Handling Objections with the Option Arm. Nowadays, there are hundreds of Loan Officers and Mortgage people who have the Pay Option Arm at their disposal, but there are very few that actually know and understand how to sell it, the right way. I’m sure there are all kinds of people reading this right now saying “I know the right way to sell it, bla-bla-bla.” If you do, great! I give you props for doing so. BUT, there are a lot of Loan Officers that don’t know and don’t know they don’t know. Get it? I’m hoping this little article will help shed some light on what I’m talking about. Here’s what I mean; if you can handle the objections, you can sell the Option Arm. If you understand the objections, you can answer them properly. I’ll give you a brief “this is what I’m talking about” here. Almost every objection you get when presenting the POA properly will be a version of one of these:
1. I’m afraid of the rate increasing too quickly and going too high.
2. I’m afraid my payments will increase and I can’t afford them anymore.
There may be other minor ones, but let’s tackle these.
“I’m afraid of the rate increasing too quickly and going too high.” This one is simply overcome by explaining the indexes to the borrower, in a way he/she can understand! That’s the key, keeping it simple. Don’t overwhelm the borrower with fancy mortgage terms, just stay with the basics. The index is the only “moving part” of the POA. So, making the borrower feel comfortable with the index is the key to overcoming this objection. NOTE: Which ever index you decide to sell, make sure you can explain it to the average person who doesn’t understand the first thing about mortgages. I always ask myself, did you explain it in a way your Grandmother would understand it? You may be able to explain some indexes better than others, but you have to figure that out on your own.
*Tip: Have your Account Rep explain it to you until you fully understand it* Once you’re borrower is comfortable with how stable, or unstable, the index actually is, you’re ready for the next objection:
“I’m afraid my payments will increase and I can’t afford them anymore.”
Now this is the time to earn your money. You have to really understand how the payment is figured and how the increases are figured. Not just by using your calculator, but by explaining it to your borrower as well. Don’t always assume the payments are in 5 year increments. There are a few Lenders that actually have a 10 year recast, so know who they are and what their parameters are. Here’s a tip, the simpler you can make it for your borrower, the more of an “expert” you’ll become in their eyes. Just a couple of quick tips about the Pay Option Arm. Go out there and sell!
Andrew has sold and has trained other Mortgage Professionals on how to sell the Pay Option Arm. He is the author of the e-book titled The A.R.M. Factor: Guide to Understanding and Selling the Pay Option Arm. He writes a free weekly newsletter entitled "The Mortgage Mailbag". Get more details at http://www.MortgageMailbag.com
http://ezinearticles.com/?Handling-Objections-with-the-Option-Arm&id=564738
Tuesday, May 22, 2007
What is an Assumable Mortgage?
In an assumable mortgage, a buyer is able to take over the seller’s existing loan, essentially taking the place of the seller. The loan balance remains the same and hopefully, so does the interest rate.
Types of Assumable Loans
So, what types of loans today are assumable? Many ARM’s have an assumability option, although you will have to check with your broker or lender to find out for certain. The advantages of taking out an assumable loan is seen when you’re ready to sell your home, and a qualified buyer can avoid the closing costs of obtaining a first mortgage. Also, your mortgage may carry a rate below what the market is offering, effectively increasing the value and marketability of your home. Fixed rate conventional loans are less likely to be assumable because lenders have been burned in the past having to honor a low interest rate during a time when the market interest rates are much higher. That is when mortgages started carrying “due-on-sale” clauses.
FHA and VA Loans
The majority of loans that are assumable are FHA and VA loans. Since the late 1980’s, lenders have required that the new borrower meet the lender’s qualification requirements. Previously, FHA and VA loans had been assumable by anyone. There are three levels of assumption with different sets of liabilities and obligations. They are assignment, subject to, and novation. Look for future articles here that will examine these differences more in-depth.
Fees and Rate Adjustments
Check with the lender to find out what fees or rate adjustments are required in the mortgage assumption. Depending on the terms of assuming the mortgage, it may make more sense to take out a new loan altogether. FHA charges an assumption fee of $500 and a credit report fee. VA loans charge a $255 processing fee , a $45 funding fee and the VA itself receives a funding fee of 0.5% to 1% of the loan balance.
Cash for Difference Between Loan Balance and Sale Price
Borrowers who benefit the most from assumable mortgages are those that have the cash to pay the difference between the seller’s loan balance and the agreed upon sales price. For example, you are, purchasing a $200,000 home and have 10% to put down as a down payment. The seller’s assumable mortgage balance is only $40,000, which will require to obtain a second mortgage or other type of financing for roughly $140,000. Because second mortgage rates are almost always higher than those of first mortgages, it would probably make much more sense to take out a new 80-10 piggyback loan.
Mortgage Sanity provides help and information for people about many different aspects of the mortgage process. Visit http://www.mortgagesanity.com for help with your mortgage loan.
Recommended Mortgage Lenders Online - We maintain a list of recommended mortgage companies online and update the list regularly.
http://ezinearticles.com/?What-is-an-Assumable-Mortgage?&id=566396
Types of Assumable Loans
So, what types of loans today are assumable? Many ARM’s have an assumability option, although you will have to check with your broker or lender to find out for certain. The advantages of taking out an assumable loan is seen when you’re ready to sell your home, and a qualified buyer can avoid the closing costs of obtaining a first mortgage. Also, your mortgage may carry a rate below what the market is offering, effectively increasing the value and marketability of your home. Fixed rate conventional loans are less likely to be assumable because lenders have been burned in the past having to honor a low interest rate during a time when the market interest rates are much higher. That is when mortgages started carrying “due-on-sale” clauses.
FHA and VA Loans
The majority of loans that are assumable are FHA and VA loans. Since the late 1980’s, lenders have required that the new borrower meet the lender’s qualification requirements. Previously, FHA and VA loans had been assumable by anyone. There are three levels of assumption with different sets of liabilities and obligations. They are assignment, subject to, and novation. Look for future articles here that will examine these differences more in-depth.
Fees and Rate Adjustments
Check with the lender to find out what fees or rate adjustments are required in the mortgage assumption. Depending on the terms of assuming the mortgage, it may make more sense to take out a new loan altogether. FHA charges an assumption fee of $500 and a credit report fee. VA loans charge a $255 processing fee , a $45 funding fee and the VA itself receives a funding fee of 0.5% to 1% of the loan balance.
Cash for Difference Between Loan Balance and Sale Price
Borrowers who benefit the most from assumable mortgages are those that have the cash to pay the difference between the seller’s loan balance and the agreed upon sales price. For example, you are, purchasing a $200,000 home and have 10% to put down as a down payment. The seller’s assumable mortgage balance is only $40,000, which will require to obtain a second mortgage or other type of financing for roughly $140,000. Because second mortgage rates are almost always higher than those of first mortgages, it would probably make much more sense to take out a new 80-10 piggyback loan.
Mortgage Sanity provides help and information for people about many different aspects of the mortgage process. Visit http://www.mortgagesanity.com for help with your mortgage loan.
Recommended Mortgage Lenders Online - We maintain a list of recommended mortgage companies online and update the list regularly.
http://ezinearticles.com/?What-is-an-Assumable-Mortgage?&id=566396
The Risks of Getting 100% Financing
It’s great to be able to get your dream home for no money out of your pocket, but you need to consider the risks below when deciding if doing so is a smart move for you.
No Equity
Since you will be borrowing all of what your home is worth, you will leave yourself with no equity. Because of this fact, it will be more difficult to sell your home if you decide to do so. You will also not have many refinancing options available for several few years. This lack of equity virtually guarantees that you will be saddled with your current mortgage for many years.
High Interest Rates
With 100% financing, you will almost always garner higher interest rates than on mortgage loans with considerable down payment. Higher rates, and therefore higher payments, mean that you will be taking on a greater, monthly financial burden.
Mandatory Escrow and PMI
By exceeding 80% financing, most conventional lenders will force you to create an escrow account to cover your annual real estate taxes and homeowner’s insurance. You will also be required to pay private mortgage insurance (PMI), which is an insurance policy to compensate the bank for their heightened risk on high loan-to-value mortgages. These mandatory monthly additions to your mortgage payment can increase your monthly bill by several hundred dollars, causing you extreme financial distress.
Remember that 100% financing is a great option for those with little upfront cash who want to buy a home. However, these mortgages can also limit your financial flexibility greatly. Before entering into one, you must carefully consider the risks mentioned here. Once you sign the papers, you will be committing yourself to a long term financial responsibility, especially nowadays as property appreciation has begun to slow nationwide.
Recommended Mortgage Lenders Online For 100% Financing - We maintain a list of low rate mortgage lenders and update the list frequently. Try applying with one of our recommended lenders first.
FAQ's About Mortgages After Bankruptcy- Read this article to learn some information on getting a mortgage loan after a bankruptcy.
http://ezinearticles.com/?The-Risks-of-Getting-100%-Financing&id=566386
No Equity
Since you will be borrowing all of what your home is worth, you will leave yourself with no equity. Because of this fact, it will be more difficult to sell your home if you decide to do so. You will also not have many refinancing options available for several few years. This lack of equity virtually guarantees that you will be saddled with your current mortgage for many years.
High Interest Rates
With 100% financing, you will almost always garner higher interest rates than on mortgage loans with considerable down payment. Higher rates, and therefore higher payments, mean that you will be taking on a greater, monthly financial burden.
Mandatory Escrow and PMI
By exceeding 80% financing, most conventional lenders will force you to create an escrow account to cover your annual real estate taxes and homeowner’s insurance. You will also be required to pay private mortgage insurance (PMI), which is an insurance policy to compensate the bank for their heightened risk on high loan-to-value mortgages. These mandatory monthly additions to your mortgage payment can increase your monthly bill by several hundred dollars, causing you extreme financial distress.
Remember that 100% financing is a great option for those with little upfront cash who want to buy a home. However, these mortgages can also limit your financial flexibility greatly. Before entering into one, you must carefully consider the risks mentioned here. Once you sign the papers, you will be committing yourself to a long term financial responsibility, especially nowadays as property appreciation has begun to slow nationwide.
Recommended Mortgage Lenders Online For 100% Financing - We maintain a list of low rate mortgage lenders and update the list frequently. Try applying with one of our recommended lenders first.
FAQ's About Mortgages After Bankruptcy- Read this article to learn some information on getting a mortgage loan after a bankruptcy.
http://ezinearticles.com/?The-Risks-of-Getting-100%-Financing&id=566386
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