Nick Pakulla - Mortgage Lender Loan Officer in MD, DC, VA

There are some very positive signs in the economy are emerging and Fed policies are keeping Rockville MD mortgage rates near historic lows.

We strongly encourage spring buyers to get fully-approved now to avoid missing out on “the one.”  Without having an approval letter buyers could risk missing out on their dream home, or at the minimum be under high-stress to gather and send the required approval documentation last minute.  Our bank approvals are good for up to 1 year, there is no cost or obligation, and approvals can be turned around in 1 hour. 

Mortgage News Headlines of Interest:

• US Jobless Claims fall to 4-year low, consumer confidence up, Bloomberg: http://buswk.co/wQBtva
• Mortgage delinquencies hit 3-year low, Wall Street Journal: http://on.wsj.com/x4QdRs
• Standardization proposed for monthly Mortgage Statements by CFPB, New York Times: http://nyti.ms/yuaEuN
• $25 Billion Mortgage settlement deal FAQ (not to be confused with the HARP refinance program), Bankrate: http://bit.ly/xCfRF4
• Murmurs that FHA Mortgage Insurance Premiums will be increasing again this year, Reuters: http://reut.rs/AcpNUH

Our Community Bank is here to support you and your buyers, with our ability to close loans in 2 weeks, 10% down second trust products above the loan limits, and 5% no monthly mortgage insurance products we are ready to get you and your buyers to settlement on time with ease.

As always, we are accessible anytime to go over payments, closing costs, and issue approval letters at any time.  301-585-RATE (7283).  I hope you had a great holiday weekend! 

 

With Rockville MD mortgage rates still near all-time lows many buyers will have significantly higher payments and may qualify for less if they head back up (like they did last spring).  Please pass the example below to your buyers to show how beneficial low interest rates are!

$417,000 borrowed
@4.125% = $2,020 per month
@5.125% = $2,270 per month – this is $90,000 in wasted interest paid over the life of the same $417,000 loan!
@5.125% a $2,020 principal and interest payment would equate to a mortgage of only $371,000!  This means that in this example buyers today can finance $46,000 more for the same exact principal and interest payment due to low mortgage rates.

 

If you look at the chart above, for the past 2 years mortgage rates have been in the low 5%’s during spring…. Will history repeat itself again?  Even scarier, look how quickly mortgage rates shot up from November 2010 to January 2011.

HAPPY HALLOWEEN!

***About First Place Bank

First Place Bank is an established community bank new to the MD/DC/VA market.  With all the struggles of the “large banks” the community banking model has proven to be much more efficient.  We still offer 80/10/10’s, in-office underwriting, and have a group of local bank approved appraisers (no 3^rd party appraisal system).  My entire group made the move to First Place Bank after thirteen years at a large bank mainly because we believe in a higher level of service.  We work with some of the best Realtors in the area and our goal is to create a new, higher standard in the mortgage business.  All top Realtors should have a community bank option to rely on.  Please consider us for your next buyer.  Thank you.

VA announces a decrease to the VA funding fee effective October 1st.  For the full notice you can find it at: http://www.benefits.va.gov/HOMELOANS/circulars/26_11_12.pdf

Purpose: This circular announces changes in funding fees for Department of Veterans Affairs (VA) loans closed on or after October 1, 2011.

2.

Fee Changes a. For loans closed on or after October 1, 2011, the fee for subsequent use loans with less than 5 percent downpayment and subsequent use regular refinance loans will be 2.8 percent for both active duty Servicemembers, Veterans, and persons qualifying based solely on service in the Reserves or National Guard. This change is due to passage of Public Law 112-26, Restoring GI Bill Fairness Act of 2011. b. Funding fees for loans other than subsequent use will also change for loans closed on or after October 1, 2011. These fee changes were already set to change based on previous legislation. The below table shows the upcoming changes. c. Funding fees for Interest Rate Reduction Refinancing Loans and Assumptions will not change. They will remain at .50 percent.

3.

Possibility of Future Funding Fee Changes: Should Congress pass legislation making additional changes to the funding fee structure, VA will immediately publish a notice on our website and the VA Funding Fee Payment System (FFPS), and soon afterward, issue another Circular. Lenders should closely monitor our website and VA FFPS for information on funding fee changes.

4.	Rescission: This circular is automatically rescinded on October 1, 2012.

By Direction of the Under Secretary for Benefits

Michael J. Frueh
Acting Director, Loan Guaranty Service

Loan Fee Structure for Guaranteed Loans

First Time Use	Veteran	Reservist/National Guard
Down payment:   Less than 5 percent*: – October 1, 2004 until October 1, 2011 – On or after October 1, 2011 At least 5 percent but less than 10 percent: – Before October 1, 2011 – On or after October 1, 2011 10 percent or more: – Before October 1, 2011 – On or after October 1, 2011	2.15%  1.40%     1.50%  0.75%    1.25%  0.50%	2.40%  1.65% 1.75%  1.00%  1.50%  0.75%
Second and Subsequent Use Down payment:   Less than 5 percent*: – October 1, 2007 until October 1, 2011 – October 1, 2011 until October 1, 2012 – October 1, 2012 until October 1, 2013 – On or after October 1, 2013 At least 5 percent but less than 10 percent – Before October 1, 2011 – On or after October 1, 2011 10 percent or more – Before October 1, 2011 – On or after October 1, 2011   Refinancing Loans: Interest rate reduction .5%	3.30%  2.80%  2.15%  1.25%     1.50%  0.75%    1.25%  0.50%	3.30%  2.80%  2.15%  1.25%  1.75%  1.00%    1.50%  0.75%

Just a reminder that the Fannie Mae loan limits are set to expire on Sept 30th and all loans must be settled on or before that date (the 30th is a Friday).  Be cautious of the dates, we are hearing that some other lenders have already stopped taking new applications for loans above $625,500 in the DC Metro area and above $494,500 in the Baltimore Metro area (likely because their processing and underwriting departments are delayed).  We keep everything in-office so if you are stuck on a file, we can help get it closed in as little as 2 weeks.  We will be taking new applications up to about 2 weeks prior to the deadline to help with the fall out that will be coming from the big banks.  As a Community Bank, the goal is to always help the local communities where we lend. 

We already have a great solution in place for those of you that are affected by the loan limit changes.  We are one of the only local banks that still do in-house second mortgages (we lend our own money) which will be used more as the Fannie Mae loan limits drop.  Splitting the loans will become the product of choice for buyers that want to get the better conforming rates and are purchasing above the new limits.  Taking the first mortgage down to $625,500 / $494,500 and then putting a second mortgage behind it (even up to $400,000 - $500,000) will be a great strategy for buyers that want to aggressively pre-pay the second.  This will be great for buyers that get paid bonuses, commissions, only have 10% down, or need to use the second as a bridge loan to go non-contingent on the sale of their current home. 

Check out my post on how to obtain a jumbo mortgage with 10% down: http://activerain.com/blogsview/2109479/how-to-get-a-jumbo-mortgage-with-a-10-low-down-payment-in-maryland-dc-or-virginia

Follow Me On:

Understanding the Home Appraisal Process

Consumers are often baffled by the home appraisal process. They may feel their home is worth a certain dollar amount, and therefore, the appraised value doesn't make sense to them. It is important to know that appraisal guidelines are dictated by the lenders. In many states, the lenders must disclose the purpose of the appraisal, as each situation carries its own set of rules. In essence, lender guidelines force appraisers to put a fair market value on a home based upon comparable sales in the area where the home is located, as the home must be bracketed according to size and value. For example, there is no set amount associated with a great view, pool, spa, bathroom upgrades, etc. If a homeowner installs a custom pool that cost them $30,000, and the local marketplace supports the value of a pool at $15,000, that item will be bracketed as [$15,000] on the appraisal. Upgrades can usually be expressed at full value in newer homes since they required investing additional money onto the cost of building the home. On the other hand, the amount invested in upgrading or remodeling an older home is rarely reflected in full in the final appraisal. The reason is the home had value in its original condition, and again, the value of the upgrades must be supported by comparable examples within the same marketplace.

These comparisons must be drawn from current market activity within the last six months. Some lenders may want to look at both closed and pending sales. This is a safeguard to prevent appraisers from over-valuing the home in question. It is further stated in the guidelines that appraisers can only place a value on homes that have closed escrow. However, when property values rapidly increase within a marketplace, appraisers are generally permitted to make concessions and put more weight on the evidence provided by comparisons to pending sales and listings. This allows for a "real time" appraisal.

At First Place Bank, we don't use 3rd party appraisal management companies. We use a local rotation of qualified appraisers that are familiar with the local marketplace. This improves appraisal quality and efficiency. Call me directly for a free consultation.

Should I float my mortgage rate?  Should I lock-in my mortgage rate?  I've said it before, and will say it again!  I always recommend borrowers lock-in their interest rate instead of deciding to float their loan.  There are a few simple reasons at play here, and I'll explain how the decision to float (even when the consensus is that rates will go down) doesn't always pan out and could end up costing you - all from what happened to rates over the past 3 weeks.

Basic reasons to lock-in your loan: Is that extra $20 per month really worth it?  What if rates shoot up by .25% overnight costing you $40 per month or more? At what point do you draw the line on floating? If your rate goes up, no matter by how much, you will be upset The "interest rate game" seems like a very big deal when making the decision to move forward with a lender, but one year after you have locked-in you will barely notice or remember the process and your mortgage payment will simply be what it is If your decide to wait, and rates go up, one year after you lock-in, and every month your write your check, you will remember Rates don't always move in full eights (0.125%'s) You have no clear way of knowing exactly what rates your lender has on a given day Leave the gambling for Vegas, not the roof over your head If rates really do get that much better you can always refinance later

The only reason to float your loan:

1. You have a strong feeling that rates will get better

Well on November 3^rd the Fed announced they would by $600 billion in treasuries to boost growth aka Quantitative Easing 2

Among other things this move was (and still is) expected to continue to push mortgage rates lower.  As a borrower you could have made the decision to wait until after the Fed's announcement to get even lower rates.  The following week after the announcement inflation fears kicked in and rates jumped 0.375% to 0.5% higher.  Aka, 4.125% became 4.5% in a matter of 1 week.  That hurts.

There was also a counter argument that since everyone was anticipating the Fed's announcement, that rates already had adjusted lower in anticipation, if the Fed didn't announce enough of a treasury purchase rates would have immediately gotten much worse.  Even when something is expected, if it is expected to be at a certain level and comes out slightly different, it can also hurt.

Even still, there is still some consensus that over the next few weeks rates could continue to go back down to the low 4%'s and maybe even the 3%'s... But do you want to chance it? 

Announcing Rockville Restaurant Week, October 4-10 2010, serving special prix-fixe menus, priced at either $8 lunch/$15 for dinner or $10 lunch/$25 dinner.  There are 31 restaurants to choose from, foodies and savvy spenders alike will be pleased.

What is Rockville Restaurant Week?
Now in its second year, Rockville Restaurant Week showcases Rockville as destination for sampling amazing cuisine from around the globe all in one city. 

Organized by the Rockville Chamber of Commerce, Restaurant Week gives diners the opportunity to sample award winning flavors at special price points.  Restaurants will be offering one of two options, either $8 lunch & $15 dinner or $10 lunch and $25 dinner.

Do I need to make a reservation?
Reservations are not required to take advantage of Restaurant Week pricing, but due to the popularity of certain restaurants throughout the year, reservations are encouraged. Walk-ins are appreciated at many establishments, but call ahead to be sure your party can be accommodated.

Participating Resteraunts:
Austin Grill
Bageltowne Deli
Baronessa Italian Restaurant
Beale Street Grill
The Bean Bag
Bombay Bistro
Branded '72
Fontina Grille
Gilly's Craft Beer & Fine Wine
Il Pinito Trattoria
Il Pizzico
Kickin' Chicken
La Tasca
Lola Bistro Cafe & Bakery
Mi Rancho
Mosaic Cuisine & Cafe
Nick's Chophouse
Philllips Seafood
Oro Pomodoro
The Potomac Grill
Potomac Pizza
Seven Seas
Spice Grill
Spice Xing
Sushi Damo
Taste of Saigon
Thai Farm
Thai Pavilion
Urban Barbque Company

A little known option when shopping for a mortgage in Montgomery County Maryland is what's called an escrow waiver. 

- An escrow account is an account setup by your lender that is funded in advance to pay your property taxes and homeowners insurance automatically. 
- An escrow waiver is an option (usually comes with an additional fee) which enables you to pay your property taxes and homeowners insurance on your own (ie: not part of your monthly mortgage payment).  Note: Not all types of mortgages allow the borrower to waive escrows.

If you let the bank hold your escrows, the bank will pay your property tax and homeowners insurance bills as they come due.  The account maintains an average balance over the course of the year, where the bank earns interest on the balance in the account.  Also there are often shortages in an escrow account (ie: when property tax bill increases) that change your total mortgage payment each year when an escrow analysis is completed (ie: your total payment to your lender could go up or down based on the changed assessments).

Don't worry - Section 10 of the Real Estate Settlement Procedures Act (RESPA) limits the amount of money a lender may require the borrower to hold in an escrow account for payment of taxes, insurance, etc. See Hud's Escrow FAQ

Banks prefer to have the borrower pay into an escrow account because the bank can be sure that the property taxes and hazard insurance will be paid thus protecting their interest and investment in your property.

When you pay the escrows on your own you can ensure that these are paid on your own terms (and that the bank isn't earning interest on your money), however, you do have to deal with the hassle of ensuring that you will have enough liquid cash to pay the property tax and homeowners bills as they come due. 

Some homeowners prefer to have an escrow account even when a waiver is offered for free.  Having the escrow account means that some of your home ownership bills are taken care of and you as the owner don't have to worry about any large property tax bills or homeowners insruance bills coming due during the year.

Some lenders charge fees, normally .25 points in order to waive escrows.  However, my bank offers a free escrow waiver if you are interested.

If you would like to discuss a escrow waiver and how it may benefit you please call me at 301-585-7283.

Yes, the mortgage lending standards have become very strict, but there is proof that they are working!  The Quarter 2 2010 losses are the lowest they have been since the government took over Fannie Mae in 2008.  

The Washington Post featured an article that Fannie Mae “reported Thursday that its loss in the second quarter shrank dramatically and that the company had put away enough money to cover most of the losses it expects in the future.”   Fannie Mae gives several reasons as to why their losses are improving: Borrowers who were very late on paying their mortgages declined from 5.47% to 4.99% Recovering more money from loans that go bad Virtually all losses were the result of bad loans made between 2005 and 2008 during the housing bubble and subsequent crash There have been few defaults on loans made since 2009 when lending standards increased Numbers 1 and 2 above seem to be more indications about the overall economy improving but #3 (virtually all losses from bad loans originated 05-08) and #4 (very few defaults since 09) seem to indicate that there has been a correction in lending standards that ARE working!

I had a Realtor tell me that a family with documentable income of $35,000 per year was given a mortgage for a $1 million dollar property that she sold short last year.  Clearly, mistakes were being made across the board with lending standards being too relaxed.

Now the corrections have been made, and with some back-burner discussions about the ultimate fate of Fannie Mae and Freddie Mac I’m sure we’ll be seeing more changes coming down the pipeline.  While the changes make a Loan Officer’s job much harder and also puts an extra strain on borrowers (additional income verification, having to document almost every non-work related deposit, not open new lines of credit or make any significant purchases in-between application and closing... etc) – it all appears to be working! 

I am an optimist, so one could argue that 2009 until now is not long enough to know for sure if we are out of the woods, but I’m going to say that there is clear evidence we are just about there.

David H. Stephens, the Assistant Secretary for Housing / Housing Commissioner released today a special notice with the intent of decreasing the annual upfront MIP down to 1% (currently at 2.25%) with a simultaneous increase in the annual MIP to 0.85-0.90% (currently at 0.50-0.55%).  The anticipated case number assignment effective date is September 7^th 2010.  The bill still needs to be signed into law.

"With this authority, FHA is in a better position to address the increased demands of the marketplace and return the MMI fund to congressionally mandated levels without disruption to the housing market."

"As I have previously stated in my testimony before Congress, FHA will lower its upfront premium simultaneously with the increase to the annual premium¹. It is our intention that effective on September 7, 2010, FHA's upfront mortgage insurance premium will be adjusted down to 100 basis points on all amortization terms and the annual mortgage insurance premium will increase to 85-90 basis points on amortization terms greater than 15 years². A Mortgagee Letter will be forthcoming once President Obama signs the bill into law, but with today's passage of H.R. 5981 and our expedited implementation schedule, I wanted to immediately inform the industry of our plans so the lending community can begin preparing for the operational and system changes required to implement FHA's new mortgage insurance premium structure on all new case numbers by September 7, 2010."

"LTV's <= 95% will increase to 85bps and LTV > 95% will increase to 90 bps."

Some real rough purchase math:

Currently:	New Bill tentatively planned to go into effect September 7th:
$300,000 Purchase	$300,000 Purchase
$289,500 Base Loan (3.5% down)	$289,500 Base Loan (3.5% down)
$296,013 Borrowed (with 2.25% upfront MIP)	$292,395 Borrowed (with 1% upfront MIP)
$1,592 / year in annual MIP (at 0.55%)	$2,605 / year in annual MIP (at 0.9%)

Each year the new bill will cost $1013 more in annual MIP charges in the above scenario, or about $80/month in additional total monthly payment**.

Difference with new bill if owner were to sell their FHA mortgaged home at the:
Start of loan: $3618 upfront savings under new bill
End of Year 1: $1013 more annual MI (New Bill Total Savings $2605)
End of Year 2: $1013 more annual MI (New Bill Total Savings $1592)
End of Year 3: $1013 more annual MI (New Bill Total Savings $579)
End of Year 4: $1013 more annual MI (New Bill Total Cost $434)...
Borrowers stop paying annual MIP when the value reaches 78% of the original loan (paying the minimum this will be approximately 11 years into the mortgage), or 7 more years x $1013/yr for a total new cost of $7525 of the proposed changes in this scenario. 

** The above scenario does not take into account if the borrower were to apply their slightly reduced principal and interest payment difference towards principal, also the borrower may move or refinance prior to completion of the 11 years.

In summary, the bill actually seems to save the borrower overall equity over the first few years in the property, however, if they stay in it for the duration and do not pay down additional principal to get to 78% LTV prior to 11 years (5 years minimum on 30 year terms) it does net the FHA Mutual Mortgage Insurance Fund more money. 

I don't see this as a drastic change and FHA mortgages are still a fantastic option to many borrowers. Ok...  it is obviously a strike against borrowers, but would you rather there be no FHA insured mortgages at all?

P.S., also remember that shortly FHA is trying to lower the limit seller concessions to 3% (down from 6%).