Home Loan Expert Blog

You do not have to be a brain surgeon to originate a real estate loan but if you do not understand the loan industry you can get a big headache. The purpose of this blog is to inform and education. The current mortgage crisis is unprecedented.

Institutional funds typically available to buy loans from loan originators have stopped. Banks, Retirment Plans, Mutual Funds which buy mortgages domestically and internationally are no longer buying mortgages due to their perceived risk as a result of increasing levels of foreclosure. Mortgages greater than $417,000 known as jumbo loans are now 1-2% higher in rate than conforming loans. Mortgage for clients who cannot document income are in short supply. Many borrowers who wish to buy or must refinance cannot find financing. The Federal Reserve and its equivalent in Asia and Europe have flooded the world economies with more capital than after the 9/11 crisis. Hopefully this crises will end soon but it has not yet. Choose your lender carefully based upon referral or your own experience. Stay informed. Let us know what you think will happen next.

Michael Sedloff (mlsedloff@southlandequities.com)

You do not have to be a brain surgeon to originate a real estate loan but if you do not understand the loan industry you can get a big headache. The purpose of this blog is to inform and education. The current mortgage crisis is unprecedented.

Institutional funds typically available to buy loans from loan originators have stopped. Banks, Retirment Plans, Mutual Funds which buy mortgages domestically and internationally are no longer buying mortgages due to their perceived risk as a result of increasing levels of foreclosure. Mortgages greater than $417,000 known as jumbo loans are now 1-2% higher in rate than conforming loans. Mortgage for clients who cannot document income are in short supply. Many borrowers who wish to buy or must refinance cannot find financing. The Federal Reserve and its equivalent in Asia and Europe have flooded the world economies with more capital than after the 9/11 crisis. Hopefully this crises will end soon but it has not yet. Choose your lender carefully based upon referral or your own experience. Stay informed. Let us know what you think will happen next.

Michael Sedloff (mlsedloff@southlandequities.com)

This blog is provided to you as an educational tool. It doesn't take a nuclear scientist to arrange a real estate loan but taking a new loan without  proper understanding can create a headache.

Please provide comments and questions so this blog can produce a meaningful dialogue.

San Diego housing is not falling apart. In fact it is doing much better than many neighboring communities. Sales have slowed 45% over the last three years.  Still there were 19,184 homes sold in the first six months of 2007.  There is inventory of near 20,000 homes which sells on average in just over six months. Communities where there was lots of developable land  like Phoenix, Arizona have over 60,000 homes for sale.

Headlines scream about foreclosures. In San Diego there were 2,896 foreclosures in the first six months of 2007 out of nearly 800,000 housing units. Less 1/2% of  all homes have gone to sale. Most foreclosures were on properties purchased after 2004 with low or zero downpayments. Some foreclosures are the result of teaser rate loans which created rising loan balances because all outstanding interest was not paid as part of the loan payment. In Southern California Riverside county has had the highest number of foreclosures and within San Diego the biggest foreclosure areas per capita have been Chula Vista, Otay, Spring Valley and Downtown San Diego. A Areas where the most new construction occured are the most affected.

Going forward interest rates are near their low for the year with fixed rates in the low to mid 6% range. Inventory will decline over the next eighteen months in part because there is little new construction on the boards for 2008. Prices may decline further but many communities with limited numbers of homes for sale will remain minimally affected. Our population keeps growing and there is a continuing shortage of land to build new housing units. San Diego will continue to outperform the country because of its desirable location and the land shortage which limits new development.

With a fixed-rate loan, your monthly payment of principal and interest never change for the life of your loan. Your property taxes may go up (we almost said down, too!), and so might your homeowner's insurance premium part of your monthly payment, but generally with a fixed-rate loan your payment will be very stable.

Fixed-rate loans are available in all sorts of shapes and sizes: 30-year, 20-year, 15-year, even 10-year. Some fixed-rate mortgages are called "biweekly" mortgages and shorten the life of your loan. You pay every two weeks, a total of 26 payments a year -- which adds up to an "extra" monthly payment every year.

During the early amortization period of a fixed-rate loan, a large percentage of your monthly payment goes toward interest, and a much smaller part toward principal. That gradually reverses itself as the loan ages.

You might choose a fixed-rate loan if you want to lock in a low rate. If you have an Adjustable Rate Mortgage (ARM) now, refinancing with a fixed-rate loan can give you more monthly payment stability.

Adjustable Rate Mortgages -- ARMs, as we called them above -- come in even more varieties. Generally, ARMs determine what you must pay based on an outside index, perhaps the 6-month Certificate of Deposit (CD) rate, the one-year Treasury Security rate, the Federal Home Loan Bank's 11th District Cost of Funds Index (COFI), or others. They may adjust every six months or once a year.

Most programs have a "cap" that protects you from your monthly payment going up too much at once. There may be a cap on how much your interest rate can go up in one period -- say, no more than two percent per year, even if the underlying index goes up by more than two percent. You may have a "payment cap," that instead of capping the interest rate directly caps the amount your monthly payment can go up in one period. In addition, almost all ARM programs have a "lifetime cap" -- your interest rate can never exceed that cap amount, no matter what.

ARMs often have their lowest, most attractive rates at the beginning of the loan, and can guarantee that rate for anywhere from a month to ten years. You may hear people talking about or read about what are called "3/1 ARMs" or "5/1 ARMs" or the like. That means that the introductory rate is set for three or five years, and then adjusts according to an index every year thereafter for the life of the loan. Loans like this are often best for people who anticipate moving -- and therefore selling the house to be mortgaged -- within three or five years, depending on how long the lower rate will be in effect.

You might choose an ARM to take advantage of a lower introductory rate and count on either moving, refinancing again or simply absorbing the higher rate after the introductory rate goes up. With ARMs, you do risk your rate going up, but you also take advantage when rates go down by pocketing more money each month that would otherwise have gone toward your mortgage payment.

This blog is provided to you as an educational tool. It doesn't take a nuclear scientist to arrange a real estate loan but taking a new loan with proper understanding can create a headache.

Please provide comments and questions so this blog can produce a meaningful dialogue.

Mike Sedloff

Loan Expert Blog-How To Improve Your Credit Score

Tip for the week of 6/27/07

How can you improve your credit score?

It's virtually impossible to change your score in the time between when most people decide to buy a home or refinance their mortgage and when they apply. So the short answer is, you really can't "on the spot." But there are strategies you can live with to make sure when you apply for a loan your score is as high as possible.

Make sure that the information each of the three credit reporting bureaus has on you is consistent and up to date. Order a copy of your credit report about once a year, and dispute any inaccuracies.

Note: Theoretically, if a series of credit reports is requested on your behalf during a limited amount of time, your score goes down until time passes without any inquiries. Changes in the law though have made "consumer-originating" credit report requests not count so much. Also, a series of requests in relation to getting a mortgage or car loan is not treated the same as a number of credit card requests in a limited time. This is because the credit bureaus, and lenders, realize that people request their own credit reports to keep up with what's on them, and smart consumers shop around for the best mortgage and car loans.

Unsolicited credit card solicitations in the mail don't count against your credit report, so don't worry.

The two main components of your credit score are your payment history and the amounts you owe. Bankruptcy filings and foreclosures, which can stay on your credit report for as many as 10 years, can significantly lower your score. It's never a good idea to take on more credit than you can handle.

Late payments work against you. It's extremely important to pay bills on time, even if it's only the monthly payment.

Dont "max out" your credit lines. Since the size of the balance on your open accounts is a factor, lower balances are better.

It's said that by carefully managing your credit, it's possible to add as much as 50 points per year to your score.

 Learn About Your Home Loan  

Learning about  a home loan does  not require a brain surgeon but failing to understand the loan you have or have been offered may cause a headache. Not all loan products will meet your needs.  In the name of affordability new loan products are both complex and confusing.

Today some borrowers who have obtained loans they did not understand may now have loans they cannot afford to repay. In this blog,  I will provide clients, their friends and associates my thoughts on loans and loan related issues. I will help you understand the loan you have or have been offered.  Learning about loan risk goes beyond loan rate. Please subscribe and stay tuned. Education is the best way to turn confusion into understanding.   

Mike Sedloff 

Loan Expert Blog  

Tip for the week of 6/25/07

Will you recieve the loan you have been promised by your lender? 

Recent interest rate increases may make loans not locked impossible to obtain. Is the loan your lender has promised truly locked? To protect yourself, ask your lender or broker to put in writing the terms, costs and lock expiration date of your loan lock.

Even locked loans may not be deliverable if they are not approved. Ask your lender or broker what documentation is needed to obtain final approval. Ask them whether any of the following are likely to be an issue in loan approval?

1) Income documentation

2) Your credit and/or credit score

3)Your reserves (Monies available for downpayment, closing costs or reserves)

4) Your property value and/or loan to value.

5) Owner occupancy

If these items are not issued, then you are more likely to be approved and obtain the loan you have been offered.

Understanding a home loan does  not require a brain surgeon but failing to understand the loan you have been offered may cause a headache.

With thirty years home lending experience under my belt,  I am very concerned about the  loans our industry are marketing to borrowers. In the name of affordability new loan products are both complex and confusing.

Many loan officers do not understand the loans they market. Many borrowers have obtained loans they did not understand and now have loans they cannot afford to repay. Many lenders did not understand the implications of the loans they have created.

In this blog,  I will provide clients, their friends and associates my honest comments on loans that you allow me to review.  I will comment on loan rates, terms and implications.  I will touch on different loan risks and benefits  each week,  so please subscribe and stay tuned. Education is the best way to turn confusion into understanding.   I want to help.

Mike Sedloff