Client Resources

 

The Loan Application Process
We will want to verify certain information about you and the property. Borrower information will include verification of income and employment, assets, and your credit history. You, the applicant, as part of your application process, will usually provide some of this information. Other information, such as your credit history, will be obtained directly from the credit bureaus.

For the property itself, we will order an appraisal in most cases and a legal description of the property, such as a title report. We have "approved appraisal company" lists, so if you have an old appraisal, we may be able to accept it.

The Loan Approval Process
During the "processing" and/or "underwriting" period, your credit, assets, income and other determinants are checked and compiled. Your loan is either approved with conditions, or approved without conditions or declined. Conditions are further documentation or checks we will need to finalize your loan before funds can be dispersed. Some borrowers become frustrated by conditions that surface at the end of a loan transaction and can't understand why they are being raised so late. Final conditions are sometimes added for final approval. We do our best to help you through the process - remember, we are simply trying to meet conditions imposed by other sources.

Since most loans are sold and serviced by other parties, the lender must verify that the loan can be sold upon close. Not to worry, no other terms of your loan can be changed after you have signed your final loan documents. When all conditions are met, your loan documents are drawn up and forwarded to the place of settlement or closing, typically a title and/or escrow company.

IMPORTANT NOTE:
Do not make any adverse changes to your financial "picture" during the loan process. Things as simple as applying for a new department store credit card to purchase a new appliance will at least force an explanation to be given and at worst may cause your loan not to fund and the approval to be withdrawn. Many times a final credit report update and additional calls to your employer may be required before funding the loan. Be patient and your loan will flow smoothly.

 

 Understanding Homebuying

Are you ready for that magic time of owning your first home?   Are you wondering how to go about it?  This is the perfect place to start! We give you step-by-step instructions on how to get into your first home!

How to start:

  • Our goal is to help "demystify" the process for you. We'll help you answer important questions, help you to do your research and plan financially to make the best decision possible for you and your family. By educating yourself on the basics of buying a home before you go house hunting you can save yourself a ton of money, time and aggravation.
  • The absolute most important thing to do is to get pre-approved for a loan amount even before you start shopping. You will know the exact maximum you can obtain for financing and you can cut the best deal on your new home!
  • Your Credit is important. When you apply for a home mortgage we will review several pieces of information, including your credit report. When you apply for your home loan your credit report will be used as an important part of how your loan is or is not approved, and for what interest rate.

Helpful hints on where to start the property portion of the process:
There are definite benefits to homeownership, including:

  • Real estate for the most part is a solid investment. Example, if you stay in a home for typically 5+ years, your house will rise in value enough to offset some of the initial expenses you'll incur and you'll earn money when you sell your home. There are of course some things to consider prior to buying that home; you will want to determine if you need to do some renovations, etc. If that is the case, you will have to factor those costs into the overall financial picture.
  • Tax benefits. You can deduct the mortgage interest from your taxable income. That deduction lowers your taxable income, which means that, you'll end up paying LESS tax on your income each year, now that is sweet!
  • Homeownership is an investment. As you pay down the principal loan amount, you are building up equity in the property. That coupled with appreciation in the value of the home can pay off nicely.


What type of area would you prefer to live in? For example, are you interested in living in the city or an urban area? What about the suburbs or maybe something more rural?

What are the local schools like? If you have, or are planning to have, children, you'll want to know about your local school system. You can get reports on your community's schools from your real estate agent, we know the best agents in any the local school board, or through one of several online resources, including:

What about the neighbors, nice people? Do you want to live in a community of mostly young professionals, or families with young children, or would you like a mix of neighbors?

What about public transportation? If you use public transportation regularly to get to work or to go shopping, it's essential that you have easy access to public transportation routes and that the routes take you to where you need to go.

What about community amenities? Are there parks, pools, libraries, etc. nearby?

What are the estimated taxes on the home? Every home listing should include information on estimated taxes for the area. You can get tax information from the homeowner, your Real Estate Agent, or from the county's tax office.

What type of city, county, or private services does the home use? For example, does the home use city water and sewer systems? Does it have well water? Is it part of a homeowners' association that provides trash pick-up and landscaping services?

Determining what area you wish to live in. Let’s consider what you're looking for in a home. Ask yourself the following:

  • Do you only want to see newer homes (typically built within the last 10 years) or are you open to looking at older homes?
  • Do you have a certain style of home in mind? The more open-minded you are when it comes to homes you'll consider, the more options you'll have when house-hunting.
  • Do you have a certain style of home in mind? For example, are you interested only in single-family (detached homes) or condos/townhouses (attached homes)?
  • How many bedrooms and bathrooms do you want? Not only to meet your current family needs, but think ahead to potential future needs such as having a home office or accommodating more children, guests, or aging parents.
  • Do you like the kitchen? Does it have the appliances, cabinets, and countertops you'd like? What about the age and condition of the appliances? How about the traffic pattern? Since families tend to spend a lot of time in the kitchen you want it to be a place where you feel comfortable, or at least have an idea about what you'd change to make it the kitchen you'd like.
  • Does it have a floor plan that works for you and your family? Do you like how the rooms are laid out? If you have young children maybe you want to be able to see your kids from the kitchen. Or if you have teenagers, maybe you want to have their bedrooms further away!
  • Does the house have the type or size yard you'd like? Is there enough space for kids to play or to entertain? Is it fenced? Can you landscape the way you'd like?


Should I have the home inspected by a professional? 
Yes, no matter how closely you review the property, there are things you either wouldn't know to look for, or wouldn't be able to evaluate on your own. That's where a home inspector can help out.
By law, sellers are required to disclose anything that they know is wrong with the home; you're also protected by a home inspection clause. Having a home inspection means that a professional home inspector will come and examine the home to give you an accurate picture of the home's condition. The report will include the home's interior, exterior, foundation, insulation, electrical wiring, plumbing, and more. A home inspector will not comment on the value of the home, or whether or not you should consider buying the home. Their only job is to report on the condition of the home.
It's a good idea to be there during the inspection if possible. A good inspector will show you everything he or she is looking for. It can help to know what you'll need to replace or update, and what to be on the lookout for that might give you problems down the road. The inspector should give you a copy of the report. Depending on what the home inspection turns up, you'll have the opportunity to possibly renegotiate the contract to offer less for the home, or require the homeowner to make specific repairs before agreeing to close on the home sale.

What about working with a real estate agent? Real estate professionals can be very helpful in the home buying process. The benefit of using us for your financing is that we work with some of the best real estate agents in the business. Check with one of our loan professionals, they know exactly who will be best suited to you’re your needs and goals.
Some of the benefits of using a real estate agent;

  • They have access to the Multiple Listing System (MLS). The MLS is the electronic listing of all homes being represented various agents throughout your area of interest. This helps the agent locate multiple choices for you based again on your needs and goal
  • They may also know about homes that are available in your area of interest that are not being actively marketed on the MLS. They can also get referrals on homes in your price range from their large network of fellow agents.
  • They have time to research the local market, make appointments for you to see homes…. All of the things that you might not have time to do or want to do for yourself!
  • They will prepare and handle all the paperwork related to the home sale.
  • They can help you determine how much the home is really worth based on comparable sales in the area.
  • They have a fiduciary responsibility to act in your best interest. They should try to negotiate the best possible deal for you.  

Offers & Counteroffers
When you've found the home you want the next step is decide whether or not you want to make an offer, meaning that you want to tell the seller that you want to purchase the home. Making an offer is where you outline exactly how much money you're willing to pay for the home and under what conditions.

Terms and Conditions
In addition to the sales price, your mortgage, and personal property, you'll want to include your requests for terms and conditions of the purchase such as:

  • Are there any repairs you want the seller to make? You should include any in the contract.
  • What is your preferred date to move in?
  • Do you want the seller to provide you with a home warranty? It's not required, but you may want to request it, particularly if the current homeowner has a policy that he/she can transfer as part of the home sales.

Contract Contingencies
A contingency is a clause in your contract saying that if something goes wrong you are not legally bound to purchase the property.

There are two standard contingencies that most home buyers include in their contract: a financing contingency and a home inspection contingency.

  • The financing contingency means that you are not obligated to buy the home if you aren't able to secure specific financing from a lender either because you don't qualify for the loan, interest rates rose above your listed maximum rate, or because you're unable to sell the home you're currently living in that you were planning to use as money for the down payment.
  • The home inspection contingency means that you have the right to renegotiate the terms of the offer or can walk away from the deal altogether if the home inspection turns up something that you weren't aware of or is something that carries a high dollar value, such as termite work, replacing a roof, deck, etc..


Where to Begin?
If you're using a real estate agent you'll have help in negotiating with the sellers and filling out the paperwork. If you're buying a home on your own the seller may have an agent that will handle the process. Remember though, the seller's agent does not work for you he/she works for the seller and they are obligated to get the highest price possible for them.
Don’t do it alone! If you are not using an agent, it's a good idea to have it reviewed by a real estate attorney. Whether you have an agent helping you walk through the process or not, the most important thing to know is that when it comes to making an offer on a home everything - everything - must be in writing.

Arriving at the Sales Price
How much do you offer for a home? The answer really depends on what type of a real estate market you're in. In a hot selling market, it sometimes takes an offer over the asking price to get the home!. If it's not such a competitive buying environment you’ll have more room to maneuver and in that case you can consider offering less than the asking price.
What affects the price?

  • Any repairs you may have to make;
  • Comparable sales in the neighborhood
  • How long the house has been on the market;
  • Whether or not the price on the house has been reduced;
  • The seller's personal situation - for example if they are getting a divorce, if they are  relocating and need to move quickly, etc.

 

Tests
You can and should request an assortment of tests to be run on your home prior to purchase, including a test for radon, lead-based paint, asbestos, and termites.

  • Termite Inspection. The termite inspection is required. If the home fails the termite inspection, the seller will be required to have the property treated for termites prior to selling.
  • Lead-Based Paint. If the home you're buying was built before 1978 you may also want to consider ordering an inspection for lead-based paint. Prior to 1978 lead-based paint was commonly used in residential homes.
  • Radon Gas. Radon is a colorless, odorless gas that moves up through the ground and enters homes typically through the foundation or basement area. Radon has been linked to lung cancer, particularly in smokers.
  • Asbestos. Although asbestos is harmless unless airborne, if you're looking to purchase an older home, chances are good that the builder used asbestos in the flooring, walls, siding, or other area of the home. If you're considering doing major renovation to an older home it's good to know if you'll be working with materials that contain asbestos. Asbestos has been linked to lung cancer.

In addition to ordering the tests, you can also negotiate to have the seller pay a portion or all of the fees for the tests to be performed.

Earnest Money Deposit
You will have to make an earnest money deposit to show the seller that you're serious about your offer. A seller doesn't want to take his/her house off the market, which is what happens when they accept a contract, if he/she is not sure that you're genuinely serious about buying the home. The amount of the deposit that you'll be required to make varies, but is typically between 1 to 3% of the sales price.

The check will not be cashed right away. Instead it will be held by a third party (such as a title office, attorney or a real estate agent) to ensure its safety. If your contract is accepted and you purchase the house your check will be cashed and the deposit is subtracted from your down payment and/or your portion of closing costs (if any).
There are a few different scenarios if the contract falls through.

  • If you back out of the deal you'll forfeit your deposit.
  • If the seller breaks the contract the deposit will be refunded to you.
  • If you have a home inspection contingency and the home inspection reveals something that you want to ask the seller to repair and the seller refuses, you have the right to walk away from the contract and the deposit will be refunded to you.

The contract should indicate who would hold the deposit and under what circumstances it will be refunded to the buyer (usually only if the financing falls through or if the seller backs out of the agreement to accept another contract).

Before Sending the Offer
Review it with your agent or professional, attorney, etc.!  Once the seller accepts the contract it is legally binding.

After Making the Offer, Then What?

  • The seller accepts your offer and you have a legally-binding contract,
  • The seller rejects your offer and the contract offer is null and void, or
  • The seller presents a counter offer with revisions to your original offer.
    • This is where the negotiating begins. You know what you want; the seller knows what he/she wants; and the counter offer is best described as the middle ground everyone can or cannot agree upon.
    • Once they accept or make a counter offer you will review the counter offer add any additional changes on your part or sign/initial to accept changes and send back. Theoretically this could go on forever, but usually an agreement is reached in the second or third counter offer – keep the faith!


Once you are successful you go into escrow or settlement,
This is where you and the seller “close” the deal! Closing on the property and your home loan transpires when you sign all the papers transferring ownership of the property from the seller to you!

Balance of your Down Payment 
At the closing the balance of your down payment is due and payable. Remember that earnest money deposit? It will now be applied toward your down payment amount. A cashier’s check or a certified check is typically required for the down payment. Your bank will supply you with one.

The Close and Moving In
Once you finalize all documents, it’s time to move in – congratulations!
If you have any unanswered questions be sure to contact one of our loan professionals for additional advice and professional contacts.

 

 Moving Tips

These are hazardous and other items which carriers are prohibited by law from transporting:

  • Paints or flammables
  • Aerosol cans and pressurized containers including deodorant, shaving cream, hair spray
  • Explosives
  • Matches
  • Fire extinguishers
  • Light bulbs and fluorescent bulbs
  • Batteries
  • Nail polish remover
  • Open liquor bottles
  • Antifreeze
  • Shoe polish
  • Bleach
  • Chemistry sets
  • Propane gas
  • Lighter fluid
  • Candles
  • Cord wood

NOTE: Guns can be moved as long as they have the bolt, firing pin and trigger assembly disassembled. There are various state and federal laws you should check. Overseas shipments are subject to individual country regulations.

The 'before the move garage sale help list':

  • Be realistic about prices. What would you be willing to pay?
  • Label everything with a price ahead of time.
  • Place a classified ad in the newspaper, and put signs up in the neighborhood .
  • Allow several days for sorting and labeling.
  • Be willing to haggle.
  • Display merchandise on tables.
  • Set up displays the night before your sale or very early.
  • Be ready for early birds.
  • Start with lots of change and take checks only from people you know.
  • Remove your neighborhood signs after the sale is over!


Moving - the last items to pack
The last items packed should be all the items you'll need when you arrive at your new home:

  • Cereals, soups, snack & lunch items
  • Coffee, tea, coffee cups, cream & sugar, powdered drinks
  • Coffee maker or teapot
  • Paper plates, napkins, cups, paper towels, plastic silverware and serving spoons
  • Pots, pans, bottle opener, can opener
  • Trash bags, paper and plastic bags, aluminum foil, plastic wrap
  • Cleaning supplies, including rags, cleanser, window cleaner
  • Dish soap, bath soap, and towels
  • Toilet paper & tissues
  • A bag containing screws, nails, hooks, etc.
  • Extension cords
  • Screwdrivers, hammer, small tools (drill) and scissors
  • A flashlight
  • A radio
  • A first aid kit
  • A phone book from your previous area
  • Toys, books, crayons for the kids

 

 

1st Timer Information

Prepare for home ownership with AZG Capital L.L.C.
Buying a home requires more than just money for a down payment. You also have to be committed to taking control of your surroundings and your finances. We will work with you throughout the home-buying process to help make owning your first home as easy as possible. Together, we can help you understand how owning a home is more attainable—and easier to understand than you may realize.
Home ownership means you no longer pay monthly rent for the roof over your head. Now you own it, you can get an equity build up – not the landlord. You can do what you want with your house. Here are just a few benefits of homeownership:

  • Interest Tax Deductions
    You may be able to deduct the interest on your home loan, as well as the federal (and sometimes, state) real estate taxes you pay annually. Be sure to consult your tax advisor. Because of this tax advantage, it may actually be cheaper to own than rent.
  • Equity
    If the value of your property increases as you pay down your mortgage, you build equity that can be used to finance other major purchases, or as a down payment on a future home.
  • A Protection Against Inflation
    Home ownership could help you counteract rising inflation. Although past performance cannot guarantee future trends, real estate has historically appreciated at a higher rate than inflation in most regions.

Let's start your home-buying journey today
Secure Your Rate
Should you lock your mortgage loan interest rate now? Learn more about options like rate locks and float downs. One of our purchase loan experts can help you finalize your decision, would you like to speak with someone now?

Here is some important information regarding your credit 
Credit reports are kept by the three major credit agencies, Experian, Equifax, and TransUnion. Among other things, they show your credit payment history.
A credit score is a number calculated by Fair Isaac based on the information in your credit report. You have three different credit scores, one for each of your credit reports.  We can help you through that process, we are not a credit repair agency, but we can help you understand the issues, and learn more about credit.

Know what you can afford
We will look at your income, debt and credit to determine the kind of loan that best suits your needs and goals. The size of your down payment will also determine how much you can afford. We will walk you through each step.

Line up cash
You will need to come up with some cash of your own.  We will pinpoint that number for you as we work through the process. Items we will consider are the proper down payment, fees and closing costs. These may include the appraisal fee, loan fees, attorney's fees, inspection fees, and the cost of a title search. Again, we help you arrive at the best possible scenario to fit your needs and goals.  There are many options available such as withdrawals from your IRA account without incurring penalties, etc.  We will help you analyze your finances to come up with the best solution.

Loan Jargon
The following three terms will help you better understand the rest of this scenario:

1.     Loan-to-Value (or LTV)
This is the loan amount as a percentage of the purchase price or appraised value (whichever is less). If you are buying a $150,000 home with $15,000 down payment you have a 90% LTV. Loans over 80% LTV require either PMI (Private Mortgage Insurance) or a combination of a 1st and 2nd mortgage which avoids the PMI.

2.     Housing Ratio
This is your total monthly housing expense (principal, interest, tax, insurance, and PMI and homeowners dues (condos if applicable) divided by your gross monthly income. Note "gross" income is "before" deductions. If you have a "W2" job your income is easy to determine. If you are self employed, please note your gross income is what you bring from your Schedule C onto line 12 of your 1040. Also, a 2 year history of consistent self-employment income is generally necessary.

3.     Debt Ratio
This is your total monthly housing expense plus your monthly payments of your installment and revolving debt. Some details here: this would include child support, alimony or separation maintenance. Any debt with fewer than 10 months to go does not count. A debt such as a "buy furniture now, make no payments until more than a year from now" does not count as long as there are 12 months to go without payments. The same applies for student loans.

Your income and credit will determine the sizeof the loan you can qualify for. You will need cash for 3 things:

1.     The "Down Payment"

2.     Closing Costs
This is where many people get off track. You need to cover your one time or "non-recurring" closing costs, your "recurring" closing costs: prepaid interest, insurance, impounds if there is PMI and potential prorated property tax.

3.     Reserves
You need more than $10.00 left in the bank after you purchase. We need to see 2 months (PITI) of your total monthly housing expenses in reserve. You will want to be sure that you get together all of the cash necessary to close.


Once I have determined what size loan you will be able to qualify for and where the money is coming from I can determine how expensive a home you can afford.


Points

What are Points?
Points are up front mortgage interest fees paid on a loan to reduce the initial interest rate. For example, a one-point loan will always have a lower interest rate than a zero-point loan. Therefore, paying points is a trade-off between paying money now versus paying money later. A Point represents 1% of the loan amount, and depending on how long you plan to stay in your home, paying points can save you a lot of money in the long run. It takes about five to seven years to recoup the cost of paying a point upfront. Here's the math. Let's say you take out a $100,000 30-year fixed mortgage, and you have the option of either paying 6% with no points or 5 3/4% with one point. With the 6% mortgage, your monthly payment will be $600. And with the 5 3/4% loan, it would be $584, a savings of $16 per month. After about 62 months, or a little over five years, you would have recouped the $1,000 point you paid upfront. And then you would start to benefit from the lower monthly payments.

No Point Loans
There are many reasons for choosing a "No Points — No Closing Cost" Mortgage. The following outlines some of the most common reasons borrowers choose this option.

1.     Lack of cash to close escrow. If you are purchasing a new home and are short on cash for the down payment, a "No Points — No Closing Cost" mortgage can save you up to thousands of dollars.

2.     If the estimated time you will be staying in the home is less than 4 years, while paying points and closing costs will give you a lower interest rate and a lower monthly payment, it typically takes about 4-5 years of living in the property to realize the benefit of the lower payment when weighed against the total cost of the points.

3.     Lack of equity in the property when refinancing. A similar situation as portrayed in item "1". If it makes financial sense to refinance your mortgage, but you do not have enough equity in the property to add your closing costs into the new mortgage - a "No Points — No Closing Cost" mortgage could make great sense.


Tax Issues
In a refinance transaction, points must be amortized over the life of the loan. For example, on a 30 year loan, you can deduct 1/30th of the points paid each year. If you refinance for a second time, however, you may be able to deduct the remaining unamortized points in the year you refinance the loan. Consult your tax advisor for more information.

 

 A Guide To Lock-Ins

The interest rate market is subject to constant swings without advance notice. Locking a rate protects you from the time that your lock is confirmed to the day that your lock period expires.

Please note that we cannot be held responsible for any rates that may change prior to our written confirmation.

Lock-in Defined
A lock is an agreement by BOTH you, the borrower, and the lender and specifies the number of days for which a loan's interest rate and points will be guaranteed by the lender. Should interest rates rise and you have met all of your conditions the lender is then obligated to honor the rate that they have locked on your behalf. Should interest rates decrease, the lock must still be honored by you.

When Can I Lock?
You can lock a rate once your application information has been reviewed. In some cases, your application will provide all the information needed and you will have the option to lock at the time you apply. Otherwise you will be invited to lock after you have returned your package and your documentation and credit information has been reviewed.

We recognize that you may not be available to request a lock during this time period; if so, please contact your Loan Agent for assistance. We are working with all of our lending partners to extend the lock-in period, and appreciate your understanding.

Lock Period
Lock-ins will vary from 10 days to 180 days. It costs more to lock in for extended periods of time.

Lock Confirmation
Until we confirm in writing that your rate lock has been accepted by our lender, your loan is not locked in. When you request a lock, we contact our lender partner and secure the lock on your behalf. Unfortunately, the lock process is not yet automated within the mortgage industry, therefore, we must follow the lock guidelines of our lending partners. For this reason, we are not able to verify your lock request immediately but will do so ASAP after your lock request submission.

 

 Purchase Strategies

Loan product developments in recent years have greatly expanded the options available for all home buyers. Today's loan programs offer borrowers opportunities to maximize buying power, save cash for repairs or improvements, or even buy a home with little down payment. Now we will discuss some of the ways buyers can take advantage of the expanding loan market to secure the best financing available today.


Purchase prequalifications
We can pre-qualify you as a borrower without specific property information. In other words, your loan information is used for full underwriting and includes your employment information, asset information, and credit history. We can then pre-qualify you as a borrower, subject to a maximum loan amount, down payment, and interest rate.

Getting prequalified for a loan is critical in today's real estate environment. Many Realtors® do not want to accept offers from buyers unless they are pre-qualified for a home loan. By going through the loan process prior to signing a purchase contract on a home, you can eliminate all of the obstacles to borrowing without jeopardizing an actual purchase transaction. Once your loan is approved, your real loan closing will be quick and subject only to a satisfactory appraisal and title report on the home.

To begin the prequalification process you need to make some assumptions about your purchase price, loan amount, and loan program. Any of these assumptions can change once you've found your home, but it helps to do the following:

  • Complete your application for the maximum loan amount and purchase price that you're interested in. We can always change these later.
  • Get your loan approved at an interest rate that is somewhat higher than what you expect to get. Again, we can always change it later.

The prequalification of your loan will ensure that your real purchase will go smoothly once you have located the perfect home.

No income verification loans
No income verification mortgage loans were very popular in the early 2000's. They provided loans to anyone with a certain credit score without verification of income. Generally these loans are used by self-employed borrowers who have difficulty verifying all of their income, or by borrowers with very complex income structures. These loans are high risk and many borrowers entered into loans that they were unable to repay. As a result, most all lenders have now removed no income verification loans as loan options.

Is it possible to get a Stated Loan still?

There are still lenders available that can provide a no income verification stated loan but they are harder to get. Typically, these loans are only available to the self-employed borrower and require a significant down payment. Additionally, the credit score of the borrower must be impeccable.

The loans are offered at much higher interest rates, many times making them unaffordable. For example, if rates are 6 percent, no verification loans rates can be 10 to 12 percent and thousands of dollars more to acquire. These high rates mean payments are higher and loans are typically unaffordable.

No Income Verification Loan Information

Make sure that you properly state your income. Many people were tempted by beautiful homes and stated they earned higher incomes than they actually made. This is one of the many reasons that so many loans defaulted.

Take an honest approach to income and debt. Be sure that you examine all additional fees, such as mortgage insurance, taxes, and fire insurance. In addition, factor in maintenance, utility costs, trash collection, and other fees associated with the home. Before you buy a home, be sure you know the full picture.

You may find it makes more sense to use a traditional loan and reap the benefits of the lower monthly payment they can offer. You may have to provide the lender with more documents, but it will usually save you thousands in interest and closing costs. We’ll help you compare the costs of a no verification loan to a regular loan, then ask for a “needs” list from your lender. The needs list will provide with a list of documentation required to qualify the loan. You may find the list might not be as long as you thought.

We will help you with your decision-making process and give you a comparison of programs and fees.


You can avoid mortgage insurance with 80/10/10 financing
One way to avoid having to pay mortgage insurance is to purchase a home with a combination first and second mortgage. The first mortgage would be limited to 80% of the home's appraised value. The second mortgage, which would close in conjunction with the first, would then provide for the difference between the home's purchase price, less the 80% first mortgage, less the down payment available. In other words, if you have a 10% down payment available, your first loan would provide for the 80% mortgage with a second mortgage of 10%. This is commonly referred to as an "80-10-10" transaction.

Another way to avoid incurring mortgage insurance payments is to find a lender that offers self-insured programs. This type of loan would typically have a higher interest rate in place of the private mortgage insurance premium. The decision of whether to obtain a loan with mortgage insurance versus the above two options should take into account the combined monthly payments of the various options, adjusted for the tax benefits of interest deductions.

 

Home Inspections

Home Inspection by a Professional — Good Idea!

Q. WHAT IS A "HOME INSPECTION"?
A home inspection is generated by a visual examination of the physical structure and systems of a home, from top to bottom. An inspection is similar to a physical check-up. If problems or symptoms are found, the inspector may recommend further evaluation.

Q. WHAT WILL IT INCLUDE?
The standard home inspection report contains a review and the condition of the home's heating system, central air conditioning system (temperature permitting), interior plumbing and electrical systems; the roof, attic, and visible insulation; walls, ceilings, floors, windows and doors; the foundation, basement, and visible structure.

Q. WHY SHOULD I GET A HOME INSPECTION?
The purchase of a home is probably the largest single investment people ever make. You should learn as much as you can about the condition of the property and the need for any repairs before you buy. Nobody likes unpleasant surprises and difficulties afterwards. Naturally, a home inspection will also point out the positive aspects of a home. After the inspection, you will have a much clearer understanding of the property you are about to purchase.

Q. WHAT DOES IT COST?
The inspection fee for a typical one-family house varies geographically, as does the cost of housing. Similarly, within a given area, the inspection fee may vary depending upon the size of the house, particular features of the house, its age, and possible additional services, such as septic, well, or radon testing. It is a good idea to check local prices on your own.

Q. CAN I DO IT MYSELF?
Even the most experienced homeowner lacks the knowledge and expertise of a professional home inspector who has inspected hundreds, perhaps thousands, of homes in his or her career. An inspector is familiar with the many elements of home construction, their proper installation, and maintenance. He or she understands how the home's systems and components are intended to function together, as well as how and why they can or may fail.

Q. HOW DO I FIND A HOME INSPECTOR?
The best source is a friend, or perhaps a business acquaintance, who has been satisfied with and can recommend a home inspector they have used. In addition, the names of local inspectors can be found in the Yellow Pages where many advertise under "Building Inspection Service" or "Home Inspection Service".

 

 REFINANCING

The Process
Reasons To Refinance
Rules No Longer Apply
Costs Lower Than Ever
A Guide To Lock-Ins
Points

 

The Process

We've designed our site to make it easy for you. This brief diagram will give you a good jump-start!

Event

Who Does It

Details

Review our loan information

Applicant

Before you begin an application, please review loan information from:

·         Our Homebuying Center

·         Our Refinance Center

·         Our website

Apply

Applicant

Complete an application. This will set the process in motion.

Loan Originator Contact by Phone

AZG Capital L.L.C.

Your first connection with your loan originator will get a dialogue started which will insure that you get the loan that you want.

Credit Check & Prequalification

AZG Capital L.L.C.

We pre-approve you using our artificial intelligence software, or underwriting your loan in-house. Our system will assess your credit, income and assets to quickly determine what loan(s) you qualify for.

Required Loan Documentation and Paperwork

Applicant/AZG Capital L.L.C.

Paperwork is still a big part of the loan process. We will mail you forms to sign and a document checklist.

Rate Lock & Appraisal

Applicant/AZG Capital L.L.C.

Once we determine your loan amount, type of loan and rate, your loan agent will recommend the appropriate time to lock the rate with a lender.

Loan Submission for the Best Rate/Program

AZG Capital L.L.C.

Once all of the paperwork is assembled by our processors, your package will be forwarded to underwriting for approval.

Underwriting and Approval

AZG Capital L.L.C./Lender

An underwriter will review the package and fax an approval to AZG Capital L.L.C. and any conditions necessary for the approval. Most conditions are taken care of by AZG Capital L.L.C..

Clear Loan Conditions

AZG Capital L.L.C.

Our closer gets the conditions from underwriting for final preparations to close.

Loan Documents Delivered

AZG Capital L.L.C./Lender

Loan documents are prepared and delivered to the escrow agent. The escrow agent will call you to arrange a signing. This is coordinated by your loan originator, your Realtor and the escrow agent.

Loan Funding

Escrow/AZG Capital L.L.C./Lender

Once the signed documents are returned, they will be reviewed. The escrow agent will request a wire transfer of the loan funds, close and record the transaction.



The Loan Application Process
We will want to verify certain information about you and the property. Borrower information will include verification of income and employment, assets, and your credit history. You, the applicant, as part of your application process, will usually provide some of this information. Other information, such as your credit history, will be obtained directly from the credit bureaus.

For the property itself, we will order an appraisal in most cases and a legal description of the property, such as a title report. We have "approved appraisal company" lists, so if you have an old appraisal, we may be able to accept it.

The Loan Approval Process
During the "processing" and/or "underwriting" period, your credit, assets, income and other determinants are checked and compiled. Your loan is either approved with conditions, or approved without conditions or declined. Conditions are further documentation or checks we will need to finalize your loan before funds can be dispersed. Some borrowers become frustrated by conditions that surface at the end of a loan transaction and can't understand why they are being raised so late. Final conditions are sometimes added for final approval. We do our best to help you through the process - remember, we are simply trying to meet conditions imposed by other sources.

Since most loans are sold and serviced by other parties, the lender must verify that the loan can be sold upon close. Not to worry, no other terms of your loan can be changed after you have signed your final loan documents. When all conditions are met, your loan documents are drawn up and forwarded to the place of settlement or closing, typically a title and/or escrow company.

IMPORTANT NOTE:
Do not make any adverse changes to your financial "picture" during the loan process. Things as simple as applying for a new department store credit card to purchase a new appliance will at least force an explanation to be given and at worst may cause your loan not to fund and the approval to be withdrawn. Many times a final credit report update and additional calls to your employer may be required before funding the loan. Be patient and your loan will flow smoothly.

 

Reasons to Refinance

There are five major reasons to consider refinancing an existing mortgage:

  • Decrease monthly payments from a higher fixed rate to a lower fixed rate.
    Example: If the rate is 7.5% now and a homeowner switches to a 6.5% rate, he or she will save 1% on the mortgage less the costs of refinancing. On a $200,000 mortgage, for example, the savings will be over $50,000 over 30 years by reducing the interest rate by just that one percentage point.
  • Improve monthly cash flow with lower payments.
    Cash flow may be tight after moving into a new home. Switching to an adjustable rate program where the rate is fixed for the next three to ten years could provide breathing room needed. Similarly, for those who are in a 15 or 20 year term loan, switching to a 30 year term can also increase monthly cash flow.
  • Switch to a fixed rate program to eliminate payment changes of adjustable rate mortgages (ARMs). 
    Homeowners with one year ARMs will see their rates rise as rates move up. Using programs that hold rates steady for three, five or seven years, you can refinance into a low fixed rate.
  • Withdraw funds from the equity in a home.
    If cash is needed for home improvements, college education or to consolidate debts, the borrower may be able to refinance 75% to 80% of the current value of the home if it has been owned for one year or more.
  • Shorter loan terms
    Probably the best incentive to refinance is found by refinancing into a shorter term loan while keeping the loan payment stable. A borrower can save tens of thousands in interest by reducing the term of the loan.


Old Rules No Longer Apply

If interest rates fall below your current mortgage rate, refinancing may be a great idea. The old idea that rates must be 2 full percentage points below your existing loan is not true. A drop of as little as 1/2% could save you thousands of dollars.

A variety of loan terms, no-point rate options and lower closing cost loans have greatly decreased the rate difference needed to make refinancing profitable.

We as consumers spend substantial amounts of time trying to make our savings and investments earn more. One avenue which is sometimes overlooked is seeing how much we can decrease our debt payments. Since a mortgage is usually the largest debt we have, it pays to concentrate most on reducing that payment first.

 

Costs Lower Than Ever

The costs of refinancing have decreased greatly in the past several years. Using no cost out of pocket loans, for example, borrowers can save thousands of dollars up front. Also, closing costs can usually be included in the new mortgage loan amount so that no cash is required to execute a refinance.

Paying Points for a lower interest rate is an excellent idea if you are staying in the property more than 4 years.

Deciding whether to refinance usually involves totaling the costs of refinancing and subtracting those expenses from the total savings expected. It is also important to determine how many months it will take to pay back the costs of refinancing from the savings that will accrue.

The savings that can be obtained from refinancing depend directly on the answers to the above questions. It is best to answer these questions with the help of a qualified mortgage professionals.

 

A Guide To Lock-Ins

The interest rate market is subject to constant swings without advance notice. Locking a rate protects you from the time that your lock is confirmed to the day that your lock period expires.

Please note that we cannot be held responsible for any rates that may change prior to our written confirmation.

Lock-in Defined
A lock is an agreement by BOTH you, the borrower, and the lender and specifies the number of days for which a loan's interest rate and points will be guaranteed by the lender. Should interest rates rise and you have met all of your conditions the lender is then obligated to honor the rate that they have locked on your behalf. Should interest rates decrease, the lock must still be honored by you.

When Can I Lock?
You can lock a rate once your application information has been reviewed. In some cases, your application will provide all the information needed and you will have the option to lock at the time you apply. Otherwise you will be invited to lock after you have returned your package and your documentation and credit information has been reviewed.

We recognize that you may not be available to request a lock during this time period; if so, please contact your Loan Agent for assistance. We are working with all of our lending partners to extend the lock-in period, and appreciate your understanding.

Lock Period
Lock-ins will vary from 10 days to 180 days. It costs more to lock in for extended periods of time.

Lock Confirmation
Until we confirm in writing that your rate lock has been accepted by our lender, your loan is not locked in. When you request a lock, we contact our lender partner and secure the lock on your behalf. Unfortunately, the lock process is not yet automated within the mortgage industry, therefore, we must follow the lock guidelines of our lending partners. For this reason, we are not able to verify your lock request immediately but will do so ASAP after your lock request submission.

 

Points

What are Points?
Points are up front mortgage interest fees paid on a loan to reduce the initial interest rate. For example, a one-point loan will always have a lower interest rate than a zero-point loan. Therefore, paying points is a trade-off between paying money now versus paying money later. A Point represents 1% of the loan amount, and depending on how long you plan to stay in your home, paying points can save you a lot of money in the long run. It takes about five to seven years to recoup the cost of paying a point upfront. Here's the math. Let's say you take out a $100,000 30-year fixed mortgage, and you have the option of either paying 6% with no points or 5 3/4% with one point. With the 6% mortgage, your monthly payment will be $600. And with the 5 3/4% loan, it would be $584, a savings of $16 per month. After about 62 months, or a little over five years, you would have recouped the $1,000 point you paid upfront. And then you would start to benefit from the lower monthly payments.

No Point Loans
There are many reasons for choosing a "No Points — No Closing Cost" Mortgage. The following outlines some of the most common reasons borrowers choose this option.

1.     Lack of cash to close escrow. If you are purchasing a new home and are short on cash for the down payment, a "No Points — No Closing Cost" mortgage can save you up to thousands of dollars.

2.     If the estimated time you will be staying in the home is less than 4 years, while paying points and closing costs will give you a lower interest rate and a lower monthly payment, it typically takes about 4-5 years of living in the property to realize the benefit of the lower payment when weighed against the total cost of the points.

3.     Lack of equity in the property when refinancing. A similar situation as portrayed in item "1". If it makes financial sense to refinance your mortgage, but you do not have enough equity in the property to add your closing costs into the new mortgage - a "No Points — No Closing Cost" mortgage could make great sense.


Tax Issues
In a refinance transaction, points must be amortized over the life of the loan. For example, on a 30 year loan, you can deduct 1/30th of the points paid each year. If you refinance for a second time, however, you may be able to deduct the remaining unamortized points in the year you refinance the loan. Consult your tax advisor for more information.

 

MORTGAGE INFORMATION

The Process
Qualifying
Paying Points
Zero Down Loans
Mortgage Types
Mortgage Settlement Costs
Mortgage Market
Mechanics Of The Process
Mortgage Insurance
Regulations
Economic Indicators
FAQ's
Glossary

 

 

The Process

We've designed our site to make it easy for you. This brief diagram will give you a good jump-start!

Event

Who Does It

Details

Review our loan information

Applicant

Before you begin an application, please review loan information from:

·         Our Homebuying Center

·         Our Refinance Center

·         Our website

Apply

Applicant

Complete an application. This will set the process in motion.

Loan Originator Contact by Phone

AZG Capital L.L.C.

Your first connection with your loan originator will get a dialogue started which will insure that you get the loan that you want.

Credit Check & Prequalification

AZG Capital L.L.C.

We pre-approve you using our artificial intelligence software, or underwriting your loan in-house. Our system will assess your credit, income and assets to quickly determine what loan(s) you qualify for.

Required Loan Documentation and Paperwork

Applicant/AZG Capital L.L.C.

Paperwork is still a big part of the loan process. We will mail you forms to sign and a document checklist.

Rate Lock & Appraisal

Applicant/AZG Capital L.L.C.

Once we determine your loan amount, type of loan and rate, your loan agent will recommend the appropriate time to lock the rate with a lender.

Loan Submission for the Best Rate/Program

AZG Capital L.L.C.

Once all of the paperwork is assembled by our processors, your package will be forwarded to underwriting for approval.

Underwriting and Approval

AZG Capital L.L.C./Lender

An underwriter will review the package and fax an approval to AZG Capital L.L.C. and any conditions necessary for the approval. Most conditions are taken care of by AZG Capital L.L.C..

Clear Loan Conditions

AZG Capital L.L.C.

Our closer gets the conditions from underwriting for final preparations to close.

Loan Documents Delivered

AZG Capital L.L.C./Lender

Loan documents are prepared and delivered to the escrow agent. The escrow agent will call you to arrange a signing. This is coordinated by your loan originator, your Realtor and the escrow agent.

Loan Funding

Escrow/AZG Capital L.L.C./Lender

Once the signed documents are returned, they will be reviewed. The escrow agent will request a wire transfer of the loan funds, close and record the transaction.



The Loan Application Process
We will want to verify certain information about you and the property. Borrower information will include verification of income and employment, assets, and your credit history. You, the applicant, as part of your application process, will usually provide some of this information. Other information, such as your credit history, will be obtained directly from the credit bureaus.

For the property itself, we will order an appraisal in most cases and a legal description of the property, such as a title report. We have "approved appraisal company" lists, so if you have an old appraisal, we may be able to accept it.

The Loan Approval Process
During the "processing" and/or "underwriting" period, your credit, assets, income and other determinants are checked and compiled. Your loan is either approved with conditions, or approved without conditions or declined. Conditions are further documentation or checks we will need to finalize your loan before funds can be dispersed. Some borrowers become frustrated by conditions that surface at the end of a loan transaction and can't understand why they are being raised so late. Final conditions are sometimes added for final approval. We do our best to help you through the process - remember, we are simply trying to meet conditions imposed by other sources.

Since most loans are sold and serviced by other parties, the lender must verify that the loan can be sold upon close. Not to worry, no other terms of your loan can be changed after you have signed your final loan documents. When all conditions are met, your loan documents are drawn up and forwarded to the place of settlement or closing, typically a title and/or escrow company.

IMPORTANT NOTE:
Do not make any adverse changes to your financial "picture" during the loan process. Things as simple as applying for a new department store credit card to purchase a new appliance will at least force an explanation to be given and at worst may cause your loan not to fund and the approval to be withdrawn. Many times a final credit report update and additional calls to your employer may be required before funding the loan. Be patient and your loan will flow smoothly.

 

 

 

Qualifying

Qualifying
Issues for qualifying are:

·         Employment history

·         Cash available for closing and the source of those funds

·         Credit history


Verification of Income
With our new process we try to eliminate paper work not create it! Documentation generally needed include the following:

·         A current pay stub from borrower's employer.

·         W2's from the borrower's employer—most recent two years.

·         Written verification of employment from the employer (lenders request this information directly from employer).


Verification of Funds to Close
Cash and cash equivalents, such as stocks and bonds, as well as equity ownership in other assets, such as real estate. Some or all of these assets may be used for the down payment and for paying the loan closing costs. These assests will need to be validated before the final credit decision can be rendered. There are several ways this can be done:

·         Borrowers may provide a copy or the last 3 months of bank depository or investment company statements.

·         Written verification of deposit from the depository institution. This information would be transmitted directly to the institution(s).

·         For a purchase, a copy of the sales contract on any real estate to be sold.

Some or all of the above may be needed in order to verify the funds to close.

If you are refinancing you will need enough reserves to pay your mortgage, insurance and taxes for approximately 3 months.


Credit Report
Credit reporting agencies have access to central repositories that collect, store and report credit obligations and pay records on most consumers. Have any collections, judgements, liens, repossessions or foreclosures been reported? These items are all covered in a full report. The report will assist us in getting you the best loan.


Property Value Confirmation
The security or collateral for residential mortgages is real property. Appraisals use three approaches in the evaluation analysis.

The evaluation approaches are:

·         Cost Approach: The value of the land plus the cost of the improvements less depreciation.

·         The Market Approach: Recent sales in your neighborhood.

·         Income Approach: Determines the value based on the rental income that can be derived from the property.

Although all three approaches are considered in an appraisal report, the market value approach is usually given the most weight because it reviews the most recent sales surrounding the property.

Most appraisals begin with a physical inspection of the property by a professional appraiser. During the inspection, the appraiser measures the property, locates the rooms on a drawing, and notes the overall condition of the property and surrounding neighborhood.

After the inspection, the appraiser locates both the sales activity and current listings in the area from real estate data bases and prepares a written report. The report indicates the value of the property and summarizes the important aspects of the evaluation process.


Title Search
During the loan processing, lenders require that a title search be performed on the property. This search will reveal the legal description, the owner of record and outstanding liens and encumbrance on the property. Liens are items such as property taxes, mortgage loans, and judgments. Encumbrances may be road maintenance agreements, right of way and utility easements.

Usually, a plot map or land survey is prepared as part of the title search to show the location of the improvement on the property. After the search has been completed, the title company will prepare a written document that reflects their findings and delivers the report to the lender. This report is commonly called a preliminary title report.

After the loan is closed, the title company will prepare a title policy that reflects the new mortgage loan as a lien on the property. The policy is called an American Land Title Association (ALTA) policy. Additionally, IF there was a transfer of title, the new owner usually obtains a title policy as well.

 

 Zero Down Loans

We can help you move into a new home without any down payment if you qualify. A 3% to 5% down payment can qualify you for a better interest rate, however if you don't meet the requirements for a 3% to 5% down loan, you can see if you qualify for a 30 -year fixed loan with no money down. Please note these products have a higher interest rate and a prepayment penalty and are not available from many lenders.

 

 

Mortgage Types

Fixed Rate Mortgage
Fixed rate mortgages are probably the most common type of mortgage. "Fixed rate" refers to the fact that the interest rate is agreed upon at initiation of the loan and never changes over the life of the loan. This also means that the principal and interest payment is fixed and will not change over the life of the loan.

Adjustable Rate Mortgage (ARM)
Adjustable rate mortgages do just that: adjust their rate. Simply put, a loan that starts with an initial rate of 5% may be 7% the next year and 9% the 3rd year. Does my payment change? In most cases, yes. When interest rates change, payments are re-calculated on the remaining principal balance for the remaining term at the new interest rate.

Shorter Term Fixed Loan
A short term fixed mortgage refers to a mortgage which has a set interest rate and set payments based on an amortization of 30 years, however, the loan converts to an adjustable loan after a period of 3, 5, 7 or 10 years depending on the program you decide on. This loan is an attractive option for someone who anticipates selling or refinancing their home during the fixed rate period of the loan. What happens if I don't move or sell? Make sure the loan contains no prepayment penalty, that way you can refinance if and when rates drop.

Mortgage Programs
CONVENTIONAL MORTGAGE - Conventional loans originated in the 1930's after the Depression and are the benchmark of all other loan types. This loan has several traits:

  • Set Monthly Payments: The periodic payment never changes.
  • Set Interest Rate: The interest rate never changes.
  • Set Loan Term: Typically 15 or 30 years.
  • Self Amortization: The loan is paid off at the end of the specified term.


VA (Veterans Administration)
This type of loan is also government backed and is available only to Veterans. Some of the features are:

  • No down payment required
  • Low interest rates

A VA loan has an up front requirement of a funding fee (FF). This funding fee is a one-time charge which can be rolled into the mortgage amount.

 

 

Mortgage Settlement Costs

The mortgage closing or settlement (escrow closing) probably causes more questions from the borrower than any other—we will answer some of the most frequently asked questions.

A settlement may involve several people, and a variety of documents and fees. Once you understand what is involved, you may Find the entire closing process simpler than you might have imagined. While this section focuses on settlements in home purchases, much of the information also will be useful if you are refinancing a mortgage.

We'll start with two important facts

  • Many buyers think of settlement as the last step to becoming the legal owners of their new home. But it's a process that begins weeks or even months before, and follows an outline set largely by a buyer's original offer to the seller of the house. That offer becomes the sales contract, once it's signed by the seller, and it covers many of the key elements of the settlement or closing.
  • Practices differ from one locality to another regarding who pays what closing costs. Across the country, however, buyers and sellers are free to negotiate certain fees. In some cases, certain costs can be shifted, it may affect the sale price of the property. In most states, costs can also be cut by shopping around among providers of the settlement services.

The point is this: The more you know about the process, the better your chances are for saving money at settlement time.


Types of Closing Costs
There are three basic categories of charges and fees in settlement or closing transactions:

  • Charges for establishing and transferring ownership
    These include title search, title insurance, related legal fees, notary charges, hazard insurance, and fees for conducting the settlement.
  • Amounts paid to state and local governments
    Recordation fees, and prepaid property taxes.
  • Costs of obtaining a mortgage
    These include appraisals, credit checks, loan documentation fees, loan origination, commitment, and processing fees.


Title Insurance
In addition to a formal title search, your lender is likely to require a title insurance policy. The policy guards the lender against an error by whomever searched the title. (In some cases, the title insurer might arrange for or conduct the title search.) Let's say, for example, that a long-lost relative of the seller turns up with indisputable evidence that the relative - and not the seller - holds legal title to the property. Though it should have been found in the public records, the relative's claim was missed somehow. Errors are rare, but they do occur.

When this happens, the lending institution finds that it has loaned the home buyer thousands of dollars to buy a house from someone who did not own it. To avoid such problems, the lender will insist on title insurance prior to settlement. The cost of the policy (a one-time premium) is usually based on the loan amount, and is often paid by the purchaser. There's nothing, however, to keep you from asking the seller, during your negotiations, to pay part of all of the premium.

The title insurance required by the lender protects only the lender. To protect yourself against unforeseen title problems, you may also want to take out an owner's title insurance policy. Normally the additional premium cost is only a fraction of the lender's policy, but this can vary from area to area.

Some final advice on keeping title insurance costs low -- if the house you are buying was owned by the seller for only a few years, check with a title company. If you can obtain a re-issue rate, the premium is likely to be significantly lower than their regular charge for a new policy. If no claims have been made against the title since the previous title search was done, the seller's insurer may consider the property to be a lower insurance risk.

Finally, shop around. Not just for the premium (which can vary depending on how much competition there is in a market area), but for coverage as well. (links to local title companies here.) Generally, you should look for a policy with as few exclusions from coverage as possible. The exclusions are listed in each policy. Some policies have so many exclusions - that is, situations under which the insurer will not pay for your title problems- that you end up with little coverage for your premium dollar.


Government Imposed Costs
In some parts of the country, the transfer, recordation, and property taxes collected by local and state governments may be among the heftiest charges paid at settlement. While there is no way to avoid paying these taxes, you may be able to lessen your share of the bill. Try shifting some or all of the cost to the house. But remember, you must do this when you make your offer to purchase the property.


Mortgage-Related Closing Costs

  • Application fee
    Imposed by some lenders, this charge covers the initial costs of processing your loan request. WE DO NOT impose up front charges.
  • Appraisal fee
    This fee pays for an independent appraisal of the home you want to purchase. The lender requires this opinion or estimate of the market value of the house for the loan.
  • Survey
    At a minimum, the lender will require an independent verification from a surveying firm that your lot has not been encroached upon by any structures since the last survey conducted on the property. Alternatively, the lender may insist upon a complete (and more costly) survey to ensure that the house and other structures legally are where you and the seller say they are.


Loan Origination Fees and Discount Points
One point equals one percent of the loan amount. For example, one point on a $150,000 loan would be $1,500. In some cases - especially with refinances - the points can be financed by adding them to the loan amount.

 

Mortgage Market

The Primary Market The primary market consists of mortgage loan originators, the community of banks, lenders, credit unions, saving and loans (virtually any lending institution willing to originate and underwrite a mortgage). In fact, the secondary market uses the term "originator" to refer to the original lender.

Most lenders make loans with the understanding they may sell those loans to the secondary market (see below).

Why would a lender sell your loan after all the trouble you've both gone through to get it in the first place? Two reasons. First, the lender wants to free up the money it has invested in your mortgage to make additional loans (which may in turn be sold again to the secondary market).

The Secondary Market The secondary market comprises of insurance companies, pension funds, banks, securities dealers, thrifts and government-sponsored enterprises such as Fannie Mae and Freddie Mac. These organizations invest in mortgages made by lenders in the primary market.

The loan you negotiate (especially fixed rate loans) will probably be sold into what is known as the "secondary market."

The secondary market won't change your mortgage. But it may change where you pay and who receives your money. The reason - the financial community views a mortgage as an asset. And like any asset, it can be bought and sold. More than likely, your mortgage will be sold to another party (perhaps more than once during the life of the loan). Regardless of who "buys" your loan, both you and that buyer are bound by the terms you negotiate with the original lender.

Fannie Mae and Freddie Mac, Who and What Are They? Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) are large, quasi government charted corporations with significant influence in the mortgage industry. Technically, Fannie Mae and Freddie Mac are "government sponsored enterprises." They are publicly traded (you can buy stock in either organization), profit oriented, and responsible to their shareholders; but Congress retains some control over their operations.

How influential are Fannie Mae and Freddie Mac? Together, they buy approximately half of the family home mortgages originated each year. The two organizations compete directly and follow very similar business plans. Fannie Mae is the largest corporation in America in terms of assets. This economic clout enables the pair to influence the mortgage market nationwide (generally in favor of the home buyer) in the following ways:

  • Allowing lenders in the primary market to originate new loans by purchasing mortgages made according to conforming guidelines.
  • Helping lessen regional differences in interest rates nationwide by encouraging investment in areas with high interest rates, which promotes competition among lenders (pushing interest rates down)
  • Providing a bridge between capital markets and the mortgage market, increasing the availability of mortgage dollars.

Mechanics Of The Process

There are general secondary market underwriting guidelines, but many variables are considered in the loan application analysis. The following outlines some of the basic areas and items considered in the process:

Monthly Housing Expenses and Total Debt Obligations
One of the first things an underwriter determines is the borrower's proposed monthly housing expenses and total monthly debt obligations.

Housing Expenses
These include the monthly principal and interest payments that are stipulated on the mortgage note. In addition, the monthly housing expenses include a monthly amount for the property taxes and hazard insurance (1/12 of the annual taxes and insurance). There may be other expenses, such as condominium fees, homeowners fees, special assessments, etc., that are included.

Monthly Personal Debt Obligations
These include monthly credit obligations, such as installment payments, revolving charge cards or other borrower obligations that will continue longer than 20 months. Usually, 5% of the current balance of a revolving charge account is used for the monthly payment.

Total Monthly Debt Obligations
This combines the monthly housing expenses and monthly personal debt obligations.

Monthly Income
One of the most important components of the loan underwriting process is determining the borrower's monthly income. The income of all borrowers and co-borrowers is included in the calculation. The income can be derived from several sources, but it must be supported by historical documentation and have a high likelihood of continuation. The following outlines the types of income that are used and the means to support them:

  • Salary:
    Income derived from any kind of salary, whether monthly, weekly or hourly is acceptable. Two year employment history is usually required.
  • Commission and bonus:
    Commissions and bonuses can be used for income. The underwriter will average the last two years of income shown on federal income tax returns and the year-to-date earnings from the written verification of employment or pay stubs.
  • Self-employment income:
    Generally, the underwriter will average the income derived through self-employment for the last two years from the applicant's federal tax returns and the year-to-date earnings from a profit and loss statement on the business. Underwriters will take into consideration the income trends in the business, as well.
  • Other income:
    Other income can be used for loan qualification. Income derived from rental properties, interest, dividends, pensions and social security can be used. Some restrictions apply regarding the amount of time the income has been recognized and the amount of time remaining.



Income To Debt Ratios
After determining the monthly income of the borrower and any co-borrowers, the monthly housing expenses and the total monthly debt obligations, the underwriter calculates two ratios that are helpful in the loan underwriting process.

Primary Housing Expense/Income Ratio(front end ratio)
This ratio is the result of dividing the housing expenses for the proposed loan by the monthly income of the borrower(s).

For example:
Primary housing expenses $1,000
Total monthly income $4,000
The ratio will be 25% ($1,000 divided by $4,000 = 25%)

Total Obligations/Income Ratio (back end ratio)
This ratio is the result of dividing the housing expenses for the proposed loan plus the borrower(s) other monthly credit obligations by the monthly income of the borrower(s).

For example:
Total obligations of the borrower $1,400
Housing expenses $1,000
Other credit obligations $400
The ratio would be 35% ($1,400 divided by $4,000 = 35%)

Qualifying ratios are only one component of the underwriting process and many other variables are considered in the final decision.

Funds to Close
When the proposed loan is being used to finance the purchase of a home, underwriters will determine the source of funds for the down payment and closing costs.

The following are acceptable sources of funds for closing:

  • Cash
    Cash in any depository institution or investment company is acceptable.
  • Stocks, bonds, mutual funds, etc.
    Cash equivalent investments are acceptable forms of funds. They can be validated through statements from investment companies for the last two months.
  • Sale of existing property
    Many times the source of funds for the down payment on a home comes from the equity in a property that will be sold. The sales price of the property being sold is indicated on the loan application and any existing loan is verified on the credit report or through a verification of previous mortgage.
  • Gift from family members
    Gifts from family members for the down payment and/or closing costs are acceptable so long as there is no requirement for repayment. Some loan programs limit the amount of gift funds allowed.



Credit Analysis
Another part of the underwriting process is determining the credit worthiness of the borrower. Loan underwriters review the borrower's credit report to find evidence of debt repayment behavior.

Some of the important areas that are reviewed are:

  • Past and existing mortgage debt:
    The past repayment history on mortgage debt can be a good indication of a borrowers attitude toward mortgage obligations. A good payment history on mortgage debt is very important in the credit analysis.

    Generally, payments received 30 days past the due date are reflected in the credit report as late. Lenders vary in strictness and some may not allow any late mortgage payments, while others will allow 1 or 2 in the last two years if there is a good explanation.
  • Installment and revolving credit:
    Other items on the credit report can also indicate a borrower's attitude toward credit obligations. Credit reports indicate the outstanding balance, current balance and terms of payment on the borrower's revolving and installment debt. Underwriters review these credit obligations to determine the borrower's patterns of credit use and repayment behavior. Revolving credit encompasses department store and bank credit cards. Installment credit encompasses longer term credit with structured payment plans, such as car loans.

    Generally, underwriters are not concerned over isolated and minor slow payments indicated on the credit report.
  • Collections, repossession, foreclosures and bankruptcies:
    Credit reports also indicate public records such as collections, repossessions, foreclosures and bankruptcies. Though these items may indicate past credit problems, they sometimes have valid explanations. Underwriters may require a letter of explanation on items noted in the public records. Many times consumers have re-established credit and have an excellent payment history on their current obligations.



Underwriting the Appraisal
Generally, underwriters are not professional appraisers and do not re-appraise the property. They will review the appraisal to assure that it meets the requirements of the investor and sometimes request additional information to substantiate the value. They may request that a second appraisal or review appraisal be performed. A review appraisal can be completed from a site inspection or review of the written appraisal. In both cases, another professional appraiser will perform the review.

Compensating Factors:
The underwriters consider many variables in their analysis. No two borrowers have the same credit and income profiles and underwriters use all of the information in the loan file to render a decision.

Many times, borrowers fall outside the guidelines, but have strong compensating factors that reflect low credit risk. Some compensating factors are history of savings, long-term job stability, history of making monthly credit payments that equal or exceed the proposed payments, a substantial down payment or a large cash reserve after the close of escrow.

Final Credit Decision
After the underwriter has reviewed the entire loan package, there can be four outcomes:

  • Approval
    If the loan is "picture perfect" and the underwriter has no questions, the loan will be approved with no conditions.
  • Approval with conditions
    The most common response. There are two types of conditional approvals: (a) If the underwriter needs additional documentation before a final credit decision can be made, a "prior-to-document" conditional approval will be rendered. In essence, the loan documents will not be prepared until the condition has been satisfactorily met. An example of a "prior-to-document" condition could be a pay stub to validate the borrower's income. (b) If the loan can be approved, but a condition must be met prior to closing, a "prior to funding" conditional approval will be rendered. In this case, the loan documents will be prepared and sent to the closing agent, but the lender will not fund the loan until the condition has been met. An example of a "prior to closing" conditional approval could be proof of sale of existing home where the equity will be used as a down payment.
  • Suspended
    Sometimes the underwriter will be unable to make a decision on a loan file because it is either incomplete or there are many unanswered questions. In these cases, the underwriter will ask for additional information from the borrower before an underwriting decision is made. An example of a suspension may be large gaps in the borrower's previous employment history and no tax returns to indicate the place of employment.
  • Denial
    Underwriters will be unable to approve a loan if the loan file has substantial deficiencies and does not meet the minimum standards of the lender or the lender's secondary market investors require a second underwriter review of the loan package before a final denial is communicated to the borrower. Denial letters with the reason for denial are sent to borrowers within 3 days of the final credit decision.

 

 Mortgage Insurance

Helping You To Buy The Home You Want
Mortgage insurance (MI) allows you to choose from a wider price range of homes. How? We can generally accept a lower down payment than the standard 20% if AZG Capital L.L.C. obtains mortgage insurance on your loan through a mortgage insurance company. You can not only get the home you deserve, but you can conserve your savings and increase your income tax deductions, just by putting less money down.

Buy More Home
You may be able to afford more home and maximize your investment if AZG Capital L.L.C. obtains your Mortgage Insurance for you.

 

Without MI

With MI

Down Payment

20%

10%

5%

Your Available Savings

$20,000

$20,000

$20,000

Maximum Home Price

$100,000

$200,000

$400,000


Financing a home with a low down payment may be the best way to afford a home in high-priced markets.

Conserve Your Savings
The lower your down payment, the more you retain for home furnishings, other investments, future emergencies, or even college tuition.

 

without MI

with MI

Home Price

20%

10%

5%

Down Payment

20%

10%

5%

Cash Down Payment

$20,000

$10,000

$ 5,000

Your Available Savings

$20,000

$20,000

$20,000

Savings Retained

$0

$10,000

$15,000


Even if you have less than $20,000 saved, you can still afford to buy a $100,000 home with a lower down payment option if AZG Capital L.L.C. obtains MI on your qualified loan from a mortgage insurance company.

Increase Your Tax Write-off
A larger loan amount will have higher interest payments and could result in higher tax deductions.

Special Note
It is very important to understand that you must have additional 'reserve' cash after the down payment. Reserves should equal a minimum of 2 to 3 months housing payment, taxes and insurance.

 

 

Federal Regulations

The federal government has enacted consumer protection laws pertaining to residential mortgage lending. We have attempted to review the most salient points of those laws and discuss areas that are important when consumers are shopping for a mortgage loan. Some of the content of the federal regulations could be open for interpretation.

We do not represent that the following sections on the regulations are 100% accurate: it should not be considered a legal opinion of the law. Readers may seek the entire text from the governing bodies or talk to counsel for a comprehensive opinion.


EQUAL CREDIT OPPORTUNITY ACT REGULATION B
Regulation B was issued by the Board of Governors of the Federal Reserve System to implement the provisions of the Equal Credit Opportunity Act (ECOA). The law was enacted in 1974 to make if unlawful for creditors to discriminate in any aspect of a credit transaction on the basis of sex or marital status. In 1976, through amendments to the Act, it became unlawful to also discriminate on the basis of race, color, religion, national origin, age, receipt of public assistance and the good faith exercise of rights under the Consumer Credit Protection Act.

The primary purpose of the ECOA is to prevent discrimination in the granting of credit by requiring banks and other creditors to make extensions of credit equally available to all credit worthy applicants with fairness, impartially and without discrimination on may prohibited basis. The regulation applies to consumer and other types of credit transactions. This discussion will be limited to those provisions of ECOA that relate specifically to the mortgage lending process, including:

  • Rules Concerning Taking of Applications
  • Rules Concerning the Evaluation of Applicants
  • Rules Concerning Extension of Credit
  • Rules Concerning Consumer Notifications


Consumer Information for Monitoring Purposes
Rules Concerning Taking of Applications:

  • Oral or Written Statements:
    The regulation specifically prohibits a lender from making any oral or written statement, in advertising or otherwise, to applicants or prospective applicants that would discourage on a prohibited basis a responsible person from making or pursuing an application.
  • Collection of Information:
    With regards to collection of information, a lender may request any information in connection with an application, with certain exceptions discussed below:
  • Required collection of information:
    The lender is required to request information for monitoring purposed for credit transactions secured by the applicant's dwelling.
  • Information about a former spouse:
    The lender is permitted under the regulation to request any information concerning an applicant's spouse that is requested about the applicant, if the applicant resides in a community property state, like California, or property on which the applicant is relying as a basis for repayment of the credit requested is located in a community property state. Information regarding a former spouse may be requested if the request can also be made to the applicant, if the applicant is relying upon alimony, child support or separate maintenance payments from a spouse (no longer residing with the applicant) or former spouse as a basis for repayment of the credit requested.
  • Other accounts of the applicant:
    A lender may request an applicant to list any account upon which the applicant is liable and to provide the name and address in which the account is carried. A lender may also ask the names in which an applicant has previously received credit.
  • Marital Status:
    In California, a lender may inquire about an applicant's marital status, due to the fact that California is a community property state. A lender may only use the terms "married," "unmarried" and "separated."
  • Disclosure about income from alimony, child support or separate maintenance:
    Under the regulation, a lender may inquire whether an applicant's income is derived in whole or part from alimony, child support or separate maintenance only if the lender first discloses to the applicant that the income from these sources need not be revealed unless the applicant wishes to rely on it to establish credit worthiness. This disclosure must be given to any co-applicant as well.
  • Sex:
    The lender is prohibited from inquiring about the sex of an applicant. An applicant may be requested to designate a title in an application form (such a Ms., Mr.,. Mrs., or Miss) if the form discloses that the title designation is optional. Otherwise, the application form must use terms that are neutral to sex.
  • Childbearing, child rearing:
    The lender is prohibited from requesting or considering information concerning the applicant's plan or expectations of having children, their childbearing capabilities or birth-control practices. The lender is permitted to inquire about the number and ages of an applicant's dependents or about dependent-related financial obligations or expenditures, provided such information is requested without regard to any prohibited basis.
  • Race, color, religion, national origin:
    A lender may not inquire about the race, color, religion or national origin or any applicant or any other person in connection with a credit transaction. A lender may inquire about an applicant's permanent residence and immigration status.



Rules Concerning Evaluation of Applicants
Evaluation Information
The regulation allows a lender to consider any information properly obtained, so long as the information is not used to discriminate against an applicant on a prohibited basis.

Specific Rules Concerning the Use of Information:

  • A lender may not take a prohibited basis into account in any system of evaluating the credit worthiness of applicants.
  • Age and/or receipt of public assistance may only be used for the purpose of determining a pertinent element of credit worthiness. Furthermore, age may be considered when such age is used to favor the elderly applicant in extending credit.
  • Childbearing, child rearing assumptions or aggregate statistics relating to the likelihood that any group of persons will bear or rear children or will, for that reason, receive diminished or interrupted income in the future, may not be used by the lender.
  • A lender may not discount or exclude from consideration the income of an applicant or the spouse of an applicant on a prohibited basis or because the income is derived from part-time employment or is an annuity, pension or other retirement benefit. A lender may consider that amount and the probable continuance of any such income in evaluating an applicant's credit worthiness.
  • To the extent that a lender considers credit history in evaluating the credit worthiness of similarly qualified applicants for a similar type and amount of credit in evaluating an applicant's credit worthiness, a lender may consider:
  • The credit history, when available, of accounts designated as accounts that the applicant and that applicant's spouse are permitted to use or for which both are contractually liable.
  • On the applicant's request, any information the applicant may present that tends to indicate that the credit does not accurately reflect the applicant's credit worthiness; and

    On the applicant's request, the credit history, when available, of any account reported in the name of the applicant's spouse or former spouse that the applicant can demonstrate accurately reflects the applicant's credit worthiness.



Rules Concerning Extension of Credit

  • Extension of Credit:
    A lender may not refuse to grant an individual account to a credit worthy applicant on the basis of sex, marital status or any other prohibited basis.
  • Applicant's Name(s):
    A lender may not refuse to allow an applicant open or maintain an account in a birth-given first name and surname that is the applicant's birth-given surname, the spouse's surname or a combined surname.
  • Signature of Applicant's Spouse of Other Person:
    In general, a lender may not require the signature of an applicant's spouse or other person, other than a joint applicant, on any credit instrument if the applicant qualifies under the lender's standards of credit to be secured, the lender may require the signature of the applicant's spouse or other joint owner of the collateral on any instrument necessary or reasonably believed to be necessary under state law to make the property being offered as security available to satisfy the debt in the event of a default. In California, applicable state law requires all owners of personal property to sign in order to encumber the property. Therefore, the lender may request the non-applicant spouse or other parties to sign a security agreement or other instrument to secure a lien on the property, but not the promissory note. With transactions involving community real property, both spouses must sign the deed of trust in order for the lien to be perfected for the lender. Non-applicant spouse's signature should never be requested on the application or the promissory note.



Consumer Notifications

  • Appraisal Notification:
    Effective December 14, 1993, the Federal Reserve Board issued amendments to Regulation B, Equal Credit Opportunity Act. These amendments require the lender to notify the applicant of their right to receive a copy of their appraisal on loans secured by one-to-four family dwellings.
  • Action Taken:
    A lender must notify an applicant of action taken generally within 30 days after receiving a completed application. A notification given to an applicant when adverse action is taken is required to be in writing and must contain: a statement of action taken; the name and address of the lender; a statement of the provisions known commonly as the ECON Notice; the name and address of the federal agency that administers compliance with respect to the lender; and either a statement of specific reasons for the action taken or a disclosure of the applicant's right to a statement of specific reasons within a specified period of time.
  • Information for Monitoring Purposes:
    A lender that receives an application for credit primarily for the purchase or refinancing of a dwelling occupied or to be occupied by the applicant as a principal residence, where the extension of credit will be secured by the dwelling, is required to request as part of the application the following information regarding the applicants race or national origin (using the categories American Indian or Alaskan Native; Asian or Pacific Islander; Black; White; Hispanic; Other [specify] ); Sex; Marital Status (using the categories Married, Unmarried, and Separated); and age. The applicant(s) are not required to supply the requested information. If the applicant(s) chooses not to provide the requested information or any part of it, that fact will be noted on the form.

    The lender then is required to note on the form, to the extent possible, the race and national origin and sex of the applicant(s) on the basis of visual observation or surname. The lender is required to inform the applicant(s) that the government information is being requested by the federal government for the purpose of monitoring compliance with the federal statutes that prohibit lender from discriminating against applicants on the basis of race or national origin, sex, martial status and age. The lender should also inform the applicant(s) that if the applicant chooses not to provide the information, the lender is required to note the race or national origin and sex on the basis of visual observation.


HOME MORTGAGE DISCLOSURE ACT REGULATION C
The Home Mortgage Disclosure Act (HMDA) was enacted by Congress in 1974 and implemented by the Federal Reserve Board as Regulation C. This regulation provides the public with information regarding financial institutions' record of assisting in the credit need of the neighborhoods and communities in which they are located.

Another purpose to HMDA is to aid public officials in targeting public investments to attract investments from the private sector. The regulation through the various amendments requires lending institutions to collect and disclose data regarding the applicants and their characteristics. The HMDA regulation thereby allows for the public to determine possible discriminatory lending patterns and assists in enforcing anti-discriminatory statues.

Through this regulation the regulatory agencies have the authority to review a lender's mortgage loan record to determine any discriminatory practices against classes of individuals and/or within particular area within the communities served by the lender. The following types of mortgage loans are subject to coverage under HMDA:

  • home purchase loans for any residential dwelling, including a condominium unit, mobile home, manufactured home, or multi-family dwelling,
  • home improvement loans made for the purpose of repairing, rehabilitating or remodeling a dwelling and,
  • the refinancing of a home previously covered by HMDA.

In order to evaluate lending practices, financial depository institutions are required to collect certain data from applicants. All required HMDA data is found on the Real Estate Loan Application Form 1003 in the government monitoring information section, which specifically request the applicant to provide information regarding national origin, race and sex.

The regulation allows the option to the loan applicant to furnish the data concerning national origin, race and sex. However, the regulation does require the applicant to document his/her choice when information will not be voluntarily provided.


TRUTH IN LENDING ACT REGULATION Z
The truth in Lending Act (TILA) is intended to enable the customer to compare the cost of a cash versus credit transaction and the difference in the cost of credit among different lenders.

TILA also establishes disclosure standards for advertisements that refer to certain credit terms.

In addition to financial disclosure, TILA provide consumers with substantive rights in connection with certain types of credit transactions to which it relates. These include a right of rescission in certain real estate lending transactions, regulation of certain credit card practices and a means for fair and timely resolution of credit billing disputes.

We will limit our synopsis to the provisions of TILA which relate specifically to mortgage lending.

  • Early and Final Regulation Z Disclosure Requirements
  • Disclosure Requirements for ARM Loans
  • Right of Rescission
  • Advertising Disclosure Requirements

Early and Final Regulation Z Disclosure Requirements:

TILA requires lender to make specific disclosures on loans subject to the Real Estate Settlement Procedures Act (RESPA) within three business days after their receipt of a written application. This disclosure statement is partially based on the initial information provided by the consumer. A final disclosure statement is provided at the time of loan closing. The disclosure is required to be in a specific format with the following information:

1.     Name and address of creditor

2.     Amount financed

3.     Itemization of amount financed (optional, if Good Faith Estimate is provided)

4.     Finance charge

5.     Annual percentage rate (APR)

6.     Payment schedule

7.     Prepayment policy

8.     Total sales price

9.     Demand feature

10.   Variable rate information

11.   Total of payments

12.   Security Interest

13.   Insurance requirement

14.   Late payment policy

15.   Security interest charges

16.   Contract references

17.   Assumption policy

18.   Required deposit information


Disclosure Requirements for Adjustable Rate Mortgage Loans:
If the annual percentage rate on a loan secured by the consumer's principal dwelling may increase after consummation and the term of the loan exceeds one year, TILA requires additional adjustable rate mortgage disclosure to be provided, including:

  • The booklet titled Consumer Handbook on Adjustable Rate Mortgages, published by the Board and the Federal Home Loan Bank Board or a suitable substitute.
  • A loan program disclosure for each variable-rate program in which the consumer expresses and interest. The loan program disclosure shall contain the necessary information as prescribed by Regulation Z.

Right of Rescission:
In a credit transaction in which a security interest is or will be retained or acquired in a consumer's principal dwelling, each consumer whose ownership is or will be subject to the security interest has the right to rescind the transaction. The lender is required to deliver two copies of the notice of the right to rescind and one copy of the disclosure statement to each consumer entitled to rescind. The notice must be on a separate document that identifies the rescission period on the transaction and must clearly and conspicuously disclose the retention or acquisition of a security interest in the consumer's principal dwelling; the consumer's right to rescind the transaction, and how the consumer may exercise the right to rescind with a form for that purpose, designating the address of the lender's place of business.

In order to exercise the right to rescind, the consumer must notify the creditor of the rescission by mail, telegram or other means of communication. Notice is considered given when mailed, filed for telegraphic transmission, or sent by other means, when delivered to the lender's designated place of business. The consumer may exercise the right to rescind until midnight of the third business day following consummation of the transaction, delivery of the notice of right to rescind, or delivery of all material disclosures, whichever occurs last.

When a consumer rescinds a transaction, the security interest giving rise to the right of rescission becomes void and the consumer will no longer be liable for any amount, including the finance charge.

The consumer may modify or waive the right to rescind if the consumer determines that the extension of credit is needed to meet a bona fide personal financial emergency. To modify or waive the right, the consumer must give the lender a dated written statement that describes the emergency, specifically modifies or waives the right to rescind and bears the signature of all the consumers entitled to rescind. Printed forms for this purpose are prohibited.

Advertising Disclosure Requirements:
Advertising directed to consumers; TILA requires the advertisement to disclose the credit terms and rate in a certain manner. If an advertisement for credit states specific credit terms, it may state only those terms that actually are or will be arranged or offered by the lender. If an advertisement states a rate of finance charge, it may state the rate an "annual percentage rate" (APR) using that term. If the annual percentage rate may be increased after consummation the advertisement must state that fact.

 

 Economic Indicators

Interest Rate Forecasting
There are a variety of economic indicators used by the Federal Reserve, Wall Street bond traders and institutional investors to forecast the direction of interest rates. Some indicators are released by the Federal government; others are released by private research firms and trade associations.

Residential mortgages, US Treasury securities, municipal and corporate bonds are part of what is termed the "long term debt market" known as the "Capital Markets." There are many variables which influence the rates on long-term debt instruments. An understanding of key economic indicators can provide clues to the future direction of interest rates.

*Key economic indicators are listed below in general order.

Top of Form

                                                                                         

Bottom of Form



Beige Book
This is the Federal Reserve's analysis of the economy and an explanation as to why they do what they do. This is published before each meeting of the FOMC and gives some insight into their intentions.


Gross Domestic Product
The gross domestic product (GDP) is considered by many to be the most important economic indicator published. Providing the broadest measure of economic activity, the GDP is considered the nation's report card.

The four major components of the GDP are: consumption, investment, government purchases, and net reports.

Consumption spending represents about 56% of the GDP and is divided into three categories: durable goods (items expected to last more than three years), non durable goods (food and clothing), and services.

Investment spending accounts for about 14% of the GDP and covers three categories: nonresidential (spending on plants and equipment), residential (single-family and multi-family homes), and the change in business inventories.

Government spending represents about 17% of the GDP, covering spending on defense, roads, schools, etc.

Net exports account for the balance or about 13% of the GDP. Imports deduct from GDP and exports add to the figure. In recent years, the U.S. has consistently experienced net imports, with imports exceeding exports.

The economy's average sustainable growth rate has historically been between 2.5% and 3.0%. Rapid economic expansion, growth, in excess of the average sustainable rate, is generally short-lived, as it can lead to inflation and, in turn, cause the Federal Reserve to tighten monetary policy in order to slow growth. An economic downturn, or negative growth, is known as a recession. During a recession, the Fed may lower interest rates to stimulate the economy and increase the growth rate.

Bad news is good news for the bond market. A weak GDP is received favorably by bond investors; a strong report causes concern the Fed might need to intervene and raise interest rates (a negative for the fixed income market).


Consumer Price Index
The consumer price index (CPI) in considered, by most economists to be the most important measure of inflation. It compares prices for a fixed-list of goods and services to a fixed period of time.

The consumer price index (CPI) in considered, by most economists to be the most important measure of inflation. It compares prices for a fixed-list of goods and services to a fixed period of time.

The CPI categories and respective weightings are:

·         Housing 42%

·         Food 18%

·         Transportation 17%

·         Medical Care 6%

·         Apparel 6%

·         Entertainment 4%

·         Other 7%

Unlike other measures of inflation, which only cover domestically-produced goods, the CPI covers imported goods, which are becoming increasingly important to the US economy.

Analysts focus on the "core" CPI, which excludes the volatile food and energy sectors. The core index is considered a more accurate measure of the underlying rate of inflation.

The bond market can be extremely sensitive to changes in the CPI which exceed expectations. Example: a higher-than-expected CPI can cause bond prices to fall and yields to rise. Likewise, a lower-than-expected figure is bullish for the market, causing the bonds to gain and yields to fall.


Producer Price Index (PPI)
The producer price index (PPI) is a monthly indicator of inflation. It is a measure of wholesale prices at the producer level for consumer goods and capital equipment. Unlike the CPI, it does not included services.

The PPI categories and respective weightings are:

·         Finished Consumer Goods 40%

·         Food 26%

·         Capital Equipment 25%

·         Energy 9%



Employment - Payment Jobs
Except for the GDP, the government's employment report is the most significant economic indicator reported. It provides information on employment, the average workweek, hourly earnings, and the unemployment rate.

The data covers the following major categories:

·         Goods-Producing

·         Manufacturing

·         Construction

·         Mining

·         Service-Producing

·         Transportation and Public Utilities

·         Wholesale Trade

·         Retail Trade

·         Finance, Insurance, and Real Estate

·         Services

·         Government



Jobless Claims
Jobless claims are US Labor Department reports of initial state jobless benefit claims, seasonally adjusted. They give an indication of potential "wage inflation" when they remain low.


Housing Starts
The housing industry accounts for approximately 5% of the overall economy. Housing starts is important because it is a leading indicator. Sustained declines in housing starts slow the economy and can push it into a recession. Likewise, increases in housing activity triggers economic growth.

Building permit data is released at the same time as housing starts. Permit activity provides insight into housing and overall economic activity in upcoming months. It is so important that it is included in the index of leading economic indicators.

Housing activity is directly impacted by mortgage rates. Higher interest rates increase housing costs and reduce the number of qualified borrowers, thus, a decline in home sales and drop-off in starts. Conversely, lower interest rates increases housing affordability and spurs homes sales and housing starts.

Housing data can have a significant impact on the bond market. A stronger-than-expected report is viewed negatively, suggesting strong growth and possible inflation. Housing data can have a significant impact on the bond market. A weak report has the opposite effect on the market.


National Association of Purchasing Managers
The National Association of Purchasing Managers (NAPM) index is based on a survey of over 250 companies, twenty-one different industries, covering all 50 states.

The survey covers the following six areas:

·         Production

·         Orders

·         Commodity Prices

·         Inventories

·         Vendor Performance

·         Employment

Participants are asked to evaluate their position in each of these categories as "up," "down," or "unchanged." The calculated index is then adjusted for seasonal changes.

The bond market views a strong number as negative and a weak report as bullish or positive.


Retail Sales
This report contains valuable information about consumer spending the consumption part of the gross domestic product (GDP). Consumption spending accounts for more than one- half of GNP.

Retail sales data represents merchandise sold for cash or credit by retailers. Durable goods, such as autos, make up about 35% of the figure. The balance consists of non-durables, like gasoline, restaurants, and general merchandise.

There are several drawbacks to the report. The data covers purchases of goods only, not services. Services are becoming a major factor in our "new" economy.

The bond market reacts negatively to a strong report.


Durable Goods Orders
A leading indicator of manufacturing activity. Increases in orders generally leads to increases in production. Drops in orders are followed by a build-up of inventories and, eventually, a decline in production. Economists use durable goods data to forecast changes in manufacturing.

Durable Goods are hard to predict. A strong report is bad news for the bond market, causing the bond to slump. Likewise, a weak report is viewed positively by investors.


Leading Economic Indicators
This is a composite index of economic variables that generally lead changes in overall economic activity. This index is followed as a forecasting measure of broader indicators of growth such as payroll employment and GDP. It is also followed as an early indicator of future inflation. This is not viewed as an important release because it is a rehash of previously released data.


Industrial Production
This report measures the physical volume of output of the nation's manufacturing sector, including factories, mines, and utilities. Goods-producing industries account for about 45% of the economy. The balance, the service sector and construction industry, account for the remaining 55%.

 

 

 

The Loan Application Process
We will want to verify certain information about you and the property. Borrower information will include verification of income and employment, assets, and your credit history. You, the applicant, as part of your application process, will usually provide some of this information. Other information, such as your credit history, will be obtained directly from the credit bureaus.

For the property itself, we will order an appraisal in most cases and a legal description of the property, such as a title report. We have "approved appraisal company" lists, so if you have an old appraisal, we may be able to accept it.

The Loan Approval Process
During the "processing" and/or "underwriting" period, your credit, assets, income and other determinants are checked and compiled. Your loan is either approved with conditions, or approved without conditions or declined. Conditions are further documentation or checks we will need to finalize your loan before funds can be dispersed. Some borrowers become frustrated by conditions that surface at the end of a loan transaction and can't understand why they are being raised so late. Final conditions are sometimes added for final approval. We do our best to help you through the process - remember, we are simply trying to meet conditions imposed by other sources.

Since most loans are sold and serviced by other parties, the lender must verify that the loan can be sold upon close. Not to worry, no other terms of your loan can be changed after you have signed your final loan documents. When all conditions are met, your loan documents are drawn up and forwarded to the place of settlement or closing, typically a title and/or escrow company.

IMPORTANT NOTE:
Do not make any adverse changes to your financial "picture" during the loan process. Things as simple as applying for a new department store credit card to purchase a new appliance will at least force an explanation to be given and at worst may cause your loan not to fund and the approval to be withdrawn. Many times a final credit report update and additional calls to your employer may be required before funding the loan. Be patient and your loan will flow smoothly.

 

 Understanding Homebuying

Are you ready for that magic time of owning your first home?   Are you wondering how to go about it?  This is the perfect place to start! We give you step-by-step instructions on how to get into your first home!

How to start:

  • Our goal is to help "demystify" the process for you. We'll help you answer important questions, help you to do your research and plan financially to make the best decision possible for you and your family. By educating yourself on the basics of buying a home before you go house hunting you can save yourself a ton of money, time and aggravation.
  • The absolute most important thing to do is to get pre-approved for a loan amount even before you start shopping. You will know the exact maximum you can obtain for financing and you can cut the best deal on your new home!
  • Your Credit is important. When you apply for a home mortgage we will review several pieces of information, including your credit report. When you apply for your home loan your credit report will be used as an important part of how your loan is or is not approved, and for what interest rate.

Helpful hints on where to start the property portion of the process:
There are definite benefits to homeownership, including:

  • Real estate for the most part is a solid investment. Example, if you stay in a home for typically 5+ years, your house will rise in value enough to offset some of the initial expenses you'll incur and you'll earn money when you sell your home. There are of course some things to consider prior to buying that home; you will want to determine if you need to do some renovations, etc. If that is the case, you will have to factor those costs into the overall financial picture.
  • Tax benefits. You can deduct the mortgage interest from your taxable income. That deduction lowers your taxable income, which means that, you'll end up paying LESS tax on your income each year, now that is sweet!
  • Homeownership is an investment. As you pay down the principal loan amount, you are building up equity in the property. That coupled with appreciation in the value of the home can pay off nicely.


What type of area would you prefer to live in? For example, are you interested in living in the city or an urban area? What about the suburbs or maybe something more rural?

What are the local schools like? If you have, or are planning to have, children, you'll want to know about your local school system. You can get reports on your community's schools from your real estate agent, we know the best agents in any the local school board, or through one of several online resources, including:

What about the neighbors, nice people? Do you want to live in a community of mostly young professionals, or families with young children, or would you like a mix of neighbors?

What about public transportation? If you use public transportation regularly to get to work or to go shopping, it's essential that you have easy access to public transportation routes and that the routes take you to where you need to go.

What about community amenities? Are there parks, pools, libraries, etc. nearby?

What are the estimated taxes on the home? Every home listing should include information on estimated taxes for the area. You can get tax information from the homeowner, your Real Estate Agent, or from the county's tax office.

What type of city, county, or private services does the home use? For example, does the home use city water and sewer systems? Does it have well water? Is it part of a homeowners' association that provides trash pick-up and landscaping services?

Determining what area you wish to live in. Let’s consider what you're looking for in a home. Ask yourself the following:

  • Do you only want to see newer homes (typically built within the last 10 years) or are you open to looking at older homes?
  • Do you have a certain style of home in mind? The more open-minded you are when it comes to homes you'll consider, the more options you'll have when house-hunting.
  • Do you have a certain style of home in mind? For example, are you interested only in single-family (detached homes) or condos/townhouses (attached homes)?
  • How many bedrooms and bathrooms do you want? Not only to meet your current family needs, but think ahead to potential future needs such as having a home office or accommodating more children, guests, or aging parents.
  • Do you like the kitchen? Does it have the appliances, cabinets, and countertops you'd like? What about the age and condition of the appliances? How about the traffic pattern? Since families tend to spend a lot of time in the kitchen you want it to be a place where you feel comfortable, or at least have an idea about what you'd change to make it the kitchen you'd like.
  • Does it have a floor plan that works for you and your family? Do you like how the rooms are laid out? If you have young children maybe you want to be able to see your kids from the kitchen. Or if you have teenagers, maybe you want to have their bedrooms further away!
  • Does the house have the type or size yard you'd like? Is there enough space for kids to play or to entertain? Is it fenced? Can you landscape the way you'd like?


Should I have the home inspected by a professional? 
Yes, no matter how closely you review the property, there are things you either wouldn't know to look for, or wouldn't be able to evaluate on your own. That's where a home inspector can help out.
By law, sellers are required to disclose anything that they know is wrong with the home; you're also protected by a home inspection clause. Having a home inspection means that a professional home inspector will come and examine the home to give you an accurate picture of the home's condition. The report will include the home's interior, exterior, foundation, insulation, electrical wiring, plumbing, and more. A home inspector will not comment on the value of the home, or whether or not you should consider buying the home. Their only job is to report on the condition of the home.
It's a good idea to be there during the inspection if possible. A good inspector will show you everything he or she is looking for. It can help to know what you'll need to replace or update, and what to be on the lookout for that might give you problems down the road. The inspector should give you a copy of the report. Depending on what the home inspection turns up, you'll have the opportunity to possibly renegotiate the contract to offer less for the home, or require the homeowner to make specific repairs before agreeing to close on the home sale.

What about working with a real estate agent? Real estate professionals can be very helpful in the home buying process. The benefit of using us for your financing is that we work with some of the best real estate agents in the business. Check with one of our loan professionals, they know exactly who will be best suited to you’re your needs and goals.
Some of the benefits of using a real estate agent;

  • They have access to the Multiple Listing System (MLS). The MLS is the electronic listing of all homes being represented various agents throughout your area of interest. This helps the agent locate multiple choices for you based again on your needs and goal
  • They may also know about homes that are available in your area of interest that are not being actively marketed on the MLS. They can also get referrals on homes in your price range from their large network of fellow agents.
  • They have time to research the local market, make appointments for you to see homes…. All of the things that you might not have time to do or want to do for yourself!
  • They will prepare and handle all the paperwork related to the home sale.
  • They can help you determine how much the home is really worth based on comparable sales in the area.
  • They have a fiduciary responsibility to act in your best interest. They should try to negotiate the best possible deal for you.  

Offers & Counteroffers
When you've found the home you want the next step is decide whether or not you want to make an offer, meaning that you want to tell the seller that you want to purchase the home. Making an offer is where you outline exactly how much money you're willing to pay for the home and under what conditions.

Terms and Conditions
In addition to the sales price, your mortgage, and personal property, you'll want to include your requests for terms and conditions of the purchase such as:

  • Are there any repairs you want the seller to make? You should include any in the contract.
  • What is your preferred date to move in?
  • Do you want the seller to provide you with a home warranty? It's not required, but you may want to request it, particularly if the current homeowner has a policy that he/she can transfer as part of the home sales.

Contract Contingencies
A contingency is a clause in your contract saying that if something goes wrong you are not legally bound to purchase the property.

There are two standard contingencies that most home buyers include in their contract: a financing contingency and a home inspection contingency.

  • The financing contingency means that you are not obligated to buy the home if you aren't able to secure specific financing from a lender either because you don't qualify for the loan, interest rates rose above your listed maximum rate, or because you're unable to sell the home you're currently living in that you were planning to use as money for the down payment.
  • The home inspection contingency means that you have the right to renegotiate the terms of the offer or can walk away from the deal altogether if the home inspection turns up something that you weren't aware of or is something that carries a high dollar value, such as termite work, replacing a roof, deck, etc..


Where to Begin?
If you're using a real estate agent you'll have help in negotiating with the sellers and filling out the paperwork. If you're buying a home on your own the seller may have an agent that will handle the process. Remember though, the seller's agent does not work for you he/she works for the seller and they are obligated to get the highest price possible for them.
Don’t do it alone! If you are not using an agent, it's a good idea to have it reviewed by a real estate attorney. Whether you have an agent helping you walk through the process or not, the most important thing to know is that when it comes to making an offer on a home everything - everything - must be in writing.

Arriving at the Sales Price
How much do you offer for a home? The answer really depends on what type of a real estate market you're in. In a hot selling market, it sometimes takes an offer over the asking price to get the home!. If it's not such a competitive buying environment you’ll have more room to maneuver and in that case you can consider offering less than the asking price.
What affects the price?

  • Any repairs you may have to make;
  • Comparable sales in the neighborhood
  • How long the house has been on the market;
  • Whether or not the price on the house has been reduced;
  • The seller's personal situation - for example if they are getting a divorce, if they are  relocating and need to move quickly, etc.

 

Tests
You can and should request an assortment of tests to be run on your home prior to purchase, including a test for radon, lead-based paint, asbestos, and termites.

  • Termite Inspection. The termite inspection is required. If the home fails the termite inspection, the seller will be required to have the property treated for termites prior to selling.
  • Lead-Based Paint. If the home you're buying was built before 1978 you may also want to consider ordering an inspection for lead-based paint. Prior to 1978 lead-based paint was commonly used in residential homes.
  • Radon Gas. Radon is a colorless, odorless gas that moves up through the ground and enters homes typically through the foundation or basement area. Radon has been linked to lung cancer, particularly in smokers.
  • Asbestos. Although asbestos is harmless unless airborne, if you're looking to purchase an older home, chances are good that the builder used asbestos in the flooring, walls, siding, or other area of the home. If you're considering doing major renovation to an older home it's good to know if you'll be working with materials that contain asbestos. Asbestos has been linked to lung cancer.

In addition to ordering the tests, you can also negotiate to have the seller pay a portion or all of the fees for the tests to be performed.

Earnest Money Deposit
You will have to make an earnest money deposit to show the seller that you're serious about your offer. A seller doesn't want to take his/her house off the market, which is what happens when they accept a contract, if he/she is not sure that you're genuinely serious about buying the home. The amount of the deposit that you'll be required to make varies, but is typically between 1 to 3% of the sales price.

The check will not be cashed right away. Instead it will be held by a third party (such as a title office, attorney or a real estate agent) to ensure its safety. If your contract is accepted and you purchase the house your check will be cashed and the deposit is subtracted from your down payment and/or your portion of closing costs (if any).
There are a few different scenarios if the contract falls through.

  • If you back out of the deal you'll forfeit your deposit.
  • If the seller breaks the contract the deposit will be refunded to you.
  • If you have a home inspection contingency and the home inspection reveals something that you want to ask the seller to repair and the seller refuses, you have the right to walk away from the contract and the deposit will be refunded to you.

The contract should indicate who would hold the deposit and under what circumstances it will be refunded to the buyer (usually only if the financing falls through or if the seller backs out of the agreement to accept another contract).

Before Sending the Offer
Review it with your agent or professional, attorney, etc.!  Once the seller accepts the contract it is legally binding.

After Making the Offer, Then What?

  • The seller accepts your offer and you have a legally-binding contract,
  • The seller rejects your offer and the contract offer is null and void, or
  • The seller presents a counter offer with revisions to your original offer.
    • This is where the negotiating begins. You know what you want; the seller knows what he/she wants; and the counter offer is best described as the middle ground everyone can or cannot agree upon.
    • Once they accept or make a counter offer you will review the counter offer add any additional changes on your part or sign/initial to accept changes and send back. Theoretically this could go on forever, but usually an agreement is reached in the second or third counter offer – keep the faith!


Once you are successful you go into escrow or settlement,
This is where you and the seller “close” the deal! Closing on the property and your home loan transpires when you sign all the papers transferring ownership of the property from the seller to you!

Balance of your Down Payment 
At the closing the balance of your down payment is due and payable. Remember that earnest money deposit? It will now be applied toward your down payment amount. A cashier’s check or a certified check is typically required for the down payment. Your bank will supply you with one.

The Close and Moving In
Once you finalize all documents, it’s time to move in – congratulations!
If you have any unanswered questions be sure to contact one of our loan professionals for additional advice and professional contacts.

 

Moving Tips

These are hazardous and other items which carriers are prohibited by law from transporting:

  • Paints or flammables
  • Aerosol cans and pressurized containers including deodorant, shaving cream, hair spray
  • Explosives
  • Matches
  • Fire extinguishers
  • Light bulbs and fluorescent bulbs
  • Batteries
  • Nail polish remover
  • Open liquor bottles
  • Antifreeze
  • Shoe polish
  • Bleach
  • Chemistry sets
  • Propane gas
  • Lighter fluid
  • Candles
  • Cord wood

NOTE: Guns can be moved as long as they have the bolt, firing pin and trigger assembly disassembled. There are various state and federal laws you should check. Overseas shipments are subject to individual country regulations.

The 'before the move garage sale help list':

  • Be realistic about prices. What would you be willing to pay?
  • Label everything with a price ahead of time.
  • Place a classified ad in the newspaper, and put signs up in the neighborhood .
  • Allow several days for sorting and labeling.
  • Be willing to haggle.
  • Display merchandise on tables.
  • Set up displays the night before your sale or very early.
  • Be ready for early birds.
  • Start with lots of change and take checks only from people you know.
  • Remove your neighborhood signs after the sale is over!


Moving - the last items to pack
The last items packed should be all the items you'll need when you arrive at your new home:

  • Cereals, soups, snack & lunch items
  • Coffee, tea, coffee cups, cream & sugar, powdered drinks
  • Coffee maker or teapot
  • Paper plates, napkins, cups, paper towels, plastic silverware and serving spoons
  • Pots, pans, bottle opener, can opener
  • Trash bags, paper and plastic bags, aluminum foil, plastic wrap
  • Cleaning supplies, including rags, cleanser, window cleaner
  • Dish soap, bath soap, and towels
  • Toilet paper & tissues
  • A bag containing screws, nails, hooks, etc.
  • Extension cords
  • Screwdrivers, hammer, small tools (drill) and scissors
  • A flashlight
  • A radio
  • A first aid kit
  • A phone book from your previous area
  • Toys, books, crayons for the kids

 

 

1st Timer Information

Prepare for home ownership with AZG Capital L.L.C.
Buying a home requires more than just money for a down payment. You also have to be committed to taking control of your surroundings and your finances. We will work with you throughout the home-buying process to help make owning your first home as easy as possible. Together, we can help you understand how owning a home is more attainable—and easier to understand than you may realize.
Home ownership means you no longer pay monthly rent for the roof over your head. Now you own it, you can get an equity build up – not the landlord. You can do what you want with your house. Here are just a few benefits of homeownership:

  • Interest Tax Deductions
    You may be able to deduct the interest on your home loan, as well as the federal (and sometimes, state) real estate taxes you pay annually. Be sure to consult your tax advisor. Because of this tax advantage, it may actually be cheaper to own than rent.
  • Equity
    If the value of your property increases as you pay down your mortgage, you build equity that can be used to finance other major purchases, or as a down payment on a future home.
  • A Protection Against Inflation
    Home ownership could help you counteract rising inflation. Although past performance cannot guarantee future trends, real estate has historically appreciated at a higher rate than inflation in most regions.

Let's start your home-buying journey today
Secure Your Rate
Should you lock your mortgage loan interest rate now? Learn more about options like rate locks and float downs. One of our purchase loan experts can help you finalize your decision, would you like to speak with someone now?

Here is some important information regarding your credit 
Credit reports are kept by the three major credit agencies, Experian, Equifax, and TransUnion. Among other things, they show your credit payment history.
A credit score is a number calculated by Fair Isaac based on the information in your credit report. You have three different credit scores, one for each of your credit reports.  We can help you through that process, we are not a credit repair agency, but we can help you understand the issues, and learn more about credit.

Know what you can afford
We will look at your income, debt and credit to determine the kind of loan that best suits your needs and goals. The size of your down payment will also determine how much you can afford. We will walk you through each step.

Line up cash
You will need to come up with some cash of your own.  We will pinpoint that number for you as we work through the process. Items we will consider are the proper down payment, fees and closing costs. These may include the appraisal fee, loan fees, attorney's fees, inspection fees, and the cost of a title search. Again, we help you arrive at the best possible scenario to fit your needs and goals.  There are many options available such as withdrawals from your IRA account without incurring penalties, etc.  We will help you analyze your finances to come up with the best solution.

Loan Jargon
The following three terms will help you better understand the rest of this scenario:

1.     Loan-to-Value (or LTV)
This is the loan amount as a percentage of the purchase price or appraised value (whichever is less). If you are buying a $150,000 home with $15,000 down payment you have a 90% LTV. Loans over 80% LTV require either PMI (Private Mortgage Insurance) or a combination of a 1st and 2nd mortgage which avoids the PMI.

2.     Housing Ratio
This is your total monthly housing expense (principal, interest, tax, insurance, and PMI and homeowners dues (condos if applicable) divided by your gross monthly income. Note "gross" income is "before" deductions. If you have a "W2" job your income is easy to determine. If you are self employed, please note your gross income is what you bring from your Schedule C onto line 12 of your 1040. Also, a 2 year history of consistent self-employment income is generally necessary.

3.     Debt Ratio
This is your total monthly housing expense plus your monthly payments of your installment and revolving debt. Some details here: this would include child support, alimony or separation maintenance. Any debt with fewer than 10 months to go does not count. A debt such as a "buy furniture now, make no payments until more than a year from now" does not count as long as there are 12 months to go without payments. The same applies for student loans.

Your income and credit will determine the sizeof the loan you can qualify for. You will need cash for 3 things:

1.     The "Down Payment"

2.     Closing Costs
This is where many people get off track. You need to cover your one time or "non-recurring" closing costs, your "recurring" closing costs: prepaid interest, insurance, impounds if there is PMI and potential prorated property tax.

3.     Reserves
You need more than $10.00 left in the bank after you purchase. We need to see 2 months (PITI) of your total monthly housing expenses in reserve. You will want to be sure that you get together all of the cash necessary to close.


Once I have determined what size loan you will be able to qualify for and where the money is coming from I can determine how expensive a home you can afford.


 

Points

What are Points?
Points are up front mortgage interest fees paid on a loan to reduce the initial interest rate. For example, a one-point loan will always have a lower interest rate than a zero-point loan. Therefore, paying points is a trade-off between paying money now versus paying money later. A Point represents 1% of the loan amount, and depending on how long you plan to stay in your home, paying points can save you a lot of money in the long run. It takes about five to seven years to recoup the cost of paying a point upfront. Here's the math. Let's say you take out a $100,000 30-year fixed mortgage, and you have the option of either paying 6% with no points or 5 3/4% with one point. With the 6% mortgage, your monthly payment will be $600. And with the 5 3/4% loan, it would be $584, a savings of $16 per month. After about 62 months, or a little over five years, you would have recouped the $1,000 point you paid upfront. And then you would start to benefit from the lower monthly payments.

No Point Loans
There are many reasons for choosing a "No Points — No Closing Cost" Mortgage. The following outlines some of the most common reasons borrowers choose this option.

1.     Lack of cash to close escrow. If you are purchasing a new home and are short on cash for the down payment, a "No Points — No Closing Cost" mortgage can save you up to thousands of dollars.

2.     If the estimated time you will be staying in the home is less than 4 years, while paying points and closing costs will give you a lower interest rate and a lower monthly payment, it typically takes about 4-5 years of living in the property to realize the benefit of the lower payment when weighed against the total cost of the points.

3.     Lack of equity in the property when refinancing. A similar situation as portrayed in item "1". If it makes financial sense to refinance your mortgage, but you do not have enough equity in the property to add your closing costs into the new mortgage - a "No Points — No Closing Cost" mortgage could make great sense.


Tax Issues
In a refinance transaction, points must be amortized over the life of the loan. For example, on a 30 year loan, you can deduct 1/30th of the points paid each year. If you refinance for a second time, however, you may be able to deduct the remaining unamortized points in the year you refinance the loan. Consult your tax advisor for more information.

  

 

A Guide To Lock-Ins

The interest rate market is subject to constant swings without advance notice. Locking a rate protects you from the time that your lock is confirmed to the day that your lock period expires.

Please note that we cannot be held responsible for any rates that may change prior to our written confirmation.

Lock-in Defined
A lock is an agreement by BOTH you, the borrower, and the lender and specifies the number of days for which a loan's interest rate and points will be guaranteed by the lender. Should interest rates rise and you have met all of your conditions the lender is then obligated to honor the rate that they have locked on your behalf. Should interest rates decrease, the lock must still be honored by you.

When Can I Lock?
You can lock a rate once your application information has been reviewed. In some cases, your application will provide all the information needed and you will have the option to lock at the time you apply. Otherwise you will be invited to lock after you have returned your package and your documentation and credit information has been reviewed.

We recognize that you may not be available to request a lock during this time period; if so, please contact your Loan Agent for assistance. We are working with all of our lending partners to extend the lock-in period, and appreciate your understanding.

Lock Period
Lock-ins will vary from 10 days to 180 days. It costs more to lock in for extended periods of time.

Lock Confirmation
Until we confirm in writing that your rate lock has been accepted by our lender, your loan is not locked in. When you request a lock, we contact our lender partner and secure the lock on your behalf. Unfortunately, the lock process is not yet automated within the mortgage industry, therefore, we must follow the lock guidelines of our lending partners. For this reason, we are not able to verify your lock request immediately but will do so ASAP after your lock request submission.

 

Purchase Strategies

Loan product developments in recent years have greatly expanded the options available for all home buyers. Today's loan programs offer borrowers opportunities to maximize buying power, save cash for repairs or improvements, or even buy a home with little down payment. Now we will discuss some of the ways buyers can take advantage of the expanding loan market to secure the best financing available today.


Purchase prequalifications
We can pre-qualify you as a borrower without specific property information. In other words, your loan information is used for full underwriting and includes your employment information, asset information, and credit history. We can then pre-qualify you as a borrower, subject to a maximum loan amount, down payment, and interest rate.

Getting prequalified for a loan is critical in today's real estate environment. Many Realtors® do not want to accept offers from buyers unless they are pre-qualified for a home loan. By going through the loan process prior to signing a purchase contract on a home, you can eliminate all of the obstacles to borrowing without jeopardizing an actual purchase transaction. Once your loan is approved, your real loan closing will be quick and subject only to a satisfactory appraisal and title report on the home.

To begin the prequalification process you need to make some assumptions about your purchase price, loan amount, and loan program. Any of these assumptions can change once you've found your home, but it helps to do the following:

  • Complete your application for the maximum loan amount and purchase price that you're interested in. We can always change these later.
  • Get your loan approved at an interest rate that is somewhat higher than what you expect to get. Again, we can always change it later.

The prequalification of your loan will ensure that your real purchase will go smoothly once you have located the perfect home.

No income verification loans
No income verification mortgage loans were very popular in the early 2000's. They provided loans to anyone with a certain credit score without verification of income. Generally these loans are used by self-employed borrowers who have difficulty verifying all of their income, or by borrowers with very complex income structures. These loans are high risk and many borrowers entered into loans that they were unable to repay. As a result, most all lenders have now removed no income verification loans as loan options.

Is it possible to get a Stated Loan still?

There are still lenders available that can provide a no income verification stated loan but they are harder to get. Typically, these loans are only available to the self-employed borrower and require a significant down payment. Additionally, the credit score of the borrower must be impeccable.

The loans are offered at much higher interest rates, many times making them unaffordable. For example, if rates are 6 percent, no verification loans rates can be 10 to 12 percent and thousands of dollars more to acquire. These high rates mean payments are higher and loans are typically unaffordable.

No Income Verification Loan Information

Make sure that you properly state your income. Many people were tempted by beautiful homes and stated they earned higher incomes than they actually made. This is one of the many reasons that so many loans defaulted.

Take an honest approach to income and debt. Be sure that you examine all additional fees, such as mortgage insurance, taxes, and fire insurance. In addition, factor in maintenance, utility costs, trash collection, and other fees associated with the home. Before you buy a home, be sure you know the full picture.

You may find it makes more sense to use a traditional loan and reap the benefits of the lower monthly payment they can offer. You may have to provide the lender with more documents, but it will usually save you thousands in interest and closing costs. We’ll help you compare the costs of a no verification loan to a regular loan, then ask for a “needs” list from your lender. The needs list will provide with a list of documentation required to qualify the loan. You may find the list might not be as long as you thought.

We will help you with your decision-making process and give you a comparison of programs and fees.


You can avoid mortgage insurance with 80/10/10 financing
One way to avoid having to pay mortgage insurance is to purchase a home with a combination first and second mortgage. The first mortgage would be limited to 80% of the home's appraised value. The second mortgage, which would close in conjunction with the first, would then provide for the difference between the home's purchase price, less the 80% first mortgage, less the down payment available. In other words, if you have a 10% down payment available, your first loan would provide for the 80% mortgage with a second mortgage of 10%. This is commonly referred to as an "80-10-10" transaction.

Another way to avoid incurring mortgage insurance payments is to find a lender that offers self-insured programs. This type of loan would typically have a higher interest rate in place of the private mortgage insurance premium. The decision of whether to obtain a loan with mortgage insurance versus the above two options should take into account the combined monthly payments of the various options, adjusted for the tax benefits of interest deductions.

 

Home Inspections

Home Inspection by a Professional — Good Idea!

Q. WHAT IS A "HOME INSPECTION"?
A home inspection is generated by a visual examination of the physical structure and systems of a home, from top to bottom. An inspection is similar to a physical check-up. If problems or symptoms are found, the inspector may recommend further evaluation.

Q. WHAT WILL IT INCLUDE?
The standard home inspection report contains a review and the condition of the home's heating system, central air conditioning system (temperature permitting), interior plumbing and electrical systems; the roof, attic, and visible insulation; walls, ceilings, floors, windows and doors; the foundation, basement, and visible structure.

Q. WHY SHOULD I GET A HOME INSPECTION?
The purchase of a home is probably the largest single investment people ever make. You should learn as much as you can about the condition of the property and the need for any repairs before you buy. Nobody likes unpleasant surprises and difficulties afterwards. Naturally, a home inspection will also point out the positive aspects of a home. After the inspection, you will have a much clearer understanding of the property you are about to purchase.

Q. WHAT DOES IT COST?
The inspection fee for a typical one-family house varies geographically, as does the cost of housing. Similarly, within a given area, the inspection fee may vary depending upon the size of the house, particular features of the house, its age, and possible additional services, such as septic, well, or radon testing. It is a good idea to check local prices on your own.

Q. CAN I DO IT MYSELF?
Even the most experienced homeowner lacks the knowledge and expertise of a professional home inspector who has inspected hundreds, perhaps thousands, of homes in his or her career. An inspector is familiar with the many elements of home construction, their proper installation, and maintenance. He or she understands how the home's systems and components are intended to function together, as well as how and why they can or may fail.

Q. HOW DO I FIND A HOME INSPECTOR?
The best source is a friend, or perhaps a business acquaintance, who has been satisfied with and can recommend a home inspector they have used. In addition, the names of local inspectors can be found in the Yellow Pages where many advertise under "Building Inspection Service" or "Home Inspection Service".

 


REFINANCING

The Process
Reasons To Refinance
Rules No Longer Apply
Costs Lower Than Ever
A Guide To Lock-Ins
Points

 

The Process

We've designed our site to make it easy for you. This brief diagram will give you a good jump-start!

Event

Who Does It

Details

Review our loan information

Applicant

Before you begin an application, please review loan information from:

·         Our Homebuying Center

·         Our Refinance Center

·         Our website

Apply

Applicant

Complete an application. This will set the process in motion.

Loan Originator Contact by Phone

AZG Capital L.L.C.

Your first connection with your loan originator will get a dialogue started which will insure that you get the loan that you want.

Credit Check & Prequalification

AZG Capital L.L.C.

We pre-approve you using our artificial intelligence software, or underwriting your loan in-house. Our system will assess your credit, income and assets to quickly determine what loan(s) you qualify for.

Required Loan Documentation and Paperwork

Applicant/AZG Capital L.L.C.

Paperwork is still a big part of the loan process. We will mail you forms to sign and a document checklist.

Rate Lock & Appraisal

Applicant/AZG Capital L.L.C.

Once we determine your loan amount, type of loan and rate, your loan agent will recommend the appropriate time to lock the rate with a lender.

Loan Submission for the Best Rate/Program

AZG Capital L.L.C.

Once all of the paperwork is assembled by our processors, your package will be forwarded to underwriting for approval.

Underwriting and Approval

AZG Capital L.L.C./Lender

An underwriter will review the package and fax an approval to AZG Capital L.L.C. and any conditions necessary for the approval. Most conditions are taken care of by AZG Capital L.L.C..

Clear Loan Conditions

AZG Capital L.L.C.

Our closer gets the conditions from underwriting for final preparations to close.

Loan Documents Delivered

AZG Capital L.L.C./Lender

Loan documents are prepared and delivered to the escrow agent. The escrow agent will call you to arrange a signing. This is coordinated by your loan originator, your Realtor and the escrow agent.

Loan Funding

Escrow/AZG Capital L.L.C./Lender

Once the signed documents are returned, they will be reviewed. The escrow agent will request a wire transfer of the loan funds, close and record the transaction.



The Loan Application Process
We will want to verify certain information about you and the property. Borrower information will include verification of income and employment, assets, and your credit history. You, the applicant, as part of your application process, will usually provide some of this information. Other information, such as your credit history, will be obtained directly from the credit bureaus.

For the property itself, we will order an appraisal in most cases and a legal description of the property, such as a title report. We have "approved appraisal company" lists, so if you have an old appraisal, we may be able to accept it.

The Loan Approval Process
During the "processing" and/or "underwriting" period, your credit, assets, income and other determinants are checked and compiled. Your loan is either approved with conditions, or approved without conditions or declined. Conditions are further documentation or checks we will need to finalize your loan before funds can be dispersed. Some borrowers become frustrated by conditions that surface at the end of a loan transaction and can't understand why they are being raised so late. Final conditions are sometimes added for final approval. We do our best to help you through the process - remember, we are simply trying to meet conditions imposed by other sources.

Since most loans are sold and serviced by other parties, the lender must verify that the loan can be sold upon close. Not to worry, no other terms of your loan can be changed after you have signed your final loan documents. When all conditions are met, your loan documents are drawn up and forwarded to the place of settlement or closing, typically a title and/or escrow company.

IMPORTANT NOTE:
Do not make any adverse changes to your financial "picture" during the loan process. Things as simple as applying for a new department store credit card to purchase a new appliance will at least force an explanation to be given and at worst may cause your loan not to fund and the approval to be withdrawn. Many times a final credit report update and additional calls to your employer may be required before funding the loan. Be patient and your loan will flow smoothly.

 

 Reasons to Refinance

There are five major reasons to consider refinancing an existing mortgage:

  • Decrease monthly payments from a higher fixed rate to a lower fixed rate.
    Example: If the rate is 7.5% now and a homeowner switches to a 6.5% rate, he or she will save 1% on the mortgage less the costs of refinancing. On a $200,000 mortgage, for example, the savings will be over $50,000 over 30 years by reducing the interest rate by just that one percentage point.
  • Improve monthly cash flow with lower payments.
    Cash flow may be tight after moving into a new home. Switching to an adjustable rate program where the rate is fixed for the next three to ten years could provide breathing room needed. Similarly, for those who are in a 15 or 20 year term loan, switching to a 30 year term can also increase monthly cash flow.
  • Switch to a fixed rate program to eliminate payment changes of adjustable rate mortgages (ARMs). 
    Homeowners with one year ARMs will see their rates rise as rates move up. Using programs that hold rates steady for three, five or seven years, you can refinance into a low fixed rate.
  • Withdraw funds from the equity in a home.
    If cash is needed for home improvements, college education or to consolidate debts, the borrower may be able to refinance 75% to 80% of the current value of the home if it has been owned for one year or more.
  • Shorter loan terms
    Probably the best incentive to refinance is found by refinancing into a shorter term loan while keeping the loan payment stable. A borrower can save tens of thousands in interest by reducing the term of the loan.

  

Old Rules No Longer Apply

If interest rates fall below your current mortgage rate, refinancing may be a great idea. The old idea that rates must be 2 full percentage points below your existing loan is not true. A drop of as little as 1/2% could save you thousands of dollars.

A variety of loan terms, no-point rate options and lower closing cost loans have greatly decreased the rate difference needed to make refinancing profitable.

We as consumers spend substantial amounts of time trying to make our savings and investments earn more. One avenue which is sometimes overlooked is seeing how much we can decrease our debt payments. Since a mortgage is usually the largest debt we have, it pays to concentrate most on reducing that payment first.

 

Costs Lower Than Ever

The costs of refinancing have decreased greatly in the past several years. Using no cost out of pocket loans, for example, borrowers can save thousands of dollars up front. Also, closing costs can usually be included in the new mortgage loan amount so that no cash is required to execute a refinance.

Paying Points for a lower interest rate is an excellent idea if you are staying in the property more than 4 years.

Deciding whether to refinance usually involves totaling the costs of refinancing and subtracting those expenses from the total savings expected. It is also important to determine how many months it will take to pay back the costs of refinancing from the savings that will accrue.

The savings that can be obtained from refinancing depend directly on the answers to the above questions. It is best to answer these questions with the help of a qualified mortgage professionals.

 

A Guide To Lock-Ins

The interest rate market is subject to constant swings without advance notice. Locking a rate protects you from the time that your lock is confirmed to the day that your lock period expires.

Please note that we cannot be held responsible for any rates that may change prior to our written confirmation.

Lock-in Defined
A lock is an agreement by BOTH you, the borrower, and the lender and specifies the number of days for which a loan's interest rate and points will be guaranteed by the lender. Should interest rates rise and you have met all of your conditions the lender is then obligated to honor the rate that they have locked on your behalf. Should interest rates decrease, the lock must still be honored by you.

When Can I Lock?
You can lock a rate once your application information has been reviewed. In some cases, your application will provide all the information needed and you will have the option to lock at the time you apply. Otherwise you will be invited to lock after you have returned your package and your documentation and credit information has been reviewed.

We recognize that you may not be available to request a lock during this time period; if so, please contact your Loan Agent for assistance. We are working with all of our lending partners to extend the lock-in period, and appreciate your understanding.

Lock Period
Lock-ins will vary from 10 days to 180 days. It costs more to lock in for extended periods of time.

Lock Confirmation
Until we confirm in writing that your rate lock has been accepted by our lender, your loan is not locked in. When you request a lock, we contact our lender partner and secure the lock on your behalf. Unfortunately, the lock process is not yet automated within the mortgage industry, therefore, we must follow the lock guidelines of our lending partners. For this reason, we are not able to verify your lock request immediately but will do so ASAP after your lock request submission.

 

Points

What are Points?
Points are up front mortgage interest fees paid on a loan to reduce the initial interest rate. For example, a one-point loan will always have a lower interest rate than a zero-point loan. Therefore, paying points is a trade-off between paying money now versus paying money later. A Point represents 1% of the loan amount, and depending on how long you plan to stay in your home, paying points can save you a lot of money in the long run. It takes about five to seven years to recoup the cost of paying a point upfront. Here's the math. Let's say you take out a $100,000 30-year fixed mortgage, and you have the option of either paying 6% with no points or 5 3/4% with one point. With the 6% mortgage, your monthly payment will be $600. And with the 5 3/4% loan, it would be $584, a savings of $16 per month. After about 62 months, or a little over five years, you would have recouped the $1,000 point you paid upfront. And then you would start to benefit from the lower monthly payments.

No Point Loans
There are many reasons for choosing a "No Points — No Closing Cost" Mortgage. The following outlines some of the most common reasons borrowers choose this option.

1.     Lack of cash to close escrow. If you are purchasing a new home and are short on cash for the down payment, a "No Points — No Closing Cost" mortgage can save you up to thousands of dollars.

2.     If the estimated time you will be staying in the home is less than 4 years, while paying points and closing costs will give you a lower interest rate and a lower monthly payment, it typically takes about 4-5 years of living in the property to realize the benefit of the lower payment when weighed against the total cost of the points.

3.     Lack of equity in the property when refinancing. A similar situation as portrayed in item "1". If it makes financial sense to refinance your mortgage, but you do not have enough equity in the property to add your closing costs into the new mortgage - a "No Points — No Closing Cost" mortgage could make great sense.


Tax Issues
In a refinance transaction, points must be amortized over the life of the loan. For example, on a 30 year loan, you can deduct 1/30th of the points paid each year. If you refinance for a second time, however, you may be able to deduct the remaining unamortized points in the year you refinance the loan. Consult your tax advisor for more information.

 

MORTGAGE INFORMATION

The Process
Qualifying
Paying Points
Zero Down Loans
Mortgage Types
Mortgage Settlement Costs
Mortgage Market
Mechanics Of The Process
Mortgage Insurance
Regulations
Economic Indicators
FAQ's
Glossary

 

 

The Process

We've designed our site to make it easy for you. This brief diagram will give you a good jump-start!

Event

Who Does It

Details

Review our loan information

Applicant

Before you begin an application, please review loan information from:

·         Our Homebuying Center

·         Our Refinance Center

·         Our website

Apply

Applicant

Complete an application. This will set the process in motion.

Loan Originator Contact by Phone

AZG Capital L.L.C.

Your first connection with your loan originator will get a dialogue started which will insure that you get the loan that you want.

Credit Check & Prequalification

AZG Capital L.L.C.

We pre-approve you using our artificial intelligence software, or underwriting your loan in-house. Our system will assess your credit, income and assets to quickly determine what loan(s) you qualify for.

Required Loan Documentation and Paperwork

Applicant/AZG Capital L.L.C.

Paperwork is still a big part of the loan process. We will mail you forms to sign and a document checklist.

Rate Lock & Appraisal

Applicant/AZG Capital L.L.C.

Once we determine your loan amount, type of loan and rate, your loan agent will recommend the appropriate time to lock the rate with a lender.

Loan Submission for the Best Rate/Program

AZG Capital L.L.C.

Once all of the paperwork is assembled by our processors, your package will be forwarded to underwriting for approval.

Underwriting and Approval

AZG Capital L.L.C./Lender

An underwriter will review the package and fax an approval to AZG Capital L.L.C. and any conditions necessary for the approval. Most conditions are taken care of by AZG Capital L.L.C..

Clear Loan Conditions

AZG Capital L.L.C.

Our closer gets the conditions from underwriting for final preparations to close.

Loan Documents Delivered

AZG Capital L.L.C./Lender

Loan documents are prepared and delivered to the escrow agent. The escrow agent will call you to arrange a signing. This is coordinated by your loan originator, your Realtor and the escrow agent.

Loan Funding

Escrow/AZG Capital L.L.C./Lender

Once the signed documents are returned, they will be reviewed. The escrow agent will request a wire transfer of the loan funds, close and record the transaction.



The Loan Application Process
We will want to verify certain information about you and the property. Borrower information will include verification of income and employment, assets, and your credit history. You, the applicant, as part of your application process, will usually provide some of this information. Other information, such as your credit history, will be obtained directly from the credit bureaus.

For the property itself, we will order an appraisal in most cases and a legal description of the property, such as a title report. We have "approved appraisal company" lists, so if you have an old appraisal, we may be able to accept it.

The Loan Approval Process
During the "processing" and/or "underwriting" period, your credit, assets, income and other determinants are checked and compiled. Your loan is either approved with conditions, or approved without conditions or declined. Conditions are further documentation or checks we will need to finalize your loan before funds can be dispersed. Some borrowers become frustrated by conditions that surface at the end of a loan transaction and can't understand why they are being raised so late. Final conditions are sometimes added for final approval. We do our best to help you through the process - remember, we are simply trying to meet conditions imposed by other sources.

Since most loans are sold and serviced by other parties, the lender must verify that the loan can be sold upon close. Not to worry, no other terms of your loan can be changed after you have signed your final loan documents. When all conditions are met, your loan documents are drawn up and forwarded to the place of settlement or closing, typically a title and/or escrow company.

IMPORTANT NOTE:
Do not make any adverse changes to your financial "picture" during the loan process. Things as simple as applying for a new department store credit card to purchase a new appliance will at least force an explanation to be given and at worst may cause your loan not to fund and the approval to be withdrawn. Many times a final credit report update and additional calls to your employer may be required before funding the loan. Be patient and your loan will flow smoothly.

 

 

 

Qualifying

Qualifying
Issues for qualifying are:

·         Employment history

·         Cash available for closing and the source of those funds

·         Credit history


Verification of Income
With our new process we try to eliminate paper work not create it! Documentation generally needed include the following:

·         A current pay stub from borrower's employer.

·         W2's from the borrower's employer—most recent two years.

·         Written verification of employment from the employer (lenders request this information directly from employer).


Verification of Funds to Close
Cash and cash equivalents, such as stocks and bonds, as well as equity ownership in other assets, such as real estate. Some or all of these assets may be used for the down payment and for paying the loan closing costs. These assests will need to be validated before the final credit decision can be rendered. There are several ways this can be done:

·         Borrowers may provide a copy or the last 3 months of bank depository or investment company statements.

·         Written verification of deposit from the depository institution. This information would be transmitted directly to the institution(s).

·         For a purchase, a copy of the sales contract on any real estate to be sold.

Some or all of the above may be needed in order to verify the funds to close.

If you are refinancing you will need enough reserves to pay your mortgage, insurance and taxes for approximately 3 months.


Credit Report
Credit reporting agencies have access to central repositories that collect, store and report credit obligations and pay records on most consumers. Have any collections, judgements, liens, repossessions or foreclosures been reported? These items are all covered in a full report. The report will assist us in getting you the best loan.


Property Value Confirmation
The security or collateral for residential mortgages is real property. Appraisals use three approaches in the evaluation analysis.

The evaluation approaches are:

·         Cost Approach: The value of the land plus the cost of the improvements less depreciation.

·         The Market Approach: Recent sales in your neighborhood.

·         Income Approach: Determines the value based on the rental income that can be derived from the property.

Although all three approaches are considered in an appraisal report, the market value approach is usually given the most weight because it reviews the most recent sales surrounding the property.

Most appraisals begin with a physical inspection of the property by a professional appraiser. During the inspection, the appraiser measures the property, locates the rooms on a drawing, and notes the overall condition of the property and surrounding neighborhood.

After the inspection, the appraiser locates both the sales activity and current listings in the area from real estate data bases and prepares a written report. The report indicates the value of the property and summarizes the important aspects of the evaluation process.


Title Search
During the loan processing, lenders require that a title search be performed on the property. This search will reveal the legal description, the owner of record and outstanding liens and encumbrance on the property. Liens are items such as property taxes, mortgage loans, and judgments. Encumbrances may be road maintenance agreements, right of way and utility easements.

Usually, a plot map or land survey is prepared as part of the title search to show the location of the improvement on the property. After the search has been completed, the title company will prepare a written document that reflects their findings and delivers the report to the lender. This report is commonly called a preliminary title report.

After the loan is closed, the title company will prepare a title policy that reflects the new mortgage loan as a lien on the property. The policy is called an American Land Title Association (ALTA) policy. Additionally, IF there was a transfer of title, the new owner usually obtains a title policy as well.


Zero Down Loans

We can help you move into a new home without any down payment if you qualify. A 3% to 5% down payment can qualify you for a better interest rate, however if you don't meet the requirements for a 3% to 5% down loan, you can see if you qualify for a 30 -year fixed loan with no money down. Please note these products have a higher interest rate and a prepayment penalty and are not available from many lenders.

 

 

Mortgage Types

Fixed Rate Mortgage
Fixed rate mortgages are probably the most common type of mortgage. "Fixed rate" refers to the fact that the interest rate is agreed upon at initiation of the loan and never changes over the life of the loan. This also means that the principal and interest payment is fixed and will not change over the life of the loan.

Adjustable Rate Mortgage (ARM)
Adjustable rate mortgages do just that: adjust their rate. Simply put, a loan that starts with an initial rate of 5% may be 7% the next year and 9% the 3rd year. Does my payment change? In most cases, yes. When interest rates change, payments are re-calculated on the remaining principal balance for the remaining term at the new interest rate.

Shorter Term Fixed Loan
A short term fixed mortgage refers to a mortgage which has a set interest rate and set payments based on an amortization of 30 years, however, the loan converts to an adjustable loan after a period of 3, 5, 7 or 10 years depending on the program you decide on. This loan is an attractive option for someone who anticipates selling or refinancing their home during the fixed rate period of the loan. What happens if I don't move or sell? Make sure the loan contains no prepayment penalty, that way you can refinance if and when rates drop.

Mortgage Programs
CONVENTIONAL MORTGAGE - Conventional loans originated in the 1930's after the Depression and are the benchmark of all other loan types. This loan has several traits:

  • Set Monthly Payments: The periodic payment never changes.
  • Set Interest Rate: The interest rate never changes.
  • Set Loan Term: Typically 15 or 30 years.
  • Self Amortization: The loan is paid off at the end of the specified term.


VA (Veterans Administration)
This type of loan is also government backed and is available only to Veterans. Some of the features are:

  • No down payment required
  • Low interest rates

A VA loan has an up front requirement of a funding fee (FF). This funding fee is a one-time charge which can be rolled into the mortgage amount.

 

 

Mortgage Settlement Costs

The mortgage closing or settlement (escrow closing) probably causes more questions from the borrower than any other—we will answer some of the most frequently asked questions.

A settlement may involve several people, and a variety of documents and fees. Once you understand what is involved, you may Find the entire closing process simpler than you might have imagined. While this section focuses on settlements in home purchases, much of the information also will be useful if you are refinancing a mortgage.

We'll start with two important facts

  • Many buyers think of settlement as the last step to becoming the legal owners of their new home. But it's a process that begins weeks or even months before, and follows an outline set largely by a buyer's original offer to the seller of the house. That offer becomes the sales contract, once it's signed by the seller, and it covers many of the key elements of the settlement or closing.
  • Practices differ from one locality to another regarding who pays what closing costs. Across the country, however, buyers and sellers are free to negotiate certain fees. In some cases, certain costs can be shifted, it may affect the sale price of the property. In most states, costs can also be cut by shopping around among providers of the settlement services.

The point is this: The more you know about the process, the better your chances are for saving money at settlement time.


Types of Closing Costs
There are three basic categories of charges and fees in settlement or closing transactions:

  • Charges for establishing and transferring ownership
    These include title search, title insurance, related legal fees, notary charges, hazard insurance, and fees for conducting the settlement.
  • Amounts paid to state and local governments
    Recordation fees, and prepaid property taxes.
  • Costs of obtaining a mortgage
    These include appraisals, credit checks, loan documentation fees, loan origination, commitment, and processing fees.


Title Insurance
In addition to a formal title search, your lender is likely to require a title insurance policy. The policy guards the lender against an error by whomever searched the title. (In some cases, the title insurer might arrange for or conduct the title search.) Let's say, for example, that a long-lost relative of the seller turns up with indisputable evidence that the relative - and not the seller - holds legal title to the property. Though it should have been found in the public records, the relative's claim was missed somehow. Errors are rare, but they do occur.

When this happens, the lending institution finds that it has loaned the home buyer thousands of dollars to buy a house from someone who did not own it. To avoid such problems, the lender will insist on title insurance prior to settlement. The cost of the policy (a one-time premium) is usually based on the loan amount, and is often paid by the purchaser. There's nothing, however, to keep you from asking the seller, during your negotiations, to pay part of all of the premium.

The title insurance required by the lender protects only the lender. To protect yourself against unforeseen title problems, you may also want to take out an owner's title insurance policy. Normally the additional premium cost is only a fraction of the lender's policy, but this can vary from area to area.

Some final advice on keeping title insurance costs low -- if the house you are buying was owned by the seller for only a few years, check with a title company. If you can obtain a re-issue rate, the premium is likely to be significantly lower than their regular charge for a new policy. If no claims have been made against the title since the previous title search was done, the seller's insurer may consider the property to be a lower insurance risk.

Finally, shop around. Not just for the premium (which can vary depending on how much competition there is in a market area), but for coverage as well. (links to local title companies here.) Generally, you should look for a policy with as few exclusions from coverage as possible. The exclusions are listed in each policy. Some policies have so many exclusions - that is, situations under which the insurer will not pay for your title problems- that you end up with little coverage for your premium dollar.


Government Imposed Costs
In some parts of the country, the transfer, recordation, and property taxes collected by local and state governments may be among the heftiest charges paid at settlement. While there is no way to avoid paying these taxes, you may be able to lessen your share of the bill. Try shifting some or all of the cost to the house. But remember, you must do this when you make your offer to purchase the property.


Mortgage-Related Closing Costs

  • Application fee
    Imposed by some lenders, this charge covers the initial costs of processing your loan request. WE DO NOT impose up front charges.
  • Appraisal fee
    This fee pays for an independent appraisal of the home you want to purchase. The lender requires this opinion or estimate of the market value of the house for the loan.
  • Survey
    At a minimum, the lender will require an independent verification from a surveying firm that your lot has not been encroached upon by any structures since the last survey conducted on the property. Alternatively, the lender may insist upon a complete (and more costly) survey to ensure that the house and other structures legally are where you and the seller say they are.


Loan Origination Fees and Discount Points
One point equals one percent of the loan amount. For example, one point on a $150,000 loan would be $1,500. In some cases - especially with refinances - the points can be financed by adding them to the loan amount.

  

Mortgage Market

The Primary Market The primary market consists of mortgage loan originators, the community of banks, lenders, credit unions, saving and loans (virtually any lending institution willing to originate and underwrite a mortgage). In fact, the secondary market uses the term "originator" to refer to the original lender.

Most lenders make loans with the understanding they may sell those loans to the secondary market (see below).

Why would a lender sell your loan after all the trouble you've both gone through to get it in the first place? Two reasons. First, the lender wants to free up the money it has invested in your mortgage to make additional loans (which may in turn be sold again to the secondary market).

The Secondary Market The secondary market comprises of insurance companies, pension funds, banks, securities dealers, thrifts and government-sponsored enterprises such as Fannie Mae and Freddie Mac. These organizations invest in mortgages made by lenders in the primary market.

The loan you negotiate (especially fixed rate loans) will probably be sold into what is known as the "secondary market."

The secondary market won't change your mortgage. But it may change where you pay and who receives your money. The reason - the financial community views a mortgage as an asset. And like any asset, it can be bought and sold. More than likely, your mortgage will be sold to another party (perhaps more than once during the life of the loan). Regardless of who "buys" your loan, both you and that buyer are bound by the terms you negotiate with the original lender.

Fannie Mae and Freddie Mac, Who and What Are They? Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) are large, quasi government charted corporations with significant influence in the mortgage industry. Technically, Fannie Mae and Freddie Mac are "government sponsored enterprises." They are publicly traded (you can buy stock in either organization), profit oriented, and responsible to their shareholders; but Congress retains some control over their operations.

How influential are Fannie Mae and Freddie Mac? Together, they buy approximately half of the family home mortgages originated each year. The two organizations compete directly and follow very similar business plans. Fannie Mae is the largest corporation in America in terms of assets. This economic clout enables the pair to influence the mortgage market nationwide (generally in favor of the home buyer) in the following ways:

  • Allowing lenders in the primary market to originate new loans by purchasing mortgages made according to conforming guidelines.
  • Helping lessen regional differences in interest rates nationwide by encouraging investment in areas with high interest rates, which promotes competition among lenders (pushing interest rates down)
  • Providing a bridge between capital markets and the mortgage market, increasing the availability of mortgage dollars.

Mechanics Of The Process

There are general secondary market underwriting guidelines, but many variables are considered in the loan application analysis. The following outlines some of the basic areas and items considered in the process:

Monthly Housing Expenses and Total Debt Obligations
One of the first things an underwriter determines is the borrower's proposed monthly housing expenses and total monthly debt obligations.

Housing Expenses
These include the monthly principal and interest payments that are stipulated on the mortgage note. In addition, the monthly housing expenses include a monthly amount for the property taxes and hazard insurance (1/12 of the annual taxes and insurance). There may be other expenses, such as condominium fees, homeowners fees, special assessments, etc., that are included.

Monthly Personal Debt Obligations
These include monthly credit obligations, such as installment payments, revolving charge cards or other borrower obligations that will continue longer than 20 months. Usually, 5% of the current balance of a revolving charge account is used for the monthly payment.

Total Monthly Debt Obligations
This combines the monthly housing expenses and monthly personal debt obligations.

Monthly Income
One of the most important components of the loan underwriting process is determining the borrower's monthly income. The income of all borrowers and co-borrowers is included in the calculation. The income can be derived from several sources, but it must be supported by historical documentation and have a high likelihood of continuation. The following outlines the types of income that are used and the means to support them:

  • Salary:
    Income derived from any kind of salary, whether monthly, weekly or hourly is acceptable. Two year employment history is usually required.
  • Commission and bonus:
    Commissions and bonuses can be used for income. The underwriter will average the last two years of income shown on federal income tax returns and the year-to-date earnings from the written verification of employment or pay stubs.
  • Self-employment income:
    Generally, the underwriter will average the income derived through self-employment for the last two years from the applicant's federal tax returns and the year-to-date earnings from a profit and loss statement on the business. Underwriters will take into consideration the income trends in the business, as well.
  • Other income:
    Other income can be used for loan qualification. Income derived from rental properties, interest, dividends, pensions and social security can be used. Some restrictions apply regarding the amount of time the income has been recognized and the amount of time remaining.



Income To Debt Ratios
After determining the monthly income of the borrower and any co-borrowers, the monthly housing expenses and the total monthly debt obligations, the underwriter calculates two ratios that are helpful in the loan underwriting process.

Primary Housing Expense/Income Ratio(front end ratio)
This ratio is the result of dividing the housing expenses for the proposed loan by the monthly income of the borrower(s).

For example:
Primary housing expenses $1,000
Total monthly income $4,000
The ratio will be 25% ($1,000 divided by $4,000 = 25%)

Total Obligations/Income Ratio (back end ratio)
This ratio is the result of dividing the housing expenses for the proposed loan plus the borrower(s) other monthly credit obligations by the monthly income of the borrower(s).

For example:
Total obligations of the borrower $1,400
Housing expenses $1,000
Other credit obligations $400
The ratio would be 35% ($1,400 divided by $4,000 = 35%)

Qualifying ratios are only one component of the underwriting process and many other variables are considered in the final decision.

Funds to Close
When the proposed loan is being used to finance the purchase of a home, underwriters will determine the source of funds for the down payment and closing costs.

The following are acceptable sources of funds for closing:

  • Cash
    Cash in any depository institution or investment company is acceptable.
  • Stocks, bonds, mutual funds, etc.
    Cash equivalent investments are acceptable forms of funds. They can be validated through statements from investment companies for the last two months.
  • Sale of existing property
    Many times the source of funds for the down payment on a home comes from the equity in a property that will be sold. The sales price of the property being sold is indicated on the loan application and any existing loan is verified on the credit report or through a verification of previous mortgage.
  • Gift from family members
    Gifts from family members for the down payment and/or closing costs are acceptable so long as there is no requirement for repayment. Some loan programs limit the amount of gift funds allowed.



Credit Analysis
Another part of the underwriting process is determining the credit worthiness of the borrower. Loan underwriters review the borrower's credit report to find evidence of debt repayment behavior.

Some of the important areas that are reviewed are:

  • Past and existing mortgage debt:
    The past repayment history on mortgage debt can be a good indication of a borrowers attitude toward mortgage obligations. A good payment history on mortgage debt is very important in the credit analysis.

    Generally, payments received 30 days past the due date are reflected in the credit report as late. Lenders vary in strictness and some may not allow any late mortgage payments, while others will allow 1 or 2 in the last two years if there is a good explanation.
  • Installment and revolving credit:
    Other items on the credit report can also indicate a borrower's attitude toward credit obligations. Credit reports indicate the outstanding balance, current balance and terms of payment on the borrower's revolving and installment debt. Underwriters review these credit obligations to determine the borrower's patterns of credit use and repayment behavior. Revolving credit encompasses department store and bank credit cards. Installment credit encompasses longer term credit with structured payment plans, such as car loans.

    Generally, underwriters are not concerned over isolated and minor slow payments indicated on the credit report.
  • Collections, repossession, foreclosures and bankruptcies:
    Credit reports also indicate public records such as collections, repossessions, foreclosures and bankruptcies. Though these items may indicate past credit problems, they sometimes have valid explanations. Underwriters may require a letter of explanation on items noted in the public records. Many times consumers have re-established credit and have an excellent payment history on their current obligations.



Underwriting the Appraisal
Generally, underwriters are not professional appraisers and do not re-appraise the property. They will review the appraisal to assure that it meets the requirements of the investor and sometimes request additional information to substantiate the value. They may request that a second appraisal or review appraisal be performed. A review appraisal can be completed from a site inspection or review of the written appraisal. In both cases, another professional appraiser will perform the review.

Compensating Factors:
The underwriters consider many variables in their analysis. No two borrowers have the same credit and income profiles and underwriters use all of the information in the loan file to render a decision.

Many times, borrowers fall outside the guidelines, but have strong compensating factors that reflect low credit risk. Some compensating factors are history of savings, long-term job stability, history of making monthly credit payments that equal or exceed the proposed payments, a substantial down payment or a large cash reserve after the close of escrow.

Final Credit Decision
After the underwriter has reviewed the entire loan package, there can be four outcomes:

  • Approval
    If the loan is "picture perfect" and the underwriter has no questions, the loan will be approved with no conditions.
  • Approval with conditions
    The most common response. There are two types of conditional approvals: (a) If the underwriter needs additional documentation before a final credit decision can be made, a "prior-to-document" conditional approval will be rendered. In essence, the loan documents will not be prepared until the condition has been satisfactorily met. An example of a "prior-to-document" condition could be a pay stub to validate the borrower's income. (b) If the loan can be approved, but a condition must be met prior to closing, a "prior to funding" conditional approval will be rendered. In this case, the loan documents will be prepared and sent to the closing agent, but the lender will not fund the loan until the condition has been met. An example of a "prior to closing" conditional approval could be proof of sale of existing home where the equity will be used as a down payment.
  • Suspended
    Sometimes the underwriter will be unable to make a decision on a loan file because it is either incomplete or there are many unanswered questions. In these cases, the underwriter will ask for additional information from the borrower before an underwriting decision is made. An example of a suspension may be large gaps in the borrower's previous employment history and no tax returns to indicate the place of employment.
  • Denial
    Underwriters will be unable to approve a loan if the loan file has substantial deficiencies and does not meet the minimum standards of the lender or the lender's secondary market investors require a second underwriter review of the loan package before a final denial is communicated to the borrower. Denial letters with the reason for denial are sent to borrowers within 3 days of the final credit decision.

 

 

 

Mortgage Insurance

Helping You To Buy The Home You Want
Mortgage insurance (MI) allows you to choose from a wider price range of homes. How? We can generally accept a lower down payment than the standard 20% if AZG Capital L.L.C. obtains mortgage insurance on your loan through a mortgage insurance company. You can not only get the home you deserve, but you can conserve your savings and increase your income tax deductions, just by putting less money down.

Buy More Home
You may be able to afford more home and maximize your investment if AZG Capital L.L.C. obtains your Mortgage Insurance for you.

 

Without MI

With MI

Down Payment

20%

10%

5%

Your Available Savings

$20,000

$20,000

$20,000

Maximum Home Price

$100,000

$200,000

$400,000


Financing a home with a low down payment may be the best way to afford a home in high-priced markets.

Conserve Your Savings
The lower your down payment, the more you retain for home furnishings, other investments, future emergencies, or even college tuition.

 

without MI

with MI

Home Price

20%

10%

5%

Down Payment

20%

10%

5%

Cash Down Payment

$20,000

$10,000

$ 5,000

Your Available Savings

$20,000

$20,000

$20,000

Savings Retained

$0

$10,000

$15,000


Even if you have less than $20,000 saved, you can still afford to buy a $100,000 home with a lower down payment option if AZG Capital L.L.C. obtains MI on your qualified loan from a mortgage insurance company.

Increase Your Tax Write-off
A larger loan amount will have higher interest payments and could result in higher tax deductions.

Special Note
It is very important to understand that you must have additional 'reserve' cash after the down payment. Reserves should equal a minimum of 2 to 3 months housing payment, taxes and insurance.

 

Federal Regulations

The federal government has enacted consumer protection laws pertaining to residential mortgage lending. We have attempted to review the most salient points of those laws and discuss areas that are important when consumers are shopping for a mortgage loan. Some of the content of the federal regulations could be open for interpretation.

We do not represent that the following sections on the regulations are 100% accurate: it should not be considered a legal opinion of the law. Readers may seek the entire text from the governing bodies or talk to counsel for a comprehensive opinion.


EQUAL CREDIT OPPORTUNITY ACT REGULATION B
Regulation B was issued by the Board of Governors of the Federal Reserve System to implement the provisions of the Equal Credit Opportunity Act (ECOA). The law was enacted in 1974 to make if unlawful for creditors to discriminate in any aspect of a credit transaction on the basis of sex or marital status. In 1976, through amendments to the Act, it became unlawful to also discriminate on the basis of race, color, religion, national origin, age, receipt of public assistance and the good faith exercise of rights under the Consumer Credit Protection Act.

The primary purpose of the ECOA is to prevent discrimination in the granting of credit by requiring banks and other creditors to make extensions of credit equally available to all credit worthy applicants with fairness, impartially and without discrimination on may prohibited basis. The regulation applies to consumer and other types of credit transactions. This discussion will be limited to those provisions of ECOA that relate specifically to the mortgage lending process, including:

  • Rules Concerning Taking of Applications
  • Rules Concerning the Evaluation of Applicants
  • Rules Concerning Extension of Credit
  • Rules Concerning Consumer Notifications


Consumer Information for Monitoring Purposes
Rules Concerning Taking of Applications:

  • Oral or Written Statements:
    The regulation specifically prohibits a lender from making any oral or written statement, in advertising or otherwise, to applicants or prospective applicants that would discourage on a prohibited basis a responsible person from making or pursuing an application.
  • Collection of Information:
    With regards to collection of information, a lender may request any information in connection with an application, with certain exceptions discussed below:
  • Required collection of information:
    The lender is required to request information for monitoring purposed for credit transactions secured by the applicant's dwelling.
  • Information about a former spouse:
    The lender is permitted under the regulation to request any information concerning an applicant's spouse that is requested about the applicant, if the applicant resides in a community property state, like California, or property on which the applicant is relying as a basis for repayment of the credit requested is located in a community property state. Information regarding a former spouse may be requested if the request can also be made to the applicant, if the applicant is relying upon alimony, child support or separate maintenance payments from a spouse (no longer residing with the applicant) or former spouse as a basis for repayment of the credit requested.
  • Other accounts of the applicant:
    A lender may request an applicant to list any account upon which the applicant is liable and to provide the name and address in which the account is carried. A lender may also ask the names in which an applicant has previously received credit.
  • Marital Status:
    In California, a lender may inquire about an applicant's marital status, due to the fact that California is a community property state. A lender may only use the terms "married," "unmarried" and "separated."
  • Disclosure about income from alimony, child support or separate maintenance:
    Under the regulation, a lender may inquire whether an applicant's income is derived in whole or part from alimony, child support or separate maintenance only if the lender first discloses to the applicant that the income from these sources need not be revealed unless the applicant wishes to rely on it to establish credit worthiness. This disclosure must be given to any co-applicant as well.
  • Sex:
    The lender is prohibited from inquiring about the sex of an applicant. An applicant may be requested to designate a title in an application form (such a Ms., Mr.,. Mrs., or Miss) if the form discloses that the title designation is optional. Otherwise, the application form must use terms that are neutral to sex.
  • Childbearing, child rearing:
    The lender is prohibited from requesting or considering information concerning the applicant's plan or expectations of having children, their childbearing capabilities or birth-control practices. The lender is permitted to inquire about the number and ages of an applicant's dependents or about dependent-related financial obligations or expenditures, provided such information is requested without regard to any prohibited basis.
  • Race, color, religion, national origin:
    A lender may not inquire about the race, color, religion or national origin or any applicant or any other person in connection with a credit transaction. A lender may inquire about an applicant's permanent residence and immigration status.



Rules Concerning Evaluation of Applicants
Evaluation Information
The regulation allows a lender to consider any information properly obtained, so long as the information is not used to discriminate against an applicant on a prohibited basis.

Specific Rules Concerning the Use of Information:

  • A lender may not take a prohibited basis into account in any system of evaluating the credit worthiness of applicants.
  • Age and/or receipt of public assistance may only be used for the purpose of determining a pertinent element of credit worthiness. Furthermore, age may be considered when such age is used to favor the elderly applicant in extending credit.
  • Childbearing, child rearing assumptions or aggregate statistics relating to the likelihood that any group of persons will bear or rear children or will, for that reason, receive diminished or interrupted income in the future, may not be used by the lender.
  • A lender may not discount or exclude from consideration the income of an applicant or the spouse of an applicant on a prohibited basis or because the income is derived from part-time employment or is an annuity, pension or other retirement benefit. A lender may consider that amount and the probable continuance of any such income in evaluating an applicant's credit worthiness.
  • To the extent that a lender considers credit history in evaluating the credit worthiness of similarly qualified applicants for a similar type and amount of credit in evaluating an applicant's credit worthiness, a lender may consider:
  • The credit history, when available, of accounts designated as accounts that the applicant and that applicant's spouse are permitted to use or for which both are contractually liable.
  • On the applicant's request, any information the applicant may present that tends to indicate that the credit does not accurately reflect the applicant's credit worthiness; and

    On the applicant's request, the credit history, when available, of any account reported in the name of the applicant's spouse or former spouse that the applicant can demonstrate accurately reflects the applicant's credit worthiness.



Rules Concerning Extension of Credit

  • Extension of Credit:
    A lender may not refuse to grant an individual account to a credit worthy applicant on the basis of sex, marital status or any other prohibited basis.
  • Applicant's Name(s):
    A lender may not refuse to allow an applicant open or maintain an account in a birth-given first name and surname that is the applicant's birth-given surname, the spouse's surname or a combined surname.
  • Signature of Applicant's Spouse of Other Person:
    In general, a lender may not require the signature of an applicant's spouse or other person, other than a joint applicant, on any credit instrument if the applicant qualifies under the lender's standards of credit to be secured, the lender may require the signature of the applicant's spouse or other joint owner of the collateral on any instrument necessary or reasonably believed to be necessary under state law to make the property being offered as security available to satisfy the debt in the event of a default. In California, applicable state law requires all owners of personal property to sign in order to encumber the property. Therefore, the lender may request the non-applicant spouse or other parties to sign a security agreement or other instrument to secure a lien on the property, but not the promissory note. With transactions involving community real property, both spouses must sign the deed of trust in order for the lien to be perfected for the lender. Non-applicant spouse's signature should never be requested on the application or the promissory note.



Consumer Notifications

  • Appraisal Notification:
    Effective December 14, 1993, the Federal Reserve Board issued amendments to Regulation B, Equal Credit Opportunity Act. These amendments require the lender to notify the applicant of their right to receive a copy of their appraisal on loans secured by one-to-four family dwellings.
  • Action Taken:
    A lender must notify an applicant of action taken generally within 30 days after receiving a completed application. A notification given to an applicant when adverse action is taken is required to be in writing and must contain: a statement of action taken; the name and address of the lender; a statement of the provisions known commonly as the ECON Notice; the name and address of the federal agency that administers compliance with respect to the lender; and either a statement of specific reasons for the action taken or a disclosure of the applicant's right to a statement of specific reasons within a specified period of time.
  • Information for Monitoring Purposes:
    A lender that receives an application for credit primarily for the purchase or refinancing of a dwelling occupied or to be occupied by the applicant as a principal residence, where the extension of credit will be secured by the dwelling, is required to request as part of the application the following information regarding the applicants race or national origin (using the categories American Indian or Alaskan Native; Asian or Pacific Islander; Black; White; Hispanic; Other [specify] ); Sex; Marital Status (using the categories Married, Unmarried, and Separated); and age. The applicant(s) are not required to supply the requested information. If the applicant(s) chooses not to provide the requested information or any part of it, that fact will be noted on the form.

    The lender then is required to note on the form, to the extent possible, the race and national origin and sex of the applicant(s) on the basis of visual observation or surname. The lender is required to inform the applicant(s) that the government information is being requested by the federal government for the purpose of monitoring compliance with the federal statutes that prohibit lender from discriminating against applicants on the basis of race or national origin, sex, martial status and age. The lender should also inform the applicant(s) that if the applicant chooses not to provide the information, the lender is required to note the race or national origin and sex on the basis of visual observation.


HOME MORTGAGE DISCLOSURE ACT REGULATION C
The Home Mortgage Disclosure Act (HMDA) was enacted by Congress in 1974 and implemented by the Federal Reserve Board as Regulation C. This regulation provides the public with information regarding financial institutions' record of assisting in the credit need of the neighborhoods and communities in which they are located.

Another purpose to HMDA is to aid public officials in targeting public investments to attract investments from the private sector. The regulation through the various amendments requires lending institutions to collect and disclose data regarding the applicants and their characteristics. The HMDA regulation thereby allows for the public to determine possible discriminatory lending patterns and assists in enforcing anti-discriminatory statues.

Through this regulation the regulatory agencies have the authority to review a lender's mortgage loan record to determine any discriminatory practices against classes of individuals and/or within particular area within the communities served by the lender. The following types of mortgage loans are subject to coverage under HMDA:

  • home purchase loans for any residential dwelling, including a condominium unit, mobile home, manufactured home, or multi-family dwelling,
  • home improvement loans made for the purpose of repairing, rehabilitating or remodeling a dwelling and,
  • the refinancing of a home previously covered by HMDA.

In order to evaluate lending practices, financial depository institutions are required to collect certain data from applicants. All required HMDA data is found on the Real Estate Loan Application Form 1003 in the government monitoring information section, which specifically request the applicant to provide information regarding national origin, race and sex.

The regulation allows the option to the loan applicant to furnish the data concerning national origin, race and sex. However, the regulation does require the applicant to document his/her choice when information will not be voluntarily provided.


TRUTH IN LENDING ACT REGULATION Z
The truth in Lending Act (TILA) is intended to enable the customer to compare the cost of a cash versus credit transaction and the difference in the cost of credit among different lenders.

TILA also establishes disclosure standards for advertisements that refer to certain credit terms.

In addition to financial disclosure, TILA provide consumers with substantive rights in connection with certain types of credit transactions to which it relates. These include a right of rescission in certain real estate lending transactions, regulation of certain credit card practices and a means for fair and timely resolution of credit billing disputes.

We will limit our synopsis to the provisions of TILA which relate specifically to mortgage lending.

  • Early and Final Regulation Z Disclosure Requirements
  • Disclosure Requirements for ARM Loans
  • Right of Rescission
  • Advertising Disclosure Requirements

Early and Final Regulation Z Disclosure Requirements:

TILA requires lender to make specific disclosures on loans subject to the Real Estate Settlement Procedures Act (RESPA) within three business days after their receipt of a written application. This disclosure statement is partially based on the initial information provided by the consumer. A final disclosure statement is provided at the time of loan closing. The disclosure is required to be in a specific format with the following information:

1.     Name and address of creditor

2.     Amount financed

3.     Itemization of amount financed (optional, if Good Faith Estimate is provided)

4.     Finance charge

5.     Annual percentage rate (APR)

6.     Payment schedule

7.     Prepayment policy

8.     Total sales price

9.     Demand feature

10.   Variable rate information

11.   Total of payments

12.   Security Interest

13.   Insurance requirement

14.   Late payment policy

15.   Security interest charges

16.   Contract references

17.   Assumption policy

18.   Required deposit information


Disclosure Requirements for Adjustable Rate Mortgage Loans:
If the annual percentage rate on a loan secured by the consumer's principal dwelling may increase after consummation and the term of the loan exceeds one year, TILA requires additional adjustable rate mortgage disclosure to be provided, including:

  • The booklet titled Consumer Handbook on Adjustable Rate Mortgages, published by the Board and the Federal Home Loan Bank Board or a suitable substitute.
  • A loan program disclosure for each variable-rate program in which the consumer expresses and interest. The loan program disclosure shall contain the necessary information as prescribed by Regulation Z.

Right of Rescission:
In a credit transaction in which a security interest is or will be retained or acquired in a consumer's principal dwelling, each consumer whose ownership is or will be subject to the security interest has the right to rescind the transaction. The lender is required to deliver two copies of the notice of the right to rescind and one copy of the disclosure statement to each consumer entitled to rescind. The notice must be on a separate document that identifies the rescission period on the transaction and must clearly and conspicuously disclose the retention or acquisition of a security interest in the consumer's principal dwelling; the consumer's right to rescind the transaction, and how the consumer may exercise the right to rescind with a form for that purpose, designating the address of the lender's place of business.

In order to exercise the right to rescind, the consumer must notify the creditor of the rescission by mail, telegram or other means of communication. Notice is considered given when mailed, filed for telegraphic transmission, or sent by other means, when delivered to the lender's designated place of business. The consumer may exercise the right to rescind until midnight of the third business day following consummation of the transaction, delivery of the notice of right to rescind, or delivery of all material disclosures, whichever occurs last.

When a consumer rescinds a transaction, the security interest giving rise to the right of rescission becomes void and the consumer will no longer be liable for any amount, including the finance charge.

The consumer may modify or waive the right to rescind if the consumer determines that the extension of credit is needed to meet a bona fide personal financial emergency. To modify or waive the right, the consumer must give the lender a dated written statement that describes the emergency, specifically modifies or waives the right to rescind and bears the signature of all the consumers entitled to rescind. Printed forms for this purpose are prohibited.

Advertising Disclosure Requirements:
Advertising directed to consumers; TILA requires the advertisement to disclose the credit terms and rate in a certain manner. If an advertisement for credit states specific credit terms, it may state only those terms that actually are or will be arranged or offered by the lender. If an advertisement states a rate of finance charge, it may state the rate an "annual percentage rate" (APR) using that term. If the annual percentage rate may be increased after consummation the advertisement must state that fact.

 

Economic Indicators

Interest Rate Forecasting
There are a variety of economic indicators used by the Federal Reserve, Wall Street bond traders and institutional investors to forecast the direction of interest rates. Some indicators are released by the Federal government; others are released by private research firms and trade associations.

Residential mortgages, US Treasury securities, municipal and corporate bonds are part of what is termed the "long term debt market" known as the "Capital Markets." There are many variables which influence the rates on long-term debt instruments. An understanding of key economic indicators can provide clues to the future direction of interest rates.

*Key economic indicators are listed below in general order.

Top of Form

                                                                                         

Bottom of Form



Beige Book
This is the Federal Reserve's analysis of the economy and an explanation as to why they do what they do. This is published before each meeting of the FOMC and gives some insight into their intentions.


Gross Domestic Product
The gross domestic product (GDP) is considered by many to be the most important economic indicator published. Providing the broadest measure of economic activity, the GDP is considered the nation's report card.

The four major components of the GDP are: consumption, investment, government purchases, and net reports.

Consumption spending represents about 56% of the GDP and is divided into three categories: durable goods (items expected to last more than three years), non durable goods (food and clothing), and services.

Investment spending accounts for about 14% of the GDP and covers three categories: nonresidential (spending on plants and equipment), residential (single-family and multi-family homes), and the change in business inventories.

Government spending represents about 17% of the GDP, covering spending on defense, roads, schools, etc.

Net exports account for the balance or about 13% of the GDP. Imports deduct from GDP and exports add to the figure. In recent years, the U.S. has consistently experienced net imports, with imports exceeding exports.

The economy's average sustainable growth rate has historically been between 2.5% and 3.0%. Rapid economic expansion, growth, in excess of the average sustainable rate, is generally short-lived, as it can lead to inflation and, in turn, cause the Federal Reserve to tighten monetary policy in order to slow growth. An economic downturn, or negative growth, is known as a recession. During a recession, the Fed may lower interest rates to stimulate the economy and increase the growth rate.

Bad news is good news for the bond market. A weak GDP is received favorably by bond investors; a strong report causes concern the Fed might need to intervene and raise interest rates (a negative for the fixed income market).


Consumer Price Index
The consumer price index (CPI) in considered, by most economists to be the most important measure of inflation. It compares prices for a fixed-list of goods and services to a fixed period of time.

The consumer price index (CPI) in considered, by most economists to be the most important measure of inflation. It compares prices for a fixed-list of goods and services to a fixed period of time.

The CPI categories and respective weightings are:

·         Housing 42%

·         Food 18%

·         Transportation 17%

·         Medical Care 6%

·         Apparel 6%

·         Entertainment 4%

·         Other 7%

Unlike other measures of inflation, which only cover domestically-produced goods, the CPI covers imported goods, which are becoming increasingly important to the US economy.

Analysts focus on the "core" CPI, which excludes the volatile food and energy sectors. The core index is considered a more accurate measure of the underlying rate of inflation.

The bond market can be extremely sensitive to changes in the CPI which exceed expectations. Example: a higher-than-expected CPI can cause bond prices to fall and yields to rise. Likewise, a lower-than-expected figure is bullish for the market, causing the bonds to gain and yields to fall.


Producer Price Index (PPI)
The producer price index (PPI) is a monthly indicator of inflation. It is a measure of wholesale prices at the producer level for consumer goods and capital equipment. Unlike the CPI, it does not included services.

The PPI categories and respective weightings are:

·         Finished Consumer Goods 40%

·         Food 26%

·         Capital Equipment 25%

·         Energy 9%



Employment - Payment Jobs
Except for the GDP, the government's employment report is the most significant economic indicator reported. It provides information on employment, the average workweek, hourly earnings, and the unemployment rate.

The data covers the following major categories:

·         Goods-Producing

·         Manufacturing

·         Construction

·         Mining

·         Service-Producing

·         Transportation and Public Utilities

·         Wholesale Trade

·         Retail Trade

·         Finance, Insurance, and Real Estate

·         Services

·         Government



Jobless Claims
Jobless claims are US Labor Department reports of initial state jobless benefit claims, seasonally adjusted. They give an indication of potential "wage inflation" when they remain low.


Housing Starts
The housing industry accounts for approximately 5% of the overall economy. Housing starts is important because it is a leading indicator. Sustained declines in housing starts slow the economy and can push it into a recession. Likewise, increases in housing activity triggers economic growth.

Building permit data is released at the same time as housing starts. Permit activity provides insight into housing and overall economic activity in upcoming months. It is so important that it is included in the index of leading economic indicators.

Housing activity is directly impacted by mortgage rates. Higher interest rates increase housing costs and reduce the number of qualified borrowers, thus, a decline in home sales and drop-off in starts. Conversely, lower interest rates increases housing affordability and spurs homes sales and housing starts.

Housing data can have a significant impact on the bond market. A stronger-than-expected report is viewed negatively, suggesting strong growth and possible inflation. Housing data can have a significant impact on the bond market. A weak report has the opposite effect on the market.


National Association of Purchasing Managers
The National Association of Purchasing Managers (NAPM) index is based on a survey of over 250 companies, twenty-one different industries, covering all 50 states.

The survey covers the following six areas:

·         Production

·         Orders

·         Commodity Prices

·         Inventories

·         Vendor Performance

·         Employment

Participants are asked to evaluate their position in each of these categories as "up," "down," or "unchanged." The calculated index is then adjusted for seasonal changes.

The bond market views a strong number as negative and a weak report as bullish or positive.


Retail Sales
This report contains valuable information about consumer spending the consumption part of the gross domestic product (GDP). Consumption spending accounts for more than one- half of GNP.

Retail sales data represents merchandise sold for cash or credit by retailers. Durable goods, such as autos, make up about 35% of the figure. The balance consists of non-durables, like gasoline, restaurants, and general merchandise.

There are several drawbacks to the report. The data covers purchases of goods only, not services. Services are becoming a major factor in our "new" economy.

The bond market reacts negatively to a strong report.


Durable Goods Orders
A leading indicator of manufacturing activity. Increases in orders generally leads to increases in production. Drops in orders are followed by a build-up of inventories and, eventually, a decline in production. Economists use durable goods data to forecast changes in manufacturing.

Durable Goods are hard to predict. A strong report is bad news for the bond market, causing the bond to slump. Likewise, a weak report is viewed positively by investors.


Leading Economic Indicators
This is a composite index of economic variables that generally lead changes in overall economic activity. This index is followed as a forecasting measure of broader indicators of growth such as payroll employment and GDP. It is also followed as an early indicator of future inflation. This is not viewed as an important release because it is a rehash of previously released data.


Industrial Production
This report measures the physical volume of output of the nation's manufacturing sector, including factories, mines, and utilities. Goods-producing industries account for about 45% of the economy. The balance, the service sector and construction industry, account for the remaining 55%.