Creative Home Buying Options Abound!

Learn which ones may be right for you

by Bob Melone, radius loan officer

Over the last few years, you’ve likely heard that mortgage lending guidelines have undergone some tightening. It may even seem like getting approved for a mortgage without flawless credit and less than 20% down is next to impossible, and that “creative financing” options went out of style in 2005 along with Jessica and Nick.

Honestly, nothing could be further from the truth. In the next few installments of our radius blog, I’ll be discussing the many creative mortgage options available, which allow for fixed rates, low down payments and flexible credit scores.  

Today, I’d like to focus on the granddaddy of creative financing options: the Federal Housing Administration’s (FHA) 203(k) rehabilitation program. The FHA 203(k) rehab program allows buyers to finance almost any improvements they’d like when purchasing a home with as little as 3.5% down (based on the home’s purchase price and rehab amount). Meanwhile, renovation work can start right after the closing.

Before addressing specifics of the program, though, consider this scenario. If you’re currently in the market to purchase a new home or you’ve bought one before, you likely know it well:

You see a hot, new listing for a home that’s just hit the market. Looking at the pictures and description online, everything looks flawless: the size and style of the home, the bedroom count, the neighborhood… it’s all perfect! You’re sure it’s an ideal fit for you and your family. You promptly set up an appointment, the agent opens the front door and… UGH!! The linoleum in the kitchen is peeling and the lime green cabinets are straight out of a Brady Bunch episode. They’re so outdated even Alice wouldn’t want to use them!

You’re heartbroken. But once reality sets in, you know the house could, in fact, be perfect. That is, with a new kitchen, updates to the bathrooms, a roof that could use some repair, the removal of an old shag carpet that needs to be pulled up so the hardwood floors underneath can be refinished, and the possible addition of a deck off the back.

All those renovations and more are possible through FHA’s 203(k) rehab program, which allows for the following (and much more):

• Additions for increasing living area or a garage
• Finishing basements
• Satisfying Title 5 requirements
• Making any structural repairs
• Remediating health issues (i.e., mold)
• Updating kitchens and baths
• Completely replacing utilities (electrical, plumbing, etc.)

Single-family homes, condominiums and 2-4 unit homes are all eligible under the FHA 203(k) rehab program. You can even use it to renovate your current home! Meanwhile, our 203(k) program allows for flexible credit qualifying and credit scores as low as 640.

Maximum loan amounts, which are also quite generous, vary from county to county and the type of property you plan to buy. For example, the maximum loan amount for a single-family home in Norfolk County is $523,750, while the maximum loan limit for a four-family home in Norfolk County is over $1,000,000! To find the complete list of maximum FHA loan limits, follow this link.

Simply put, the FHA 203(k) program is a great way to turn today’s reality into tomorrow’s dream. So if you’re planning to buy a home that needs some work, or plan to do renovations on your current home, please feel free to call me with questions. I’m more than happy to answer them and would love to help.

Have a great day!

When you’re buying a home, zip your wallet!

by Bob Melone, radius loan officer

A few weeks ago, I came across an article on The Boston Herald ’s website discussing credit updates that lenders perform prior to a buyer’s closing. In the mortgage industry, we call this a Loan Review Report (LRR). The LRR is an update to the borrower’s credit report, which shows whether a borrower has applied for new credit or increased balances (and payments) on existing debts. This check typically occurs three to five days prior to a closing.

Though the article is a bit over-dramatic at times (like when it compares a lender pulling an LRR to NSA’s phone surveillance) its overall message is spot on: Potential home buyers should not apply for or obtain new credit at any time during the home buying process! That’s because increased debt can push a loan from being approved to declined, even after a clean mortgage commitment is issued.

When reviewing a loan application, mortgage lenders carefully review a potential borrower’s debt-to-income ratio, which is the percentage of monthly income that goes toward paying their mortgage, bills and other expenses, like car and student loans. While maximum debt-to-income ratios depend on a borrower’s income and the overall strength of their application, lenders generally like to see that no more than one-third of a borrower’s income goes toward monthly debt and expenses.

While an LRR can potentially increase a buyer’s debt ratio, so can the rising mortgage rates we’ve seen in recent weeks. Together, these two factors can create a perfect storm of stress and anxiety in the days before a closing. As a result, not incurring new debt, which has always been important, is now more vital than ever.

Unfortunately, borrowers often don’t know that adding new debt after an initial loan approval can negatively impact their final eligibility to acquire a new loan. Many people think that once the P&S is signed, they’re free to make new purchases like buying furniture or a new car, and that’s where they can get into trouble.

At radius, we make a concerted effort to remind borrowers about the risk of incurring new debt throughout the loan application process. It’s a message that can’t be underscored enough!

If acquiring new credit can’t be avoided, borrowers should talk with their mortgage lender first to avoid any potential pitfalls.

Applying for a home loan is generally stressful for everyone, even for experienced borrowers with low debt-to-income ratios and stellar credit ratings. That’s why it makes sense to do everything in your power to minimize pitfalls.

The bottom line is this: After home buyers apply for a home loan, they should keep their wallets closed! Don’t apply for or obtain new credit, or make any large purchases. It’s an easy way to maintain your borrowing profile and work toward starting life in your new home.

Andria Dolce Raves

Stephanie Avelino worked with our very own Andria Dolce, and had a lot to say about her. This is what she said:

Dear radius financial:

I have three words for you:  Andria, Andria, Andria.  Dolce that is.

You know:  Andria Dolce  
Loan Officer NMLS# 949919
 @ radius financial group inc.

This is Stephanie Avelino and I recently had the good fortune and pleasure to work with Andria as we were refinancing a 2 family investment property in Roslindale, MA.  Andria was great to work with and I would recommend her and radius financial in a heartbeat.  Feel free to contact me anytime for further information.

Here are some highlights to my experience:

1:  ORGANIZATION:

Andria is organized, knowledgeable and follows through when she says she will.  She was often able to answer my questions right on the spot and if she couldn’t, she promptly got back to me with the information I needed.

This was extremely helpful because I am only a moderately organized person myself and I live a life that is a bit too hectic between 2 kids ages 5 and 13 (yeah that’s pretty interesting) working part time, managing our own household and taking care of the investment property.  Many days I am lucky if I get my pants on before I leave the house.   With Andria’s help and support I was able to collect and submit all necessary paperwork and forms needed to complete the refinancing.  Andria helped keep me on track throughout the process – just what I needed.

2:  DETERMINATION

Andria is determined and resourceful.  We had a 30 year fixed rate loan on our property but we also had a special deleading loan through the city of Boston that had been transferred and required subordination.  This required tracking down the loan info and dealing with Mass Housing Finance Agency.  At first I didn’t even know which bank or agency had acquired the loan after transfer.  This issue added some extra red tape and time to our application process and made the whole thing more complicated.

With Andria’s help and support and resources that she was able to draw upon, we were able to obtain the subordination, even though at first our request was denied and it seemed like this might not be possible.  In addition, even if we had not been able to obtain the subordination, Andria had a back up plan in mind that probably would have allowed us to restructure the loan and still wind up with a favorable rate for refinancing.

3:  ACCESSIBILITY

Andria is accessible and reassuring.  It was easy to get in touch with her, even on weekends and the time she was sick.  And she offered information and reassurance for all of my questions and confusion about the different steps of the process.

4:  HAPPY ENDING

My new loan has now been transferred to Citibank and I now have a monthly payment that is about $570 less than my old monthly payment.  I am one very satisfied customer.

Winning that $250 gift card would make me happy, but even without it I am quite pleased to have worked with radius to help me refinance my property.

In addition, Andria is nice and she has a sense of humor: Two big pluses to the already mentioned attributes.

Hope all goes well for folks at radius.  Things with us are swell.

Take Care:
Stephanie Avelino

Hydrogen Peroxide Power

Whether you’re moving out of your home or into a new one, you’ll likely be putting in some cleaning time. Instead of investing in a host of expensive cleaning agents, consider using hydrogen peroxide. It’s a safe, ultra-cheap gem at a price that can’t be beat: A 16-oz. bottle only costs a buck!

Here are 10 ways you can use 3% hydrogen peroxide to make your home shine:

In Your Kitchen

1. Clean your cutting board and countertop. Hydrogen peroxide bubbles away any residue left after preparing meat or fish for dinner. Add hydrogen peroxide to an opaque spray bottle — exposure to light kills its effectiveness — and spray on your surfaces. Let everything bubble for a few minutes, then scrub and rinse clean.

2. Wipe out your refrigerator and dishwasher. Because it’s non-toxic, hydrogen peroxide is great for cleaning units that store food and dishes. Just spray the appliance outside and in, let the solution sit for a few minutes, then wipe clean.

3. Clean your sponges. Soak them for ten minutes in a 50/50 mixture of hydrogen peroxide and warm water in a shallow dish. Rinse the sponges thoroughly afterward.

4. Remove baked-on crud from pots and pans. Combine hydrogen peroxide with enough baking soda to make a paste, then rub onto the dirty pan and let it sit for a while. Come back later with a scrubby sponge and some warm water, and the baked-on stains will lift right off.

In Your Bathroom

5. Whiten bathtub grout. If excess moisture has left your tub grout dingy, first dry the tub thoroughly, then spray it liberally with hydrogen peroxide. Let it sit — it may bubble slightly — for a little while, then come scrub the grout with an old toothbrush. You may have to repeat the process a few times, depending on how much mildew is there, but eventually your grout will be white again.

6. Clean the toilet bowl. Pour half a cup of hydrogen peroxide into the toilet bowl, let stand for 20 minutes, then scrub clean.

In Your Laundry Room

7. Remove stains from clothing, curtains, and tablecloths. Hydrogen peroxide can be used to pre-treat stains — just soak the stain for a while in 3% hydrogen peroxide before tossing the garment into the laundry. You can also add a cup of peroxide to a regular load of whites to boost brightness. It’s a green alternative to bleach, and works just as well.

Anywhere in Your Home

8. Brighten dingy floors. Combine half a cup of hydrogen peroxide with one gallon of hot water, then go to town! Because it’s so mild, it’s safe for any floor type, and there’s no need to rinse.

9. Clean kids’ toys and play areas. Hydrogen peroxide is a safe cleaner to use around kids, or anyone with respiratory problems, because it’s not a lung irritant. Fill an opaque spray bottle with hydrogen peroxide and spray toys, toy boxes, doorknobs, and anything else your kids touch on a regular basis. You can also soak a rag in peroxide to make a wipe.

Outside

10. Help out your plants. To ward off fungus, add a little hydrogen peroxide to your spray bottle the next time you’re spritzing plants. Use 1/2 cup of hydrogen peroxide added to one gallon of water for your plants.

What’s Your Mortgage IQ?

A recent Zillow survey shows that prospective home owners still have a bit to learn about mortgages.  Here are some of the findings, along with facts to help you become a more educated buyer:

Survey Finding: One-third of home buyers think they need a down payment of at least 5% to make a home purchase.

FACT: Loan programs insured by the Federal Housing Administration (FHA) require as little as 3.5% down. FHA loans also offer more flexible underwriting guidelines than conventional financing, and can be used for single- and multi-family homes (up to four units).

 

Survey Finding: 24% of home buyers believe the best mortgage deals are available through the banks where they have savings and checking accounts.

FACT: Other lenders can compete with and often offer lower rates than institutional banks, along with a wide range of loan programs to choose from.

 

Survey Finding: 20% of homeowners think that underwater mortgages — those in which borrowers owe more than their homes are worth – can’t be refinanced into lower rates. 

FACT: Programs like HARP (the Home Affordable Refinance Program) and Freddie Mac’s Relief Refinance Mortgages (a.k.a. Open Access) can help eligible home owners refinance despite declining property values.

 

Survey Finding: One-third of homeowners believe that after a foreclosure or short sale, it takes a full seven years before credit scores recover and they can buy another home.

FACT: Some homeowners who foreclose their home or sell it on a short sale can obtain financing for a new one in as little as two years.

–

With all the information (and misconceptions) surrounding mortgages, learning what you need to make smart, informed decisions can feel pretty overwhelming. While we encourage our clients to learn as much as they can about the home financing process, we also know few people have the time to do all the research on their own.

That’s where the value of an experienced loan officer comes in. By carefully working to learn your life plans and financial circumstances, an experienced, reputable loan officer will give you trusted feedback and guidance, so you can find a loan that fully meets your needs and circumstances.

No News Isn’t Necessarily Good News

As Sandy and Dan Lucca of Plymouth, MA, walked through the usual steps of buying a new home, they had no idea how suddenly or unexpectedly the process could fall apart.

They’d already completed a home inspection, signed the purchase and sale (P&S) and were approved for a loan, when they received a call from their mortgage company, informing them that they wouldn’t be able to meet the closing deadline due to processing delays.

Dan and Sandy were stunned. When they first applied for a loan, the lender confirmed that their timeline wasn’t an issue.  “Since then, we hadn’t heard anything from the bank, so we just assumed everything was fine,” said Dan Lucca.

When it comes to mortgage lending, no news isn’t necessarily good news. Particularly in today’s economic climate, many lenders are struggling to meet closing deadlines, but don’t readily offer up that information. When they finally do, it’s often late in the process, which can put borrowers in real jeopardy.

For Dan and Sandy, they got the call from their lender just nine days before their closing. With their existing house to be sold in the coming days and a substantial down payment on the line, they were set to lose a lot of money with no place to go.

Not knowing what to do next, they promptly told their realtor about the delay, who in turn urged them to contact Jeff Pilon, a radius loan officer.

“Unfortunately, this is not an uncommon scenario,” said Jeff Pilon. “People reasonably assume everything is fine until they’re told otherwise, which typically happens late in the game, and that’s when the fun begins.”

After just one phone call with the Luccas, Jeff and his underwriting team snapped into action. Eight days later, Dan and Sandy received a full loan commitment and closed on their new home, as originally scheduled.

“In a matter of days, Jeff was able get us back on track,” said Sandy Lucca. “He took all the stress away.”

To prevent loans from falling apart due to time delays, Jeff strongly encourages borrowers to ask lenders upfront how long it will take to get a full commitment. Then listen carefully to the answer. If the lender indicates any potential for delay, it’s best to walk away and find another company that can assure you of working within the needed time-frame.

When Timing is Everything

With today’s stricter lending standards, you’d think people who actually get approved for a loan would sail through the process. But that’s not always the case. For qualified borrowers who need to close a loan quickly, many lenders simply can’t commit, which can jeopardize homebuyers’ plans.

Take Daisy Marroquin, a 22-year-old Army National Guard soldier from Framingham, MA, who fully qualified for a loan and was promptly approved by three lenders. The home she wanted to buy was a short sale, so she needed to move fast.

That’s when she hit a major roadblock.

The closing needed to happen in three weeks, but all three lenders said they couldn’t do it in that time-frame; each said the process would take at least 35 to 40 days. By then, the home would be gone, and so would the “once in a lifetime” deal Daisy had found.

The next day she relayed the story to a colleague, who suggested contacting Andria Dolce, a loan officer at radius.

“I hate to say it, but I was kind of skeptical,” said Daisy. “I’d never heard of radius before, but Andria was recommended and at that point I had nothing to lose so I gave her a call.” She was immediately glad she did.

Andria was able to approve Daisy’s loan within hours and arranged for an appraiser to inspect the home the next day. Twenty days later, Daisy closed on her loan, without confusion or fuss.

“Andria made it all so easy,” said Daisy. “I couldn’t believe it, especially after hearing ‘no, no, no’ from everyone else.”

Meanwhile, Andria knew they could get the deal done with the right support and focus.

“People’s borrowing needs don’t always perfectly match our typical timeline,” said Andria. “But when time is of the essence, you just have to hustle a little more to make it work.”

After the mad rush to buy her new home, Daisy is taking a sigh of relief as she settles in.

“This is the perfect house for me, but I never could have financed it through another lender. Without radius there to help me grab the deal, it would have slipped right by.”

Networking Helps Couple Re-Finance

“We were in the process of re-financing with another vendor and the process was taking a very long time with very little communications from the vendor.  My husband attended a networking event and caught up with Andria from radius and she offered to take a look at our re-finance information.”

“Andria was able to provide us with a timely turnaround, enabling us to receive the low rate we wanted.  The electronic communications were highly efficient – all the pre-application paperwork could be viewed securely and electronic signatures were accepted.  Even the formal closing process was customer-focused in that the attorney came to our home after work hours to accommodate our schedules.”

“We were very pleased with our re-finance process executed by Andria and would highly recommend her services to others.  Our neighbors are currently working with her and are having a similar positive experience as well.”

– Sandi Griffiths

Assistant Vice President, Investor Services

Brown Brothers Harriman

New Year Predictions

Originally posted on January 10, 2013

There’s no crystal ball to tell how or when interest rates may change in the coming months. But here’s a realistic look at what affects them and how to put it all in perspective.

While the new year comes with lots of resolutions and predictions, I’ve never been one to make many of either.  Resolutions are often quickly broken and predictions have as much chance of being right as they do wrong…

By far, the question I get asked most often is, “Where are interest rates going?” My usual answer is, “Good question!”

Honestly, no one knows exactly what interest rates will do nor can they foresee a change in advance.  We can make a lot of educated guesses, but they are no more than that.

There’s often a lot of confusion as to how interest rates are set. Contrary to what you sometimes hear on the news, the government doesn’t “set” interest rates.  The Federal Reserve sets the Federal Funds rate (a.k.a. the discount rate), which is the rate at which banks borrow from the government.  They are very short-term rates, directly impacting equity lines, auto loans and credit cards. They do not directly affect mortgage rates, though.  In fact, sometimes when the Fed increases the Federal Funds rate, mortgage rates drop.

Mortgage rates are directly tied to Mortgage Backed Securities or mortgage bonds, but they are often mistakenly thought to move in step with the 10-year Treasury Note. Not only do they not always trend in the same direction, but sometimes have an inverse relationship.

In the most simplistic terms, there are many economic factors that affect mortgage rates, but bad economic news coupled with tame inflation keep mortgage interest rates low.

Right now, rates are artificially low due to the Quantitative Easing (QE) actions of the Federal Reserve.  The Fed is currently buying $85 billion in mortgage back securities each month. This QE activity has kept rates at today’s historical lows.

Mortgage rates move in “real time” just as stocks do; both are subject to change at any given time while the market is open. While it would be great to purchase a stock at rock bottom and then sell at its peak, no one can predict those circumstances. The same holds true for mortgage interest rates. A few days after I locked the interest rate for my own home, rates fell .25%. That’s just how the market works. But far too often, clients focus so much on interest rates that they lose sight of the big picture.

The truth is, there are multiple factors that contribute to locking in a good mortgage. Yes, interest rates are one of them, but many other considerations play an important role, too.

That’s why it’s critical to work with a trusted mortgage banker who takes the time to learn about your financial and living circumstances, and offers advice based on where you’re at now and what your plans are for the years ahead.

So here’s my best advice regarding today’s interest rates, which are as low as I’ve seen them: Try not to obsess over their micro-movements. Take the time to find a mortgage that works for you on all fronts, and is one you’re comfortable paying.  Then shut out the media and move on with the things that matter to you most, like your home and family. To me, that’s the real big picture, and that’s what’s most important.

Happy New Year!

Holiday Enlightenment at Dunkin’ Donuts

Originally posted on December 18, 2012

The holidays are a ridiculously busy time of year for just about everybody. For me, between end-of-year closings and other work projects, along with an endless list of holiday tasks, I’m usually trying to accomplish way too much at once. And that’s when I do stupid things.

The other day, I was in the Dunkin’ Donuts drive-through to pick up my morning coffee, when I started thinking about the day ahead and how much I needed to do in so little time. As I reached for my briefcase to review a few documents, my foot slipped off the brake and I crashed into the car in front of me.

My attempt at multi-tasking in the three-minute drive-through caused a five-minute delay for me, the man whose car I hit and the people behind us. So I certainly learned my lesson there.

But what really blew me away wasn’t my foolishness. It was the reaction from the driver. After assessing his car and realizing there wasn’t any damage, he just shrugged and told me to have a nice day. Then he hopped back in his car.

I wanted to hug the guy. Whether his car was damaged or not, I fully expected him to criticize or lash out (and he would have been totally justified in doing so!), but his easy-going, relaxed attitude threw me for a complete loop.

The only way I could think to thank him in the moment was to tell the Dunkin’ Donuts woman on the speakerphone that I would pay for whatever he ordered.

As I thought about the incident afterwards, I suspected that the man’s reaction wasn’t in the spirit of holiday generosity. He’s probably a kind, patient and forgiving person in general. But his attitude reminded me just how important and meaningful those qualities are, and how much they impact other people.

So when I start to get stressed and distracted about everything I need to do, particularly in the days ahead, or when someone does something I’m not thrilled about, I’m going to channel that morning and regroup.

Meanwhile, when I was back in line at Dunkin’ Donuts the following day, I made sure not to smash into anyone. Then I paid for the person behind me. I’m not taking credit for this idea – I think I heard it from Oprah.  I just hope it made the stranger’s day a little nicer, in a small token of appreciation for the driver who brightened mine.

I hope your holiday season is filled with kindness, patience and generosity, too. Happy Holidays!