Everything You Need to Know About Mortgages, But Didn’t Know Who to Ask

colorado springs home loansThe world of home financing is a multi-faceted one and we at Springs Homes would like to help you understand the ins and outs of the mortgage world. Much of the confusion and seemingly random nature of the home loan and mortgage process has to do with where the money comes from and how it flows. In this article we will discuss the various roles played in this process.

 

 

 

 

 

  In general, there are three “tiers” in Mortgage Lending. I am going to refer to them as follows:

  1. The Origination Stage
  2. The Middle Man
  3. The Secondary Market

The Origination Stage:

There are five types of lenders in the Origination Stage:

1. Correspondent Lenders are companies that actually loan homebuyers the money they need to purchase a home. They have their own money and their own underwriters.

2. Direct Lenders are the “Big Guns” of the mortgage world, e.g. Chase and Wells Fargo. They have a division which functions as a Correspondent Lender in the Origination Stage. (This is confusing because they also have a department that packages the loans and offers them for sale to the secondary market.) They also have their own money and underwriters.

3. Brokers shop Direct Lenders to find you the best mortgage. They do not have their own money or their own underwriters. Once you have chosen the mortgage you want from the ones offered, brokers present your file to that lender and wait for approval.

4. Portfolio Banks originate loans, finance and keep some of them, and sell some to the Secondary Market. First Bank and ENT Credit Union are the major Portfolio Banks in Colorado.

5. Sub Prime: These lenders loan money that does not meet the guidelines of FNMA, FHLMC, GNMA. Rates and fees are usually high to offset the risk of the loan.

The Middle Man:

Once the loan is closed in the Origination Stage, lenders sell the loans to The Middle Man (or one of the Big Guns), like Wells Fargo or Chase. Those banks then package loans into huge portfolios of similar loans and sell them to the secondary market while retaining the servicing, another income stream for the Middle Man. Because FNMA, FHLMC,GNMA have a list of strict guidelines for the loans they purchase, each file is reviewed before it is added to a portfolio. These auditors are dedicated to reviewing each file. If the file doesn’t meet all the guidelines, the loan will be kicked back to the original lender. If the file is rejected for any reason, the Originating Lender is required to buy the loan back. The Originating Lender is then holding an “unsellable” loan, restricting their liquidity. This is why mortgage companies are fanatic about following all the rules.

The Secondary Market:

The secondary mortgage market is comprised of private and government agencies, which buy mortgage loans.

Fannie Mae (Federal National Mortgage Association, or FNMA) buys portfolios of conventional loans, with or without Private Mortgage Insurance from Direct Lenders.

Freddie Mac (Federal Home Loan Mortgage Corporation or FHLMC) buys portfolios of conventional loans, with or without Private Mortgage Insurance from Direct Lenders as well as portfolios from banks, savings and loans as well as Direct Lenders.

Ginnie Mae (Government National Mortgage Association or GNMA) buys portfolios of government loans, e.g. Veterans Administration (VA) and Federal Housing Administration (FHA) from Direct Lenders.

The purpose of the secondary market is to allow Originating Lenders to lend more money to potential homeowners. By purchasing loans from the Middle Man, Fannie, Freddie and Ginnie provide liquidity to those lenders, who can now offer more loans. Both Fannie and Freddie are limited to purchasing loans of $417,000 or less—this figure is reevaluated every year.

Once Fannie, Freddie and Ginnie have purchased the loans, they are converted into mortgage securities and bonds and offered as trading commodities. Because Ginnie Mae handles government guaranteed loans, their yield is generally higher than those of Fannie Mae or Freddie Mac.

There are of course multitudes of exceptions and guidelines can change daily, making explanations a challenge.

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4381 Crow Creek Drive

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Built in 2003, this charming 2-story home shows pride of ownership inside and out!   Features 3 bedrooms, 3 baths, over 1,400 finished square feet, custom  interior paint, wood floors in kitchen and dining room, gas fireplace with travertine tile surround, built-in T.V. niche, upper level loft, updated bathrooms, air conditioning, oversized patio, tasteful landscaping with lush lawn and mature fruit trees, and even a dog run!  Great Springs Ranch location...walk to nearby elementary school!

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What You Get: Tri-Lakes $325,000 to $400,000

triheadThe Tri-Lakes area is located in Monument, Colorado just minutes north of Colorado Springs. This area grew because it is convenient to both Colorado Springs and Denver. Lots sizes in this area are larger as are the homes and their prices.

We have looked at the last six months of sales (March 2014-August 2014). In this period we saw a high sale of $1,230,000 and a low sale of $125,000. The average sales price in the area is $399,557, this makes the median price $366,000.

For this article, we are going to take a look at what you can get between $325,000 and $400,000. We chose this range because it's about $40,000 above and below the median price. Here is a look at the numbers:


 

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Numbers are for homes that sold between $325,000 and $400,000
94 Number of Sales
3,463 Average Square Footage
4.2 Average Number of Bedrooms
3.4 Average Number of Baths
2.6 Average Garage Size (spots)
37,676 Average Lot Square Footage
$103.60 Average Price Per Square Foot

 


And here’s some pictures of what those homes look like.

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For more information on the Tri-Lakes area, give me a call at 719-492-1577

"Based on information from the Pikes Peak REALTOR Services Corp. ("RSC"), for the period March 1, 2014 through August 26, 2014 .  RSC does not guarantee or is in any way responsible for its accuracy.  Data maintained by RSC may not reflect all real estate activity in the market."

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1635 Capadaro Court. Monument Colorado. 80132

We have just listed this beautiful ranch style home in the popular Doewood Estates Subdivision of Monument, Colorado. This home has it all, sitting on a secluded cul-de-sac with a large lot full of natural trees and vegetation.The main level features hardwood floors throughout and is full of beautiful natural light with an open feel while still separating the living spaces. See for yourself in this video walkthrough.

 

 

For More information, please visit: http://CapadaroCt.com

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Credit Dings Might NOT Stop Your Home Buying Plans

Colorado Springs Home BuyerApplying for a mortgage can be one of the more frustrating aspects of buying your Colorado Springs home. And if you’ve suffered a bump in the road credit wise, you may be hesitant even to try to obtain a home loan. But, fear not! Armed with some knowledge and a bit of patience, you can join the ranks of homeowners in the Colorado Springs area.

Credit Disputes You checked your report at www.annualcreditreport.com and, to your dismay, there is some erroneous information or a negative report based on late or missing payments. Even though you may want to call the company immediately, if you are applying for a mortgage, do not dispute any derogatory information on your credit report. If your report shows that you are in the middle of a dispute, your loan application will be rejected or it will be referred to a person (instead of a computer) for a “manual underwrite,” which can take a very long time to resolve. Wait until your mortgage is approved and then dispute the report.

Bankruptcy. Yes, you can be approved for a mortgage even if you’ve declared bankruptcy. If you have declared a Chapter 7 bankruptcy (one in which all debts are forgiven), you must wait 2 years after the bankruptcy is discharged to qualify for an FHA or VA loan. For a Chapter 13 (when you agree on a repayment plan), if you have been making on-time payments for one year after declaration, you may qualify for an FHA or VA loan. In either case, you must not have a single late or missed payment during the post-bankruptcy waiting periods—if you do, the qualifying period will be reset close to the date of your missed payment.

For conventional (non-government insured) loans, the waiting period is 4 years after the discharge of a Chapter 7 bankruptcy and 2 years after the 1-year payment period for a Chapter 13 bankruptcy. And, as with disputed credit reports, if you dispute a bankruptcy while applying for a home loan, the date of the bankruptcy will be reset close to the date you initiate the dispute.

Loan Modification If you are having difficulty making mortgage payments for your loan in its current form, you may request a loan modification. When you do so, and if it is approved, make sure that the lender reports this to the credit bureau as “Paid as agreed.” Have the lender put this in writing before you sign off on any loan modification papers. If the lender reports the modification as a “Repayment plan,” your credit report will be dinged.

Short Sale and Foreclosure If you go through a short sale (selling your home for less than the outstanding debt), your credit score will not be affected if the lender notates it as “Paid as agreed.” If your lender agrees to forgive a portion of your loan, you will most likely sign an unsecured note promising to pay back the agreed-upon amount. As with Loan Modification, have your lender give you written proof that “Paid as agreed” will be reported to the credit bureau. If you don’t take this step, and the lender notates “Settled for less than the full balance,” you will be dinged a whopping 105 points!

If you are experiencing foreclosure, in which the lender takes possession of the property due to non-payment of the loan, you will also want to negotiate with the lender about how he will report it. If the notation “Foreclosure” appears on the report, you will be dinged 110 points.

In both cases, with a potential short sale or foreclosure, speak to your lender as soon as you realize there may be trouble looming. Don’t wait until the situation becomes dire, as many lenders are now much more willing to negotiate help for homeowners than in previous years.

Coming Soon: Meet Fannie, Freddie and Ginnie.

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