Lee Morof's Real Estate Blog

What is HARP 2.0?  HARP 2.0 is the revamped version of the Home Affordable Refinance Program.  It allows homeowners who owe more on their mortgages than their homes are worth to refinance into today’s low mortgage rates. Additionally, HARP 2.0 provides refinancing without high-priced closing costs and fees and appraisals are not even required in most cases.

Who qualifies?

To qualify for a HARP 2.0 refinance, you must meet these requirements:

1. Your mortgage must be owned or guaranteed by Fannie Mae or Freddie Mac.
2. The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
3. You cannot have lender-paid mortgage insurance.
4. You must be current on your mortgage and have no late payments in the last six months.
5. You must have no more than one late payment in the past 12 months.
6. This must be your first refinance through HARP.
7. Your Southeast Michigan real estate’s current loan-to-value ratio must be greater than 80%.

What are the steps?

Here are four steps to refinance through HARP:

1. Determine who owns the mortgage on your Southeast Michigan real estate and if it is owned or guaranteed by Fannie Mae or Freddie Mac. To check if your mortgage is backed by Fannie Mae or Freddie Mac, visit http://www.fanniemae.com/loanlookup or https://ww3.freddiemac.com/corporate.
2. Find out if your mortgage is old enough. (See #2 above.) You can find your mortgage start date by looking at your closing paperwork. In the upper-right-hand corner of your settlement is your “funding date.” That’s the date you’re looking for.
3. Contact your current mortgage holder to inquire about HARP.
4. Compare rates and costs with other mortgage companies to ensure the best refinance terms. If you want to explore refinancing options for your Southeast Michigan real estate, contact a HUD-approved housing counselor at 1-888-995-HOPE (4673). HUD can design a plan for your individual situation.

For more information on HARP 2.0 or for answers to other real estate questions, call me at 248-514-2640 or email me at info@NorthWoodwardHomes.com.

Lee Morof
Associate Broker/Certified Distressed Property Expert/Attorney
RE/MAX Showcase Homes, Birmingham, Michigan
www.NorthWoodwardHomes.com

Mortgage lenders are primarily concerned with your ability to repay your Southeast Michigan real estate mortgage.  They will consider your credit score, debt-to-income ratio and how much you have for a down payment before telling you what you can afford to spend on Southeast Michigan real estate in Oakland County.

Credit Score

One of the first things your lender will review is your credit score.  Credit scores range from a low of 350 to a high of 850.  In this case, the higher, the better.  The lower your credit score, the higher your interest rate and points will be, and the lower the amount of home you’ll be able to afford. If your score is too low, you may not qualify for a mortgage. If your score is low, you may need to take some time to improve your credit score before buying Southeast Michigan real estate.

Debt-to-Income Ratio

Lenders use a formula called the debt-to-income ratio to determine if your income is high enough and your debts are low enough to qualify for a certain loan amount.

Standard debt-to-income ratios are the housing expense (also called the front-end ratio) and the total debt-to-income (also called back-end ratio).  How are these calculated?

• Front-end ratio:  Shows how much of your gross monthly pretax income would go toward the mortgage payment.  As a general rule, the monthly mortgage payment, including principal, interest, taxes, and homeowners insurance, should not exceed 28 percent of your gross monthly income.  To calculate the front-end or housing expense ratio, multiply your annual salary by 0.28, and then divide by 12 months.  This is your maximum housing expense ratio. (Annual salary x 0.28/12 = Maximum housing expense ratio)
• Back-end ratio:  This shows how much of your gross income would go toward all of your debt obligations – mortgage, car loans, child support, credit card bills, etc.  Your monthly debt obligation should not exceed 36 percent of your gross income.  To calculate this ratio, multiply your annual salary by 0.36, and then divide by 12 months.  This is your maximum allowable debt-to-income ratio. (Annual salary x 0.36/12 = Maximum allowable debt-to-income ratio)

Down Payment

Last but definitely not least, lenders consider the amount you have for your down payment. The bigger your down payment, the less risk the lender feels like he is taking on, so you will probably receive a better interest rate. Ideally, you want to come up with at least 20% of the value of your new home as a down payment, to avoid things like mortgage insurance payments.

The mortgage process can be confusing.  I would be happy to go over this information with you in detail, or if you prefer, I can refer you to a well-respected, knowledgeable mortgage lender. Please call me today at 248-514-2640 or email me info@NorthWoodwardHomes.com for more information.

Lee Morof
Associate Broker/Certified Distressed Property Expert/Attorney 
RE/MAX Showcase Homes, Birmingham, Michigan
www.NorthWoodwardHomes.com

One way lenders increase their profits on your Southeast Michigan real estate mortgage is by charging settlement fees. While many fees are standard and required, others may be negotiated.

Shop Around For Better Closing Fees

The Good Faith Estimate (GFE), as required by RESPA, is presented to you after you apply for a loan to purchase your Southeast Michigan real estate. It gives you a heads up as to what fees you should expect at closing.

If you don’t like the numbers you’re seeing on the GFE, shop around with other lenders. If you were approved for one loan, you can likely be approved for another.  Collect comparable GFEs and see how the interest rate, monthly payments, points, and closing fees stack up. Your best bet is to tell your lenders that you’re comparison shopping, so they give you the best numbers possible.

Common closing fees you can expect to see on your Good Faith Estimate include:

• Appraisal Fee – Fee for an independent appraisal of the value of the property. This fee often ranges from $350 to $500. Note that payment for this fee is sometimes required prior to closing.
• Credit Report Fee – This is the cost of acquiring a credit report.
• Title Insurance Fee – This is the fee paid to a title company for research and insurance related to the title of the property.
• Processing Fee – The processing fee covers the cost of the person who handles collecting the paperwork, such as credit reports and employment history, for underwriting. Sometimes, the processor is the loan officer.
• Loan Origination Fee – Also called underwriting fee, administrative fee or processing fee, the loan origination fee is charged by the lender for evaluating and preparing your mortgage loan. This fee can cover the lender’s attorney’s fees, document preparation costs, notary fees, and similar charges.
• Application Fee – This fee covers the processing of an application for mortgage insurance.

All loans have fees; there’s no escaping them.  If there aren’t any fees, the cost of making the loan has been wrapped up in other areas such as the interest rate or points.  So as you comparison shop, remember to look to the long-term cost of the loan, not just settlement fees.

That said, with some comparison shopping and negotiation, you may be able to decrease your fee amounts without the price being woven elsewhere into the loan for your Southeast Michigan real estate.

Whether you’re ready to buy or need more information before taking the plunge, I can help. Give me a call today at 248-514-2640 or email me at info@NorthWoodwardHomes.com.

Lee Morof
Associate Broker/Certified Distressed Property Expert/Attorney
RE/MAX Showcase Homes, Birmingham, Michigan
Call:  248-514-2640
info@NorthWoodwardHomes.com
www.NorthWoodwardHomes.com

If you get a mortgage for more than 80% of your Southeast Michigan real estate’s fair market value, your lender will require that you pay Private Mortgage Insurance (PMI). PMI payments are expensive at about 0.5% to 1% of the entire loan amount on an annual basis.

Obviously, it would be a good thing if you didn’t have to pay PMI. To help you achieve that goal, here are several tips to avoid paying PMI on your Southeast Michigan real estate:

• Save for a big down payment: The easiest way to avoid PMI is to have a down payment of at least 20% of the value of the home you want to purchase.
• Borrow to get 20% down: Check with friends and family for down payment assistance. You can offer repayment with interest and still never pay what you would have to for PMI.
• Get a Second Mortgage: Getting a second mortgage to cover the difference between your down payment on your first mortgage and the 20% threshold for your PMI can make a substantial difference in your monthly payments. Talk to a qualified mortgage professional to discuss your options.
• Pay More Interest: Some lenders will waive PMI if you agree to a higher interest rate. Again, discuss your options with a mortgage professional.
• Consider a Less Expensive Home: This goes back to being able to hit that 20% threshold. As we’ve all seen in this tough economy, stretching beyond your means can have dire consequences if your circumstances change. Consider if you really need that extra bedroom and extra expense. If you haven’t saved enough to afford an expensive home, downsize your expectations and buy within your means.

If you’d like a referral to an outstanding mortgage professional or need help finding a home that fits your budget, give me a call today at 248-514-2640 or email me at info@NorthWoodwardHomes.com.

Lee Morof
Associate Broker/Certified Distressed Property Expert/Attorney  
RE/MAX Showcase Homes, Birmingham, Michigan
Call:  248-514-2640
info@NorthWoodwardHomes.com
www.NorthWoodwardHomes.com

If you are on the verge of buying Southeast Michigan real estate, you’ve probably heard the term Private Mortgage Insurance (PMI). Mortgage professionals talk about it a great deal, but you may be asking, “What is it exactly? And why should I care?”

Private Mortgage Insurance Defined
PMI is required by lenders if the down payment of a purchase is less than 20 percent of the home’s value. It protects the lender if the borrower defaults on the loan. It also makes the lender more apt to loan, even if the down payment is as low as 3%, because in the long run, the lender’s investment is protected.

You Pay For It
Unlike other types of insurance which you pay to protect your interest in an asset, you pay Private Mortgage Insurance to the mortgage company to protect its interest in your new Southeast Michigan real estate. (Note that PMI is not usually tax deductible. Check with a tax professional for details. )

Make It Go Away: PMI Can Be Terminated Once You’ve Paid Down Your Loan
Once you pay down your mortgage to the point where it hits the magical 80% of the original purchase price or appraised value, whichever is less, you can request cancellation of PMI. The Homeowners Protection Act requires that loans made after 1999 include notifications to the borrower when you arrive at this point in your payments.

Your PMI payments must be automatically canceled once you pay down your loan to 78%. At closing, and on a yearly basis, you should receive information from your lender about when you can request cancellation.

Whether you’re ready to buy Southeast Michigan real estate or need more information before taking the plunge, I can help. Give me a call today at 248-514-2640 or email me at info@NorthWoodwardHomes.com.

Lee Morof
Associate Broker/Certified Distressed Property Expert/Attorney  
RE/MAX Showcase Homes, Birmingham, Michigan
Call:  248-514-2640
info@NorthWoodwardHomes.com
 www.NorthWoodwardHomes.com

With appealingly-low home prices and historically-low mortgage rates, you know this is an ideal time to buy Southeast Michigan real estate. What about your adult child who doesn’t have the down payment needed to buy his or her first home? Should you help him or her take advantage of this opportunity?

Many parents are asking themselves this question. According to a survey done by the National Association of REALTORS®, 36% of first-time buyers received help with their down payment from family or friends – typically parents – in 2010.  That was up 28% from 2009.

Can you afford it?

The first thing to ask yourself is whether you can afford it. Are you on track to reach your financial goals for retirement? If you are not, you cannot afford to help your child buy Southeast Michigan real estate.  Additionally, some financial experts suggest that you should not tie up more than 3% to 5% of your assets in family loans.

Are you prepared to lose the money?

Your offspring may fully intend to repay you, but his or her ability to do so could change quickly in today’s financial environment.

To reduce the possibility of your child falling behind on payments or defaulting, create a contingency plan.  If the amount you’ve lent is small enough, you might decide to give it to them as a gift. If not, work out a schedule of repayment. For instance, you could reduce the monthly payment. Just make sure you get some type of payment on a regular basis, even if it’s only symbolic.

Will your other children be accepting?

Your other children should know that you are providing this aid, if you intend to also help them financially, and if not, why you made that decision. If helping one of your kids finance a home will cause a major rift in your family, you may not want to move forward with it.
Can you do the deal and then back off?

Helping your son or daughter buy Southeast Michigan real estate in Oakland County, Michigan can be a positive for all of you. But you don’t want to be the type of parent who helps and then spends the next decade dictating how to decorate the home and dropping in to visit any time you please.

If you’d like to find a home to purchase for your child, I can help.  Give me a call today at 248-514-2640 or email me at info@NorthWoodwardHomes.com for additional information.

Lee Morof
Associate Broker/Certified Distressed Property Expert/Attorney
RE/MAX Showcase Homes, Birmingham, Michigan
Call:  248-514-2640
info@NorthWoodwardHomes.com
www.NorthWoodwardHomes.com

When you go through one of the Michigan foreclosures, your credit score drops considerably. The good news is that you can rebuild your credit.  Here are a few tips to help:

1. Create a budget. A budget lets you see exactly how much money you have to spend each month. It also helps you track where you spend your money. Put together a budget that fits your lifestyle and then stick to it.

2. Build an emergency fund. You never know when an emergency will happen. When you’re prepared for a financial emergency, you’re better protected from financial problems.

3. Repair your credit.  Review your credit reports from all three credit bureaus.  Dispute any errors you find.  Removing errors from your credit reports help improve your credit.

4. Establish new credit. This can be tricky after a Michigan foreclosure. New credit will give you a chance to prove you can manage debt. However, you certainly don’t want to find yourself owing more than you can possibly pay. If you can get a traditional credit card, your interest rate will be very high, so choose and use your credit cards wisely. An alternative is to apply for a secured credit card, which requires that you put money down as a deposit before credit is extended to you. Use your card regularly but lightly, and you will see your credit start to improve as you make consistent payments.

5. Have patience. It takes time to rebuild your credit. Don’t expect your credit score to be in the good or excellent range within weeks or even months after your Michigan foreclosure. It’s going to stay on your credit report for seven years, so there’s no need to rush.

A foreclosure is not the end of the world. Let me help you plan for and find your next home so it fits your budget. Give me a call at 248-514-2640 or email me at info@NorthWoodwardHomes.com.

Lee Morof
Associate Broker/Attorney
RE/MAX Showcase Homes
Birmingham, Michigan
www.NorthWoodwardHomes.com
info@NorthWoodwardHomes.com
Call:  248-514-2640

With the current Michigan foreclosure woes, and the strains of the economy these days, many people are worried about what they’ll do when their ARM (adjustable rate mortgage) resets.  Here are a few suggestions to help you weather the current financial storm:

What is an ARM?
ARM refers to a mortgage loan that has a variable interest rate.  The amount of the monthly payments will change several times over the life of the loan.  ARMs usually have a lower introductory interest rate than a fixed-rate mortgage.  After a period of time, the interest rate is recalculated, resulting in a higher interest rate and monthly payment.

Get Out Your Loan Paperwork
Many homeowners are worried about what will happen to their monthly payments when the ARM resets.  Foreclosure is a real worry.  The best way to avoid Michigan foreclosures is to know exactly what the terms of your loan agreement are.  Look for the date that the interest rate is set to change.  Find out what the cap is on each interest rate adjustment, and what the cap is for interest increases throughout the life of the loan.

After you have gathered that information, you can calculate what your ARM will reset to.  It’s best to know what the worst-case scenario payment could be when your ARM adjusts.  This information can help you determine if you are going to need help getting your loan payments manageable.  The next step is to make a detailed list of your current and future income and bills.  This will give you a better understanding of your financial status. 

Call Your Mortgage Company
If, after you make this list, you can see that you are going to have trouble making the difference in the monthly payments, call your mortgage company.  It’s best to call them before you miss a payment.  They may be able to renegotiate the terms of your loan for you.

If you’re ready to sell your home, I can help. Call me at 248-514-2640 or email me at info@NorthWoodwardHomes.com for more information.  Ask me about a Short Sale.

Lee Morof
RE/MAX Showcase Homes
Birmingham, Michigan
www.NorthWoodwardHomes.com
info@NorthWoodwardHomes.com
Call:  248-514-2640

The good housing numbers continue for Southeast Michigan real estate in Oakland County Michigan. May 2008 sales are up by 9.3%, pending sales are up by 15.6%, and listing inventories are down by 7.43% as compared to May 2007. 37% of the homes sold were bank owned down from approximately 50%. I believe the worst is over as, in all fairness, the banks are no longer lending money to individuals with poor credit scores. As less bank owned homes are placed on the market, the laws of supply and demand will eventually stabilize home prices.

This statistical information has been obtained from Realcomp, the REALTORS MLS. Realcomp is Michigan’s largest Multiple Listing Service. Although not guaranteed, these statistics are from data Realcomp believes to be reliable. This information is not to be reproduced, redistributed, or combined with data from other sources without expressed permission from Realcomp.

Lee Morof
RE/MAX Showcase Homes
Birmingham, Michigan
www.NorthWoodwardHomes.com
info@NorthWoodwardHomes.com
Call:  248-514-2640