Get The Overview On Escrow Accounts

Get The Overview On Escrow AccountsWhether you are purchasing a new home or you are considering to refinance your home, odds are the lender will require an escrow account. These accounts are often a source of confusion for homeowners.

In reality, these accounts benefit the homeowner and help protect the lender.

What Is An Escrow Account?

Escrow accounts are sometimes called “impound” accounts. These accounts are set up to help manage payments of property taxes and homeowner’s insurance.

Depending on the individual requirements of the lender, you may be asked to pay as much as one-quarter of these upfront and they will be put into the account for the purposes of making payments.

Who Controls Escrow Accounts?

Lenders have complete control over escrow accounts. However, homeowners are entitled to receive an annual statement advising them of their escrow balance.

If there is an increase or decrease in insurance payments through the year, a homeowner may request the lender evaluate the escrow account and change the amount that is paid.

Is Interest Paid On Escrow Accounts?

There is no mandate to pay interest on escrow accounts. When you refinance your home, the funds for your taxes and insurance are calculated into your overall payment.

The portion that is to be used to pay taxes and insurance is placed in escrow.

What Happens If I Sell My Home Or Refinance?

When you sell or refinance your home, your escrow account will be credited at closing. The amount may be used to lower your out-of-pocket costs or may be turned over to you as a direct payment.

What Happens If There Is Not Enough/Too Much Money In Escrow?

If your lender has underestimated your escrow payments, they may request you send an additional payment to make up the difference. In the event you are paying too much into escrow, your lender has the discretion to release the overage amount directly to you.

In most cases, shortfalls or overages of $50 or less are typically not a major concern.

If your lender requires you to have an escrow account for the taxes and insurance portion of your mortgage payment, it can be very helpful. Escrow accounts help ensure you do not have to come up with a large payment once a year for insurance or quarterly for taxes.

In some cases, if a lender does not require an escrow account, as a borrower, you may request they escrow your taxes and insurance for convenience.

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3 Common Home Financing Problems And How To Avoid Them

3 Common Home Financing Problems And How To Avoid ThemGetting the best mortgage financing for your new home can sometimes be a complicated process and, unfortunately, things can go wrong. Using a licensed and trusted mortgage loan specialist can help alleviate many of these challenges.

There are certain mistakes that many homebuyers make when applying for their mortgages that can seriously damage their chances of being approved. If you are aware of the most common mortgage issues, you will be better able to prevent them when applying for your own mortgage.

Make sure that you keep the following tips in mind when applying for a mortgage:

Making Large Purchases Before Closing On The Mortgage

Many homebuyers think that they are in the clear once the mortgage deal is approved and they move forward on another large purchase such as a car or home furnishings. However, it is best to hold off on all major purchases until the mortgage is finalized, as additional debt will change your “debt-to-income ratio” which could mean that you no longer qualify for the loan.

Many lenders pull your credit information right before funding, so avoid any big-ticket items until you have signed on the dotted line.

Switching Jobs During The Mortgage Loan Process

When deciding whether or not to approve your loan, the lender will look at your salary and your job stability. If you make a career move during the process of applying for the loan, this could make your income seem unstable and could cause the bank to decline your loan.

Stay in your job through your home closing date to reassure the bank that you have a stable income; you can always switch careers later.

Having No Credit Card

You might think that the fact that you have gotten by without a credit card for this long would be a positive thing in the mind of lenders. However, having no credit history at all makes lenders nervous, as they don’t know how you will handle credit when you have it.

Instead, get a credit card that you repay in full every month, which will help to show them you can manage your credit responsibly.

These are just a few examples of major mistakes that home buyers make when applying for a mortgage. If you can avoid these issues, you will find it much easier to buy a Maine home.

As always, call your trusted home mortgage financing professional today to discuss your personal situation and get the best advice on your upcoming home purchase!

Housing Bright Spot: Construction Spending Rises

Construction Spending Rises

U.S. construction spending rose 0.3 percent in April as private residential construction increased at the fastest pace in six months. Overall construction spending was up 6.8 percent compared with April 2011.

Construction spending rose to an annual rate of $820.7 billion, the Commerce Department said on Friday, after an upwardly revised 0.3 percent increase in March.

Also on Friday, the Institute for Supply Management said its index of national factory activity slipped to 53.5 from 54.8 in April, just missing expectations for 53.9. But, while the pace of growth in U.S. manufacturing slowed modestly in May, according to the report, a gauge of new orders rose to its highest in over a year. A reading above 50 indicates expansion in the manufacturing sector.

What Happened to Rates Last Week?


Mortgage backed securities (MBS) gained +105 basis points from last Friday to the prior Friday which caused 30 year fixed mortgage rates to reach a new all-time low.
Mortgage rates moved lower throughout the week on heightened concerns over the banking issues in Spain and Italy as their bond yields soared to new all-time highs.  This made the quality and safety of U.S. bonds very attractive to foreign investors.  This added demand caused bond prices to increase and interest rates (which move in the opposite direction) to decrease.
Mortgage backed securities shot upward (causing mortgage rates to hit new all-time lows) on Friday in reaction to the much weaker than expected jobs data.  The Unemployment Rate increased from 8.1% to 8.2%, but the real story was the big miss in the Non-Farm Payroll data.  The market was expecting the economy to add around 150,000 new jobs but instead, it only added 69,000.
This much weaker than expected employment data caused a big-time buying spree of 10 year U.S. Treasuries and the higher yield paying Mortgage Backed Securities.

What to Watch Out For This Week:

The following are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages.

Date Time (ET) Economic Release Actual Estimate Prior
4-Jun 10:00 AM Factory Orders 0.10% -1.90%
5-Jun 10:00 AM ISM Services 53.1 53.5
6-Jun 7:00 AM MBA Mortgage Index NA -1.30%
6-Jun 8:30 AM Productivity-Rev. -0.80% -0.50%
6-Jun 8:30 AM Unit Labor Costs-Rev 2.30% -2.00%
6-Jun 10:30 AM Crude Inventories NA 2.213M
6-Jun 2:00 PM Fed’s Beige Book
7-Jun 8:30 AM Initial Claims 375K 383K
7-Jun 8:30 AM Continuing Claims 3250K 3242K
7-Jun 3:00 PM Consumer Credit $12.7B $21.4B
8-Jun 8:30 AM Trade Balance -$49.7B -$51.8B
8-Jun 10:00 AM Wholesale Inventories 0.50% 0.30%

 

FHA Mortgage Insurance RISING April 1st

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It’s Official: FHA Hike of 75bps Will Come April 1.

 

The Federal Housing Administration is following through with its pledge to increase upfront and annual insurance premiums on its forward single-family business. The plan is to help rebuild it’s insurance emergency fund which has taken a hit over the last few years during the housing collapse (FHA has paid out nearly $37 billion in defaulted mortgages since 2008).

 

Unveiled late Monday, the increases are designed to strengthen FHA’s capital position and “have minimal impact on the market and borrowers,” according to FHA acting commissioner Carol Galante. She noted that FHA streamline refinances are exempt from these premium hikes.

 

Starting April 1, FHA will hike its upfront premium by 75 basis points to 175 bp on all single-family loans, including jumbos.

 

FHA is also hiking the annual premium on loan balances of up to $625,500 on April 1. On higher balance loans or jumbos, FHA is planning to implement a 35-bp hike in the annual premium on June 1.

 

The federal mortgage insurance agency currently charges a 115 bp annual premium when the loan-to-value ratio is above 95%.

REFINANCE UPDATE if your home is under water

This morning, FHFA announced their enhancements to the HARP refinancing program. Operational details of the plan are to be released on November 15. Only loans that were purchased or guaranteed by Fannie Mae or Freddie Mac on or before May 31, 2009 and have a current LTV over 80% are eligible. In addition, the loan must be current, no late payments in the last six months and no more than one late in the last 12 months. There are no restrictions on who may refinance these loans.

Program guidelines include:

–              No limit on LTV, if new loan is a fixed rate loan (current LTV must be above 80%)

 

–              Loans previously refinanced under HARP not allowed

 

–              Certain agency fees will be waived if new loan is a shorter term loan

 

–              Appraisals not required where Agency AVM is available

 

–              Certain originator Reps and Warrants will be  waived

Borrowers can determine if their loan is owned or guaranteed by Fannie or Freddie at http://www.fanniemae.com/loanlookup/ or http://www.freddiemac.com/corporate/

 

 

 

 

 

 

Sell off.

Investors sold Bonds today and took some profits after the big surge in prices this week. Markets don’t go straight up or straight down so the move lower today wasn’t a big surprise and came without any gloom and doom headlines.

The 3.5% coupon fell 88bp to end at 102.78. Stock markets fluctuated between positive and negative several times during the session and ended with moderate gains but the Dow had its worst week since October 2008 down 6.4%…closing at 10,771.48 up 37.65. The S&P 500 fell 6.5% this week but managed to gain 6.87 to 1,136.43 while the Nasdaq was up 27.56 to 2,483.23 but down 5.3% for the week. The big news today was the record one day move for Gold as it had lost $100 to $1,641/oz before finishing at $1,653/oz down $88. Oil settled at $79.85/barrel down 66 cents falling 9.2% for the week. Next week economic data is plentiful and will give investors a broad look at the economy.

It’s a great time to own Gold

It’s a great time to own Gold : Stock markets were unchanged today giving the Bond markets a reason to run higher. The 3.5% coupon jumped 25bp to end at 101.56, but ended below resistance levels set last October. Tech shares were sold aggressively today and pushed money into Bonds and utility related stocks. The Dow saw a meager gain of 4.28 to end at 11,410.21, the S&P saw a paltry gain of 1.13 to 1,193.89 while the Nasdaq dropped 11.97 to end at 2,511.48. Oil saw a gain of 93 cents to $87.58/barrel on lower inventories while Gold closed at a record $1,791.20 up $8.80. Tomorrow’s data includes Initial Claims, CPI, Philly Fed Index and Existing Home Sales.