Lisa Otero
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Phone: (405)200-3193    Fax: (405)604-2988
Mortgage Information

Buying Real Estate & Homes For Sale

Home financing can be a critical part of any real estate transaction. Below you will find some outstanding mortgage information that may be able to help you with the purchase of your next home in Oklahoma City, Edmond, Midwest City, Del City, Moore, Yukon, Mustang or other surrounding Oklahoma County, OK areas.

Three Steps to Getting a Mortgage

 

Shopping for a mortgage is the first step toward owning a home and perhaps the most daunting, especially if you are not prepared.
Once a simple task that meant comparing fixed rates from among perhaps a dozen or fewer savings and loan companies, the mortgage hunt today is like finding your way through a maze.
There are dozens of loan types and hundreds of loan programs available through thousands of mortgage brokers, bankers, lenders, finance companies, credit unions and even stock brokerage firms.
Contrary to popular belief, finding a mortgage doesn't begin with an application.
Education is a better first choice. Mortgage information sources are as vast as the number of mortgages available. Web sites, topical newspaper articles, mortgage books, consumer seminars and workshops, financial planners, real estate agents, mortgage brokers and lenders are all available to assist you along the way.
First, you must determine how your mortgage payment will fit your current budget and, to some extent, your future obligations 15 to 30 years down the road.
If you discover too late that you can't afford your mortgage, you'll not only face the possibility of losing the roof over your head, but you could also damage your ability to purchase a home later.
Step 1: Examine your finances
Start by determining how much mortgage you can afford. Lenders are apt to put your loan application in the best light and qualify you for as much as they are willing to lend, which can be more than you can afford or need.
It's up to you to take stock of your income and expenses, current and projected, to determine what you can comfortably manage each month. Along with your mortgage payment, don't forget related insurance, taxes, homeowner association dues and any other costs rolled into the mortgage payment.
Step 2: Shopping for a loan
When you are ready to shop for a loan you have two basic types of mortgage stores to shop -- direct lenders and mortgage brokers.
Direct lenders have money to lend. They make the final decision on your application. Brokers are intermediaries who, like you, have many lenders from which to choose. Lenders have a limited number of in-house loans available. Brokers can shop many lenders for each lenders' store of loans. If you have special financing needs and can't find a lender to suit them, an experienced broker may be able to ferret out the loan you need. Mortgage brokers, however, are paid from the amount you borrow. The amount varies. Mortgage brokers are a lot like real estate agents, make sure to go with someone who is recommended and has been in the business a substantial amount of time. Internet brokers perhaps receive the smallest cut, sometimes none at all, and can prove to be a real bargain.
Don't just go with the lowest interest rate. There are many other factors that affect the true cost of the loan, inlcuding broker fees, points (each point is one percent of the amount you borrow), prepayment penalties, the loan term, application fees, credit report fee, appraisal and many others.
Step 3: Apply for a loan
The application process is the easy part -- provided you've gathered documents necessary to prove claims you make on the application.
The application will ask for information about your job tenure, employment stability, income, your assets (property, cars, bank accounts and investments) and your liabilities (auto loans, installment loans, mortgages, credit-card debt, household expenses and others).
The lender will run your credit report to look at your FICO scores, which are very important when it comes to rates and terms you will be offered. You will also likely have to supply additional documentation, including paycheck stubs, bank account statements, tax returns, investment earnings reports, rental agreements, divorce decrees, proof of insurance, among other information. If the lender deems you creditworthy, it will likely hire a professional appraiser to make sure the value of the home you want to buy is worth your purchase price.
   

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REALTOR.com® is the official site of the National Association of REALTORS® and is operated by Move, Inc

Questions to Expect From Mortgage Lenders

 

Your mortgage lender will want to know a lot about you before approving your loan application, and justifiably so; they and their underwriters want to be assured that you meet their minimum level of creditworthiness before lending you money.
 
Areas of Questioning 
Here are the general areas of questioning you can expect from a lender: 
1. Employment and income 
2. Outstanding debts 
3. Cash reserves and assets 
4. Down payment 
5. Loan purpose 
6. Property use 
7. Property type
 
Employment and Income
  • Where do you work? 
  • How much do you make?
  • How long have you been at your job?
  • How is your income derived -- steady salary or irregular income? If it's the latter, you may need to provide more details to obtain a favorable interest rate.
Outstanding Debts
  • What recurring debts do you have? 
  • How much do you pay a month for auto loans? 
  • Credit cards? How much of your monthly pretax income do these debts consume?
  • Cash reserves and assets
  • How much money do you have in the bank?
  • How much will be left after you pay your down payment and closing costs?
Down Payment
  • How much money are you putting down?
  • Is this your own money?
  • If not, is it a gift from your parents?
  • A nonprofit agency grant?
Loan Purpose
  • Is this mortgage for a home buy or refinance?
  • If it's a refinance, do you want to take cash out at closing to pay off other debts? If so, how much?
Property Use
  • Do you plan to live in the house?
  • Is it investment property?
Property Type
  • A condominium? 
  • A duplex?
 
The following responses tend to work in your favor:
  • Steady employment (two or more years) with the same employer or in same line of work.
  • Low debt: no recent major buys (such as automobiles) and a debt-to-income ratio of 36 percent or less.
  • Loan is for straight home purchase (or rate-and-term refinance).
  • Property is detached single-family home to be used as primary residence.
  • Down payment of at least 5 percent of sales price with your own money.
  • You'll have at least two months' worth of mortgage payments in the bank after closing.
These responses tend to work against you:
  • Self-employed or contract worker.
  • High debt: credit cards maxed out, total debt-to-income ratio more than 36 percent.
  • Property is a duplex or condominium, to be used as a vacation home or rental.
  • No cash left after home buy and closing costs.
  • Down payment is 3 percent or less of buy price and money is borrowed.
  

 1995- 2010 NATIONAL ASSOCIATION OF REALTORS® and Move, Inc. All rights reserved.  Equal Housing Opportunity
REALTOR.com® is the official site of the National Association of REALTORS® and is operated by Move, Inc.

Underwriting

 

This is where the real approval process begins
Once your loan has been approved, the clock starts ticking to closing day. Much remains to be done during those few weeks, and most of it occurs behind the scenes.
 
You can help speed the process by:
·         Providing complete documentation with your application.
·         Responding promptly to your lender’s request for more information.
·         Calling your lender and real estate agent to check on your loan application status.
·         Helping contact employers and others who may need to provide documentation.
·         Keeping records of your conversations with your lender.
 
 
Here’s what’s happening while you wait:
Underwriting verification
Your lender's team of underwriters springs into action, verifying the information on your application and supporting documents. They will call your employer, for instance, to verify that you work in the job and at the salary stated on your application. The amount of verification involved depends on how risky your lender perceives you to be.
 
Appraisal
Your lender will require an independent appraisal of the property prior to closing, the outcome of which could affect the rate and terms of your mortgage. The work will be done by a licensed appraiser, who will arrive at an expert's estimated value of the property based on physical inspection and a sampling of comparables or "comps" -- prices paid for comparable properties that have recently sold in the neighborhood. Cost of an appraisal typically runs between $300 and $500.
 
Title Search and Title Insurance
Your lender doesn't want to lend money against a house that may have claims or other encumbrances upon it. That's why a title company performs a title search.
The title company will go to the county courthouse and research the history of the property, looking for encumbrances such as mortgages, claims, liens, easement rights, zoning ordinances, pending legal action, unpaid taxes and restrictive covenants. The title insurer then issues a policy that guarantees the accuracy of the work. Your lender will require a title policy that protects the lender. In some cases two policies are issued, one to protect the lender and one to protect the property owner.
 
Flood Certification
Lenders also want to know whether the property you're buying is in a flood-prone area. They will hire a vendor to analyze your property and neighboring sites to determine if it's in a flood zone; their report is called a flood certification. If the answer is yes, you'll be required to buy flood insurance because most standard homeowners' policies don't cover damage from rising water.
 
Survey
Some lenders also will require that a home's property lines be verified by a professional survey.
 
 

© 1995- 2010 NATIONAL ASSOCIATION OF REALTORS® and Move, Inc. All rights reserved.  Equal Housing Opportunity
REALTOR.com® is the official site of the National Association of REALTORS® and is operated by Move, Inc.

Understanding Escrow Accounts

 

Convenience is the primary benefit of these accounts
At closing, you will be required to deposit real estate taxes and insurance premiums into an escrow account (sometimes called an impound account). An escrow account ensures that the taxes and insurance will be paid, and on time. This protects the lender from tax liens and uninsured losses that the borrower can't repay.
The federal Real Estate Settlement Act limits the amount lenders can require in escrow to a maximum of two months' payments. Escrow assessments and adjustments are generally made annually.
 
How escrow accounts are managed
The amount in the escrow account varies during the year due to tax assessments and insurance premium adjustments. The lender typically will cover any shortfalls until it can adjust your monthly payment to make up for tax hikes and premium increases. Your monthly mortgage payment will fluctuate from year to year, even on long-term, fixed-rate loans.
 
Can I avoid escrow?
Yes. Some lenders allow you to pay your own property taxes and home insurance premiums, especially if your loan-to-value ratio is below 80 percent. But don't be surprised if the lender boosts your interest rate to compensate for the additional risk they're assuming.
Once an escrow requirement is in place, it can be difficult to persuade a lender to cancel it. If your loan is sold, as is common, and there is nothing in the lending agreement that provides for cancellation of the escrow requirement, you'll have to live with the decision of your new mortgage servicer.
 
 

© 1995- 2010 NATIONAL ASSOCIATION OF REALTORS® and Move, Inc. All rights reserved.  Equal Housing Opportunity
REALTOR.com® is the official site of the National Association of REALTORS® and is operated by Move, Inc.

Points

 

When people want to find out how much their mortgages cost, lenders often give them quotes that include both loan rates and “points”.
 
What exactly is a point?
            A point is a free equal to 1 percent of the loan amount. A 30 year, $150,000 mortgage might have a rate of 7 percent, but come with a charge of 1 point, or $1,500.
 
A lender can charge 1, 2 or more points. There are two kinds of point – discount points and origination points.
·         Discounts points: These are actually prepaid interest on the mortgage loan. The more points you pay, the lower the interest rate on the loan and vice versa. Borrowers typically can pay anywhere from zero to 3 or 4 points, depending on how much they want to lower their rates. This kind of point is tax-deductible.
·         Origination fee: This is charged by the lender to cover the costs of making the loan. The origination fee is deductible if it was used to obtain the mortgage and not to pay other closing costs. The IRS specifically states that if the fee is for items that would normally be itemized on a settlement statement, such as notary fees, preparation costs and inspection fees, it is not deductible.
 
How do you decide whether to pay points and how many?
 
            That depends on a number of factors, such as how much money you have available to put down at closing and how long you plan on staying in your house.
            Points as prepaid interest help reduce the interest rate. If you plan to stay in your home for a while, it may be worth reducing the interest rate by paying points.
            The best option depends on your individual needs, but, if you need the lowest possible closing costs, choose the zero-point option on you loan program.
 
By the numbers….
            A lender might offer you a 30-year fixed mortgage of $165,000 at 6 percent interest with no points. The monthly principal and interest payment would be $989. If you pay 2 points at closing (that’s $3,300) you can bring the interest rate down to 5.5 percent, with a monthly payment of $937. The savings difference would be $52 per month. But it would take 64 months to earn back the $3,300 spent upfront via lower payments. If you’re sure you will own the house for more than five years and a half years you save money by paying the points.
 
  

 1995- 2010 NATIONAL ASSOCIATION OF REALTORS® and Move, Inc. All rights reserved.  Equal Housing Opportunity
REALTOR.com® is the official site of the National Association of REALTORS® and is operated by Move, Inc.

Mortgage Insurance

 

If your down payment on a home is less than 20 percent of the appraised value or sale price, you must obtain mortgage insurance.
Mortgage insurance sometimes is referred to as private mortgage insurance, or PMI, to distinguish it from FHA and VA insurance, which are run by government programs. The cost of mortgage insurance varies depending on the size of the down payment and the loan, but it typically amounts to about one-half of 1 percent of the loan.
With mortgage insurance, the borrower pays the premiums, but the lender is the beneficiary. The coverage protects lenders against the borrower's default. If a borrower stops paying on a mortgage, the insurance company ensures that the lender will be paid in full. Mortgage companies pick insurance providers for their customers, but the borrowers have to foot the bill. Usually, they do so in monthly installments. But some lenders offer programs whereby the borrower pays the entire insurance premium in a lump sum at closing.
By the numbers ... 80-10-10 plan 
If we compare the purchase of a $150,000 home under the 80-10-10 plan to a standard fixed mortgage including mortgage insurance, we find that the former is $35.36 cheaper each month.
 
Here's how it works: Under the 80-10-10 plan, the 10 percent down payment on a $150,000 house is $15,000. The first mortgage is $120,000 at 7 percent, which comes to a monthly payment of $798.36. The second mortgage for $15,000 has a 9 percent interest rate, making a monthly payment of $120.69. The total monthly payment for both loans is $919.05.
 
With a $15,000 down payment, one mortgage of $135,000 at 7 percent has a monthly payment of $898.16, plus mortgage insurance of $56.25, making a total payment $954.41. 

House value: $150,000 
80-10-10 plan 
Down payment: 10%, $15,000
Mortgage 1: $120,000 (7%), $798.36
Mortgage 2: $15,000 (9%), $120.69
Total monthly: $919.05
 
Standard fixed mortgage plan 
Down payment:  10%, $15,000
Mortgage 1: $135,000 (7%), $898.16
Mortgage insurance: +$56.25
Total monthly: $954.41  

Monthly difference:
$35.36
 
Pay More Interest
Some lenders will waive the mortgage insurance requirement if the buyer accepts a higher interest rate on the mortgage loan. The rate increase generally ranges from three-quarters of a percentage point, or 75 basis points, to a full percentage point, depending on the down payment. A basis point is one-hundredth of 1 percentage point. Borrowers can benefit from this because mortgage interest is tax-deductible, whereas mortgage insurance premiums aren't. But they'll end up paying more interest over the lives of their loans due to the higher rates.
 
Use an 80-10-10 Loan
This program involves getting two loans. The borrower gets a first mortgage equal to 80 percent of the sale price, a second mortgage for another 10 percent of the price and puts the remaining 10 percent down at closing. The second mortgage has a higher interest rate. But since it applies to 10 percent of the total loan, the monthly payments on the two mortgages can still be lower than the monthly payment on one home loan with mortgage insurance. Plus, interest on the second mortgage is tax-deductible. The 80-10-10 loan isn't the only plan available; borrowers can get 80-15-5 loans or other combinations.
By the numbers ...
If we compare the purchase of a $150,000 home under the 80-10-10 plan to a standard fixed mortgage including mortgage insurance, we find that the former is $35.36 cheaper each month.
Here's how it works: Under the 80-10-10 plan, the 10 percent down payment on a $150,000 house is $15,000. The first mortgage is $120,000 at 7 percent, which comes to a monthly payment of $798.36. The second mortgage for $15,000 has a 9 percent interest rate, making a monthly payment of $120.69. The total monthly payment for both loans is $919.05.
With a $15,000 down payment, one mortgage of $135,000 at 7 percent has a monthly payment of $898.16, plus mortgage insurance of $56.25, making a total payment $954.41.
 
  

© 1995- 2010 NATIONAL ASSOCIATION OF REALTORS® and Move, Inc. All rights reserved.  Equal Housing Opportunity
REALTOR.com® is the official site of the National Association of REALTORS® and is operated by Move, Inc.

Removing Private Mortgage Insurance

 

Knowing your rights can save you money
If you secured a home loan with less than a 20 percent down payment, chances are your lender required you to buy mortgage insurance to cover its exposure in case you default.
Once your equity position in the home reaches 20 percent, however, you will want to stop paying mortgage insurance (unless you have an FHA-insured loan, which requires premium payments to the government for the life of the loan).
 
Know your rights
By law, your lender must tell you at closing how many years and months it will take you to pay down your loan sufficiently to cancel mortgage insurance.
Most home buyers ask that mortgage insurance be canceled once they pay their loan balance down to 80 percent of their home's original appraised value. When their balances drop to 78 percent, their mortgage servicer is required to cancel mortgage insurance for them. Mortgage servicers also must give borrowers an annual statement that shows who to call for information about canceling mortgage insurance.
The law does allow lenders to require mortgage insurance of a high-risk borrower until the balance shrinks to 50 percent of the home's value. You may fall into this high-risk category if you have missed mortgage payments, so make sure your payments are up to date before asking your lender to drop mortgage insurance. Lenders may require a higher equity percentage if the property has been converted to rental use.

Calculate the equity in your home
Equity = Value - Mortgage balance
Percent of Equity = Equity / Value

Example: If you estimate (or, better yet, if you have it appraised) that the home is worth $200,000, and you owe $150,000 on the mortgage, your equity is $50,000 (the $200,000 value minus the $150,000 mortgage balance). You have 25 percent equity in the home (the $50,000 equity divided by $200,000 equals 0.25, or 25 percent).
With equity of 20 percent or greater, you have a good case to rid yourself of mortgage insurance. If you can't persuade your lender to drop mortgage insurance, consider refinancing. If your home value has increased enough, the new lender won't require mortgage insurance. Make sure, however, that your refinance costs don't exceed the money you save by eliminating mortgage insurance.
 
No more mortgage insurance
Here are steps you can take to get out from under mortgage insurance even sooner or strengthen your negotiating position:

Get a new appraisal: Some lenders will consider a new appraisal instead of the original sales price or appraised value when deciding if you meet the 20 percent equity threshold. Cost of an appraisal generally runs from $300 to $500.
Prepay on your loan: Even $50 a month can mean a dramatic drop in your loan balance over time.
Remodel: Add a room or a pool to increase your home's market value. Then, ask the lender to recalculate your loan-to-value ratio using the new value figure.

 
 

© 1995- 2010 NATIONAL ASSOCIATION OF REALTORS® and Move, Inc. All rights reserved.  Equal Housing Opportunity
REALTOR.com® is the official site of the National Association of REALTORS® and is operated by Move, Inc

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Coldwell Banker Mike Jones Company
4801 Gaillardia Pkwy 125 • Oklahoma City, OK 73142
Phone: (405)200-3193 • Fax: (405)604-2988




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