Who is IRRRL you say? What is IRRRL?
IRRRL IS: The VA Interest Rate Reduction Refinance Loan
It is a home loan refinance program which provides another benefit to the 600,000+ veterans who may be searching for ways to save money. IRRRL allows you to refinance a property on which you used your VA eligibility benefit. If you have used your VA benefit and now you want to find out if there is another VA benefit waiting for you to tap, then visit: http://www.benefits.va.gov/HOMELOANS/irrrl.asp for information or call and talk to a lender who is familiar with VA loans. When would you consider “another” loan? 1. If your current fixed rate mortgage can be refinanced to a lower rate. or 2. If you currently have a 30 year mortgage and you would like to reduce the term to 15 years, or 3. If your current loan is an adjustable rate mortgage (ARM) you may enjoy locking in a fixed low rate. Important: Because of funding fees, for maximum benefit, the new reduced interest rate should be in the neighborhood of at least 1% – 2% below your current rate. An experienced VA lender (and a veteran) Jack Tenold at First Priority Financial, is happy to provide you with an analysis to show you if it makes sense for you to refinance your current home. There is no appraisal and a new certificate of eligibility is not required. Remember: The VA does not lend money. It only verifies your eligibility and there are many VA lenders to choose from. I am a veteran who helps veterans and I am always available to answer your questions. Veterans have you been introduced to IRRRL? Allow me to assist you.
Scammers of all kinds come out this time of year to prey on those that may not be aware. They seek out those that can’t easily fend for themselves. Sometimes it is a senior who may be sick, lonely or suffering from dementia. Because I work with many seniors over the age of 62 in my reverse mortgage business I pay close attention to these con artists. They can pick the vulnerable out easily and spin their services or products as though they are legitimate.
The Better Business Bureau (BBB) listed the top 10 scams of last year. This great organization sees it all and works hard to inform consumers about how to inform themselves of the reputation and quality of services a business performs prior to doing business with them. The Top 10 Scams for 2011 were:
- Top Job scam that targets anyone looking for work – YOU GOT THE JOB! Now fill out the online job form and they have all of your information for Identity Theft.
- Top Sweepstakes and Lottery scam– YOU WON! Targets social media users so that when you click on the link the scammer sees all of your personal information
- Top Social media scam – click here – downloads a virus that finds your passwords
- Top Home improvement scam – in person pitch that results in shoddy work or they take your money and run
- Top Check Cashing scam – sorry I wrote the check for too much, write me one for the difference. Their check bounces and your check is cashing
- Top Phishing scam – email from ACH (automated clearing house) about an electronic transaction problem. Link takes you to a false banking site that steals your money.
- Top Identity Theft scam – you are staying at a hotel and a late night call from someone posing as a desk clerk for your credit card information
- Top Phone scam – we can help you keep your house by dealing with your mortgage company. They get paid and do nothing and you owe more in the end
- Tom Sales Scam – online pitch like win an iPad – you pay for every bid even if you don’t get what you bid to purchase
- Top Phishing scam of the year is the Better Business Bureau Scam
BBB email “complaint against your business” – clicking on the link downloads malware that gets your banking information and transfers money
Helping seniors understand Reverse Mortgages in the Spokane, WA area is my business so I hear a lot of horror stories. Just yesterday I was told about a business owner in town that was on the phone talking with his 90 something mother in Monroe, WA and she told him that her bank account was empty. He was shocked as she wasn’t wealthy but always carried a comfortable balance in her savings.
As it turns out she was a victim of the Top Sweepstakes and Lottery scam. She was called and told that she won but would need to send some money to claim it. Then call after call for more money until she had exhausted all of her savings and incurred $20,000 in credit card debt. The family got DSHS involved and they aren’t sure that she believed them when they told her that she was the victim of a scam.
If you ever have a question about whether or not something is a scam be sure to give me a call, Jack Tenold, and if I don’t know the answer I will refer you to someone with more knowledge.
Wait! What IS a reverse mortgage?
The other day I had a conversation that summarizes an all-too-common situation.
I was chatting with a lovely senior lady (we’ll call her Jane) who, with her husband, was shopping for a new senior-friendly home. I suggested that she may wish to purchase the home with a reverse mortgage.
“I just don’t want one. No reverse mortgage for me.”
“But you would be able to live here, keep a great deal of your cash from the sale of your previous home, and never have a house payment as long as either one of you stayed in the home,” I said.
“No no. Not for me,” she insisted. “Hold on, tell me more about this thing,” asked her husband.
And therein lies the problem. So many people who insist they don’t want a reverse mortgage have no idea what it is. They have worked themselves into a belief that a reverse mortgage would not be good for them, when oftentimes it is the best solution for their financial needs.
You see, a reverse mortgage is simply another tool to consider when making a financial plan. It is quite common for seniors to want to stay in their home, have extra cash, and not be burdened with house payments.
Although my office does all kinds of home mortgages – and does them well – I have made it a point to emphasize to people 62 years of age and older that they should seriously consider the benefits of a reverse mortgage. And do you know what the two biggest obstacles are that I have to overcome?
Here are the obstacles: Fear and ignorance. All of us are woefully ignorant when it comes to this financial tool. And that ignorance produces fear.
The media, the government, and financial sites seem to go out of their way to portray this rather simple financial tool as a scary, complex, dangerous instrument. In fact, it is a vital part of a good financial plan for many people.
Here’s a good exercise for you:
Find a financial product that looks like this:
A lump sum or a monthly income given directly to you.
- No repayment of that money until you leave the home permanently.
- No impact on Social Security.
- No impact on Medicare.
- No impact on your taxes.
- No limitations on what you can do with the money.
- You retain title to the home and pay property taxes, homeowner’s insurance, and HOA dues (if any).
Did you find a financial product which can do those things? Unless you answered “reverse mortgage”, I’m pretty sure you did not. Because there is no product other than a reverse mortgage which can accomplish all of those goals.
Anyone considering a home loan today is concerned about the value of their home. With all loans, the appraisal is to determine the value of the property.
The appraised value is determined by a licensed appraiser comparing properties that have recently sold in your neighborhood. The appraiser is independent and cannot be influenced by a loan officer or lender and is responsible for making certain that the property meets certain requirements.
FHA appraisers are particularly concerned that the house is in reasonable condition and that there are no health or safety issues. The AMC (Appraisal Management Company) will call you to set a time to appraise your home. Generally, the appraisal report will be completed within two weeks. Sometimes the appraiser makes the appraisal “conditional” to certain repairs being done on the home such as paint, hand rails or other minor repairs.
Call me if you require further information regarding an appraisal. My toll free number is (800) 617-3105.
Perhaps you are outgrowing your home, or have been forced to relocate due to a job transfer. Regardless of the motivation for keeping one property while purchasing another, let’s address this question with the mortgage approval in mind:
So, Do I Have To Sell?
Yes. No. Maybe. It depends.
Welcome to the wonderful world of mortgage lending. Only in this industry can one simple question elicit four answers…and all of them may be right.
If you are in a financial position where you qualify to afford both your current residence and the proposed payment on your new house, then the simple answer is No!
Qualifying based on your Debt-to-Income Ratio is one thing, but remember to budget for the additional expenses of maintaining multiple properties. Everything from mortgage payments, increased property taxes and hazard insurance to unexpected repairs should be factored into your final decision.
What If I Rent My Current Property?
This scenario presents the “maybe” and the “it depends” answers to the question.
If you’re not quite qualified to carry both mortgages, you may have to rent the other property in order to offset the mortgage payment.
In that scenario, the lender will typically only count 75% of the monthly rent you are proposing to receive.
So if you are going to receive $1000 a month in rent and your current payment is $1500, the lender is going to factor in an additional $750 of monthly liabilities in your overall Debt-to-Income Ratios.
Another detail that can present a huge hurdle is the reserve requirement and equity ratio most lenders have. In some cases, if you are going to rent out your current home, you will need to have at least 25% equity in order to offset your payment with the proposed rent you will receive.
Without that hefty amount of equity, you will have to qualify to afford BOTH mortgage payments. You will also need some significant cash in the bank.
Generally, lenders will require six months reserve on the old property, as well as six month reserves on the new property.
For example, if you have a $1500 payment on your old house and are buying a home with a $2000 monthly payment, you will need over $21,000 in the bank.
Keep in mind, this reserve requirement is incremental to your down payment on the new property.
What If I Can’t Qualify Based On Both Mortgage Payments?
This answer is pretty straightforward, and doesn’t require a financial calculator to figure out.
If you are in this situation, then you will have to sell your current home before buying a new one.
If you aren’t sure of the value of the home or how your local market is performing, give us a ring and we’ll happily refer you to a great real estate agent that is in tune with property values in your neighborhood.
As you can tell, purchasing one home while living in another can be a very complicated transaction. Please feel free to contact us anytime so we can review your specific situation and suggest the proper action plan.
Related Articles – Mortgage Approval Process:
- Basic Mortgage Terms
- How Much Can I Afford?
- Common Documents Required For A Mortgage Pre-Approval
- Top 8 Questions To Ask Your Lender During Application Process
- What’s The Difference Between An Investment Property, Second Home and Primary Residence?
- Seven Items Real Estate Agents Need To Know About Your Mortgage Approval
My clients are often surprised to learn what appraisers actually look at when determining the value of a real estate property whether it is rural or urban.
A common misconception is that the value of a home is determined after the appraiser has completed a physical property inspection. Actually, the appraiser has a good idea of the property’s value by the time the appointment is scheduled because the professional appraiser has done some homework.
The good news is that you don’t have to worry about pushing back an appointment a few days just to “clean things up” in order to help influence the value of your property. Most folks prefer to put everything in order because the appraiser will take photographs of the interior and the exterior of the home. A clean and tidy house will certainly make it easier for the appraiser and you will feel better too. Also, it doesn’t hurt to mention the new roof or furnace or fence that you may have recently purchased.
The Key Components Addressed In An Appraisal
Location, view, topography, lot size, utilities, zoning, external factors, highest and best use, landscaping features…
Quality of construction, finish work, fixed appliances and any defining features
Age, deterioration, renovations, upgrades, added features
Health & Safety:
Structural integrity, code compliance
Above grade and below grade improvements
Is the property conforming to the neighborhood?
Is the property functional as built – style and use?
Garages, Carports, Shops, etc..
Curb appeal, lot size, & conforming to the neighborhood are obvious to the appraiser when they drive down into the neighborhood pull up in front of your home.
When entering your home, they are going to look at the overall design, condition, finish work, upgrades, any defining features, functional utility, square footage, number of rooms and health and safety items.
Be sure to have all carbon monoxide and smoke detectors in working condition.
Since a home appraisal provides half the weight in any credit decision involving the security of real estate, the appraisal is done by a qualified, licensed appraiser who is familiar with your neighborhood, and the type of home you are buying, selling or refinancing.
If you’re interested in the specifics, here is a copy of the blank 1040 URAR form that is used by every appraiser in the country.
Related Update on HVCC:
Appraisers hired for a mortgage transaction on a conforming loan are chosen from a pool of qualified appraisers at random. Neither you nor your lender has the opportunity to decide which appraiser will inspect your home. This change was brought on with the Home Valuation Code of Conduct HVCC, and is effective with conventional loans originated on or after May 1, 2009.
Related Appraisal Articles:
Why is there such a difference between what my appraised value is and the price similar homes are selling for on my street?
It’s a great question, and you don’t have to be a mortgage professional or a real estate agent to understand the answer.
The distinction lies in the purpose of the two valuations and who is responsible for creating them.
The purpose of an appraisal is to make sure that an independent non-interested third party verifies the “most likely” sale price based on the market value and condition of the home.
Appraisals are meant to be a realistic determination of the value of a home if it were to sell in the current market, in its current condition.
In addition, appraisers are governed by rules intended to standardize the subjective process of determining a home’s value.
Some of the key factors appraisers look at are: location, above ground size, room count, bathroom count, style of home, condition of property, amenities, and market conditions such as how long it takes for home to sell and if values are increasing, decreasing or steady.
Appraisers are also asked to look only at comparable sales within a certain distance, usually one mile except in rural areas, and within a specified period of time, which is 3 months in the current market.
Listing prices on the other hand are influenced by the real estate agent, and set by interested and often emotional sellers.
Sellers are not held by any rules when they list a home. In some cases, sellers take what they paid for the house, add what they have spent on improvements and even add amount for profit.
Often times, sellers will list their home based on the amount needed to pay for the real estate agent, closing costs and cover the amount of the mortgages.
Extra low prices are generally the result of an extra motivated seller that has to sell and move in a rush, so they’ll list their property below market comps in order to be the most competitive.
Throw in bank owned homes (foreclosed properties), and listing prices may be all over the place without a logical explanation due to an asset manager making decisions from another part of the country.
While list price is never a good indication of what a home in your neighborhood is worth, appraisals are not an exact science that will determine the true value of your home either.
Some will argue that a home is worth what people will pay for it, so there’s obviously a little room for personal interpretation. Either way, the bank securing that piece of real estate for a mortgage loan generally always has the final opinion that matters the most.