No More Bubbles!

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If you can recall the housing bubble that took place around 2007, many people went after the American dream. The house with the grandiose marble staircase and the luxurious swimming pool became possible to attain because lenders were allowing consumers to borrow the money that was necessary to obtain these gilded desires. However, many lenders neglected to make sure that an individual could afford to pay the money back. Consequently, homeowners that were initially qualified to receive those loans were left in a position where they could no longer afford to repay them. This caused a ripple effect throughout out the entire financial industry and led to the collapse of certain financial institutions.

Now that the market is somewhat recovered, congress is making lenders learn from their past mistakes by implementing the Dodd-Frank Wall Street Reform and Consumer Protection act. The Consumer Financial Protection Bureau issued these new guidelines to mortgage lenders with goals of bringing down foreclosures and preventing future housing bubbles from being created or expanded. The CFPB focused specifically on Regulation Z. This deals with the Truth in Lending Act which directly impacts a consumers ability to purchase a home.

The regulation prohibits lenders from creating a loan without considering the borrowers ability to repay and enforces parts of the Dodd-Frank Act. Regulation Z also prohibits lenders from penalizing borrowers who pay off their loans early and makes lenders retain information that they have been following through on the new guidelines for three years.

Now potential homeowners will receive honest feedback regarding their financial stability and the kind of home they will be able to afford with their loan. Lenders have to make a thorough assessment of a homebuyers' financial income, debt to income ratio and any assets that they may have to determine their ability to repay the loan. For more information about the Dodd-Frank regulations visit the Consumer Financial Protection Bureau website at www.consumerfinance.gov

Source: The Consumer Financial Protection Bureau

Unsure about how to navigate today's unpredictable real estate market? Let us help you make an informed decision and deal with any concerns you have about purchasing the home of your dreams.

Mynor and Associates

Keller Williams Capitol Properties

License 611201301-473-1622

For Sale by Agent/Broker

Pay Off Your Mortgage Faster

I met up with a couple of clients recently from Rock Creek Forest and Rosemary Hills, and the conversation quickly went towards the super low interest rates. While the low rates certainly provided these home owners with a great opportunity to refinance, they wondered what else they could do to pay off their mortgages sooner.

With this conversation in mind, I decided that the information I've posted below would be beneficial for all of my home owners from Whitehall Condominiums to East Bethesda to home owners across the country. So enjoy! I hope it helps you achieve financial freedom sooner than you expected!

BTW If you ever know of anyone looking to buy or sell a home, I'm never too busy for your referral!

A Different Way to Lower Mortgage Payments

Whether you live in Bethesda, San Francisco or New York, refinancing for a lower mortgage payment is always appealing. But the fees and credit requirements can be burdensome.

According to a recent New York Times article, there is another, lesser-known option called “recasting” or “re-amortization” that can work just as well.  Basically, you lower your principal with a lump sum of cash and then reset your monthly payments based on the original interest rate and loan terms. Because your principal has been reduced, your monthly payments decrease and you save on your total interest for the loan. The larger the lump sum you can provide, the more you save. Just making extra payments without recasting only shortens the length of the loan.  It doesn’t reduce your monthly cost.

However, there are some stipulations. Finding a lender that even offers this service can be challenging, and those that do can have restrictions. Many lenders exclude FHA and Veterans Affairs loans. Lenders who do offer this service often require a minimum payment toward the principal and charge a fee. At JPMorgan Chase, the required minimum is $5,000 with a $150 fee. In addition, interest-only and adjustable-rate loans generally aren’t eligible, and a borrower must be current with all mortgage payments.

Lenders aren’t obligated to recast mortgages, and most don’t advertise it.  But in an effort to be more customer-service-focused, they will consider requests on a case-by-case basis.

This scenario typically works well for those who might not qualify for refinancing due to bad credit or self-employment.  It’s also good for anyone with extra cash like a year-end bonus, a tax refund, or proceeds from the sale of another property. It doesn’t make sense for anyone with interest rates of 5 percent or lower, since the extra cash would yield more being invested in something with a higher return.

Whether you choose refinancing or recasting, make sure it’s the right decision for your current situation. Don’t rob Peter to pay Paul just to get a lower interest rate.

Contact me today for expert help buying or selling in the DC, MD, & VA area!