Loan Advice from Dana

Which is better: To retire without a mortgage or keep the mortgage and retire with a bigger nest egg?

More Americans approaching retirement face what some describe as worrisome levels of debt.

Consider: More than half (55 percent) of the American population aged 55 to 64 carry a home mortgage, according to a paper presented at the 15th annual Joint Conference of the Retirement Research Consortium in August.

What’s more, that debt isn’t going away after retirement. Among people aged 65 to 74, almost half had mortgages or other loans on their primary residences.

So what’s the better tactic? To aggressively pay down one’s mortgage before retirement, and stop or perhaps reduce saving for retirement? To keep saving for retirement and retire with a mortgage.

Or should you save a bit less for retirement and pay down one’s mortgage a bit more aggressively?

The answer depends on your personal situation.

Variables include current income, savings, current tax rates, your Schedule A itemization before and during retirement, whether you have access to a Health Savings Account, your retirement-income needs with and without a mortgage, your mortgage balance, the number of years remaining on your mortgage, and interest rates and opportunities to refinance — among many other factors.

The tax consequences of pursuing one tactic or the other must be considered.

“There are tax advantages to pension contributions, and interest payments on mortgages are tax deductible, so one has to compare these advantages,” said Annamaria Lusardi, who, along with Olivia Mitchell, is the co-author of “Financial Literacy: Implications for Retirement Security and the Financial Marketplace.”

Kathleen Mealey, a financial counselor with Cabot Money Management, agreed, saying that contributing to a 401(k) and deducting interest payments from a mortgage could be beneficial, especially if it puts you in a lower tax bracket.

A word of warning: You are likely to lose much of the benefits of deducting mortgage-interest payments the closer you are to paying it off in full. Also, consider this fact: You do get a tax deduction with your 401(k) contribution. But the deduction only defers your taxes.

Mealey and others also suggest you pursue the tactic that offers the highest return on your investment. “ If the long-term rate of return on the 401(k) plan will be higher than the mortgage, and there is a comfort level with the risk involved, it may not be advantageous to pay off the mortgage.”

For some, this is a no-brainer. “With current low interest rates that are fixed for a number of years, a retiree can possibly have a better return on the money in a long-term objective portfolio than the 3 or 4 percent interest payment,” said Michael Callahan, president of Edu4Retirement.

On the other hand, if you aren’t earning much on your retirement investments, if you have low or negative returns, it might make sense to pay down your mortgage, Mitchell said.

Reasons not to pay down mortgage

There are some general rules to follow.

For instance, Mike Kenney, a consultant with Nationwide Financial, suggests that you not pay down your mortgage unless you already have ample assets to cover all retirement-income needs and/or are making the full allowable contribution to your 401(k).

“The likely outcome of paying off a mortgage early is increased taxation on earned income now, though this would not apply with a Roth 401(k), and increased taxation due to the loss of a potential deduction later,” Kenney said.

Mitchell suggested that one’s house is a nondiversified, and potentially quite risky, asset.

“In this light, hastening to pay off the mortgage may be the wrong thing to do,” she said.

Reasons to pay down

In some cases it might make sense to pay down your mortgage. For instance, if your mortgage rate is variable and you think interest rates are rising, that makes paying off more appealing, Mitchell said.

And some people believe that the “right thing to do” is to pay off the mortgage because it helps them sleep better at night, she said.

Besides, having your mortgage paid off also pays off in other ways. You’ll be able to qualify for a reverse mortgage, said Callahan.

Reasons to keep saving

There’s one big reason to keep saving for retirement, advisers said. If your employer matches your contribution to your 401(k) in some form or fashion, that’s “automatic return right away,” Mitchell said.

What’s more, since many employers take the contribution out of your paycheck, “if you don’t see it, you won’t spend it, making that relatively easy,” said Mitchell.

Others, however, prefer having cash in the bank or money in the stock market rather than a paid-off mortgage.

“To me, cash is king,” said Callahan. “If you can amortize the payment of the mortgage, you have options by having the retirement savings on hand. You can always pay off the mortgage if the cash is available.”

Plus, he said, it forces a better financial plan while working because past decisions need to be completed while future decisions need planning and commitments.

And, Callahan said, having a mortgage “may keep people working longer, so that they won’t overestimate the value of their retirement savings.”

Paying down the mortgage before retirement will help you lower your expenses in retirement. That’s especially important because housing represents more than 30 percent of the expenses for people 65 and older.

Lowering expenses is a critical issue in retirement. “With finite resources, keeping expenses low is essential,” said Callahan. “Owning a home is very expensive. Upkeep — is not cheap.”

According to Lusardi and Mitchell’s research, early boomers, as compared with previous generations at the same age, bought more-expensive homes and got close to retirement with higher mortgage debt than other generations. They also have higher credit-card debt.

“This means that, in addition to deciding how to de-cumulate their wealth, this generation will also have to manage their debt well into retirement, and these decisions are not that easy and do require some basic financial literacy,” Lusardi said.

The bottom line, at least for Mitchell, is this: “I’d say do both — and keep working longer.”

By: Robert Powell / MarketWatch

Posted in:General
Posted by Ali Shahidi Broker/Owner on September 3rd, 2013 2:36 PM

Is your credit report telling lies about you? Credit report errors happen all the time, especially if you have a common name. Dispute them pronto, so you don’t end up paying more than you should for your mortgage and home owners insurance, or have trouble getting credit.

Just remember: Removing errors is a DIY project. So don’t get baited by credit repair servicers (“Pay us before we do any work on your behalf;” “Don’t contact the credit reporting companies directly” ) — these pitches are usually scams. Instead, try these seven tips for fixing credit report mistakes.

1. Do it now. As soon as you find out there’s an error (check your credit report at least annually), take immediate action to repair the damage. The longer you put off reporting the error, the harder it’ll be to find the evidence to prove you’re right and they’re wrong.

Plus, you can lose consumer protections if you wait longer than a month to send a written dispute of certain mistakes, like when you get an incorrect debt-collection notice.

2. Don’t assume the mistake you know about is the only mistake in your credit history. About 5% of U.S. consumers have a credit report error in one of their three major credit bureau reports, the Federal Trade Commission says.

Find out what each of the three big bureaus is reporting about you by ordering a free credit report.

3. If your credit report error involves identity theft (you see credit card accounts you didn’t open or loans you didn’t take out), call each of the three credit reporting bureaus and ask them to put a fraud alert on your file. Then, fill out a Federal Trade Commission identity theft report and call the police to report the theft. The FTC and police reports help prove you had your identity stolen.

4. Complain to everyone who screwed up. Write or file an online dispute with the credit reporting company and the business that made the mistake in the first place. If the mistake was made by:

  • A finance company, like a credit card issuer or mortgage lender: Call and ask what their procedures are for correcting errors.
  • Debt collection company: Follow the instructions on the collections notice to formally dispute the debt, which forces the debt collector to verify the debt.

For credit bureaus, use these websites:

  • Equifax. You’ll need to your credit report number.
  • Experian makes you get a credit report identification number (it appears on your Experian credit report) before you want to file a credit report dispute online with them.
  • TransUnion.

5. If all this complaining does nothing, and according to a 60 Minutes investigation it’s quite possible nothing is exactly what will happen, consider contacting your state attorney general’s office to see if they can offer any guidance.

6. Back up your story with proof. If you could get a late payment report removed by just calling and saying you paid on time, we’d all do it. You’ve got to prove your case by sending copies (never trust the credit bureau with the originals!) of the records that show you’re right and the company that made the error is wrong.

Of course it’s harder to prove you didn’t do something (like when you don’t owe an unpaid $300 debt to a dentist in a state you’ve never even been to) than to mail a bank statement showing the credit card company cashed the check they say they never got.

Either way, set up a file folder where you keep:

  • Copies of complaints
  • Receipts of certified mail
  • Screen prints from online filings
  • Notes from phone calls
  • A calendar reminding you when you’re supposed to hear back from or respond to companies.

7. If at first you don’t succeed, keep complaining until you do. If you don’t get satisfaction after your DIY attempts to repair the error:

  • Ask the credit reporting agency to put a short statement in your credit report saying you disagree with the report.
  • File a complaint with the Consumer Financial Protection Bureau. The bureau will look into your error and report back on what it finds. (This is a new service that started less than a year ago. Read about it here.
  • Complain to the Federal Trade Commission 1-877-FTC-HELP (1-877-382-4357).
  • Call or write to your state attorney general (that’s who enforces your state credit reporting and debt collection laws).

By: Dona DeZube I HouseLogic

Posted in:General
Posted by Ali Shahidi Broker/Owner on August 29th, 2013 4:37 PM


As the Consumer Financial Protection Bureau (CFPB) continues to work its way through the rule-making process, consumers are reading more about what banks are doing to deal with the changes. Banks, being risk-averse by nature, are working hard to mitigate the impacts of any rules they feel may harm their businesses.


Risk sharing

One of the new rules that lenders find least palatable involves risk sharing. Federal regulators have determined that one of the reasons lenders made questionable loans that contributed to the financial crisis was because they knew the loans would be sold off to secondary market investors, making the bad loans someone else’s problem. To discourage this thinking, the CFPB is considering making lenders maintain some ownership in all loans, keeping them responsible. In addition, the nation’s largest investors have begun to aggressively assert their contractual right to make lenders buy back loans that go bad. Taken together, these changes make it much more important for lenders to make loans only to borrowers they are sure can and will repay them.

Of course, this could prompt lenders to make far fewer loans, making it harder for consumers to get financing for new homes and putting pressure on the improving recovery. The federal government doesn’t want this either, so regulators are working with the industry to find a compromise that will allow lenders to continue to make new loans but take an active role in ensuring that borrowers can afford the loans they buy.


Finding compromise

The compromise will likely come in the form of the qualified residential mortgage (QRM). Basically, the QRM is a description of a loan product that exists in a safe harbor for lenders. If they make a loan that meets the requirements for a QRM, they will not be asked to hold part of the risk and will be protected from future buyback requests. The only problem now is determining exactly what constitutes a qualified residential mortgage.


Consumer impact

What this means for consumers is that banks will be working hard to see that most, if not all, of the borrowers they lend to can qualify for a QRM. These loans are, by definition, designed to be less risky, so the QRM will likely impact how much consumers can borrow and how close to the appraised value of their properties they can get. It will also likely require consumers to take better care of their own creditworthiness.

On the brighter side, banks are being discouraged from writing negative amortization loans and those with balloon or interest-only payments or prepayment penalties — all products that caused problems for the industry and consumers just prior to and during the economic downturn.

Qualified mortgages are likely to be the loan products lenders offer consumers in the future. This doesn’t mean they’ll be the only mortgages available in a free market, but they will almost certainly be the most affordable.

By Rick Grant | Zillow

Posted in:General
Posted by Ali Shahidi Broker/Owner on August 28th, 2013 3:08 PM

The relationship between your credit score and your mortgage rate is simple: Lenders reward the most financially responsible borrowers with the best rates and products, says Lynne Pulford, senior vice president for Sandy Spring Bank's Mortgage Division.

And while your credit score is probably the biggest factor lenders use in determining your mortgage interest rate, there are other reasons why your interest rate might be higher than you expected.

Here are some surprising things that may contribute to a high mortgage rate…  

Factor #1 - You're Using More than 35 Percent of Your Credit Limit

Did you know that using too much of your available credit can actually hurt your credit score and in effect, your mortgage interest rate?  Well, it can, according to Harrine Freeman, a financial counselor and author of "How to Get out of Debt: Get An “A” Credit Rating for Free." 

“The average credit utilization should be no more than 35 percent,” Freeman explains. Anything higher than that lowers your credit score and categorizes you as a risky borrower who may be prone to spending more money than necessary, or may not be able to meet their debt obligations, Freeman adds.

And the impact on your credit score of using too much credit can be big. According to Freeman, credit utilization higher than 35 percent can lower your credit score by 10 to 45 points - and that higher score can translate into a higher interest rate.

Factor #2 - You Don’t Have a Mix of "Revolving" and "Installment" Credit  

While you can certainly get approved for a mortgage loan without having a mix of revolving (credit cards) and installment (loans, like a car loan for example) credit, Freeman says you might be able to get a lower interest rate if you have both.

So why is the mix of credit so important?

It’s simple: While revolving debt influences your overall credit score more heavily, having and paying down installment debt demonstrates your ability and willingness to manage debt responsibly, according to Pulford.

And while there’s no telling what the perfect balance of revolving and installment debt is, Pulford says that if you have a large amount of revolving debt, paying off some of that debt will improve your score and land you a better mortgage rate when you’re ready to refinance or get your first loan.

Factor #3 - You Borrowed Money for a Property that Went to Short Sale

If you borrowed money for a property that went to short sale, you may find yourself with a higher mortgage rate than you expected.

According to Experian’s website (one of the three largest credit reporting companies), a short sale basically means you sold your house for less money than you owe to the mortgage lender. The lender then reports the debt as “settled” rather than “paid.” And while this may not sound like a very big difference, these two words could be the difference between a high or low mortgage rate.

That's because a "settled" debt tells lenders that you weren’t able to make payments and had to reach an agreement to repay only part of the total debt, Experian points out. Not the impression you want to give to future lenders.

What's more, a short sale can drastically decrease your credit score, according to FICO's Banking Analytics blog.

For example, if you had a credit score of 680 and then went through a short sale, your score would likely drop to between 575 and 595, according to FICO's blog. 

So if a short sale is in your financial history, this may be one factor contributing to your highinterest rate.

Factor #4 - You Have a Bad History of Paying Rent on Time

Having a bad history of paying your rent on time is a problem because it could be an indication of how a person might pay their home loan, says financial counselor Chris Hogan.

And while rental histories are typically not reported to the three credit repositories (TransUnion, Equifax and Experian), Hogan says many banks and mortgage companies will ask for a 12 to 24 month rental payment history.

“These institutions want to know how well you take care of your financial obligations,” Hogan explains.

What's more, a poor rental history could eventually show up on your credit report if you are taken to court due to lack of payment, or if your delinquent account was referred to a collection agency, says Freeman.

“[Court] judgments bring down your [credit] score the most, along with bankruptcies and foreclosures,” adds Freeman.

Factor #5 - Your Spouse or Buying Partner has a Lower Credit Score than You Do

If you are purchasing a home with your spouse or significant other, his or her credit score will influence the mortgage rate you receive, according to Sheira J. MacKenzie, a loan officer with Fairway Independent Mortgage Corporation.

MacKenzie says that when two people apply for joint financing, lenders are required to use the lower credit score.

“So if one person has a 780 score and the co-borrower has a 690 score, the lower [score] is used to calculate the [interest] rate,” MacKenzie adds.

The solution? Freeman says the spouse with the higher score can apply for a mortgage loan on their own to avoid the problem, as long as they meet the income and other lender requirements. And don’t worry about leaving your spouse out: Freeman explains you can add your spouse’s name to the deed after the mortgage settlement has been completed.

By Diana Bocco | Yahoo! Homes

Posted in:General
Posted by Ali Shahidi Broker/Owner on August 22nd, 2013 6:01 PM

Here is the "laundry list" of docs you will need to start a mortgage application. Photocopies only, no originals.

#1 Driver’s Licenses (front & back) – verifies identity, Patriot Act compliant.

#2 Secondary IDs (passport OR social security card) required support for #1.

#3 Most recent paystubs for a period of one (1) month – for anyone paid W2 salary or hourly wages.

#4 W2 forms from employers for the last two (2) years – documents employment and earnings history.

#5 SIGNED Federal tax returns (with ALL PAGES AND SCHEDULES) for the last two (2) years – even if you are paid a salary (proves or disproves writing off income as unreimbursed employee expenses), essential for self-employed, bonus and commission income.

#6 Most recent bank and asset statements (ALL PAGES) for a period of two (2) months – evidence of sufficient assets for down payment, closing costs and reserves, as well as identifying need for source of origin for monies deposited.

#7 Fully executed purchase contract for the property you are buying – reason for getting the mortgage in the first place, as well as baseline for collateral appraisal and loan parameters.

#8 If refinancing, a copy of your deed – so the lender knows what property they are refinancing.

#9 Name, address and phone # of your landlord – if you are currently a renter, need to verify that you are a timely paying tenant.

#10 Name, address, phone, fax #s and e-mail address for your attorney – to coordinate the closing.

By Forbes


Posted in:General
Posted by Ali Shahidi Broker/Owner on August 20th, 2013 2:00 PM

With paperwork, credit verifications, and even getting finger-printed, refinancing can be a daunting process. And with mortgage interest rates often rising from one week to the next, a stall during the refinance process could cause you to land a higher rate than expected.

So what can you do to make refinancing as seamless as possible?

While there are hiccups in any process, Bruce Ailion, an Atlanta-based attorney and certified real estate broker, says one thing that’s helpful is gathering all necessary paperwork in a timely manner.

Below are more detailed tips on how to make the process go as smoothly as possible…

Be Prepared to Source Monetary Deposits

When getting together your refinancing documents, chances are you'll end up needing some unexpected paperwork - like letters of explanation - says Kelly Resendez, senior vice president of sales and business development for Paramount Equity Mortgage.

That's because an underwriter cannot take information provided in a loan application at face value or make assumptions, Resendez explains. Instead, underwriters are now required to obtain letters of explanation on everything - from why you are purchasing a home to what the source of deposits are into your bank account, Resendez adds.

Jon Lamkin, vice president of mortgage lending at Guaranteed Rate Inc. agrees, adding that banks now require borrowers to show the source of funds for any deposits made that are not payroll checks.

"And this can get very frustrating when clients have to source gifts from Grandma and Grandpa or expense checks for work," Lamkin adds.

So, to avoid any delay in the process, be prepared to submit an explanation of the source of any money deposited into your account.

Don't Change Jobs Before Your Loan Is in the Clear

Are you ready to hand in your two-week notice? If your loan hasn't closed, don't do it just yet.

Why? Because changing employment can potentially delay your closing, according to Ailion.

"Lenders look for stability," Ailion explains. "While there is no guarantee you will have a job a month after you close a loan, if you've been with the same employer for five years the expectation is that you will be there tomorrow," Ailion says.

In fact, loans are sometimes re-verified after closing - meaning they make sure you're still employed. And when that happens, you want the lender to find you working at the same place, Ailion says. So how long should you stay in that job after closing? "A couple of weeks to be safe," he says.

What if your job change is in the self-employment route? You may want to hold off on that dream until after the loan is finalized.

"I recently had a client go from a W2 employee to a 1099 and then apply for a refinancing, and this is a big no-no," says Lamkin, who adds that you need to show two years of 1099 income to qualify for refinancing.

"If you have less than two years of self-employment income, that new income will not be allowed and your refinancing might be denied," Lamkin says.

Check Your Credit Report Six Months Prior to the Refinance Process

If your credit report has an error, it can be detrimental to securing a low interest rate - if you can qualify at all.

"In addition to potentially affecting what program and rate you qualify for, having an incorrect credit report could cause your loan to be denied, as an underwriter will not be able to read your credit report accurately," Resendez says.

Surprisingly, Lamkin says it's usually the smallest of credit issues that are most common.

"Old cell phone contracts, $20 medical co-pays, and disputes with a credit agency are the items that usually need to be fixed," Lamkin explains. Even something as small as $10 can hurt your credit if it is not paid in full, Lamkin adds.

So how do you fix errors in your credit report? Ailion says it could be as easy as picking up the phone and calling the reporting agency to let them know of the error. "Credit bureaus are regulated by federal law and are generally good at complying with those laws," Ailion adds. One thing to keep in mind: It can take two to six months to clean up a poor credit report, so the time to start working on this issue is prior to having an immediate need to refinance, Ailion says.

Don't Buy Anything That Requires You to Take Out a New Loan

If you've been thinking about purchasing a new car, you may want to hold off until your refinance is in the clear. Why? Because making a big expense could affect your debt-to-income ratio and as a result, halt your refinance qualification.

To clarify, your debt-to-income ratio is the amount of debt you must pay each month (including any car or student loans, credit card debt, and your anticipated new mortgage payment) compared with your gross income (before taxes).

The acceptable debt-to-income threshold will vary by lender, but to give you an idea of what to aim for, the Department of Housing and Urban Development says that the debt-to-income ratio for an FHA refinance cannot exceed 43 percent.

Still having a hard time understanding what your debt-to-income ratio might be? Check out this example:

Let's say you have a gross monthly income of $4,000, and your monthly debts include a $200 monthly car payment, a $200 credit card payment, and a (projected) refinanced mortgage payment of $1,200. With these numbers, you have a debt-to-income ratio of 40 percent.

Now, let's say you decided to buy a new convertible, and it has a car payment of $400 per month. That'll bring your debt-to-income ratio to 50 percent - which means you may jeopardize your loan qualification.

The moral is that you may want to save the joy rides in the new convertible until after you close on your refinance. And remember, debt-to-income ratios will vary by lender, so make sure to shop around and conduct the necessary research.

By Diana Bocco / Yahoo! Homes

Posted in:General
Posted by Ali Shahidi Broker/Owner on August 19th, 2013 4:26 PM


The mortgage market is constantly changing. 

It’s important for buyers and sellers to be savvy consumers and educate themselves to make smart decisions.  The following are a couple of popular misconceptions. 

1.  Myth: Buyers with bad credit can’t qualify for home loans. In the last couple of weeks, two of the nation’s largest lenders of FHA loans announced that they’ve dropped the minimum
FICO score guideline from 620 (which allows for some credit imperfections) to 580, which is actually a fairly low score.  With a score of 580, the lenders are looking for more like 5 to 10 percent down – they want to see you put more of your own skin in the game, and the higher down payment lowers the risk that you’ll default. 

2.  Myth: The Mortgage Interest Deduction isn’t long for this world.  The fact is, very powerful industry groups and economists have been working with Congress to plead the case that Mortgage Interest Deduction (MID) reform any time in the near future would only handicap the housing recovery.  Congress-folk aren’t interested in stopping the stabilization of the real estate market.  As such, the MID is nearly universally thought of as safe – even by those who disagree that it should be.

3.  Myth:  It’s just a matter of time before loan guidelines loosen up. 
It’s possible that loans are as easy to get as they’re going to get.  So don’t expect that if you hold out, zero-down mortgages will come back into vogue anytime soon. Fortunately, Fannie and Freddie aren't likely to disappear for another 5-7 years, so you have a little time to pull your down payment and credit together. If you want to get into the market, the time to get yourself ready is now!

4.  Myth: If you don’t have equity, you can’t refi. There are actually a couple of ways homeowners can refi their underwater home loans.  If your loan is held by Fannie or Freddie, they will actually refinance it up to 125% of its current value, assuming you otherwise qualify for the loan.  That means, if your home is worth $100,000, you could refinance a loan up to $125,000, despite the fact that your home can’t secure the full amount of the loan.

If your loan is not owned by Fannie or Freddie, you might be a candidate for the FHA “Short Refi” program. The Short Refi program is only available to homeowners who are current on their mortgages and need to refinance up to 115 percent of their homes’ value.  So, if you owe $250,000 on your home, you can refinance via an FHA Short Refi even if your home’s value is as low as $217,000.


5.  Myth:  If you’ve lost your job and can’t make your mortgage payment, you might as well mail your keys in.  There are some new funds available in the states with the hardest hit housing and job markets, which have been designated specifically for out-of-work homeowners.


The US Treasury Department’s Hardest Hit Fund allocated $7.6 billion to a number of states, including California, all of which are now using some portion of these funds to offer up to $3,000 per month for up to 36 months in mortgage payment assistance to help unemployed homeowners avoid foreclosure.  


Source: 5 Mortgage and Foreclosure Myths

Posted in:General
Posted by Ali Shahidi Broker/Owner on April 20th, 2012 1:00 PM


Not quite ready to do a short sale?  There may be another option to refinance... Unlimited LTV relief.
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*Check eligibility here:

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Posted in:General
Posted by Ali Shahidi Broker/Owner on February 3rd, 2012 1:02 PM

Confused by all the jargon that gets thrown around by mortgage brokers, lenders and real estate agents? Here is a breakdown of some of the most common terms:

1.     Adjustable rate:

An interest rate that that may change over the life of the loan, and the essence of an Adjustable Rate Mortgage or ARM. Some rates vary according to an established financial index such as COFI—the Cost of Funds Index—typically adding a set “margin” of percentage points.


A report expressing the estimated value of a property based on a comparison of similar saleable properties. Also, the act of appraising a property.

Assumable mortgage:

A loan that can be transferred with a sold property to a new buyer.

2.     Balloon payment:

A final lump sum payment, typically larger than previous payments, due at the end of balloon-type loan.

3.     Collateral:

Property pledged as security for a debt, such as real estate that secures a mortgage. Collateral can be repossessed if the loan is not repaid.

Conventional loan:

A mortgage loan not insured or guaranteed by a federal government entity such as the Federal Housing Administration.

4.     Deed:

A document that legally transfers ownership of property from one person to another. The deed is recorded on public record with the property description.

Deed of trust:

Used in some states, it serves the same purpose as a mortgage. It conveys “title” to a real estate property to a disinterested third (a trustee), who holds the title until the owner of the property has repaid the debt.


A guy who purchases property and then records the deed.

5.     Escrow:

A third-party financial instrument to hold funds on behalf of the other two parties in a transaction. In a real estate transaction, if there are conditions to the sale such as passing an inspection, the buyer and seller may agree to use an escrow account. Once the conditions are met, the escrow transfers the payment to the seller and title is transferred to the buyer.

6.     Fixed-rate mortgage:

A mortgage with payments that remain the same throughout the life of the loan. The interest rate is fixed (unlike an adjustable rate).

7.     Good faith:

Refers to settlement charges paid by a by the borrower at closing. A Good Faith Estimate of the charges is required by The Real Estate Settlement Procedures Act.

8.     HELOC:

Home Equity Line of Credit—usually a second mortgage allowing the borrower to obtain cash against the equity of a home up to a predetermined amount.


The U.S. Department of Housing and Urban Development, created to address public housing needs, improve and develop American communities, and enforce fair housing laws.


Also known as the "settlement sheet," it itemizes all closing costs such as real estate commissions, loan fees, points, and escrow amounts.

9.     Interest-only mortgage:

A mortgage in which, for period of time, the monthly mortgage payment consists of interest only. During that period, the loan balance remains unchanged.

10. Jumbo loan:

Also called a non-conforming loan, it is a loan above a certain dollar amount. In 2009, the amount for single-family homes in most states was $417,000. Above that limit, the loan is ineligible to be purchased by the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac).

11. Lien:

A legal claim against a property that must be paid off when the property is sold. A lien is created when you borrow money and use your home as collateral for the loan.

Loan-to-value ratio:

Expressed as a percentage, the amount of the loan divided by the value of a property. For example, if you have a $120,000 mortgage against a $200,000 home, the LTV is 60 percent.

12. Mortgage:

The instrument used to pledge title to a property as security for repayment of a debt.

13. Owner-occupied:

Used to describe a home occupied by a borrower or a member of the immediate family as a primary residence—as opposed to a rental property. The distinction significantly affects mortgage rates.

14. PITI:

Principal, Interest, Taxes, and Insurance—the four elements of a monthly mortgage payment.


Mortgage industry synonym for “one percent,” typically of the principal loan amount. To pay an origination fee of two points on a $100,000 loan, for example, you’d pay $2,000 to the lender.

15. Quitclaim deed:

An instrument transferring ownership of a property, typically with no guarantee of an unencumbered “clear” title.

16. Realtor®:

A real estate broker or associate with an active membership in the National Association of Realtors®. Not all brokers are Realtors®.

Reverse mortgage:

An instrument used by senior homeowners age 62 and older to convert the equity in their home into a monthly stream of income.

17. Survey:

A measurement description of land prepared by a registered land surveyor. Typically it shows the property’s dimensions and its location relative to known landmarks, plus the location and dimensions of any improvements.

18. Title:

The evidence to the right to, or ownership of, property.

Title insurance:

A policy that guarantees the accuracy of a title search and protects against errors. Most lenders require the buyer to purchase title insurance to protect the lender against loss in the event of a title defect. This charge is included in the closing costs.

19. Underwriting:

The process of analyzing a loan application to determine the amount of risk involved in making the loan; it includes a review of the potential borrower's credit history and a judgment of the property value.

20. VA loan:

A loan guaranteed by the U.S. Department of Veterans Affairs as a benefit to military veterans.

21. Warranty deed:

A legal document which guarantees that the seller is the true owner of the property and has the right to sell the property.

22. Yield curve:

A graph that compares long-term lending rates to short-term rates. Lenders “borrow short” at lower rates to “lend long” at higher rates. A “steep” curve spells bigger profits for lenders.

23. Zero-down mortgage:

A loan that finances 100 percent of the purchase price.



Posted in:General
Posted by Ali Shahidi Broker/Owner on January 13th, 2012 2:18 PM

Refinancing is most often motivated by lower interest rates, which can bring the dual benefit of lower mortgage payments and lower interest costs over time. But there are many other legitimate motivations. Some are a product of "creative" financing products such as Adjustable Rate Mortgages that were rare a generation ago. Your personal priorities will drive decisions on how to refinance. There is no "one-size-fits-all" solution, but here are a few reasons why you might want to refi.

Lower payments: When rates fall, it's always tempting to refi. A common rule of thumb is that a two-point drop in rates will make it worthwhile. But this is not universal. For a homeowner with a $300,000 balance, a rate reduction of even one percent can lower the monthly payments by a couple hundred bucks and cut long-term interest expenses by hundreds of thousands.

A common mistake with this strategy, however, is to "start over," and refinance, a 17-year-obligation with a new 30-year loan. Sure, stretching out the term will lower the payments, but wasn't the interest rate help enough for you? Don't be greedy. When you choose the term of a new loan, think about some day getting out of debt.

A quicker payoff: This is often a worthy goal, if you can afford somewhat higher payments. Replace a 30-year-term with 15 years, and obviously you'll be out of debt sooner - and won't have to double your payments to do it. They'll rise by about 40 percent (assuming here that both loans are at about 6 percent interest). Conversely, choose the ease of a 30-year term and the payments will go down a lot less than you'd expect.

Lower interest costs: Locking in a better fixed rate is great, but it is not the only way to lower interest bills. ARMs, or Adjustable Rate Mortgages, generally offer lower rates in the early years followed by higher ones later. It can be a fool's game to think you can defer your big bills until later in life, but if you plan to be in the house for just a few years or less, an ARM may make a lot of sense.

Cash out: Liquidating the equity in a home became a national pastime in the last housing boom. Creative loan products and rapidly rising home values often made it easy to refi (at a lower rate if you were lucky) and walk away with a satchel full of cash. Taking cash out of your mortgage can be an entirely legitimate way to consolidate other debts. The downside was that gains in equity were in some cases an illusion, driven by a housing market bubble - and this way, you'll never be able to pay off the property.

For more information

Posted in:General
Posted by Ali Shahidi Broker/Owner on December 16th, 2011 5:04 PM