Is a loan with no fees or origination charge the best deal?

Is a loan with no fees or origination charge the best deal? Maybe. Never forget that interest rate is only half of the equation. Rate AND fees are the whole equation upon which you should make a decision. When talking to borrowers who have been shopping rates, I always ask the same questions. What is the term of the mortgage, are both mortgages fixed rate, and what costs are associated with the mortgage. Sometimes a borrower is comparing a 10 year fixed rate mortgage to a 30 year fixed rate mortgage. We need to make sure we are comparing apples to apples. The longer the term of a fixed rate mortgage, the higher the rate. It is very common when I inquire about the exact dollar amount of the closing costs or fees associated with the mortgage, the borrower does not know the answer because they either were fixated on the rate or it was not properly disclosed.

Fees to obtain a mortgage are referred to as closing costs. Closing costs are defined as all costs associated with a borrower obtaining a mortgage. These costs include, but are not limited to, origination fee, discount points, appraisal, title insurance, flood cert, doc prep, processing, etc. Prepays are charges for property insurance and funds put into the escrow account for property taxes, insurance, etc. Borrowers should always be careful to make sure that they are looking at a true no fee loan, and not one where the closing costs are added to the loan amount. On a true no cost mortgage, except when there is mortgage insurance or a VA funding fee, the interest rate should match the annual percentage rate (APR) as disclosed on the Truth-In-Lending disclosure statement (TIL). If mortgage insurance or a VA funding fee is required, the APR will be higher than the note.

Analyzing the mortgage choices to see what is best for the borrower is simple. Look at the difference between the costs associated with a mortgage and examine how long it will take you to break even. For example, lets compare two thirty year fixed rate mortgages with a mortgage amount of $300,000. One mortgage has a 4.25% interest rate and $6,000 in closing costs and the other option is 4.75% with no closing costs. Principal and interest for the 4.25% mortgage is $1,476 and $1,566 at 4.75%. By dividing the difference of $90 per month into the $6,000 for closing costs, we see that it will take the borrower 67 months to break even. This simplified analysis does not take into account the possible income tax ramifications or the time value of money.

Another important thing to consider is if the money used for closing costs could be better utilized paying off credit cards, kept for liquidity, used to fund a retirement account, etc. A borrower does not want to be equity rich and cash poor. As I know personally, it is very hard to eat equity. Borrowers should always remember to look at the whole forest, and not just one tree. I have noticed mortgage professionals almost always do their personal mortgage on a no cost basis. As always, the answer is to do the numbers and see what is best for your personal situation.

Chip Allen

Crestline Mortgage Bankers

A Division of Universal Lending Corp

Direct: 303.947.2109

Fax: 303.987.0676

Loanchip@hotmail.com

Your Lender for Life!

When people you care about need a mortgage,

for purchase or refinance, please do not keep me a secret.

Click here to Get started searching for YOUR Colorado Dream Home.

Zero interest HUD loan for unemployed homeowners facing foreclosure

HUD, in conjunction with NeighborWorks America, announced Monday a new program to help homeowners facing foreclosure due to involuntary unemployment, underemployment, economic conditions, or a medical condition. The program will be available for 27 states across the country and Puerto Rico. The Emergency Homeowners Loan Program (EHLP) provides for an interest free loan which pays a portion of their monthly mortgage for up to two years or $50,000, whichever comes first. The EHLP program will include missed mortgage payments (including principal, interest, taxes, and insurance), or past due charges, AND attorney fees. I think it was a wise idea to include attorney fees in this program because the last time most attorneys worked pro bono (for free), Latin was the common language.

Obviously the potential for scam artists to try and profit off of the misery of distressed homeowners is real and an area of deep concern. Borrowers should be very, very, careful about mail solicitations, or radio and TV ads requiring consumers to pay upfront fees or membership fees. More information about this program may be obtained at www.FindEHLP.org or by calling 1-855-FINF-EHLP (346-3345). Homeowners should look at the website. If they need help go to a HUD approved counselor or contact the loan officer or real estate agent who were involved in the purchase of the home. True professionals provide service to their clients before and after the sale.

I would encourage applicants to put their contact information such as name, email address, and file number on every document they provide. Emailing seems to work better than faxing, but if you must fax I would put Page 1 of 10, 2 of 10, etc on the top right corner if all information provided. Keep the information you have provided organized and accessible, and follow up to make sure it arrived. Everyone involved in this process needs to be on the same page, and the people who will be processing the applications are not mind readers.

NeighborWorks America, www.nw.org, is the nation's leader in affordable housing and community development. It is involved with more than 235 community development organizations in all fifty states, the District of Columbia and Puerto Rico. It is a legitimate organization that I admire.

Chip Allen

Crestline Mortgage Bankers

A Division of Universal Lending Corp

Direct: 303.947.2109

Fax: 303.987.0676

Loanchip@hotmail.com

Your Lender for Life!

When people you care about need a mortgage,

for purchase or refinance, please do not keep me a secret.

Click here to Get started searching for YOUR Colorado Dream Home.

Top Of The Hill In Lone Tree, Colorado

As with the rest of the home, even the lot of this 9,729 square feet, 4-bedroom, 7 bath home enjoys thoughtful design that flows effortlessly from one beautiful and useful space to another. On the way to the front door, one feels welcomed by lush landscaping and a perfect laughing waterfall splashing gently as it cascades to a quiet brook. The property abuts to Bluffs Regional Park, designated open space. The views, privacy, and access to open space will always remain unspoiled.

For more information, check out http://coloradodreamhouse.com/featured/property.php?id=7

Call Dan Polimino at 303-522-1161 or Gary Lohrman at 303-829-5900 for a private showing.

Forget Case-Shiller. By Dan Polimino.

It’s safe to say that all real estate is national, but not all-national real estate is local. What do I mean by that? It simply means that yes, our local neighborhoods and markets make up the total national real estate picture, but the national real estate picture may not be a fair representation of our local market. I hear buyers and sellers all the time talking about the Case-Shiller Index. I hear them quoting national real estate statistics like they apply to Denver and the neighborhood where they are interested in buying. So, you may be asking yourself, “Why don’t all the national real estate reports matter or apply to Denver?” The reason is that real estate is, and has always been a local event. What is happening on the ground, in say, a neighborhood like Washington Park, cannot possibly be represented accurately in a national index or a report in the Wall Street Journal.

I remember back in 2008 and 2009 when it seemed liked everyone in the country was in the middle of the real estate crash. I would call and speak with my fellow Realtors in Dallas, Austin, or the Carolina’s and they would tell me how great their market was doing in the midst of the storm. I used to pull my hair out and could not fathom how they were doing well in the middle of the worst real estate crash in the country’s history. They would go on to explain how their unemployment rate was low and how people were moving from hard hit areas to their cities. They would tell me why people still wanted to live in Dallas, Austin, Charleston, and Durham. These cities had a lot to offer and people were flocking there to improve their situations. This is a perfect example of local markets doing well when the whole national picture told quite a different story. I could go on for another two pages with example after example of cities, towns, and neighborhoods that are bucking the national trends.

The take home point here is yes, it is important to understand what is happening nationally with the economy and real estate, but understand that it may not apply to your local market. When Realtors tell you “this isn’t Florida, Nevada, or California,” they are most likely right and speaking from a position of knowledge and experience.

Dan Polimino is a Realtor with Fuller Sotheby’s International Realty. He can be reached at DPolimino@fullerproperties.com and www.coloradodreamhouse.com/denverpost

Click here to Get started searching for YOUR Colorado Dream Home.