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Things I Should Know…

If I am buying a home in Missouri or refinancing…

Mortgage Myths Debunked

Common Beliefs Which Need Correcting

MYTH: You need a huge down payment when you finance a home.

TRUTH: Conventional loans are back to the 5% to 20% down payment range and the days of “piggy-back” loans to cover the down payment spread are pretty much over, however, “no-down-payment” loans are still available through the Veterans Administration and you may see if you qualify to borrow up to 100% of the value of the property with a USDA Rural Development Loan. You may also qualify for a loan under the Federal Housing Administration with just 3.5% down.

MYTH: It is good to have as much equity in your home as possible.

TRUTH: Let’s face it. Home equity values are certainly not increasing at a rate anywhere near the return that can be obtained in any number of other very safe equity positions available to home owners. With a strong overall financial plan in place and rates still so low, it makes much more financial sense to have those assets in an earning position rather than depreciating with the sluggish real estate market.

MYTH: There is a 7 year wait to get a loan after a short sale.

TRUTH: Typically there is only a 2-4 year wait to receive approval on a mortgage loan, but that depends on the amount of the down payment and the loan type selected. It is after a foreclosure that the wait will be 3-7 years. Even if you can afford to get a mortgage right now, you will need to have an acceptable credit score which may take a few years to build back up after a foreclosure. Your mortgage specialist can give you guidance in the correct steps needed to achieve an acceptable credit score.

MYTH: My bank is the best place to get a mortgage.

TRUTH: In fact, a bank may be the WORST place to get one. The many advantages of using an experienced mortgage broker far outweigh any advantages banks usually bring to the table. An individual can become a loan officer at a bank with no previous experience in handling mortgage loans.

Did you know that bank loan officers aren’t even required to be licensed?
Every loan officer at Gateway Mortgage is an experienced veteran licensed by the state of Missouri. What makes more sense? Obtaining a loan from a bank’s single funding source with often inflexible underwriting requirements or using over 20 years of financing business acumen to leverage as many as 25 sources to obtain the best possible rates, terms, and approval conditions to fit your needs?

MYTH: Everybody charges processing and administration fees.

TRUTH: At Gateway Mortgage not one penny is paid by the borrower in the form of administration or processing fees. Gateway Mortgage is paid by our lenders to represent and perform services for them.

If I am Just Refinancing:

MYTH: The only time to refinance is when I hear interest rates are down.

Although this is the number one reason why people think about refinancing there are other reasons to consider refinancing.

Lower Monthly Payment – If your situation suddenly requires lower monthly payments, even if the interest rate is not significantly lower, by increasing the term or considering an adjustable rate mortgage you can lower your monthly obligation.

Access More Equity – As the your financial position changes, as well as that of the general economy, you may be able to access more equity in your home now than when you last set up a mortgage. These funds can be used to reduce other more expensive debt or be placed in a higher earning investment position, improving your overall economic picture.

Change in Marital Status – Life if full of change. Marriage may have increased your overall income or divorce may have reduced it. You may have need of cash in either scenario or reasons to change the conditions surrounding your mortgage picture.

Increase in Income – The big raise, a sudden inheritance, or that dream job finally lands and you find yourself in a totally different economic world than when you set up that mortgage the last time. Now you can afford to shorten that term or have investment funds to supplement available equity to compliment the return on a different level of investment and can afford to finance a better position. Within a relatively short period of time, your new economic status may significantly improve your credit score which may, of course, make you eligible for a better rate even though the market isn’t moving.

MYTH: My current lender will modify my loan so I don’t have to shop for another one.

Only portfolio lenders, those who hold the loan internally through the full term, will even consider modifying a loan, however, the vast majority of lenders sell their loans on the secondary market in which case you must refinance the loan in order to get a better rate.

MYTH: If I can’t find a lower rate, there’s no reason to keep shopping for refinancing.

It all depends on what your current situation demands. What are your reasons for refinancing as discussed above? One lender might offer lower rates, but there may be higher overall fees. If you plan to move out of your home within the next two to three years, it might be better to take a slightly higher rate with lower fees as the accumulated increase in monthly payments may turn out to be lower than the overall fees associated with refinancing.

If I Am Facing Divorce…

Every divorce situation is unique, so it is important to have a mortgage specialist conduct an analysis that takes into consideration all aspects of the properties involved coordinated with the priorities of the divorce attorney.

At Gateway Mortgage we understand the importance of working in concert with your attorney to achieve your goals and objectives. Your life is about to change dramatically. Here are some of the things you will need:

A Place to Live.

Often the largest financial decision to be made in a divorce is how to divide the marital home.

A) Sell – Clearly the most definitive conclusion to the issue both financially and emotionally. Unfortunately due to time constraints, the sale is often below market value thus diminishing the resulting financial asset. However, if the mortgage debt can be satisfied with a surplus to be divided in the settlement, this option has considerable merit.

B) Refinance –If one partner has the financial ability to “buy out” the other, the highest asset value can be attained and the transaction can sometimes result in much needed liquid funds for re-establishing a second household. Engaging the services of an experienced licensed professional mortgage specialist can help you avoid costly errors in handling the disposing of jointly held mortgage obligations and establishing new ones.

As Little Debt as Possible.

As early as possible you should try to establish credit in only your name. If/when this is accomplished; freeze any existing joint credit card accounts. In some instances you may be able to move a certain amount of the old balance to the new account. However, if the debt was originated in both names, no matter what the judge rules in the divorce decree, you are still ultimately responsible for the original debt and it will affect your credit rating if unpaid. Your credit rating will, of course, affect your ability to get a new mortgage.

As Many Retirement Assets as Possible.

If you are eligible to receive retirement assets from your spouse’s 401(k) plan, you may need a QDRO (Qualified Domestic Relations Order – a legal document different from the divorce decree) to separate those assets into solely owned accounts. If your spouse’s pension plan does not allow separation of assets, you may want to have the QDRO adjusted to compensate by having more 401(k) assets directed to you. A direct rollover of your share of IRA funds into an account solely in your name may be the best way to handle Individual Retirement Account assets. It is wise to have a professional financial planner review all retirement asset moves before agreeing to a settlement. You want to avoid liquidating any of these assets when re-establishing a mortgage solely in your name but still have them considered in your net worth assessment. Your mortgage specialist can advise you on how to do this.

Uncontested and Readily Accessible Liquid Funds.

Your cash demands will change at each phase of the proceeding. In the beginning you will need funds for hiring an attorney. In the middle of the proceedings you may need separate funds for temporary living expenses and other unexpected expenditures. When the divorce is final you will be starting a new life in a more permanent manner and that will require uncontested funds. Make every effort to NOT fall back on credit cards to finance these phases. The burden of debt will only add to an already stressful situation. As mentioned above, your mortgage specialist can ascertain whether there is a way to access available equity to assist you in establishing uncontested liquid funds.

A Financial Plan That Makes Sense for You Moving Forward.

Undoubtedly your lifestyle is in for a change. Accepting this and planning for it will give you at least some peace of mind. Some moves are obvious such as reducing your living expenses as much as possible. Having an even balance of assets in each of these categories discussed here is a smart strategy too. Not too much in one or the other, but a little in each. Engage a financial planner to assist in arranging your assets especially if your spouse handled that in the past. Look for cost saving measures wherever possible. At Gateway Mortgage not one penny is paid by the borrower in the form of administration or processing fees. Gateway Mortgage is paid by our lenders to represent and perform services for them.

About Reverse Mortgages…

Perhaps Now a Wise Approach

A reverse mortgage is a loan for senior homeowners that uses the home’s equity as collateral. In the past, a negative stigma has been attached to this mortgage option as though it were only for those in a crisis situation or for those who had planned poorly for retirement, but that attitude is rapidly changing among leading financial advisors.

With today’s investment return numbers settling into different standards than those accepted as typical in the past, using the wealth of equity in one’s home in coordination with a solid overall retirement plan, is now considered a wise approach.

Here are some key points to consider when trying to determine if a reverse mortgage makes sense for you:

Repayment

The loan generally does not have to be repaid until the last surviving homeowner permanently moves out of the property or passes away, at which time, the estate has approximately 6 months to repay the balance of the reverse mortgage or sell the home to pay off the balance.

Shortfall Guarantee

Any remaining equity is inherited by the estate which under federal regulation is not liable to cover the shortfall if the home sells for less than the balance of the reverse mortgage.

FHA Safe

FHA regulations have made this option virtually fool proof for the established homeowner as a way to safely access equity in their home without the risk of deceptive practices.

If you are considering a Reverse Mortgage you should have a Gateway Licensed Mortgage Specialist conduct a Mortgage Analysis to determine if this solution is the right one for you.

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