Karl's Mortgage and Related Info Site

1. PROGRAM DESCRIPTION: Accumulating the funds for downpayment and closing costs is a common barrier to potential homeowners.  The Smart Start Program is available to participants in the Agency's first mortgage homebuyer's program who are purchasing homes in Smart Growth areas.  The program helps these families by offering a second mortgage for downpayment and/or closing costs up to 4% of the first mortgage.

2. AVAILABLE FUNDS: As allocated by HMFA.

3. ELIGIBLE BORROWERS:Eligible households are those who qualify under the Home Buyer Program.  Borrowers with sufficient personal assets to close a loan at more than 80% LTV are ineligible.  Corporations and Investors are not permitted to act as borrowers.

4. OCCUPANCY: Property must be occupied as the borrower's primary residence within 60 days of closing.  Borrower must maintain occupancy for the life of the loan.

5. LOAN TERMS:The Agency will make Smart Start downpayment and/closing cost loans in the amount of 2%, 3% or 4% of the first mortgage to qualified Home Buyer Program borrowers purchasing in Smart Growth areas as determined by the Agency's Smart Growth locator.  (Click here to access the locator tool.)  The interest rate on the Smart Start second mortgage is 0%.  The Borrower may repay the unpaid principal in full or in part at any time before it is due.  This is known as prepayment and no penalty shall be charged.  If the Borrower continuously resides in the premises, as his/her principal residence for five (5) years from the date of the closing of the loan, the principal on the Note will have been deemed satisfied and the Lender will provide the Borrower with a cancellation of mortgage or release of lien.  If the Borrower conveys, cash-out refinances or ceases to occupy the premises as his/her principal residence, full repayment of principal will be due as follows:

• Months 0 through 24, the entire principal is due.
• After the 24^th month, 25% of the principal on the Note will be deemed satisfied and the remaining balance will be reamortized.
• After the 36^th month, an additional 25% of the principal on the Note will be deemed satisfied and the remaining balance will be reamortized.
• After the 48^th month, an additional 25% of the principal on the Note will be deemed satisfied and the remaining balance will be reamortized.
• After the 60^th month the entire Note will be satisfied and discharged.

6. INCOME LIMITS: Income limits are determined by the area of purchase as well as family size and must follow the same guidelines as the First Time Home Buyer Program.

7. PURCHASE PRICE LIMITS: Purchase price limits exist for both the statewide and target areas.  Loans submitted using FHA, VA and/or RECD guidelines must adhere to FHA or HMFA guidelines (whichever is lower) regarding purchase price limits or mortgage loan limits.
 
8.FIRST MORTGAGE PRICING:  The 30 year first mortgage interest note rate will vary depending on the Smart Start loan amount elected and will be fixed for the life of the loan in accordance with the following schedule:

2% Smart Start loan results in first mortgage Home Buyer Program rate + .375
3% Smart Start loan results in first mortgage Home Buyer Program rate + .50
4% Smart Start loan results in first mortgage Home Buyer Program rate + .75

The 40 year first mortgage requires an additional add-on of .125%.

The current base rate as of 1/30/09 is 6.50%.

Please contact me with any questions.

Karl Peidl

kpeidl@supmort.com

1-800-706-6671

 1. Pre-approval - Get pre-approved for a mortgage and know in advance exactly how much house you can afford. Completing this step will also increase your negotiating power since you'll be viewed as a "cash buyer".

2. Loan Search - Put yourself in the hands of an experienced mortgage professional, someone who will help you to determine which financing options best suit your needs today and in the future.

3. Loan Application - It's crucial to supply the lender with as much information as possible, as accurately as possible. All outstanding debts as well as assets and income should be included.

4. Documentation - Paperwork supporting the application must also be submitted. Information commonly sought includes pay stubs, two years' tax returns, and account statements verifying the source of the down payment, funds to close and reserves.

5. The Hunt - Begin shopping for a house. Once you find the right one, the terms of the sale will be negotiated, including the price and potentially the terms of the loan being sought.

6. Appraisal - Lenders require an appraisal on all home sales. By knowing the true value of the home, the borrower is protected from overpaying.

7. Title Search - This is the time when any liens against the property are discovered. A lien may have been placed on a property to ensure payment of outstanding debts by the owner. All liens must be cleared before a transaction can be completed.

8. Termite Inspection - While most purchase loans do not require a formal inspection for termite and water damage, some loans (especially government loans) allow for the possibility. If problems are found, repairs may be necessary.

9. Processor's Review - All pertinent information will be packaged by your mortgage professional and sent to the lending underwriter, including any explanations that may be needed, such as reasons for derogatory credit.

10. Underwriter's Review - Based on the information put together by the loan professional, the underwriter makes the final decision regarding whether a loan is approved.

11. Mortgage Insurance - Many lenders require private mortgage insurance when borrowers put down less than 20 percent on a loan.

12. Approval, Denial or Counter Offer - In order to approve a loan, the lender may ask the borrowers to put more money down to improve the debt-to-income ratio. The borrower may also need a bigger down payment if the property appraises for less than the purchase price.

13. Insurance - Lenders require fire and hazard insurance on the replacement value of the structure. Flood insurance will also be required if the property is located in a flood zone. In California, some lenders require earthquake insurance on condominiums.

14. Signing - During this step, final loan and escrow documents are signed.

15. Funding - At this point, the lender will send a wire or check for the amount of the loan to the title company.

16. Confirmation of Funding - The lender authorizes the disbursement of loan proceeds.

17. Closing - Documents transferring title will now be officially recorded by the County Recorder.

18. Congratulations, you are now a homeowner!

If you'd like to learn more, please give me a call. I'd be happy to speak with you!

Superior Home Mortgage Corp. licensed in DE, FL, GA: Georgia Residential Mortgage Licensee #14511, MD, MI, NY: Licensed Mortgage Banker - NY State Banking Department, NC, PA, SC, VA: Virginia State Corporation Commission License # MLB-566, & DC. Superior Mortgage Corp. licensed in CT, MA: Mortgage Lender License # MC3208, NJ: Licensed Mortgage Banker - NJ Department of Banking, RI: Rhode Island Licensed Lender & Broker, & TN. SHM Mortgage Licensed by the New Hampshire Banking Department

In response to the higher mortgage default rates being experienced by Fannie Mae and Freddie Mac (the largest buyers of 30-year fixed, conforming mortgages), the formal announcement of "Risk Based Pricing" was established during 2008.

Before this was announced, a 30-year fixed loan was basically the same price for any borrower with a credit score of 660 or higher and a loan amount up to 95% of the home value. But now, Fannie and Freddie require pricing "add-ons" using a matrix of credit score and loan-to-value percentages. This risk based pricing is MANDATED by Fannie and Freddie, and is required of ALL lenders originating conforming 30-year fixed loans.

Sometimes the interest rate can be increased to cover these add-ons without having to pay them out of pocket, but that is becoming increasingly difficult in today's market. Investors have changed the way they create rate sheet options, and they offer very little in the way of what is called "premium pricing", which used to allow options for closing costs or points to be covered in return for a higher interest rate. But in today's environment, sometimes the add-ons must be paid in the form of points - to either keep the rate and corresponding payments as low as possible, or sometimes because there simply is no other way they can be covered.

The bottom line is - smart consumers can't just call a lender and say "what's your rate and closing costs?" There are simply so many unknowns with the combination of credit score, loan-to-value percentages, property type, etc... that any reputable lender should be upfront, and be clear that any quote given is based on an assumption of certain parameters.

We are here to provide honest, straightforward advice. If we can be of any assistance to you, your friends or your family feel free to contact us. We will take care of you and your referrals in the same upfront fashion as we always have.

I've got good news and bad news...which do you want first?

OK - here's the good news. Interest rates are at historic lows, making it possible for many homeowners to refinance and improve their financial position - and combined with homes listed currently at bargain prices, those who are in the market to buy are able to purchase the home of their dreams and get a great deal.

Here's the bad news. All lenders and investors in the US have been completely slammed with the recent increase in loan applications - right at the time that many have laid off staff to save money in a challenging economy. This means that time frames needed for underwriting, approvals and closing have become longer than normal. It also means that some companies have chosen to actually raise rates, just to slow down the volume to a manageable level.

But wait - there's an answer. I know how to plan ahead and be smart, so that we can keep your rate protected. We may want to consider a longer lock period than we might normally utilize, just to ensure that your loan will be processed, underwritten, approved and closed in time to protect your rate in this extremely volatile climate.

I will also ask that my clients respond quickly when I request information or documentation, as the faster we can get a file submitted and approved, the better we are able to protect the rate.

The best news is that I continiue to work as a team with my clients - and as always, I encourage you to get in touch with me with any questions you may have at this time!

The Fed is meeting January 27th and 28th, and its actions could impact home loan rates! Don't Wait. Call me before the Fed acts so we can review your situation and determine if there's anything you need to do.

	Karl Peidl Senior Mortgage Consultant Superior Mortgage Corp (800)706-6671 x4349 kpeidl@supmort.com

Superior Home Mortgage Corp. licensed in DE, FL, GA: Georgia Residential Mortgage Licensee #14511, MD, MI, NY: Licensed Mortgage Banker - NY State Banking Department, NC, PA, SC, VA: Virginia State Corporation Commission License # MLB-566, & DC. Superior Mortgage Corp. licensed in CT, MA: Mortgage Lender License # MC3208, NJ: Licensed Mortgage Banker - NJ Department of Banking, RI: Rhode Island Licensed Lender & Broker, & TN. SHM Mortgage Licensed by the New Hampshire Banking Department

I came into the office this morning to find the latest email notifying me of guideline changes.  In the current mortgage environment, this is a daily occurrence.  Often, we are notified ahead of time regarding changes and loans in progress get grandfathered into the previous guidelines.  Other times changes take place instantaneously with little to no warning.

As I was sipping my morning Casciano's coffee, I was pondering the best way to explain to a customer that the rules changed and we need to make some adjustments.  This is always an issue I fret over as I am not the bait & switch type.  I'm the type that will take a blow to my own bottom line to help make the changes as seamless as possible for my customer.

Those who know me will attest that I am a huge Philadelphia sports fan.  I was fortunate enough to be at both parts of the clinching Game 5 of the 2008 World Series.  Suddenly, a parallel struck me.  Bud Selig, the commissioner of Major League Baseball, changed the rules in the middle of the biggest game I've ever attended.  In the cold driving rain, Bud Selig called a rain delay in the middle of the 6th inning that lasted over 40 hours. 

What made this move so controversial is that the Phillies were winning 2-1 after 5 innings.  They were then forced to take the field in extremely sloppy conditions in the top of the 6th.  Jimmy Rollins misplayed a ball the would normally be routine, which led to the tying run.  With the score tied in the middle of the 6th, play was stopped.  Normally, if play was not able to resume that night, the game would be ruled official.  The score would revert back to the 2-1 lead the home town Philllies had following the 5th inning, and they would be declared the champions. 

Little did anyone on the field or in the stands know, but Selig had decided he would change the rules of the game as they were playing.  He decided there would be an extended rain delay to last until Thanksgiving if neccesary (this game was played 10/27).

Two days later we packed the stands again to watch the Phillies become World Champions in a 3-inning sprint.  What does this have to do with mortgages?  It made me realize that all we can do in these times is remain calm, explain what is happening, and everything will be ok in the end.  We must continue to do our due diligence to process and close loans as quickly as possible to protect our customers from these changes.  Keeping everyone on the same page and working together, we can continue to make 2009 the successful year it is starting out to be.