Erie Real Estate

New Good Faith Estimate (GFE)

Good Faith Estimate video.  This is the new Good Faith Estimate (GFE) that want into effect 1/1/10.  The idea according to the Government is that it provides more information to the consumer and lessens the likelyhood of fraud by the lender.

Yes, it's good because the terms are clearly spelled out - interest rate, loan term, prepayment penalty, etc.  Settlement charges, transfer taxes, homeowner's insurance, etc. again, clearly spelled out.

At the bottom of page #1, #2, and #3 you have "Total Estimated Settlement Charges" of that equals a specific $ amount.  Again, very clear.

Here's my problem:  What is the downpayment?  Where is the downpayment listed?  Can you find it?  I'll bet you can't.  Why?  Because, it's not listed.  They just made it more confusing by telling the Borrower a not so complete "Total".

Mortgage Terms

Ballon Mortgage - A mortgage note with an amortization schedule that does not extinguish the debt by the of the term.  A large (balloon) payment of the remaining balance is required at the end of the term.

CAPS - Interest Caps: A limit on the amount the interest rate on an adjustable rate mortgage can change per adjustment and/or over the life of the loan.  Payment Caps: A limit on the amount the monthly "principal and interest" payment can change, per adjustment.

Understanding credit scores

What is a credit score? It's a number calculated based on your credit history and gives lenders a simple "lend of don't lend" answer when considering approving a loan.  Your credit score constantly changes as new information is added.  Lenders use a credit score to determine the level of risk associated with approving a loan and the appropriate interest rate for that level of risk.

How is level of risk determined?  The system awards points based on information contained in the credit report and the resulting score is compared to other consumers with similar profiles.  Lenders then can predict how likely someone is to repay a loan and make payments on time.  The lower scores have a higher percentage of late payments and a greater risk is assumed by the lender.

Calculating your score.  Think of your credit score as you would a grade in school.  Your score is determined by the following factors:

• 35% of the score is based on payment history
• 30% is based on outstanding debt.  How much do you owe on your car, mortgage or credit cards?
• 15% is based on the length of time you have had credit.  The longer you have esstablished credit the better it is for your overall score
• 10% is based on new credit.  Applying for new credit cards or loans will begatively affect your credit score.
• 10%  is based on the types of credit you currently have.  the mix of loans and available limits can make a difference.

Your score affects...  Your score not only affects whether you get the loan; it also affects how much that loan is going to cost.  As your score increases, your credit risk decreases.

Remember - good credit pays!

Fannie and Freddie - upping the fees

Fannie Mae and Freddie Mac are both toughening their credit score and down-payment rules as of April 1.  Under the new guidelines, buyers with down payments of less than 25 percent will be charged a three-quarter point add-on penalty, no matter how high their credit score.  You gotta love it - they in large part created the problem, now their answer is charge more.

In response, major lenders are already factoring in the higher fees, which reduces the effectiveness of the stimulus efforts.  Again, I like it - lenders are already factoring in the higher fees.  Sounds like gouging the consumer, again.  How can they do this?

Here's some good news - mortgage rates were down for the week:

• 30-year fixed-rate mortgages decreased to 4.99 percent from 5.19 percent;
• 15-year fixed-rate mortgages decreased to 4.66 percent from 5 percent;
• 1-year ARMs decreased to 6.10 percent from 6.22 percent

Source: Mortgage Bankers Association (02/18/2009)