans”

1. For Investment properties that you are buying for tax benefits
2. For younger couple who is just at an entry level salary position. Meaning this could be a started home and they will eventually buy a bigger home and the increasing salary will offset the deferred payment of this loan.
3. Provided you are putting some money down, someone 100% sure of
Refinancing this loan within a few year.
· You have to fully understand the loan and outsmart it and not become a money pit. Always know that you should have the ability to pay for the fully indexed loan or the actual loan payment that the lender is requiring for you to pay.
Disadvantages of “Negative Amortization loans”
1. Your balance has the potential to increase by 115% of your original balance
2. Rate could keep going up where your deferred payments changes every month.
3. Long Term rates could be much higher where when its time for you to refinance your loan, it might not be affordable anymore.
4. Not fully understanding how this loan operates.
5. Potential prepayment penalties of this loan, this will take a large portion of your equity if you were to refinance early or pay off the mortgage.


Another type of loan to watch out for is the short-term “hybrid” interest only loans now flooding the market to help consumers with marginal credit or income buy houses. Interest only mortgages requires no down payment of principal for a set time at a low fixed interest rate. Payments during that period typically are set well below what a borrower would pay on a conventional 30 years fixed-rate loan.

At the end of the initial period, which may be as short as two to three years, the loans convert to fully amortizing adjustable rate mortgages at prevailing market rates. Principal reduction now kicks in, but because of the compression of the pay back period – 25-28 years and the principal to the payment mix, the total cost can balloon 50% to 70%. Marginally qualified home buyers jolted with such payment increases within 24 t0 36 months of their purchase “ are very likely” to be pushed beyond their ability to pay the loan. They would need again to know when getting these loans, its always for short term advantage only and always vision yourself refinancing before the term is over, this way you will always be prepared to refinance if the interest rates are favorable for you. The key to gaining equity is by knowing what your next move is and when. Good luck!

Please call me if you need further clarifications on these types of programs. I am very knowledgeable and can assist you to see if this is a program you should consider or stay away from. Visit our California home loans web site, and our office is always available at (562)697-7028 or (888)822-5363. We’ll be waiting to hear from you.