Newsletters from Bay Lending

10 things that can kill a home mortgage loan

1. The house needs too much work.
A lot of properties on the market these days are foreclosures owned by banks, and many aren't in great repair. If a house is in really bad shape, it can be tough, if not impossible, to persuade another lender to give you the money to purchase it.
Bottom line: If it's a real fixer-upper, you may need to pay cash.

2. The appraisal came up short.
Occasionally during the bubble an appraiser would decide a home was worth less than the price a buyer and seller had agreed upon. But that was relatively rare. Critics accused appraisers of colluding with lenders to "hit the number" -- deliver the values needed for loans to be approved. Some appraisers acknowledged the pressure, saying banks would turn to their competitors if they didn't hit the number.
These days, the situation is drastically different. New rules hold appraisers to higher standards and sharply limit communication between appraisers and lenders. So the appraisal on the home you want to buy may fall short of the agreed-upon selling price.
Bottom line: You may be able to nudge an appraisal a bit by showing there are better "comparable sales" available than the ones the appraiser used. In general, though, appraisers are much harder to influence. You may need to reopen negotiations with the seller or come up with a bigger down payment to make a deal work -- or pay down your mortgage in order to refinance.

3. You have too much debt.
Lenders look at how much of your income will go toward housing expenses (mortgage, property taxes and insurance) as well as how much you spend on other debt payments.
The total amount of your income that can be eaten up by these expenses can vary by the lender and even by the day.
Bottom line: If your projected housing-and-debt ratio exceeds 50% of your income, you should think twice about buying a home -- not because you won't get approved (you might) but simply because you're carrying too much debt.

4. You're self-employed and your income has declined.
To get a mortgage, you typically need to submit the past two years' tax returns. If your 2008 income was lower than your 2007 income and you're a W-2 wage earner, lenders will simply use the lower figure to decide how big a mortgage you can get.
The industry is far more leery of declining income if you're self-employed.
Bottom line: If you're self-employed and your income has dropped, talk to your mortgage professional about how that might affect your loan.

5. You recently started being paid on commission.
Companies eager to cut costs have been switching some of their staffs from salaries or hourly wages to commissions. That can wreak havoc with your mortgage application because lenders typically won't count commission income unless you've been earning commissions for at least two years.
Bottom line: If your company switched you to commissions before the end of 2008, you may have to wait to get a loan or use a spouse's income to qualify.

6. There's a problem with your tax returns.
Lenders don't accept your copies of your tax returns as the final word about what you earned. These days they order transcripts of the returns you filed with the Internal Revenue Service and compare those with what you had submitted.
Your loan will get tossed if you exaggerated your income, of course. But other problems include:

• Unreimbursed employee expenses. This snares a surprising number of borrowers. Any amount taxpayers deduct for these expenses has to be deducted from the income that can be used to qualify them for a loan.
• Second-home expenses. Even if you own the property free and clear, the taxes and insurance you pay on it will affect your debt ratio. Borrowers may not list the property on their initial application, especially if there's no mortgage involved, but the tax transcript will pick up any of the second-home costs they deducted.
• A too-small payment for estimated taxes. If you're self-employed and pay estimated taxes, you might try to conserve cash by making a smaller-than-usual tax payment. That could be a mistake, since a lender might decide the smaller payment is a sign your income is declining.
• No transcript. It can take up to five weeks for a transcript to be available after a return is filed, Hackett said. So if you got an extension to file your return and didn't do so until the Oct. 15 extended deadline, your transcript won't be available for several more weeks, which could endanger your deal.

Bottom line: Review your tax returns with your mortgage lender or broker when you apply to see whether there are any red flags.

7. You can't get private mortgage insurance.
Technically, you still can get approved for a loan equal to up to 97% of a home's appraised value. To do so, however, you'd need to get approved for private mortgage insurance.  And PMI companies, severely burned by the real-estate flameout, are being pickier than ever before.
If you're the ideal borrower -- credit scores of 720 or above, with a debt load below 40% of your income and several months' worth of expenses in the bank -- you might get approved for PMI that would allow you to borrow up to 95% of a home's purchase price in a flat or improving market.  If you can't come up with a bigger down payment, you likely will get funneled into a FHA loan, which allows down payments as low as 3.5%.
Bottom line: A bigger down payment gives you more options.

8. The lender doesn't like your condo association's finances.
Mortgage buyers are enforcing guidelines on condo and co-op purchases that used to be widely ignored, as well as imposing new restrictions.
Some that you might stumble into include:

• The 10% ownership rule. If anyone owns more than 10% of the units in a building, you probably won't be able to get a loan. Lenders are worried that if this big owner defaults, the remaining owners won't be able to pay for proper maintenance. Yet 10%-plus ownership stakes are pretty common, particularly where apartments were converted to condos or co-ops and the original owner hung on to units to rent.
• The fidelity bond. Associations are supposed to buy a bond to protect against theft by management company employees. Many skated along with small bonds, but now lenders want to see more coverage
• Cash reserves. Condo associations should generally have cash reserves equal to 60% of the association fees they collect over the year, to make sure they have sufficient reserves to pay for needed maintenance and repairs. Many associations fall short of this mark.
• Bottom line: If you're buying a condo, talk to your mortgage pro about the unique requirements for these loans and make sure the association meets them before applying for a loan.

9. Your lender is dragging its heels.
Like most other companies in this recession, lenders are often reluctant to hire workers, even if mortgage applications are piling up. If it takes too long to get your mortgage approved, however, you could wind up paying a higher interest rate (if your rate lock expires), or your purchase deal could fall through, particularly if the seller has another interested buyer.
Another issue: getting subordination for second mortgages. If you're refinancing and have a home equity loan or line of credit on your property, you essentially need to get your home equity lender's permission to complete the deal.

Bottom line: Ask your lender how long it will likely take for your deal to get done. Monitor your loan and follow up frequently with your mortgage professional and any home equity lender to make sure it stays on track.

10. You fail to stay on top of the paperwork.
By now, you should have a pretty good feel for how very much scrutiny your loan application is going to get. Lenders demand a ton of paperwork, and you should be prepared to prove anything and everything, especially your income and the source of your down payment.
Any missing document or oversight can delay or even torpedo your loan, which is why you need to respond instantly to your loan officer's requests.
Bottom line: Put your mortgage professional's number on speed dial and respond promptly to any document request, no matter how silly you think it is. Without every "i" dotted and "t" crossed, the loan might not get done.

Edited from MSN Money

ATTENTION FIRST-TIME HOMEBUYERS

Put the Newly Enacted Tax Credit Legislation To Work For You

First-Time Homebuyers/Tax Credit Newsletter

Thinking about buying your first home? Good news — now may be a great time to make your move! For a limited time, qualified first-time homebuyers may receive a tax credit up to $8,000 as part of the American Recovery and Reinvestment Act of 2009. If you plan to live in the home as your primary residence and have not owned a home during the past three years; you may qualify for the tax credit. As long as the home remains your primary residence for at least three years, you will not have to repay this tax credit.

Learn More About The Tax Credit

• Available to first-time homebuyers
• Credit amount up to $8,000
• Eligible for homes purchased on or after January 1, 2009and before December 1, 2009
• Available on single-family detached homes, townhomes and condominiums — newly constructed or pre-existing
• · The tax credit does not need to be repaid unless the home is sold within the first three years after purchase

Get Started Now

Take your first step by talking to your tax advisor for more information. Then contact a Bay Lending Loan Officer to determine if this option is a fit. You may be able to buy your first home sooner than you thought possible. There is no cost and no obligation to call Bay Lending today at 1-800-866-0470.

5 STEPS TO SLASH YOUR PROPERTY TAXES

Property Taxes/Mortgage Refinance Newsletter

Here's what you need to know...

1. Know your town's methodology
   There's wide variation in how towns assess properties. Homeowners should visit their assessor's office or check the assessor's Web site for information about when assessments can be done, what period they cover, and how and when homeowners can appeal those decisions.
2. Do it yourself
   You may get mailed solicitations from real-estate agents or attorneys offering to help lower your property taxes by filing for a reassessment. But most homeowners can manage the appeal process on their own. Lawyers and consultants typically charge a percentage of your first year's tax reduction, perhaps as much as 50%. Don't want to pay a lawyer but want some hand-holding? The American Homeowners Association and the National Taxpayers Union sell property-tax-reduction kits ($29.95 and $6.95, respectively) that guide homeowners through the process. (The AHA's kit is a bit more comprehensive.)
3. Check for mistakes
   Mistakes on property assessment records often mean homeowners are taxed at higher rates than they should be. The inaccuracy rate on home assessments is between 30% and 50%, depending on region, says Pete Sepp, spokesman for the nonprofit group National Taxpayers Union. "That could include very minor inaccuracies, but the statistics still warrant people to take a look to see if there are potential savings," he says.
   
   The record might say, for instance, that your property lot is one acre when it's three-quarters of an acre, or your house has four bathrooms when it has three. If there's a flaw, "maybe you can correct it right then and there [in the assessor's office] and it wouldn't result in a long challenge process," says Consumer Reports' Perrotta.
4. Check out similar sales
   If your town's assessment method is based on market value (as is often the case), homeowners should ask themselves: Could I sell my house for this much? If the answer is no, look at what comparable homes in your town have been selling for. That means comparable in most ways: in the same school district, same number of bedrooms and bathrooms, same lot size. For example, if your three-bedroom house is currently assessed at $250,000, you need to show that similar three-bedroom houses in your neighborhood sold recently for less than that. Use sites such as Zillow.com and Cyberhomes.com to search sales data of individual homes. But keep in mind that you may not know the special circumstances that affect individual sales. If, for instance, a nearby house recently sold for a much lower price than what yours is valued at, it could be because it had damage, was a foreclosure or needed remodeling. You have to know that just because they see a certain sale price doesn't mean your home is worth the same thing that is why you need to look at multiple properties in your area.
5. Make your claim
   Most appeals are submitted in written form to county boards with a statement explaining why you think the valuation is inaccurate, how much you think your house is worth and evidence to support that claim. In some places, there will be a hearing where you can present your case, after which you should be notified within a few weeks of the board's decision.

Reprinted from SmartMoney.com

SHOULD I REFINANCE MY MORTGAGE?

Refinance based on facts, not rumors. Early indications are that the Treasury’s low-rate plan would apply only to new mortgages. So if you’re looking to refinance, there's no sense in hesitating. Bear in mind, however, that lending standards are still tight. You'll need a good credit score and at least 10% equity in your home to qualify.

Mortgage refinancing is also a good way to decrease the burden of mortgage payments to the financial institution from where you have financed the mortgage. You need to understand some of the critical factors of a mortgage refinance and why you should go for it. Many people make the mistake of waiting a little too long before making a decision to refinance. The mortgage should be refinanced in a way such that the average payout should be equivalent to the prevailing rates in the market and savings to the borrower. To achieve this, contact a mortgage professional you can trust so that he/she can go over the pros and cons of each person’s individual needs and goals

Strawberry Shortcake Recipe

INGREDIENTS:

• 3 baskets of fresh strawberries
• ½ cup sugar
• Whipping cream
• Vanilla
• Biscuits

DIRECTIONS:

Remove the stems from the strawberries. Slice into thin (1/4" to 1/8") slices. Put into a large bowl. Add 1/4 cup to 1/2 cup of sugar (depending on how sweet the strawberries are to begin with) and mix into the strawberries. Set aside at room temperature to macerate (which means that the sugar will soften the strawberries and help release their juices). After the strawberries have been sitting for 20 minutes or so, take a potato masher and mash them a little. Not too much, just enough to get more juice out of them. Whip the cream, adding a drop or two of vanilla and a teaspoon of sugar. To serve, break up one biscuit (Bisquick biscuits are a great alternative to baking biscuits from scratch) per person into big pieces into a bowl. Ladle strawberries over the biscuit. Add a dolop of whipped cream.

IS YOUR HOME READY FOR THE NEXT HURRICANE?

Hurricane/Bad Credit Myths Newsletter

Hurricane! That is the last word we all want to hear. However it is important to note that are a few other things to know about windows besides covering them with plywood until November 30, (the end of Hurricane season) safely passes.

Selecting replacement windows for your home can be confusing! When selecting a window look at its R-value, infiltration ratings and construction. Cheap windows can cause heat loss and condensation.R-VALUE is the measurement of a window’s ability to prevent heat loss. The higher the R-value, the less heat will be lost. R-values are measured at the center of the glass. Infiltration rating or U-factor measures the window’s ability to reduce air leakage through the gaps between sash and frame. Most ratings note air rate at 15 mph. Look for windows with low U-factor of at least .35. To prevent condensation, look for windows with warm air technology. This helps to keep the edges warm.

There are several types of windows - vinyl, aluminum, fiberglass and wood. There are also combinations of all of the above. Generally speaking, vinyl and wood are the least expensive….. Fiberglass the most. The general price range for an average size (30-inch by 48) is $100 to $200 which will be higher in urban areas. Extra features like tilting versions and higher or lower ratings may increase the cost. However, sometimes as the price and quality improve, more of these options are included. One way to keep your replacement costs from rising is to avoid special orders. Select from standard styles at your local retailer. Don't forget to let your homeowner’s insurance carrier know that you have made upgrades and code improvements. You may be able to get a credit on your next premium.

If you need to remodel your home call Bay Lending today for a home improvement loan. Borrow Smart! Stay safe.

Source of Article used, University of Minnesota, Extension Service, and Dept. of Wood & PaperSource 1992-2003 Diane Corrin; Hurricane Proof Your Home; Jackie Craven, Your Guide to Architecture

GETTING A HOME LOAN:

The Biggest Myths About Bad Credit

By Gabriel Traverso
Mortgage Credit Problems Columnist

If you are ready to buy a new home or refinance your current home but are still weighed down by past mistakes you might think your bad credit will prevent you from getting the home of your dreams or a new loan. Before you move forward, let's dispel the myths about what you should do if you have bad credit.

Bad Credit Myths

• You should close your credit card accounts before applying for your home loan
• Your credit score will suffer as a result of checking your credit report
• You have to pay fees to fix errors on your credit report
• Once paid, bad debt disappears from your credit report
• Your credit score won't improve for seven years
• One late payment won’t hurt your credit score

Bad Credit Truths

Open credit card accounts can help your bad credit as long as you're in good standing and aren't maxed out.

Checking your credit report does not hurt your score. You can shop for a home loan and have your report checked several times without bringing it down.

No one has to pay fees to fix errors on their credit report. All you have to do is contact the credit bureau to file a dispute. These days you can even do it online.

Bad debt will stay on your report for seven years, even when they're paid off. However, you are given space on your report to provide an explanation.

Once you have a problem yes, your credit suffers. However, you can make incremental improvements to bring your bad credit score back up in a relatively short time.

Late payments bring your credit down. Lenders will want to see that you are in good standing with all of your accounts and may ask for an explanation if they see late payments in your past.

Don't Be Discouraged

The fact of the matter is that yes, your bad credit will affect your getting a mortgage. In a bad credit mortgage you will most likely end up with a higher rate. However, that doesn't mean you have to be misled by the wrong idea about your credit score.

Broccoli-Jicama Salad

INGREDIENTS:

• 3 cups Green Giant Select® Frozen Broccoli Florets
• ¾ cup sweetened dried cranberries
• ¼ cup sweet onion slices, separated into rings
• 1 small jicama, peeled, shredded (about 3 cups)
• ½ cup lemon yogurt
• ½ cup mayonnaise
• 1 tablespoon white balsamic or rice vinegar

DIRECTIONS:

In 2-quart microwave-safe casserole, combine broccoli and 2 tablespoons water. Cover; microwave on HIGH for 6 minutes or until crisp-tender, stirring once halfway through cooking. Drain; rinse with cold water to cool. If desired, cut larger pieces of broccoli in half.

Meanwhile, place cranberries in small bowl; add boiling water to cover. Let stand 1 minute. Drain.

In medium bowl, combine cooked broccoli, cranberries, onion and jicama. In small bowl, combine yogurt, mayonnaise and vinegar; mix well. Add to broccoli mixture; toss to coat. Cover; refrigerate 20 minutes or until chilled before serving.

CREDIT SCORES

Understanding the crossroads that lead to explaining your credit score

Credit Scores Newsletter

What makes up the score?

• 35% = based on payment history (i.e. on-time pays or delinquencies)
• More weight on current pay history
• 30% = Capacity
• 15% = length of credit
• 10% = accumulation of debt in the last 12-18 months
• # of inquiries
• Opening dates
• 10% = mix of credit
• installment (raises) vs. revolving (lowers)
• # of finance company loans the lower the score

What actions will hurt you score?

• Missing Payments (regardless of $ amount, it will take 24 months to restore credit with one late payment)
• Credit cards at capacity (i.e. maxing out credit cards)
• Closing credit cards out (this lowers available capacity)
• Shopping for credit excessively
• Opening up numerous trades in a short time period
• Having more revolving loans in relation to installment loans
• Borrowing from finance companies

How to improve the score?

• Pay down on credit cards
• Do not close credit cards because capacity will be decreased
• Continue to make payments on time (older late pays will become less significant with time)
• Slow down on opening new accounts
• Moving revolving debt to installment debt

Approximate Credit Weight for each year

• 40% = current to 12 months
• 30% = 13-24 months
• 20% = 25-36 months
• 10% = 37 + months

Range of Credit Scores

Credit sores range from a low of 350 to a high of 850.

What doesn’t affect your score?

• Debt Ratio
• Income
• Length of Residence
• Length of employment