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Mortgage Advice

Do you have a mortgage question and are you looking for mortgage advice but you are not sure where to turn for unbiased answers.  Look no further because the ultimate mortgage book is here.  Mortgages: What You Need to Know, Strategies to Take Control of Your Financial Future answers most of your mortgage questions.  This book covers:

  • The different types of mortgages
  • Understanding adjustable rate mortgages
  • How an amortization schedule works for a 30-year fixed rate mortgage, and
  • It provides mortgage questions you need to ask yourself in order to determine which mortgage is right for you? 

The last chapter covers how to find a good mortgage planner in your neighborhood and what questions you should ask this person to ensure they have your best interests at heart.

Financial literacy is a big issue and this book will provide you with everything you need to know about mortgages so you can make smarter decisions for your future.  The main theme of this mortgage book is to Educate and Empower the individual:

  • To take control of their financial future buy slowing down to understand the mortgage process
  • How a mortgage affects short term cash flow while being mindful of long term retirement goals. 

After all, the type of mortgage you choose will directly impact your ability to save for retirement. 

Home Refinance

Q: My wife and I have a five-one ARM on our personal residence that's going to adjust in two years. I want to refinance into a 30-year fixed-rate loan. However, I am walking away from two investment properties, so I won't be able to refi in my name. I want to refi in my wife's name only, but it will have to be a stated-income loan because she is a student. We can show huge, huge cash in the bank. The loan amount is about $720,000. Do you think I have a snowball's chance in hell of getting a decent rate?

A: After reporting a few weeks ago that such loans were virtually impossible to find, I was dressed down by several mortgage professionals who said I didn't know what I was talking about. They told me in no uncertain terms that stated-income and no-verification loans are not only available but are available at some pretty good terms. (see Realty Q&A) That said, you are not giving a lot of information to go on here. But, as you seem to suspect, if you walk away from your two investment properties, your credit rating will sink faster than the Titanic. Worse, says David Muti, a mortgage planner in Parsippany, N.J., and the author of a new book, "Mortgages: What You Need to Know" (Pocket Guide Press), you will have a long road ahead to repair it. According to Muti, who is with Millenium Home Mortgage, you should be able to find a stated income loan with verified assets at any number of small savings-and-loans. Their rates are surprisingly close to fully documented programs, he reports, but the rate is somewhat higher than a fully documented loan and the maximum loan-to-value ratio is usually 75%. Also, applicants must have two years of continuous employment. "The problem you face is that your wife is a student," he says. "Therefore, she won't qualify." But Muti isn't so sure that you need to refinance right now anyway. Since you still have two years left before any adjustment, you have enough time to repair your credit to be able to put the loan in your name again. Furthermore, if you were to refinance today, Muti wouldn't put you in a 30-year loan. Because you aren't likely to live in your home that long or carry the mortgage to fruition, he recommends a hybrid ARM in which the rate is fixed for up to 10 years and then adjusts on an annual basis thereafter. "This would provide you with better use of your cash flow while still providing you with long-term peace of mind with your mortgage," he says. Here's Muti's advice: "Sit down with a local mortgage planner and completely lay out your entire situation to come up with a plan. Once a mortgage planner fully understands your personal circumstances, he will be in a position to make a recommendation that is right for you and your family while taking into account your short- and long-term financial goals. Take the process slow and ensure you understand all of your options and then make your decision."

Divorce and Mortgage

Q: My client’s property settlement agreement provides that the mortgage remain in place and that the house will not get sold until the children graduate high school in three years; do you still recommend seeking counsel of a mortgage planner to review the situation?

A: Yes because the issue that often pops up here is we will find out that the mortgage is up for an adjustment before the triggering event for the sale takes place. In most instances people do not know what type of mortgage they have let alone the financial impact it makes. By having a mortgage planner review the copy of the note and mortgage in advance of settlement negotiations you can ensure that the mortgage financing will not dramatically change mid-course. Often times the client is mistaken about what type of mortgage they have and as a result your Case Information Statement (CIS) will not be accurate. Many times clients think that they have a 30-year fixed when in fact it is a balloon mortgage or an adjustable. Many attorneys will reply on the CIS or even the tax returns but they can both reflect things (through no fault of you or the client) that are in fact not accurate. The best way to ensure the client has what they “think” they have regarding their mortgage is to have them provide you with a copy of their Note and Mortgage. If you are not familiar with how to read these you can send them to your mortgage planner for an analysis but basically paragraphs 2, 3 and 4 of their note will detail what they have. Highlight the terms and ensure they match the CIS. Recently we were working on a case with an attorney and her client thought she had a regular adjustable rate mortgage as she indicated on the CIS. We obtained a copy of the note and mortgage and it turned out that it was a private note from the father-in-law which was a 3 year balloon at a rate of only 3%. She was going to remain in the home and figured that her soon to be ex-father-in-law would simply extend the note. He did not want to and we discovered that she could not afford to remain in the house. This of course changed the settlement strategy. This example is clearly an easy one to drill down on but not all examples are clear cut. The important thing is to “know” the financial impact to your client before you begin settlement discussions. Life as an attorney is complicated enough. Why not make it easier and form a relationship with a mortgage planner to help you do a better job for your client while making it easier on you.