Factors That Influence Your Refinance Rate

Rock-bottom mortgage rates entice homeowners to refinance, but many borrowers are surprised to find that the advertised mortgage rate is not necessarily the refinance rate they will be offered. In fact, mortgage rates for a refi on any given day can vary by as much as a full percentage point or more, depending on various factors.

"A mortgage rate sheet looks like a menu, and there's a grid of available rates we see each day," says Peter Boyle, a senior loan originator with Summit Mortgage in Plymouth, Minn.

"There are lots of things that influence an individual's mortgage (refinance) rate, including whether or not they pay points."

Paying one point, equal to 1% of the loan amount, typically lowers the mortgage rate by one-quarter of a percentage point.

"Most advertisements for low mortgage rates show the rate with one or more points," says Pat Cunningham, vice president of Home Savings and Trust Mortgage in Fairfax, Va. "We don't recommend a lot of loans with points because of the rarity of actually recouping the money. Most borrowers refinance again or sell before they reach the break-even point from purchasing points."
Here are other factors that can influence your mortgage refinance rate.

Credit Score

Generally, the lower your credit score, the higher your refinance rate will be, says Jim Linnane, a senior vice president with Wells Fargo Home Mortgage near Chicago.

Many consumers don't realize what a big impact their credit score has on their refinance rate, Cunningham says. "For example, a credit score of 695 is pretty decent and we don't generally think of that as a bad score. But borrowers with that credit score can pay as much as three-eighths or one-half a percentage point higher on their mortgage rate compared to someone with a credit score above 760."

Loan Term

"The yield curve changes sometimes, but generally, a 15-year fixed-rate loan is lower than a 30-year fixed-rate loan," Linnane says. "You can even do a 10-year loan for a lower rate. Right now, a 15-year mortgage has an interest rate about one-half percent lower than a 30-year loan."

Loan Size

If you need to borrow a large amount of money, greater than the conforming loan limits, you'll pay an interest rate of at least three-quarters of a percentage point higher for a jumbo loan, Cunningham says.

Small loans sport higher interest rates, too. "Once the loan amount gets below $150,000, there's usually a small add-on to the interest rate," Boyle says. "The add-on is larger when you get below $100,000 or $50,000 because lenders make very little money on loans of that size."

Loan to Value

The loan-to-value ratio refers to the amount you owe compared to the appraised value of the home. If you owe $90,000 on a house that's worth $100,000, then your loan-to-value ratio, or LTV, is 90%. If you owe $70,000 on the same house, the LTV is 70%.

Mortgages with a loan-to-value ratio greater than 80% require mortgage insurance. Linnane says borrowers have the option of paying their mortgage insurance upfront or over the life of the loan, but they can also opt for "lender-paid" mortgage insurance, which covers the cost of the mortgage insurance with a higher interest rate.

Type of Refinance

"Borrowers who are applying for a rate-and-term refinance will typically pay the same mortgage rate as borrowers who are purchasing a home," Cunningham says. "If you are applying for a cash-out refinance, you'll typically pay a mortgage rate about one-fourth percent higher if your loan-to-value is at 70% or above. Usually there won't be a bump-up in the mortgage rate if your loan-to-value is 60% or lower, even if you do a cash-out refinance."

Loan-Lock Length

"A longer loan-lock period generally comes with a higher price," Boyle says, and that translates into a higher refinance rate. "You'll see a variance in the rate from 0.125% to 0.375% depending on whether you lock in your rate from 30 to 45 or 60 days."
Boyle says homeowners who want to refinance a mortgage usually need to lock their rate for at least 60 days.

Type of Residence

Cunningham says that condominiums are considered slightly more risky than single-family homes and town houses, so condo borrowers will typically be quoted a refinance rate that is 0.125 to 0.25 of a percentage point higher than the best interest rates.

by Michele Lerner Published April 10, 2012 Bankrate.com

The views, opinions, positions or strategies expressed by the authors and those providing comments or external internet links are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of First Capital, we make no representations as to accuracy, completeness, current, suitability, or validity of this information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. Any information provided does not constitute an offer or a solicitation to lend. Providing information to purchase does not guarantee a loan approval. All registered trademarks, copyright, images, or other items used are property of their respective owner and are used for editorial purposes only.

First Capital Mortgage is a subsidiary of PHH Home Loans LLC, a direct lender, Dept. of Corporations file #413-0713

Visit First Capital Online or call: 310-458-0010

Online Mortgage Applications Nearly Double in the First Quarter of 2012

Credit Scores Are up Slightly and Mortgage Rates Remain at Historically Low Levels, According to Mortgage Lenders

Mortgage applications nearly doubled in the first quarter of 2012 compared with the same period last year, according to a recent report from MortgageMarvel. This is an indication that consumer confidence is increasing and people are taking advantage of low home prices and interest rates," said Rick Allen, of Mortgage Marvel.

Refinancing continues to be prevalent. The study reflected that loans to refinance an existing mortgage accounted for 54 percent in the first quarter of 2012 versus 61 percent of loans in the fourth quarter of 2011. The volume of applications to purchase homes in the first quarter was up 40 percent over the same period last year, which indicates that the housing market is picking up.

Applicant credit scores averaged 733 in the first quarter of 2012 compared with 716 in the same period in 2011, indicating that personal finances may be improving as well. The average median household income nationwide of mortgage applicants rose from $79,400 to $87,450.

Research data is compiled from loan applications submitted to lenders using Mortgagebot's online lending platform. Mortgagebot, which owns and operates Mortgage Marvel, licenses its technology to over 1,100 lenders nationwide to facilitate mortgage applications through every delivery channel -- consumer-direct via the Internet, in the branch or call center, or through professional loan officers. In 2011, more than 500,000 loan applications were submitted through Mortgagebot's online lending platform.

This rich database is used for analyzing interest rate and buying trends in the housing market.

Nationally, average interest rates for a 30-year, fixed rate, conforming mortgage climbed slightly during the first quarter of 2012 yet still remained at historically low levels. "On January 1, 2012, the average rate for this type of loan through our lender clients was 4.02 percent," Allen said. "Rates reached a low of 3.92 percent on February 2 and a high of 4.18 percent on March 20. On March 30, the last business day of the quarter, the average rate stood at 4.06 percent."
Housing prices in most major cities have continued to fall, according to the Case-Shiller Home Price Index, but analysts are expecting prices to rise modestly during 2012. On the positive side, the Case-Shiller data indicated price increases in Miami, Phoenix and Washington, D.C. This is a ray of hope for Florida and Arizona, which were especially hard hit by the housing market's difficulties.

The consumer-estimated, average home price for applications in the study was virtually unchanged, coming in at $267,204 in the first quarter of 2012 and $266,507 in the first quarter of 2011. The average loan amount fell slightly -- from $188,528 to $185,223 -- indicating a small increase in average down payment amounts.

"Things are improving, but, even though rates are at record lows, the total mortgage market in 2011 was less than a third of what it was in 2003 -- roughly $1.2 trillion versus $3.8 trillion," Allen said. "This shows just how much the housing and mortgage markets have been impacted by economic conditions."

The views, opinions, positions or strategies expressed by the authors and those providing comments or external internet links are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of First Capital, we make no representations as to accuracy, completeness, current, suitability, or validity of this information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. Any information provided does not constitute an offer or a solicitation to lend. Providing information to purchase does not guarantee a loan approval. All registered trademarks, copyright, images, or other items used are property of their respective owner and are used for editorial purposes only.

First Capital Mortgage is a subsidiary of PHH Home Loans LLC, a direct lender, Dept. of Corporations file #413-0713

Visit First Capital Online or call: 310-458-0010

Myth-busting: Real estate market misconceptions

Published on Wed, Apr 4, 2012 Read More Business
Sequim Association of Realtors
Note:  The goal of this article is to dispel rumors and give an accurate view of the market. Myth No. 1: Banks aren’t lending.

 
Truth: “It is definitely a myth that banks aren’t lending,” said Michele Adkisson, Branch Manager - portfolio of loan products has been increasing in the last few years. This is our most successful year in terms of purchase business, so not only is our market improving, lending is expanding in the right direction. Fortunately, this is not a return to irresponsible lending of the past. I do believe lending will expand further, responsibly, once prices stabilize in our area.”
 

Truth: When asked the question, “What about the rumors we hear about banks not lending?” my answer is that while it’s true that underwriting guidelines have tightened for the time being, it’s a small price to pay for one of the largest purchases you will make in your lifetime,” said Deon Kapetan, Lending Leader at Sound Community Bank. “I consider the limitations as a way of protecting our future so that we don’t get back into the same meltdown experienced in the markets’ recent past.”
 
Truth: Teri K. Ward, Vice President, Mortgage Department Manager of First Federal, reports that it is the perfect time for first-time homebuyers.
 
“Rates are historically low, as are home prices,” Ward said. “There are programs that allow up to 100-percent financing and other programs that require as little as 3.5 percent down. The number of first-time home buyers is actually increasing!”
 
MarketWatch reported on March 29 that “The 30-year fixed-rate mortgage average fell to 3.99 percent in the week ending March 29 from 4.08 percent in the prior week, Freddie Mac said Thursday in its weekly report. The rate was 4.86 percent a year earlier.”

Myth No. 2: It’s impossible to qualify for a loan today.
 
Truth: “Lending guidelines have not changed much for lenders who have always required basic documentation of a stable income,” Ward said. What have been eliminated are stated-income loans without verification of the actual income earned by the loan applicants.
 
Truth: “You can get a loan if you have full-time employment and decent credit,” said Arthur Buhrer, Senior Loan Officer at Clift Mortgage. “Not impossible, only more difficult. You can get a home loan; however, everyone is doing the due diligence, that was absent pre-2008, to make sure that folks can afford the home payment.”

Myth No. 3: You can’t get a land or construction loan.
 
Truth: Lenders on the North Olympic Peninsula are making land loans for the purchase of residential lots and construction loans for custom homes in greater numbers than they have since 2009. Kapetan said, “When asked if I’ve seen some favorable trends in the real estate market, the answer is ‘Yes.’ Here at Sound Community Bank, we’ve recently seen more requests and inquiries for lot and construction loans than in the past couple of years. As the land sales prices have lowered, it’s has become more feasible to build that dream home with as little as 20 percent down. We’ve also seen more first-time homebuyers enter the market. With rates and prices lower than ever, the word is getting out that in some cases, owning a home costs less than renting.”
 
In fact, Nell Clausen with Estes Builders reports that “Of the custom construction homes we have now under contract or will start in the next six months, half are mortgaged with local lenders.”

Myth No. 4: There are no loans for second homes or rental properties.
 
People who have enjoyed visiting the North Olympic Peninsula on vacations would like to buy a vacation home here but are concerned that lenders may make it difficult to finance a second home.
 
Truth: “Whether buying a second home, vacation home or rental property, the requirements are the same — you must qualify with the same debt-to-income requirements. I have handled loans for all these types of purchases within the last few months,” said Al Kruebbe, President at Peninsula Mortgage.
 
Truth: “Loans are readily available for the purchase of a vacation home for both site-built and manufactured homes. The peninsula is an ideal location for a vacation home and this has become a growing segment of the acquisition market in our market area of Clallam County,” said Ward. Some buyers are purchasing with the long-term plan of living in the vacation home after their retirement.

Myth No. 5: There is no affordable housing available.
 
Truth: The National Association of Realtors reported in March that housing affordability conditions have reached the highest level since record-keeping began in 1970. NAR’s Housing Affordability Index rose to a record high of 206.1 in January, based on the relationship between median home price, median family income and average mortgage interest rate; the higher the index, the greater the household purchasing power. A rating of 200 indicates the typical family has roughly double the income needed to purchase a median-priced home.
 
Truth: Lower prices mean more affordable. “The amount of short sales and foreclosed homes have been a major contributor to the declining home values,” Ward said. “An appraisal is based on one primary thing: What were the prices of similar homes in the area that have recently sold?”

The views, opinions, positions or strategies expressed by the authors and those providing comments or external internet links are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of First Capital, we make no representations as to accuracy, completeness, current, suitability, or validity of this information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. Any information provided does not constitute an offer or a solicitation to lend. Providing information to purchase does not guarantee a loan approval. All registered trademarks, copyright, images, or other items used are property of their respective owner and are used for editorial purposes only.

First Capital Mortgage is a subsidiary of PHH Home Loans LLC, a direct lender, Dept. of Corporations file #413-0713

Visit First Capital Online or call: 310-458-0010

How to grab the best mortgage rate now.

By Lou Carlozo

CHICAGO | Wed Apr 4, 2012 12:08pm EDT

CHICAGO (Reuters) - With mortgage rates still hovering near historic lows, this could be the right time to buy a home or refinance a mortgage, but nailing down a low-rate, low-fee loan isn't that easy.
Winning one of the best deals in the current volatile mortgage market is like shooting a bullseye from a roller coaster, say brokers who are close to the action. Rates are still running under 4 percent for 30-year fixed rate loans, but they do fluctuate and not all applicants get the best rates. "It's unpredictable," says Cathy Milligan, a veteran mortgage broker with Marina Funding Group in Ventura, California. "Some people don't even know to check around. They just assume that they go to their bank and that they're going to get the best loan there is."

But Milligan has seen events as far away as a bond market rout in Europe or a New York selloff in Treasuries affect the rates she can find for her clients. Mortgage rates fluctuate far more than they used to, and there can be a broad range of rates and fees available from different lenders, she says.

That means borrowers have to search wider and work harder to get a good loan at a good rate. And once they find one, they have to be prepared to lock it in.
Here's some advice from Milligan and other mortgage experts on how to get a good home loan now.

First, obtain your credit score
FICO scores remain the standard by which many mortgage lenders assess a borrower's creditworthiness, and it now takes a score of 760 or better (on an 850 scale) to get the best rates, according to FICO, the company that created those scores. They are calculated on the basis of information in credit reports, so if you've had any credit problems in recent years, it is a good idea to make sure your score is solid before you apply for a loan. You can get your credit reports for free at AnnualCreditReport.com, but you'll have to pay for your FICO score at MyFico (www.myfico.com).

Check it about six months before you want to apply for a loan, to give yourself time to correct errors or to improve your credit performance, and your score.
The Federal Trade Commission outlines a two-step process for fixing credit report errors that can affect scores. First, tell the credit reporting company, in writing, what information you think is inaccurate. Then, dispute the items in question with the creditor or other information provider. A sample dispute letter can be found at the FTC's website (link.reuters.com/myw47s). You can also improve credit scores by reducing your credit card balances and making all your payments on time.

Get all your paperwork ready
That way you can jump on a good rate when it appears. The documents you'll need can be daunting, so begin as soon as possible. For starters, you'll need federal tax returns for the last two years, a minimum of one month's worth of pay stubs and about three months worth of bank statements.

If you are refinancing or know which home you are planning to buy, you can get an appraisal done and put in the file, suggests Grant Cardone, author of "Sell or Be Sold: How to Get Your Way in Business and in Life." That puts you in a better position to lock in," he says.
But it's best to talk to the lender or mortgage broker before you do that, because not every lender will accept the word of every appraiser. If you choose an appraiser your lender won't use, you will just end up paying for a second appraisal, and instead of saving time and money you'll waste both.

Cast a wide net
When you are shopping for quotes, try a mortgage broker, a banker, a local lender, a credit union, a national lender and at least one comparison website like Bankrate (www.bankrate.com), Mortgage Marvel (www.mortgagemarvel.com) or HSH Associates (www.hsh.com). Try your private banker too, suggests Cardone. A banker who wants all of your financial business might go the extra mile to win the relationship.

Focus on fees, not just rates
You won't learn the true cost of your mortgage until you know about all the fees that come with the deal. Everything from photocopying costs to legal fees can be charged back to you, and you may even face different fees for different lock-in periods, says Keith White of  Home Mortgage in Minneapolis.

If you need to lock in a rate for 60 days instead of 45 days, for example, that could raise your costs even though the rate stays the same. You can also be asked to pay origination fees called "points" for lower mortgage rates.

At websites such as Mortgage Marvel, an estimate of the closing costs is included in quotes. If you're working with a broker or lender directly, you should ask for the so-called "good faith estimate" of closing costs required by the U.S. Department of Housing and Urban Development. When comparing two different loans, compare annual percentage rates (APR), which take account of points and closing costs as well as the basic mortgage interest rate.

Monitor rates closely but not too close
Be ready to jump if rates drop for a few days, but don't obsess about it, lest you miss out on a buying opportunity, says Joe LaBate, who works with White at Home Mortgage in Minneapolis. He says 45 days in advance is a reasonable time to lock in a rate for a refinancing. If you are buying a home 90 days would be safer, because various events could delay the closing.

Crunch the numbers
Online calculators can help borrowers evaluate whether they're better off paying points for a lower rate, or a higher rate without the points They can also help you decide whether to take a shorter-term loan or a longer one. You can find mortgage calculators at: First Capital
For an example of how different mortgage rates and terms could affect a borrower's monthly payments and long term costs, see the chart at link.reuters.com/fes47s.
(The author is a Reuters contributor. The opinions expressed are his own.)
(Editing by Jilian Mincer, Linda Stern and Steve Orlofsky)

The views, opinions, positions or strategies expressed by the authors and those providing comments or external internet links are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of First Capital, we make no representations as to accuracy, completeness, current, suitability, or validity of this information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. Any information provided does not constitute an offer or a solicitation to lend. Providing information to purchase does not guarantee a loan approval. All registered trademarks, copyright, images, or other items used are property of their respective owner and are used for editorial purposes only.

First Capital Mortgage is a subsidiary of PHH Home Loans LLC, a direct lender, Dept. of Corporations file #413-0713

Visit First Capital Online or call: 310-458-0010

Self Employed? 2011 Tax Return? Home Loan? What Do These 3 Things Have in Common?

by John Ciolino on April 2, 2012

0diggsdigg

Self Employed? 2011 Tax Return? Home Loan? What do these 3 things have in common and why is it so important?

It’s that time of the year when you are filing your 2011 tax return and wanting to buy a new home. What most people don’t know is that if not handled properly, you may need to wait a few months after filing the return before you can buy. Let me explain.

Photo courtesy of 401K’s Flickr

If you are self employed and your 2011 tax return shows more income than 2010, you may need to use the 2011 return to qualify for a home loan. Most people don’t realize that every lender uses a form called the 4506-T to validate your filing of the return. What is this exactly? The lender sends this form to the IRS to get a transcript of your tax return to confirm it is the same return you gave them. The history of the 4506-T goes back awhile because years ago, believe it or not, a lot of clients gave lenders tax returns that were fraudulent just to qualify for a home loan. Back then they didn’t use the 4506-T so they never verified the information. Then when the market turned and loans started to default, they would investigate it and find out the returns in their package were indeed fraudulent. Ouch!

Now it is near impossible to defraud a lender because of the use of this form. Why is this so important this time of year? The main reason is when you file your tax return with the IRS, even if it is electronically filed, it is taking them up to 8 weeks to validate it. Basically they receive it but by the time they enter the information into their database it could be 8 weeks. So if you go into escrow on a house that is a 30 day escrow and you just filed the return, and you need the 2011 income to qualify, you can be certain you won’t close on time.

This error happens every year even by the most seasoned loan officers. So how do you prevent this or what should you do? You first need to communicate with your loan officer and find out if the 2011 is needed to qualify. If it is then there may be options. First one if you HAVEN’T filed the return yet ask the loan officer if you can walk into the IRS in person and have the return stamped receipt by the IRS as proof of filing. This works with a handful of lenders. The second one is WAIT. Give it at least 60 days after you file your return before you put an offer on a house to be safe.

With any of these situations the key is to communicate upfront with your loan officer and see if there is a solution before you go into escrow. I am always available to answer any finance related questions at my office (310) 656-8201

Photo courtesy of 401K’s Flickr

John Ciolino is a loan officer at First Capital and an affiliated business partner at Partners Trust Real Estate. He can be reached at John.Ciolino@thepartnerstrust.com

The views, opinions, positions or strategies expressed by the authors and those providing comments or external internet links are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of First Capital, we make no representations as to accuracy, completeness, current, suitability, or validity of this information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. Any information provided does not constitute an offer or a solicitation to lend. Providing information to purchase does not guarantee a loan approval. All registered trademarks, copyright, images, or other items used are property of their respective owner and are used for editorial purposes only.

First Capital Mortgage is a subsidiary of PHH Home Loans LLC, a direct lender, Dept. of Corporations file #413-0713

Visit First Capital Online or call: 310-458-0010

Investors Are Looking to Buy Homes by the Thousands

RIVERSIDE, Calif. — At least 20 times a day, Alan Hladik walks into a fixer-upper and tries to figure out if it is worth buying.

As an inspector for Waypoint Real Estate Group, Mr. Hladik takes about 20 minutes to walk through each home, noting worn kitchen cabinets or missing roof tiles. The blistering pace is necessary to keep up with Waypoint’s appetite: the company, which has bought about 1,200 homes since 2008 — and is now buying five to seven a day — is an early entrant in a business that some deep-pocketed investors are betting is poised to explode.

With home prices down more than a third from their peak and the market swamped with foreclosures, large investors are salivating at the opportunity to buy perhaps thousands of homes at deep discounts and fill them with tenants.

Nobody has ever tried this on such a large scale, and critics worry these new investors could face big challenges managing large portfolios of dispersed rental houses. Typically, landlords tend to be individuals or small firms that own just a handful of homes.

But the new investors believe the rental income can deliver returns well above those offered by Treasury securities or stock dividends. At the same time, economists say, they could help areas hardest hit by the housing crash reach a bottom of the market.

This year, Waypoint signed a $400 million deal with GI Partners, a private equity firm in Silicon Valley. Gary Beasley, Waypoint’s managing director, says the company plans to buy another 10,000 to 15,000 homes by the end of next year. Other large private equity investors — including Colony Capital, GTIS Partners and Oaktree Capital Management, in partnership with Carrington Holding Company — have committed millions to this new market, and Lewis Ranieri, often called the inventor of the mortgage bond, is considering it, too.

In February, the Federal Housing Finance Agency, which oversees the government-backed mortgage companies Fannie Mae and Freddie Mac, announced that it would sell about 2,500 homes in a pilot program in eight metropolitan areas, including Atlanta, Chicago and Los Angeles.

And Bank of America said in late March that it would begin testing a plan to allow homeowners facing foreclosure the chance to rent back their homes and wipe out their mortgage debt. Eventually, the bank said, it could sell the houses to investors.

Waypoint executives say they can handle large volumes because they have developed computer systems that help them make quick buying decisions and manage renovations and rentals.

“We realized that there is a tremendous amount of brain damage around acquiring single-family homes, renovating them and renting them out,” said Colin Wiel, a Waypoint co-founder. “We think this is a huge opportunity and we are going to treat it like a factory and create a production line to do this.”

Mr. Hladik, who is one of seven inspectors working full time for Waypoint’s Southern California office, is one cog in that production line.

On a recent morning, he walked through a vacant three-bedroom home with a red tiled roof here about 60 miles east of Los Angeles, one of the areas flooded with foreclosures after the housing market bust. Scribbling on a clipboard, he noted the dated bathroom vanities, the tatty family room carpet and a hole in a bedroom wall. Twenty minutes later, he plugged these details into a program on his iPad, choosing from drop-down menus to indicate the house had dual pane windows and that the kitchen appliances needed replacing.

The software calculated it would take $25,413.53 to get the home in rental shape. Mr. Hladik adjusted that estimate down to $18,400 because he deemed the landscaping in good shape. He uploaded his report to Waypoint’s database, where appraisers and executives would use the calculations to determine whether and how much to bid for the house.

With just three years of experience, Waypoint is one of the industry’s grizzled veterans. But critics say newcomers could stumble. “It’s a very inefficient way to run a rental business,” said Steven Ricchiuto, chief economist at Mizuho Securities USA. “You could wind up with an inexperienced group owning properties that just deteriorate in value.”

The big investors are wooed by what they see as a vast opportunity. There are close to 650,000 foreclosed properties sitting on the books of lenders, according to RealtyTrac, a data provider. An additional 710,000 are in the foreclosure process, and according to the Mortgage Bankers Association, about 3.25 million borrowers are delinquent on their loans and in danger of losing their homes.

With so many families displaced from their homes by foreclosure, rental demand is rising. Others who might previously have bought are now unable to qualify for loans. The homeownership rate has dropped from a peak of 69.2 percent in 2004 to 66 percent at the end of 2011, according to census data.

Economists say that these investors could help stabilize home prices. “If you have a lot of foreclosures in one community you will improve everybody’s home values if you take them off the market,” said Diane Swonk, the chief economist at Mesirow Financial. “If those homes are renovated and even rented, it is a lot better than having them stand empty.”

Until now, Waypoint, which focuses on the Bay Area and Southern California, has been buying foreclosed properties one by one in courthouse auctions or through traditional real estate agents.

The company, founded by Mr. Wiel, a former Boeing engineer and software entrepreneur, and Doug Brien, a one-time N.F.L. place-kicker who had invested in apartment buildings, evaluates each purchase using data from multiple listing services, Google maps and reports from its own inspectors and appraisers.

An algorithm calculates a maximum bid for each home, taking into account the cost of renovations, the potential rent and target investment returns — right now the company averages about 8 percent per property on rental income alone. By 5:30 on a recent morning, Joe Maehler, a regional director in Waypoint’s Southern California office, had logged onto his computer and pulled up a list of about 70 foreclosed properties that were being auctioned later that day in Riverside and San Bernardino Counties.

Looking at a three-bedroom bungalow in San Bernardino, he saw that Waypoint’s system had calculated a bid of $103,000. Mr. Maehler, who previously advised investors on commercial mortgage-backed securities deals, clicked on a map and saw that rents on comparable homes the company already owned could justify a higher offer. The house also had a pool, which warranted another price bump.

By the time the auctioneer opened the bidding on the lawn in front of the San Bernardino County Courthouse at $114,750, Mr. Maehler had authorized a maximum bid of just over $130,000.

As the auction proceeded, Waypoint’s bidder at the courthouse remained on the phone with Mr. Maehler in the company’s Irvine office about 50 miles away.

“Stay on it,” Mr. Maehler urged as the bidding went up in $100 increments. The bidder clinched it for $129,400.

The sting of the housing collapse, driven in part by investors who bought large bundles of securities backed by bad mortgages, makes some critics wary of the emerging market.

“I don’t have a lot of confidence that private market actors who now see another use for these houses as rentals, as opposed to owner-occupied, are necessarily going to be any more responsible financially or responsive to community needs,” said Michael Johnson, professor of public policy at the University of Massachusetts, Boston. Waypoint executives say they plan to be long-term landlords, and usually sign two-year leases. Once the company buys a property, it typically paints the house and installs new carpets, kitchen appliances and bathroom fixtures, spending an average of $20,000 to $25,000. They try to keep existing occupants in the house — although only 10 percent have stayed so far — and offer tenants the chance to build toward a future down payment.

Waypoint’s inspectors are evaluating hundreds of properties that Fannie Mae and Freddie Mac are offering for sale. Because the inspectors are not allowed inside these homes, they are driving by 40 of them a day, estimating renovation costs by looking at eaves, windows and the conditions of lawns.

Rick Magnuson, executive managing director of GI Partners, Waypoint’s largest investment partner, said “the jury is still out” on whether Waypoint — or any other investor — can manage such a large portfolio. But, he said, “with the technology at Waypoint, we think they can get there.”

The views, opinions, positions or strategies expressed by the authors and those providing comments or external internet links are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of First Capital, we make no representations as to accuracy, completeness, current, suitability, or validity of this information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. Any information provided does not constitute an offer or a solicitation to lend. Providing information to purchase does not guarantee a loan approval. All registered trademarks, copyright, images, or other items used are property of their respective owner and are used for editorial purposes only.

First Capital Mortgage is a subsidiary of PHH Home Loans LLC, a direct lender, Dept. of Corporations file #413-0713

Visit First Capital Online or call: 310-458-0010

Is Making Biweekly Mortgage Payments A Good Idea?

Did you get a brochure in the mail or an email that offered a great way to chop off six to eight years from your home loan?

 

The way to do this, according to the brochure, is to no longer pay one monthly mortgage payment but instead, pay every two weeks. The conventional logic is that increasingly the frequency of the payments doesn't allow interest to build up and over the course of a 30- or 15-year mortgage that can equal years eliminated from your loan.

Before you sign up for these biweekly payments, let's see if the accepted logic is actually true and if you're really saving money.

Better Credit?Some people believe that making biweekly payments improves their credit, but this is no more than a myth according to experts. Using a biweekly payment schedule set up by your mortgage lender puts you on an automatic withdrawal plan that assures that your payments are made on time. If you're the type of person who misses payments from time to time because you forgot to write the check, an automatic payment schedule will improve your credit because of the on time payments, but you can get the same advantage with an automatic monthly payment too.

Reduces Interest?Sadly, this is another myth not to believe. Depending on the particulars of your loan, there is a good chance that the company receiving your mortgage payment isn't the company that holds the loan. Although you're paying twice per month, the servicer receiving your payment isn't making biweekly payments to the company who owns your loan. They're likely holding it in an account until the end of the month.

But does this mean that the interest that is building up isn't reduced? Remember that each calendar year has 52 weeks and if each month has four weeks that would only be 48 weeks. This means that biweekly payments won't consist of two payments each month but instead, 26 half payments which equals the equivalent of 13 monthly payments in a year. If the math is a little tough to follow, it works like this: Biweekly payments are equal to 13 monthly payments in a year where making traditional monthly payments are equal to 12 payments each year. By paying an extra month, you're paying extra principal which shaves six to eight years off the life of the loan over time.

But do you have to make bimonthly payments to do that? You could divide the amount of one month's payment by 12 and add that amount to your monthly mortgage payment. If you're paying $1,500 per month, divide 1,500 by 12 and make your monthly payment $1625. Talk to your mortgage company first to make sure there isn't something more you have to do to make sure it is applied to the principal amount of your loan.

Don't Make it a ContractThere are two problems with answering the call from your lender for biweekly payments. First, the reason they want to sign you up for this plan is because there will be a fee and that's more revenue for the bank. They are charging you to give them a two week loan. Second, most consumers already have enough contractual payment obligations in their life. Especially for those without a lot of financial reserves, it is better to keep some flexibility in your budgeting rather than committing to the biweekly payments.

You can always make extra payments when you get three paychecks in a month, receive a tax refund or come in to unexpected money.

The Bottom LineDon't fall for the advertisement to make biweekly payments through a bank or mortgage servicer sponsored plan. In this case, the benefits do not outweigh the gains.
Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2012/04/02/investopedia76553.DTL#ixzz1quscTIik

The views, opinions, positions or strategies expressed by the authors and those providing comments or external internet links are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of First Capital, we make no representations as to accuracy, completeness, current, suitability, or validity of this information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. Any information provided does not constitute an offer or a solicitation to lend. Providing information to purchase does not guarantee a loan approval. All registered trademarks, copyright, images, or other items used are property of their respective owner and are used for editorial purposes only.

First Capital Mortgage is a subsidiary of PHH Home Loans LLC, a direct lender, Dept. of Corporations file #413-0713

Visit First Capital Online or call: 310-458-0010