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How the New Mortgage Rules May Affect New Graduates

by The Jamey Kramer Group

How the New Mortgage Rules May Affect New Graduates

Have you recently graduated from college?

Are you excited about purchasing your first home?

Buying your first home is an amazing moment in life. It is a moment that you will remember forever. However, new mortgage rules may mean that recent college graduates will have a harder time getting approved for a mortgage.

New graduates are facing a lot when they step off campus and onto the streets. While the economy is coming back, there is still too much unemployment. In addition, the rising cost of college tuition means that many new graduates will be saddled with sizable student loans.

Preventing Another Housing Crisis

In a comprehensive effort to prevent another housing crisis, the government has created a set of standards, the Qualified Mortgage Standards Under the Truth in Lending Act. These new standards must be met if the lenders want the mortgages to be protected from lawsuits in the event borrowers are unable to pay. They were created to ensure that lenders only issue loans to those who can afford to repay them.

Banks all across the United States are already starting to implement these new mortgage rules. So, what is changing and why would it affect recent college grads?

In our article, What Determines If You Qualify for a Mortgage, we reported about 8 factors that will determine if you qualify for a mortgage. There are a few factors that directly impact those who have recently graduated from college.

4 Factors That Directly Impact Recent College Graduates

  1. Employment Status
    The first factor that will directly affect new college graduates when applying for a home mortgage is their employment status. Even if a new grad gets hired right away, banks are looking to lend money to those who have been employed for at least 2 years.
     
  2. Income
    Another piece that banks will want to see is 2 years of income. They will ask recent graduates to show 2 years worth of W2s.
     
  3. Student Loans
    Many college students make it to graduation because of student loans. These days, student loans can be used to cover the cost of books, cars, rent and tuition. While in school, student loans can feel like a life saver, but when you are out of school these types of loans can make banks feel pretty nervous about lending money especially if they have amounted to a sizable sum of money.
     
  4. Debt-to-Income Ratio
    Lenders will be looking at the debt-to-income ratio. The magic number here is 43%. Your monthly debt (student loans, car payments, credit cards, etc.) cannot exceed 43% of your income.

What Should a College Graduate Do?

If you have recently graduated and are looking to purchase your first home, this news may be frustrating. There are few things you can do.

  • If you are still in school, get a part time job with a company you will want to work for after you graduate. When you graduate, you will be able to report that you have been working there for a year or two. You may also minimize unemployment time after graduation if that company hires you full time after graduation.
  • Pay off your credit cards and other loans as soon as possible. Get your debt lower so you can purchase more house for your money.

Summary

As a recent college graduate, there are factors that will come into play when you apply for a home mortgage. There are practical tips that you can implement to help increase your chances of being approved for a loan when you are ready to purchase your first home.

When you are ready, you may like to consider looking at the family-friendly cities of Northville and Novi, Michigan. We would be honored to help you find that perfect home. Please call our office at:

248-348-7200

What Determines if You Qualify for a Mortgage?

by The Jamey Kramer Group

What Determines if You Qualify for a Mortgage?

Would you like to purchase a home this year?

Not sure what it takes these days to qualify for a mortgage?

The housing market is coming back especially in the Metro Detroit area. It is now a prime time to purchase a home in Southwest Michigan. If you are interested in purchasing a home in the near future, you will want to be aware of the stricter rules that are being put in place for mortgage lenders.

Qualified Mortgages

The new Qualified Mortgages rules are the federal government’s response to preventing another housing crisis. According to Forbes.com

“The Qualified Mortgage rules are intended to ensure that lenders issue loans only to those who can afford to repay them.”

Lenders are now legally responsible for loans they issue according to the Qualified Mortgage Standards Under the Truth in Lending Act. However, if the mortgage meets the Qualified Mortgage requirements, the mortgage loan will be protected from lawsuits if the borrower is unable to repay.

8 Factors That Determine Qualified Mortgages

It is easy to draw the conclusion that as mortgage rules become stricter, it is likely it might get harder and harder to qualify for a mortgage loan. While some banks are still issuing non-qualified mortgages, you can bet those loans will be under strict rules as well since they are not protected. With that in mind, today we wanted to share 8 factors that go into determining a Qualified Mortgage.

  1. Employment Status
    It should come as no surprise that the banks will want you to be employed if they are going to issue you a mortgage loan. The mortgage lenders will most likely want to see at least 2 years of employment.

     
  2. Income
    Make sure to have on hand the past 2 years of W2s or income tax returns. If you have any assets, make sure to provide that information as well.

     
  3. Monthly Mortgage Loan Payment
    The banks are going to want to see how much per month your mortgage will cost you.

     
  4. Other Property Loans
    Some equity loans will fall under this category and the lenders will want to know about them.

     
  5. Other Monthly Housing Costs
    Costs like HOA dues, property taxes and even mortgage insurance will also be included when determining a Qualified Mortgage.

     
  6. Other Financial Commitments
    Banks will be taking into account credit cards, student loans, alimony and even child support.

     
  7. Debt-to-Income Ratio
    The debt-to-income ratio will be looked at on a monthly basis and it means that your monthly debt cannot be more than 43% of your monthly income.

     
  8. Your Credit History Your credit score will help to determine whether or not you as the borrower are eligible for a Qualified Mortgage.

You may learn more about the Qualified Mortgage features by checking out our article, What A Qualified Mortgage Is and How New Mortgage Rules Will Affect You

Summary

The new requirements of the Qualified Mortgage Standards Under the Truth in Lending Act have been put in place by the federal government to ensure that another housing crisis does not take place in the United States. Lenders will be held accountable and will be collecting documents and analyzing numbers.

If you or someone you know is interested in purchasing a new house, please call our office. We will be happy to help untangle the web of mortgage terms and requirements to help get you the house of your dreams.

248-348-7200

11 Real Estate Terms Made Easy

by The Jamey Kramer Group

Real Estate Terms Made Easy

Do you feel like your real estate agent is speaking another language?

Are you wondering what Escrow or PMI is?

Buying a home should be an enjoyable experience and one of the most exciting times of your life. Sometimes though, searching for a home isn’t everything you dreamed it would be. You may even feel like your real estate agent is speaking another language.

At the Jamey Kramer Group, we want to make sure that you have the experience you have always dreamed about when purchasing your home. Whether you are buying your first home or you are looking to move into something that will fit your family more comfortably, we are here to help.

We would like to provide you with common real estate terms with definitions that are easy to understand to help take the mystery out of real estate terminology. Please take a look at the list below and call our office if you have any questions.

Common Real Estate Terms

  1. Escrow
    Escrow is when a third-party holds cash, property or property title until all the terms of the property agreement are met. Once the terms are met, the assets are distributed. An example of the escrow process is when a mortgage lender collects funds for real estate taxes and/or homeowners insurance on the behalf of the borrower on a monthly basis. The funds are held in an escrow account and the lender pays the payments when they are due on the behalf of the borrower.
     
  2. ARM or Adjustable Rate Mortgage
    An ARM or Adjustable Rate Mortgage is a type of mortgage that may have the interest rate adjusted. They usually start off low then adjust periodically accordingly to the market conditions. The adjustments could take place monthly, quarterly, annually or even at a longer time interval.
     
  3. PMI or Private Mortgage Insurance
    PMI or private mortgage insurance protects the lender in case the buyer’s loan goes into default. PMI is generally required on high-risk loans. For example, if someone is putting less than 20% as a down payment, PMI may be required. The PMI can be lifted once your loan-to-value ratio hits a certain rate.
     
  4. LTV or Loan to Value
    According to RealEstateABC.com, the higher the loan-to-value ratio, the more likely lenders will consider it as a high risk loan. The LTV is the percentage of the appraised value of the home, divided by the mortgage (or money owed).
     
  5. Appraisal
    A real estate appraisal is the process of determining the value of a house or property. An appraiser will evaluate the condition of the property, the location, comparable sales of homes nearby and upgrades to help determine the market value of the house.
     
  6. Closing
    The closing in real estate is the final step when a house is transferred from the seller to the buyer.
     
  7. Closing Costs
    Closing costs are fees required in the final settlement of a real estate transaction that are not included in the price of the property. Examples of fees that may be included in closing costs include loan origination fees, escrow deposit fees (several months of property taxes and PMI if applicable), credit check fees and appraisal fees.
     
  8. Comps
    Comps or comparables are homes that are comparable to the property in question. They are used to help determine the value of the property.
     
  9. Down Payment
    The payment that the buyer pays in cash for real estate sale is considered a down payment. Down payments generally range from 3% - 20%.
     
  10. FHA Loan or Federal Housing Administration
    The FHA loan of Federal Housing Administration loan is a loan that is insured by the federal government. This type of loan allows lenders to have a lower risk if the borrower defaults on their payment. You can learn more about if a FHA loan is right for you in our article, FHA Loans and Qualifications for First Time Home Buyers.
     
  11. Fixed-Rate Mortgage
    A fixed-rate mortgage is a mortgage where the interest rate does not change for the term of the mortgage loan.

Your Turn   

Is there a real estate term that you would like to learn more about that is not covered on this list? We would be happy to help. Please give our office a call.

 248-348-7200

Property Values Rise in Metro Detroit

by The Jamey Kramer Group

Property Values Rise in Metro Detroit Has your home’s value risen?

Are you ready to move out of your current home and into your dream home?

There is more good news for Metro Detroit residents. Property values are on the rise! This means that if you are living in the Detroit metropolitan area, your home is now worth more than it was a year, 2 years, maybe even 5 years ago. The last time we have seen home prices like this was in the mid-1990s.

Home values are up 52% since the end of 2009 according to an article published by the Detroit News. Would you like to hear even more good news? Kurt Rankin, a bank economist from PNC, is forecasting more growth. He stated, “While it’s slowing, growth will remain in positive territory.”

Metro Detroit Cites Seeing Growth

Here are a few specific examples of Metro Detroit cities that are seeing a growth in property values in the last year:

  • Northville and Northville Township: In the city, there has been a 12% rise and in the township, an 8.7% rise in property values.
  • Novi and Novi Township: The city saw an 8.62% rise and the township saw an 8.84% rise in property values.

Shortage of Available Properties for Sale

With the value of homes rising, another interesting thing has happened. We are noticing a shortage in available properties for sale. It is a simple case of supply and demand. In this case, the supply of available houses on the market for sale is low, and it is driving home values up.

While many Michiganders are still unsure about the latest news reporting that home values are up, those who are putting their homes on the market are seeing a quick turnaround.

Why the Comeback?

In our article, 4 Reasons Why 2013 Had the Highest Home Sales Since 2006, we shared that all across America people are selling and purchasing homes. We talked about the 5 million previously owned homes that were sold last year alone.

One of the biggest reasons why homes are selling is that home prices have increased and homeowners that want to sell are no longer underwater in their mortgages. Other reasons include lower mortgage rates, less foreclosures and more employers hiring.

Is Your Once Perfect Home No Longer Suitable?

One of the most frustrating parts of the housing crisis is when people started to feel stuck in a house that no longer fit their family’s needs. They may have bought that house thinking it would be perfect, but then life happened and their once perfect home was no longer suitable.

If you live in the Metro Detroit area and have been dreaming about selling your current home and purchasing your dream home, please give our office a call. We would love to help you sell your home and find that perfect home that you have been dreaming of.

248-348-7200

 

4 Reasons Why 2013 Had the Highest Home Sales Since 2006

by The Jamey Kramer Group

4 Reasons Why 2013 Had the Highest Home Sales Since 2006

Is the housing crisis really over?

Why was 2013 such a great year for home sales?

2013 turned out to be a good year if you were hoping to sell your home. We haven’t seen numbers like this since the housing boom of 2006. There are a few reasons why the housing market made a rebound last year.

If you were wondering what some of those numbers were, the following will give us the answers:

  • 5 million previously owned homes were sold last year.
  • 9.2% more previously owned homes were sold in 2013 than in 2012.
  • 20% more previously owned homes were sold in 2013 than in 2011.

According to CNN Money,

The median price of a home sold in the year was $197,100, up 11.4% from the previous year.”

With so much good news, it may have you wondering why. Why was last year such a great year for the housing market? Today, we would like to share with you 4 reasons why 2013 had the highest home sales since 2006.

  1. Employment Is Up
    In November of last year, the U.S economy had already added 2.1 million jobs, according to CNN Money. Now, the recession isn’t quite over and the unemployment numbers are still too high. However, with more Americans being employed, more Americans felt comfortable enough to purchase a home.
     
  2. Mortgage Rates
    Towards the end of the year, we saw mortgage rates rise from the all time low that it had been at. This rise enticed many Americans to take the plunge, purchase their home, and take advantage of the low rates before they disappeared altogether.
     
  3. Home Prices Are Up
    One of the biggest obstacles that many Americans have faced over the last few years was that they owed more on their home than the home was worth. This is called being underwater with your mortgage.

    All over the country people are seeing the value of their home rise.

    In our article, Michigan Home Prices Are on the Rise, we shared the great news that home prices were making a comeback, and in fact many in the Detroit area had risen to where they were at in 2008.

    Not only that, but from October 2012 and October 2013 median home sale prices rose 42%.
     
  4. Foreclosure Crisis Coming To An End
    In Michigan, we saw foreclosures rates drop 37%. That was the lowest we have seen since December of 2005. In our article, Foreclosure Crisis Comes to an End, we covered if the crisis had really come to an end and why.

All of the above reasons make up the best year in home sales since 2006. Be encouraged, especially if you are looking to sell or purchase a home.

Why do you think 2013 was such a great year? Do you have a reason we didn’t list?

What a Qualified Mortgage Is and How New Mortgage Rules Will Affect You

by The Jamey Kramer Group

What a Qualified Mortgage Is and How New Mortgage Rules Will Affect You

What is the debt-to-income ratio guideline?

Are you looking to purchase a home this year?

On January 10, 2014, new mortgage rules went into effect. The Qualified Mortgage rules that have now been implemented were designed to prevent another housing crisis. The new regulations will require banks to assure that the borrowers can repay loans.

The goal of these new regulations is to prevent another housing bubble and to provide safer loans.

What is a Qualified Mortgage?

A Qualified Mortgage is a type of mortgage that meets a new set of standards set by the federal government.

Borrowers who qualify for this type of mortgage have been deemed to have the ability to pay for their mortgage. By issuing these types of loans, the lender is protected against lawsuits if the mortgage goes bad.

Qualified Mortgage Features

The following are features of Qualified Mortgages.

  • Points and fees charged to the borrower during the mortgage process and the closing will not exceed 3% of the total loan amount.
  • Prohibits interest-only loans. An interest-only loan is when the borrower only pays on the interest and in turn defers the principal payment.
  • Eliminates negative-amortization loans. Negative-amortization loans are loans where the principle of the loan increases over time, even if the borrower is faithfully making the monthly payments.
  • 30-Years or Less. The length of these loans must be 30 years or less.
  • Debt-to-Income ratios are now limited to 43%.

Affects of the New Mortgage Rules

According to Forbes.com,

 “The new rules could affect people particularly in the middle class and Midwestern region, where home prices (and thus loan amounts) tend to be lower. The reason: the new rules effectively limit the fee a mortgage broker can charge, which in turn makes loans under a certain cap not profitable for mortgage brokers.”

Forbes goes on to report that the loans between $110,000 and $160,000 are those most likely to be affected. Don Frommeyer, president of the Association of Mortgage Professionals, confirms that this is the core of where the problem is.

Banks Continue to Issue Non-QM Loans

Some banks are reporting that they will still be issuing non-QM loans. Banks who choose to do this will not sell the loans to Fannie Mae or Freddie Mac. Instead the bank will be responsible if the loan goes bad.

What do you think?

How will these new features affect the housing market? Do you think that they will have a negative or positive effect?

Tougher Lending Rules May Mean More Expensive Mortgages

by The Jamey Kramer Group

Mortgage News

Are you considering buying a home in the near future?

Tougher rules have been placed on banks all throughout the country this month, and this is only the start. The rollout will continue until March. What do the tougher lending rules mean, and how will they affect the average American looking to purchase a home with a mortgage loan? Keep reading for those answers and more.

What Do the Tougher Lending Rules Mean?

Fannie Mae and Freddie Mac announced new guidelines last month that, along with the new federal rules going in effect, could mean rigid penalties.
These guidelines will impose stiff fines on banks that write unconventional mortgages that later go bad.

How Does This Affect the Average American Looking to Purchase?

Fannie Mae and Freddie Mac do not offer or originate new mortgages. Instead, according to Time Business & Money, “they buy about two-thirds of the conventional mortgages that banks underwrite.”

What this all means is that the bank down the street is going to have even less ability to work with the average American Joe on his mortgage rate. If “average Joe” has a low credit score and a low down payment, the cost of the mortgage is likely to rise.

Where Will the Average American See the Cost Spike?

The average American will see a higher percentage rate for a mortgage. While it may seem like the difference between 4.5% and 5% isn’t significant, it actually means the difference of $21,697 over the length of a 30-year loan.

According to Time Business & Money,

    Fannie and Freddie have a floating grid of cost hikes for borrowers up and down the credit spectrum and for those with down payments below 20%. For example, a borrower seeking a 30-year fixed-rate mortgage with a credit score of 735 and making a 10% down payment would pay about .4 percentage points more—4.9% instead of 4.5%. A bigger down payment would help but even with 25% down a borrower with a credit score below 760 would pay a premium rate.

Mortgage Rates on the Rise

Last week, Yahoo Finance reported that we are already seeing a rise in mortgage rates. The rise is slight, but a rise nonetheless. These numbers were published on the 7th of January:

  • 30-Year-Mortgages:  4.39% versus the 4.38% we saw the week before.
  • 15-Year Mortgages: 3.35%
  • 5/1 ARM: 2.85%

While January isn’t normally the month that Michiganders move, it might be the perfect time to consider moving, especially if you have lower credit.

Are considering buying a home this winter? Please read our article, 3 Secrets to Why You Should Buy a Home This Winter.

If you would like to start looking for a home that is the perfect fit for you, please give our office a call. We would love to help assist you in getting into the home of your dreams.

248-348-7200

Foreclosure Crisis Comes to an End

by The Jamey Kramer Group

Good News

Have you seen less and less foreclosure signs in your neighborhood?

Will There Be More Foreclosures in 2014?

Happy Holidays and Merry Christmas Eve everyone! The holidays are always an exciting time of year. They are a time to celebrate, relax and to be thankful. It is also a great time to be with friends and loved ones.

We wanted to share with you something that you and your loved ones, and actually any American, can celebrate this holiday season. On this Christmas Eve, we would like to share fantastic news about the housing market.

According to an article published by the Detroit Free Press, Daren Blomquist, RealtyTrac vice president stated,

        “The depth and breadth of the decrease provides strong evidence that we are entering the ninth inning of this foreclosure crisis."

No one will contest that the last 5 years have been difficult. Prior to this housing crisis, foreclosures were an uncommon occurrence. Then suddenly, many Americans saw foreclosure signs pop up in their own neighborhoods. Since 2006, over 7.7 million homes fell into foreclosure, went through a short sale or were lost in a home distressed sale.

Good News

The good news to celebrate this holiday is that the season of foreclosure is coming to an end.

The Statistics

If you are like me, you are probably thinking, “that sounds good, but where are the numbers?” In the same Detroit Free Press article, we learned that November proved to be a great month. Foreclosure activity was down by 37% from a year ago in November. That is the lowest foreclosure numbers we have seen since December 2005.

Even Better News

Michigan was not even one of the states with the highest foreclosure rates. Those states were: Florida, Delaware, Maryland, Illinois and South Carolina.

The article also pointed out that there might be a little fight from foreclosures during this coming year. However, it was reported that a foreclosure comeback that could threaten the housing recovery was “highly unlikely”.

What Does This Mean For You?

This positive news means that right now or sometime in 2014 might be the perfect time for you to move into your dream home. You may have been waiting and stayed in a home that your family has outgrown. Now is the ideal time to take the next step and start looking for your next house.

Michigan is the perfect state to do that in. With lower costs of living and the rebounding economy, you can get a lot of home for your money. Cities like Northville and Novi, Michigan offer a small town feeling while being close to a big city. If you have any questions about moving into these areas or if you are eager to start looking, please call our office at 248-348-7200. We would be honored to help.

Have a wonderful holiday week everyone, and please make sure to visit this page on Thursday if you would like to know where to go out for New Year’s Eve.

Underwater, Under Equity or Low Equity Mortgages

Do you dream of owning a bigger home?

Have you have been told that you are “underwater” with your mortgage? Or perhaps you have heard that your home is under equity or has low equity. Do these terms have you wondering what they actually mean? The truth is you wouldn’t be the first person in America to be told this information.

Unfortunately, for the past few years many people all across the country have been told they are “underwater” with their mortgage. If you have questions about what it means to be “underwater” and how to get above water, this is the article for you.

Today, we are going to share with you a few terms you need to know when looking to sell your home. We won’t just share the definitions with you, but we will also give you some options. Your dream home could be right around the corner.

Underwater Mortgages

When someone says they are underwater with their mortgage it usually means they owe more on their house than the house is worth. Many, many Americans found themselves underwater with their mortgages in the past few years.

Although the housing market is improving, data recently published by CoreLogic as reported by USA Today indicates that almost 13% of homeowners with a mortgage are still in negative equity territory. According to Zillow.com, an example of being underwater is when your home is worth $250,000, and you owe $300,000 on the mortgage.

Under Equity or Low Equity Mortgages

The terms “under equity” or “low equity” mean that that the homeowner has less than 20% of home equity. This is important because in order to finance a mortgage without paying for private mortgage insurance (PMI), you will need to have 20% home equity.

What to Do About It

Here are 2 options that you have if you are looking to move on from your current home and have an underwater, under equity or low equity mortgage situation.

  1. Rent It Out

    If it’s time to move, but you don’t have the equity to put down on a new house, one option is to rent your current home out. You can use the rent money that you are paid to cover the new mortgage until the home value goes up.

    In our article, Michigan Home Prices Are on the Rise, we shared about how Michigan has made it into the top 5 states in America with year-over-year home prices gains.  In addition to that, median home sales prices are up 42% from last year.

  2. Make a Few Home Improvements

    A great way to increase your home’s value is by making a few home improvements. What is even better is that you don’t have to spend a tremendous amount of money to see a return on your investment. Please check out our article, Do Renovations Increase The Value of Your Home?, to find out the most cost effective renovations to do to increase the value of your home.

If you are looking to move into a new home that fits your needs or if you have questions about your situation with an underwater, under equity or low equity mortgage, please give my office a call. We would love to help you find your dream home.

248-348-7200

5 Tips on How to Pass a Home Inspection

by The Jamey Kramer Group

5 Tips on How to Pass a Home Inspection

Are you looking to make sure your home inspection goes smoothly?

When is the best time to prepare your home for inspection? The answer to that question is to prepare now if you are going to be selling your home.

Today, we would like to share with you a few tips to help your home pass inspection. While there are a number of areas where the inspectors will look for physical problems, the following are a few of the more common ones. We have included a few tips as well for passing your home inspection with ease.

  1. Plumbing
    This is one of the first things that inspectors look for when inspecting homes. According to Inspectionnews.com, inspectors are looking for 2 mains things when it comes to the plumbing, leaking and clogging.
     
  2. Get Rid of the Clutter
    If you are looking to sell your home, at some point you need to get rid of the clutter. That means putting away personal pictures, but it also means making sure the inspector has room to assess your plumbing, electrical panels, heating and cooling systems. The last thing any inspector wants to do is to have to move the homeowner’s personal items to do their job.
     
  3. Basement and Attics
    Another to-do on the inspector’s list is to check if the basement and attic are damp or even wet. A few of the things the inspector will be looking for is whether or not you store your own boxes on the floor of your attic or basement. Another is if there is a powdery white mineral a few inches from the floor on the walls.
     
  4. Electrical and Wiring
    Once the inspector checks the basement and the plumbing, it may be time to check the wiring and electrical of your home. The inspector will be examining the wires to make sure that they are copper or aluminum. The inspector will also check your electrical panel and circuit board.
     
  5. Roof
    Your roof will be included in the home inspection. According to Coldwellbanker.com, “A home inspection will check for weak or missing shingles and make an assessment regarding the quality of the roof. If any poor shingles are spotted, an inspector might check underneath to see if the building materials are damaged or rotten.”
     

One of the best things to do before a home inspection is to give your home a good cleaning. Make sure to clean the baseboards and every corner. Make it a point to empty out your appliances and be sure that there is clear access to the basement and attic.

Give your home its best chance of passing the inspection by making the inspector’s job as easy as possible.

Are you considering selling your home?

If you are considering selling your home and have additional questions about home inspections and how you can prepare for one, please give our office a call. We would be happy to answer your questions and honored to help you put your home on the market.

 248-348-7200

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