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Insider Mortgage Tips from Greg Fischer of Residential Mortgage Service

By Greg Fischer

Tell us a little bit about your company and its foundation.

Residential Mortgage Services, Inc. is a leading independent retail mortgage bank serving the New England and Mid-Atlantic markets.The Company is currently the largest "purchase money" lender in the Maine and New Hampshire markets, and is a top five player in the Massachusetts purchase market. In early 2014 RMS expanded its footprint into the Mid-Atlantic, starting with the state of Pennsylvania. Through its network of over 35 regional and local field offices, the professionals at RMS strive to make the "last mile" of home ownership as simple and straightforward as possible. Thousands of families have relied on the Company's expert advice, broad product selection, and high level of personal attention to achieve their homeownership dreams or refinance their existing properties. RMS has recently made some key partnerships with servicers for end-construction and renovation loans.

How important is it to document finances for mortgage needs?

In today's mortgage market, it is absolutely critical to document EVERYTHING. Most mortgages are designed to be sold on the secondary market. To trade on Wall Street, they need to conform to certain standards. Even if a lender doesn't plan on selling the servicing of your mortgage, it's important that they could. So everything is triple checked, re-verified, and often additional information is needed.

One of the most common paperwork follow-ups I'm seeing recently is verification of large deposits. Have you recently sold something? Transferred money from another account? Got a gift from Mom and Dad? Borrowed cash from a friend? Normally, a mortgage application requires bank statements to verify assets. If those bank statements show a large deposit that isn't from a paycheck, we may need to verify the source of that deposit. These sorts of things can interrupt the flow of an otherwise smooth transaction. The best way to iron out those wrinkles is to keep documentation.

Presently, do you believe it's a good time to refinance? Please elaborate.

The answer is always the same: It could be, depending on your unique financial goals and current situation.

Rates today are very good, and have been for the past few years. Maybe you've already refinanced, but rate is not the only consideration. Here are a few reasons to consider refinancing:

To change your monthly payment.

  • This might include a lower rate to pay less interest per month. You might also be looking to eliminate mortgage insurance or to consolidate a second mortgage.

To change your loan terms.

  • you might be looking to shorten the term of your loan or to refinance out of an adjustable rate mortgage into a fixed rate.

To access the equity in your home.

  • If you have equity in your home, you may still be able to refinance to a higher loan amount to get cash out of your house for other things.

To change some other aspect of the loan.

  • You need to change the structure of the current mortgage, like removing a borrower.

How can someone tell when it's a good time to refinance?

It depends entirely on your reason to refinance. For most people, this means lower monthly payments and better cash flow. In that case, you should do a little math.

Cost of the new loan / monthly savings = months to "recoup" the cost. If your new loan will cost $2000, and you'll be saving $100 a month, it will take 20 months to break even. You'll be saving money every month thereafter.

How long do you plan to live in the property? I usually recommend a 3 year or less break even point. If it will take you 5 years of savings to cover the cost of the refinance, it probably isn't a good deal for you. If you'll be saving money in 2 years, that's a pretty good investment. It all depends on your plans.

In some cases you may be able to refinance to a lower rate then you currently have and your lender covers the closing costs. The new rate may be slightly higher than if you paid the closing costs, but you could possibly break even and start saving money right away.

Why are many people reconsidering FHA loans? What programs do you believe homeowners should consider instead ?

Over the past few years, the Federal Housing Authority's (FHA) mortgage insurance premium (MIP) has increased substantially. Last June, the rules were changed so that unlike private mortgage insurance that terminates when you reach enough equity, FHA MIP is paid for the full term of the loan. So even when you owe half of what your house is worth, you're still paying the mortgage insurance premium. Expensive premiums that are paid forever have turned many people back to other alternatives.

Fortunately, at the same time this was happening, private mortgage insurance companies (PMI) that survived the crash have been expanding their guidelines and reducing their premiums. In many cases, a conventional loan with PMI may have lower payment than an FHA loan, and the PMI does eventually drop off. If your credit is good, it may be a lower payment, even if the rate is a little bit higher than FHA. Under the right circumstances, FHA is still a great loan program and definitely serves a niche. Unlike a few years ago, it isn't the best option all of the time anymore.

What mortgage options are available (private or public) for homeowners with bad credit?

In most cases where a would be home buyer has a credit score that is just under the required guidelines a little direction on what to do next and some time is what's really needed. I've seen people swing their credit scores by up to 80 points in a couple of months just by knowing what steps to take. It might be as simple as paying down a few credit cards. The best way to be trapped by bruised credit is to not know what to do about it.

There may be other options available but require more money down, higher savings, and evidence that whatever caused the bad credit has been resolved. They may also come with higher interest rates and may be difficult to qualify. If you had 5% down payment plus two months of mortgage payments in the bank, you might be better off using that to leverage your credit into a better position to qualify for a better loan.

What are the rights of a homeowner and how can they use these to their advantage when negotiating a mortgage?

Federal regulations have changed over and over again during the past few years, all with the goal of making the costs and terms of a mortgage more clear, and make comparing offers from multiple lenders simpler. Most people still focus on rate and points. That's important of course, but it isn't the entire story. Just because a lender sends you a Good Faith Estimate, you're still allowed (encouraged even) to ask questions. Do this for yourself: what are the top 3 or 4 most important factors when choosing who to work with in financing your new home? Yes, low rates and low costs are important, but what else? If you know what's most important to you, ask your lender how they can address these items for you. Find someone who's answers line up with your expectations.

What is the best way for people to contact you?

I'm best reached by email at greg.fischer@rmsmortgage.com or by cell phone 603-365-0901.

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About The Author

Greg Fischer has nearly ten years of experience in the mortgage industry. After...

Phone: 603-365-0901

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