Friday, April 29, 2016

Some Common Mortgage Loan And Finance Terms Explained

The common terms used to describe a mortgage involve the "creditor," the "debtor," and "mortgage broker." It may be self-explanatory as to what those terms mean, but there are other terms involved with a mortgage as well that a homeowner may not be completely familiar with. Let's cover some of them here:


The creditor is the financial institution, typically a bank, who provides the money in the form of a loan for the mortgage amount. The creditor is sometimes referred to as the mortgagee or lender.


The debtor is the person or party who owes the mortgage or the loan. They may be referred to as the mortgagor.

Many homes are owned by more than one person, such as a husband and wife, or sometimes two close friends will purchase a home together, or a child with their parent, and so on. If this is the case, both persons become debtors for that loan, and not just owners of the property.

In other words, be careful of having your name put on the deed or title to any house, as this makes you legally responsible for the mortgage or loan attached to that house as well.

Mortgage broker, financial advisor

Mortgages are not always easy to come by, however, because of the demand for homes in most countries, there are many financial institutions that offer them. Banks, credit unions, Savings & Loan, and other types of institutions may offer mortgages. A mortgage broker can be used by the prospective debtor to find the best mortgage at the lowest interest rate for them; the mortgage broker also acts as an agent of the lender to find persons willing to take on these mortgages, to handle the paperwork, etc.

There are typically other parties involved in closing or obtaining a mortgage, from lawyers to financial advisors. Because a mortgage for a private home is typically the largest debt that any one person will have over the course of his or her life, they often seek out whatever legal and financial advice is available to them in order to make the right decision. A financial advisor is someone who can become very familiar with your own particular needs, income, long-term goals, etc., and then give you the best advice on what your loan needs may be.


When the debtor cannot or does not meet the financial obligations of the mortgage, the property can be foreclosed on, meaning that the creditor seizes the property to recoup the remaining cost of the loan.

Typically, a home that is foreclosed upon will be sold at auction and that sale price applied to the outstanding amount of the mortgage; the debtor may still be liable for the remaining amount if the property sold for less than the outstanding balance of the mortgage.

For example, suppose a person still owes $50,000 toward their mortgage, and their home is foreclosed. At auction, the home is sold for only $45,000. The debtor is still responsible for that remaining $5,000 difference.

Most banks and financial institutions will try to avoid foreclosing on any of their debtor's property if at all possible. Not only do they run the risk of not being able to sell the home at auction for any price, but there are also additional costs and risks incurred when the home is vacated by the previous owners. This includes vandalism, squatters (persons who trespass onto vacant land or into vacant homes and stay there until forcibly removed), fines from cities for unkempt yards, and so on.

Annual Percentage Rate (APR)

The APR is not to be confused with a mortgage's interest rate.

The APR is a loan's interest rate plus the added costs of obtaining the loan, such as points, origination fees, and mortgage insurance premiums (if applicable).

If there were no costs involved in obtaining a loan other than the interest rate, the APR would then equal the interest rate.

Breakeven Point

The breakeven point is the length of time it will take to recover the costs incurred to refinance a mortgage. It is calculated by dividing the amount of closing costs for refinancing by the difference between the old and new monthly payment.

For example, if it costs you $5,000 in fees, penalties, etc., to refinance your mortgage, but you save $300 per month on your payments with your new mortgage, the break-even point is after 17 months (17 months x $300 per month = $5,100).


This refers to an Adjustable Rate Mortgage; a mortgage that permits the lender to adjust its interest rate periodically.

Fixed-Rate Mortgage

A mortgage in which the interest rate does not change during the term of the loan.


ARMs have fluctuating interest rates, but those fluctuations are usually limited by law to a certain amount.

Those limitations may apply to how much the loan may adjust over a six month period, an annual period, and over the life of the loan, and are referred to as "caps."


A number used to compute the interest rate for an ARM. The index is generally a published number or percentage, such as the average interest rate or yield on U.S. Treasury Bills. A margin is added to the index to determine the interest rate that will be charged on the ARM.

Since the index may vary with ARMs, many people considering refinancing do well to keep aware of the standard interest rate as set by the federal government, as this is typically used by lending institutions to calculate that index.

Prime Rate

The interest rate that banks charge to their preferred customers. Changes in the prime rate influence changes in other rates, including mortgage interest rates.


A homeowner's financial interest in or value of a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage and other liens, if that value is higher.

In other words, if the fair market value of the home is $200,000, and your mortgage (and other liens, if applicable) is only $150,000, then the home has $50,000 in equity.

Home Equity Loan

Loans secured by a specific property that were made against the "equity" of the property after it was purchased.

Using the illustration above of a home that has $50,000 in equity, a homeowner may take out a loan up to that amount, using the home as collateral for that loan. A lending institution knows that if the homeowner defaults on the loan, they can seize the property and sell it for at least that much, getting back their loan amount.


The gradual repayment of a mortgage loan, usually by monthly installments of principal and interest.

An amortization table shows the payment amount broken out by interest, principal, and unpaid balance for the entire term of the loan. These tables are useful because when a payment is made toward a mortgage, the same amount does not get applied to the principal and interest month after month, even when the payment amount is the same. This is often a difficult concept for those not in the real estate or banking business to understand, so an amortization table that spells out how each payment is applied to the debt over the life of the loan can be very helpful.

Cash-Out Refinance

When a borrower refinances his mortgage at a higher amount than the current loan balance with the intention of pulling out money for personal use, it is referred to as a "cash out refinance." In other words, the mortgage is not simply for the home itself but an additional amount of money is being financed as well.

Appraised Value

An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property. The appraised value of the home is a key factor in how much the home can or will be mortgaged for.


The increase in the value of a property due to changes in market conditions, inflation, or other causes.


A decline in the value of property; the opposite of appreciation.

Appreciation and depreciation are important concepts to remember; as we've just mentioned, the appraised value of the home is a determining factor in the home's mortgage. When refinancing, it's important to understand that your home may have appreciated or depreciated in value since the original or first mortgage was obtained.


An agreement in which the lender guarantees a specified interest rate for a certain amount of time at a certain cost.

Lock-in Period

The time period during which the lender has guaranteed an interest rate to a borrower.

This is a different concept than a fixed rate mortgage, as the lock-in period for a mortgage may be temporary rather than over the life of the loan.

As we said previously, many of these terms you may already be familiar with, but it doesn't hurt to review them and see how they are all tied in together with your mortgage and the refinancing process.

So now that you have these basic terms in mind when it comes to a mortgage and the lending process, let's discuss the process of refinancing in greater detail.

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Tuesday, April 26, 2016

Saturday, April 23, 2016

Builder Confidence

There was a significant amount of housing data to digest this week.  The beginning of the week had the release of the housing market index.  This index, which measures overall confidence of home builders, remained unchanged for a third straight month at 58 for the month of April.  This reading continues to signal solid confidence amongst home builders. Adding to the positive sentiment of the report was that expectations for sales in the next six months remains strong.

The West is leading the way for builder confidence which reinforces just how important this region of the country is for the new home sector. The South, which is the largest housing region remained strong as well.  The Northeast, which is the smallest sector, trails the rest of the country by a significant margin.

Although builder confidence is high, housing starts fell a sharp 8.8 percent in March.  The surprise for this report is that we are now in the spring housing season and typically starts would be increasing.  Permits for new construction also came in below expectations.  Economists do not seem to have a consensus as to the reason for the drop.  We will have to wait and see next month’s report to determine if there is a negative trend developing.

The weakness in housing starts is split pretty much evenly between single-family and multi-family sectors.  The bright side to the report is that the year-on-year rates for starts is up 14.2 percent and permits are 4.6 percent ahead.

Existing home sales jumped 5.1 percent to a 5.330 million annualized rate for the month of March.  February’s revised numbers showed a decline of 7.3 percent.  Overall sales are just a meager 1.5 percent higher than the same time last year.  The good news is that when you look at the first quarter as a whole, existing home sales are up 4.8 percent.

March's gain in sales was spearheaded by single family homes which is the most important measured component.  Single family sales rose 5.5 percent.  Year-on-year, single-family homes are up 2.6 percent. Existing condominium sales are up only 1.8 percent for the month, however they are down compared to the same time last year by 6.6 percent.

Home prices seem to be somewhat flat in many parts of the country.  The Federal Housing Finance Agency reported that home prices rose just 0.4 percent in February.  This is the softest gain in home prices since August of last year.  Year-on-year home prices are up 5.6 percent.

Next week week’s potential market moving reports are:

·        Monday April 25th – New Home Sales
·        Tuesday April 26th – Durable Goods Orders and S&P Case-Shiller House Price Index
·        Wednesday April 27th - MBA Applications, Pending Home Sales, FOMC Announcement
·        Thursday April 28th - First Time Jobless Claims and GDP

As your mortgage and real estate professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends.  I welcome the opportunity to serve you in any way I possibly can.  Please feel free to reach me at (707) 455-7070.

Wednesday, April 20, 2016

What Type Of Mortgage Loan Is Right For You?

Homebuyers and homeowners need to decide which home Mortgage loan is right for them. Then, the next step in getting a mortgage loan is to submit an application ( Uniform Residential Loan Application ). Although we try to make the loan simple and easy for you, getting a mortgage loan is not an insignificant process.

Below is a short synopsis of some loan types that are currently available.

CONVENTIONAL OR CONFORMING MORTGAGE Loans are the most common types of mortgages. These include a fixed rate mortgage loan which is the most commonly sought of the various loan programs. If your mortgage loan is conforming, you will likely have an easier time finding a lender than if the loan is non-conforming. For conforming mortgage loans, it does not matter whether the mortgage loan is an adjustable rate mortgage or a fixed-rate loan. We find that more borrowers are choosing fixed mortgage rate than other loan products.

Conventional mortgage loans come with several lives. The most common life or term of a
mortgage loan is 30 years. The one major benefit of a 30 year home mortgage loan is that one pays lower monthly payments over its life. 30 year mortgage loans are available for Conventional, Jumbo, FHA and VA Loans. A 15 year mortgage loan is usually the least expensive way to go, but only for those who can afford the larger monthly payments. 15 year mortgage loans are available for Conventional, Jumbo, FHA and VA Loans. Remember that you will pay more interest on a 30 year loan, but your monthly payments are lower. For 15 year mortgage loans your monthly payments are higher, but you pay more principal and less interest. New 40 year mortgage loans are available and are some of the the newest programs used to finance a residential purchase. 40 year mortgage loans are available in both Conventional and Jumbo. If you are a 40 year mortgage borrower, you can expect to pay more interest over the life of the loan.

A Fixed Rate Mortgage Loan is a type of loan where the interest rate remains fixed
over life of the loan. Whereas a Variable Rate Mortgage will fluctuate over the life
of the loan. More specifically the Adjustable-Rate Mortgage loan is a loan that has a
fluctuating interest rate. First time homebuyers may take a risk on a variable rate for qualification purposes, but this should be refinanced to a fixed rate as soon as possible.

A Balloon Mortgage loan is a short-term loan that contains some risk for the borrower. Balloon mortgages can help you get into a mortgage loan, but again should be financed into a more reliable or stable payment product as soon as financially feasible. The Balloon Mortgage should be well thought out with a plan in place when getting this product. For example, you may plan on being in the home for only three years.

Despite the bad rap Sub-Prime Mortgage loans are getting as of late, the market for this kind of mortgage loan is still active, viable and necessary. Subprime loans will be here for the duration, but because they are not government backed, stricter approval requirements will most likely occur.

Refinance Mortgage loans are popular and can help to increase your monthly disposable income. But more importantly, you should refinance only when you are looking to lower the interest rate of your mortgage. The loan process for refinancing your mortgage loan is easier and faster then when you received the first loan to purchase your home. Because closing costs and points are collected each and every time a mortgage loan is closed, it is generally not a good idea to refinance often. Wait, but stay regularly informed on the interest rates and when they are attractive enough, do it and act fast to lock the rate.

A Fixed Rate Second Mortgage loan is perfect for those financial moments such as home improvements, college tuition, or other large expenses. A Second Mortgage loan is a mortgage granted only when there is a first mortgage registered against the property. This Second Mortgage loan is one that is secured by the equity in your home. Typically, you can expect the interest rate on the second mortgage loan to be higher than the interest rate of the first loan.

An Interest Only Mortgage loan is not the right choice for everyone, but it can be very effective choice for some individuals. This is yet another loan that must be thought out carefully. Consider the amount of time that you will be in the home. You take a calculated risk that property values will increase by the time you sell and this is your monies or capital gain for your next home purchase. If plans change and you end up staying in the home longer, consider a strategy that includes a new mortgage. Again pay attention to the rates.

A Reverse mortgage loan is designed for people that are 62 years of age or older and already have a mortgage. The reverse mortgage loan is based mostly on the equity in the home. This loan type provides you a monthly income, but you are reducing your equity ownership. This is a very attractive loan product and should be seriously considered by all who qualify. It can make the twilight years more manageable.

The easiest way to qualify for a Poor Credit Mortgage loan or Bad Credit Mortgage loan is to fill out a two minute loan application. By far the easiest way to qualify for any home mortgage loan is by establishing a good credit history. Another loan vehicle available is a Bad Credit Re-Mortgage loan product and basically it's for refinancing your current loan.

Another factor when considering applying for a mortgage loan is the rate lock-in. We discuss this at length in our mortgage loan primer. Remember that getting the right mortgage loan is getting the keys to your new home. It can sometimes be difficult to determine which mortgage loan is applicable to you. How do you know which mortgage loan is right for you? In short, when considering what mortgage loan is right for you, your personal financial situation needs to be considered in full detail. Complete that first step, fill out an application, and you are on your way!

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Sunday, April 17, 2016

3 Extra Days

Just in case you were not sure, this year the government has been so kind to provide tax filers 3 extra days to get their tax returns in.  Monday April 18th is the deadline for filing and paying your taxes.  Remember, even if you go on extension, you must pay the tax that you believe is owed by the 18th, otherwise interest and penalties will be assessed to you and they will be calculated from the date the tax was due which is Monday.

With the exception of the beginning of the week, the stock market has been continuing to rise.  With little economic data released this week, both domestically and internationally, there has not been much for investors to be concerned over and the rising stock market is a clear indication of that.  Through the first 4 trading days of the week, the market is up just under 250 points, and within 75 points of reaching 18,000.

Clarity in the strength and direction of the housing market will be shown to us next week with the release of three major reports, the Housing Market Index, Existing Home Sales, and Housing Starts.  Thus far few surprises are expected from these reports.

For this week, the little economic news we did receive, show that inflation is once again slowing.  The Consumer Price Index rose only 0.1 percent after the prior month’s increase of 0.3 percent.  Expectations were for an increase of 0.2 percent.  With the rate of inflation slowing, this once again creates a potential challenge for the Fed to raise interest rates.  Inflation on the wholesale level as indicated by the Producer Price Index showed virtually no price increase as well.

As I am sure you can guess, since interest rates on mortgages declined last week, purchase and refinance applications jumped.  According to the Mortgage Bankers Association of America, applications for purchase loans jumped 8.0 percent and refinance applications rose 11.0 percent.

Although it never seems to happen as fast at the pumps as it does in the trading markets, oil prices have been dropping.  After rising rapidly for a number of weeks, the price for a barrel of oil is back down to just over $40 a barrel.  Of course we as consumers will see the prices at the pump decline much slower than they do in the world of trading.  Excess inventory is the main driver for the declines.  The world is using much less oil than is being pumped out of the ground so reserves are overflowing.

The labor market continues to show strength with initial jobless claims remaining well below 300k.  The latest report for the week ending April 9th showed only 253K claims were made.  This matches the lowest level since 1973 when the labor market was much smaller.

Next week week’s potential market moving reports are:

·        Monday April 18th – Housing Market Index
·        Tuesday April 19th – Housing Starts
·        Wednesday April 20th – MBA Applications, EIA Petroleum Status, Existing Home Sales
·        Thursday April 7th - First Time Jobless Claims

As your mortgage and real estate professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends.  I welcome the opportunity to serve you in any way I possibly can.  Please feel free to reach me at (707) 455-7070.

Thursday, April 14, 2016

Monday, April 11, 2016

On The Down Side

The stock market for the first time in many weeks is on the down side.  Through the first four days of trading this week the market is lower by 231 points.  Despite investors being a little skittish, there are many positive signs in the economy.

The release of the latest FOMC minutes showed that there continues to be much debate amongst board members as to whether a rate increase should occur sooner than later.  Two of the 17 participants wanted a hike right away.  Job strength along with the stabilizing of inflation were their argument for the immediate rate increase.

Many other board members held a different view of the economy.  Quite a few of them voiced concerns about inflation reversing course.  Despite not all of the members having the same view, the group agreed that a gradual approach to economic policy must remain in place.  Some members are pushing for a rate increase in April where others are not quite as committed to the adjustment occurring so soon.

According to the Mortgage Bankers Association of American mortgage applications for purchases declined by 2.0 percent while refinances increased by 7.0 percent.  Rates have declined slightly which typically will stimulate refinance activity.

The March job creation index rose all the way up to plus 32, which matches the highest level of its eight-year history. In February, the index was at 29 and has been sitting at that level since May of last year.  Further proof the labor market continues to improve and remain healthy.

Although the housing market continues to remain strong, one of the most noticeable factors of the market is the absence of Millennials.  There are a number of thoughts as to why this is happening.  Some believe they just don’t place the same value on homeownership as their parents did.

Another view is that Millennials are not convinced that real estate is a viable investment for the future because of the instability of the market.  Some Millennials when asked even said that they simply cannot afford or qualify to purchase a home because of student debt.

Regardless of the reasons, it is clear that Millennials are not in a rush to join the housing market in droves as the present time.  None the less, housing demand remains strong and home prices are rising even without significant Millennial participation.

Next week week’s potential market moving reports are:

·        Wednesday April 13th – MBA Applications, EIA Petroleum Status, Retail Sales & PPI
·        Thursday April 7th - First Time Jobless Claims and Consumer Price Index
·        Friday April 8th – Industrial Production and Consumer Sentiment

As your mortgage and real estate professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends.  I welcome the opportunity to serve you in any way I possibly can.  Please feel free to reach me at (707) 455-7070.

Tuesday, April 5, 2016

How To Calculate A Mortgage Payment With Insurance & Taxes

Mortgage payments can be calculated using a very specific equation. Calculate a mortgage payment that includes taxes and insurance with help from a licensed Realtor in this free video clip.

Saturday, April 2, 2016

Rising And Little Headwind

The stock market continues to rise and there seems to be little headwind at the present time to slow it down.  Employment continues to remain strong and inflation is virtually non-existent.  The pleasurable thing about the current market rally is that it has not been accompanied by major swings in the indices.  The Dow is up just over a 160 points for the first four days of trading this week, and none of the days have seen stomach turning movement.  It is a gradual and steady growth.

There were two positive housing reports released this week further supporting that the real estate market continues to be on track for slow but steady growth.  The report on pending home sales showed an increase of 3.5 percent from January to February.  This reverses the prior month’s decline of 3.0 percent.

The Case-Shiller House Price Index showed prices continue to rise.  Home prices for the 20-city adjusted index increased 0.8 percent for the month of January.  It is likely that with the Spring market starting to take hold in many parts of the country, home price appreciation will likely increase as demand increases.  Prices are 5.7 percent above the same time last year.

The strongest gains in home prices was in the West.  Portland Oregon and Seattle Washington showed a monthly gain of 1.5 percent.  San Diego and Los Angeles followed with a 1.1 percent gain.  Surprisingly Chicago and Detroit were next with a 1.0 percent rise.  Shortage of available homes for sale, especially in the Pacific Northwest, are a major factor in the rapid rise of home prices.

Applications for purchase mortgages rose by 2.0 percent for the week of March 25th.  Refinance applications declined by 3.0 percent.  Mortgage rates have risen slightly over the last couple of weeks which has not been deterring buyers.  Refinances are much more rate sensitive which is why we have seen a more-steady decline in this area of mortgage financing.

Surprisingly, the never ending nonsense going on in politics has yet to dampen consumer confidence.  The index for measuring this remains at a very healthy 96.2 for March.  This follows the upward revision of February’s measurement to 94.

Finally, the labor department reported a gain of 215,000 jobs for March.  The unemployment rate increased to 5.0 percent from 4.9 percent.  The increase was due to more people jumping back into the labor force looking for employment which is a positive sign for labor growth.  Wage increases continue to remain almost stagnant which is one of the reasons why inflation remains virtually non-existent.

Next week week’s potential market moving reports are:

·        Monday April 4th – Factory Orders
·        Tuesday April 5th – ISM Non-MFG Index & JOLTS Report
·        Wednesday April 6th – MBA Applications & EIA Petroleum Status & FOMC Minutes
·        Thursday April 7th - First Time Jobless Claims

As your mortgage and real estate professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends.  I welcome the opportunity to serve you in any way I possibly can.  Please feel free to reach me at (707) 455-7070.