I was consulting with a Sonoma County resident about the posibilty of doing a refinace on his home the other day and I realized that the while I am very comfortable with the concepts of qualifying for a home loan, not everyone is. So here is the explantion I used to describe to him what income ratios are and how they are applied and used in the Mortgage loan process.

Front End Ratios are the result of dividing the proposed housing debt (Principle, interest, taxes and insurance, PITI) by the income as we have calculated it . The Back End Ratio combines your PITI with your other outstanding monthly obligations and divides by the income, giving us ratios that are guidelines by which we determine the ability of the borrower to repay their total financial obligations. Obviously the higher the ratios, the higher the perceived risk of default however there is a difference between a young, newer employee making $2000 a month (guidelines limit his front ratio to 28% and back end ratio to 38%) and an employer making $10000 a month ( ratios of 38% over 49% are typically tolerated). The reason is that there is, conceivably, more residual income for the higher income earner to work with. There are also many other factors that go into the decision making process that relate to credit, equity position and assets but this is a the general rule as it relates to income ratios. I hope this helps.

If you have any more questions please call or email me.

Mortgage insurance allows Sonoma County home buyers to purchase property with less than 20% down payment.  Banks only want to lend you money if you have the required down but if you pay for insurnace to cover the differnce, you can put less down. 

 If you are currently looking for a Sonoma County home and not planning on putting down 20% then not only are you looking for the best service (that would be me) and rates and fees (also me) ,  you are also looking for which lender is going to offer you the best pricing in mortage insurance (obviuolsy ME). 2-3 years ago when California Real Estate was in a real tail spin, most Private Mortgage Insurance companies all but left the state.   Getting insurnace on a 5% down loan was all but impossible.   At the very least it was very expensive.   The only option was the FHA, which is still agreat option for borrowers with less than 5% down. Now as Sonoma County Real Estate values are moving upward Insurnace companies are coming back to the market.  If you can get to  5% down,which can include gift funds, Private Mortgage Insurance is a much better option than going FHA and the 3.5% down.  There are many options,  when considering PMI and I would be happy to sit down and talk with you about all of them.  You have options.  Is your current lender giving them all to you?

“Hunt For Your Loan”

If you are planning to buy Sonoma County real estate in the next year the first thing you need to do is you have to get pre-approved for a Real Estate Mortgage. It really does you no good to wander the internet or check out open houses with out the knowledge and advantages that being pre-approved for home loan can provide you. Many Sonoma County Realtors won’t even talk with you until you have filled out an applicaton and rightly so. they don’t want you wasting there time. Your appetite could be for a 300,000$ house and your finacnial reality is that you can only afford a 250,000$. The opposite is true as well. You could be looking at 250,000$ houses and really be able to buy something more expensive. There are so many prgrams out there that I can tailor your loan to, you just will never know until you get pre-approved for the mortgage. Filling out a Real Estate mortgage aplication is so easy. It will take you all of about 10 minutes. Just go to my website and Get Pre-Qualified. Call or email me with questions…”Hunt for your Loan”! I am here to make your home buying easy and fun!

The Rating agency that dropped the credit rating from AAA to AA+ is Standard and Poor’s and is only one of three of the rating agencies. It takes two out of the three to actually effect the credit rating of the country’s debt. In addition my opinion of these agencies is not really very high because they are the same ones that rated AAA the tranches that were at the bottom of all the trouble we now face. In additon many believe that the rating drop was done to send a political message to the politicians
That said, we have all expected Sonoma County Real estate mortgage rates to rise by now. We fully expected that we would be experiencing a certain amount of inflation putting pressure on rates but that has just not been the case. In fact what has happened is that we are seeing a flight to safety to the US bond market pushing the yields down to their third lowest level ever. Obviously, every investor out there believes that the likely hood of America defaulting on their debt is lower than any other available option out there.

So today, the effect of the drop by S&P’s mortgage rating I think has little to do with the mortgage rates but the global economic worries are causing rates to drop because of the dramatic interest in the US bond market. Right now we are in a very low real estate mortgage rate cycle that most likely won’t last very long. I would expect rates to rise very moderately over the next couple of weeks but overall stay low through the end of the next quarter. For whatever that is worth.

I still think that Sonoma County Real Estate is the best long term protection against inflation.

This has to be one of the most usefull financing tools for both Sonoma County Real Estate owner occupants and Investors alike. Simply put, it allows a borrower to fold in the cost of renovation up front into the loan. It is limited to 35,000 and can include almost everything from carpet and paint to electrical and plumbing. What it doens’t include are additions or structural items but roofs are. The idea here is to make a
Sonoma County foreclosed property livable. The one big difference between a Homepath and Homepath Renovation loan is that there is an appraisal required in order to justify the improvements for the Renovation loan. There is still no Mortgage Insurance required. Owner occupants borrower still put down just 3% of the total of purcahse price and renovation costs. Investors are only required to put 15% down of the total and they can finance up to 20 properties provided they meet guidelines.
This is a tremendous mortgage financing tool for anyone looking to purcahse foreclosure proeprties. If you would like more information I would be happy to provide it to you. Please contact me at 707-431-9715 or at hunt.conrad@prospectmtg.com. you can also fill in the info requested boxes at the bottom of the page.

The Homepath loan program is a Fannie Mae loan program intended to help Sonoma County borrowers buy Fannie Mae foreclosed properties. This is an amazing Mortgage program for both first time home buyers and investors alike. Owner occupants are given a 2 week first shot at new listings before the investors can make offers. There is no appraisal required for these loans and borrowers are encouraged to finance the closing costs by asking for seller credits. Again…NO APPRAISAL!
In additon Sonoma County owner occupied borrowers have a minimum 3% down payment with NO MORTGAGE INSURANCE. Compare that to FHA and you will be saving hundreds of dollars a month plus there is no up front MI premium. In additon there is no scrutiny for the condition of the property becasue again… there is NO APPRAISAL.
Sonoma County investors can put a minimum of 10% down and also not have an appraisal or MI required. There is also a maximum limit of 10-20 properties that an sonoma county investor can hold vs traditional mortgage loan programs that limit to 4 with mortgages.
All in All, this is a fabulous program for all Sonoma County Home buyers. Please call Hunt Conrad for more information. 707-431-9715. “Hunt For Your Loan”

The first element looked at in any loan application for a home loan in Sonoma County is going to be your credit history. How have you paid your bills? Do you pay them faithfully on time? Or do you tend to drag them out and juggle payments with the occasioanl slip up every once in a while? Or have you had a major life changing event occur in your life recently that has forced you to miss payments alltogether.

At the beginning of every loan application, we “pull” your credit report. We use three different companies called repositories that report your credit and assign you a FICO score. These scores can differ by as much
as 100 points. They digest the information they have been given by the creditors and assign a credit risk score to the borrower. If one company has more missed payements or derogatory entries for what ever reason then the score will be lower than the other company. That is why we use three different scores and only use the middle one, tossing out the high and the low. If you are married or a partner in transaction we will use the lower of the two middle scores as the primary credit score.

There is a lot that goes into why credit scores go up and down and it used to be a big secret but every credit report now provides the consumer with the reasoning behind the score as well as provides the creditors contact information. A couple of the more common reasons behind credit scores being effected aside fom the obvious missing of payments are as follows.
Too many inquiries; This is probably the biggest reason borrowers scores come down. They are shopping around for the best rates (and I have already told you you no one gets the best mortgage rate) and along the way their credit is pulled time and again and each inquiry can result in a 5 point drop or more in score. This is sometimes easily explained but can drop you in to an area that will put your mortgage application at risk.
Credit Balances too high: If you have credit cards and you carry a balance that is higher than 50% of the total available credit then your score will be dinged. Balances that are close to 100% max will be severely hit.
Too many open accounts: Pretty obvious…
Lenght of time accounts have been established: again pretty obvious.
There are many more and certainly knowing your credit score is just the beginning of understanding this key component to obtaining a home mortgage. Give me a call or email me and I can help you get a handle on your credit. 707-431-9715…hunt@prospectmtg.com

I just don’t know if they can. Rates as low as 4% for a 30 year fixed loan are virtually unprecedented in our life time. If you are waiting for rates to go lower I just don’t think they are going to. I reveiwed the history of the ten year bond recently and over the last 60 years there has been only one other time the yeilds have been this low and that was during the economic freefall we experienced in 2008. If you look at the average values of real estate in 2006 coupled with the 2 percent higher interest rates and look at the demand then, one can only assume we are at the bottom looking up. Call me with questions or concerns. Happy to help all of Sonoma County home owners. “Hunt for your loan”.

Bonds followed their recent trend lower in early trading. Pressuring Bonds lower is the strength in the Stock market as well as the exorbitant amount of Bond supply hitting the markets next week.
In related news, the New York Federal Reserve is continuing to purchase Mortgage Backed Securities. However, their efforts are just not enough to absorb the flood of new closed and securitized mortgages that are hitting the market after the heavy refinance activity recently.
Overall, Bonds have muscled back higher from the lower levels seen earlier this morning. Therefore, I recommend floating for now, as we watch to see if Bonds can regain some ground. I will continue to monitor the situation and keep you posted if a change occurs.

Bonds woke up angry this morning following yesterday’s sell-off, and are now struggling to regain their footing and move back above an important level of support.
On the news front, Initial Jobless Claims were slightly higher than expectations and continue to be a drag on the economy. However, continuing claims fell by 148,000 to 6.69 million, which is the largest one-week drop since November of 2001.
Next week brings another round of Bond supply from the Treasury, which could weigh on the Bond market. Therefore, I recommend locking but I will let you know if Bonds are able to reverse course and muster another rally.
Currently rates are trading in the 5.5% range for a 30 day lock on a 30 year conforming loan for a point in origination.