Saturday, March 30, 2013

What is Premium Mortgage Insurance and How Do I Best Utilize It

Can't Afford 20% Down on Your Home Purchase, PMI to the Rescue

What Exactly Is Premium Mortgage Insuarnce

Banks today require a 20% down payment when your purchase a home or multi-unit building used as personal residence.  In other words, the bank wants to be sure you have 20% equity in the home before they will lend you the rest.  This protects them in a couple of ways.

One, if you get into trouble financially, you are going to work a lot harder to come up with your mortgage payments if you might lose the 20% invested in your home.  Second, if your home drops in value after purchase, the banks have a 20% buffer before you are upside down (owe more than the house is worth), and therefore might be willing to walk away from the house, resulting in foreclosure and big losses to the bank.

Premium Mortgage Insurance guarantees the bank that they will get paid if you default.  This allows banks to offer mortgages with as little as 3.5% down payment.  They aren't taking the risk, the insurer is on the hook.

FHA vs Private Mortgage Insurance

The government established the FHA in order to provide such insurance.  This was to help citizens get into homes with as little as 3.5% down.  Until June of 2013, this extra payment for insurance by the homeowner was limited to 5 years or until such time as the homeowner could prove that they had a 20% stake.  The borrower might achieve the 20% equity through larger payments toward principle or by appreciation of the home in the market place.

Unless the FHA changes their present plan, as of June 2013, the FHA version of PMI premium payments will continue for the length of the loan.  The FHA is also proposing to raise their rates April 2, 2013.

Private mortgage insurance is provided by independent businesses.  They have thrived by undercutting the FHA rates.  Generally they will only insure up to 95%, rather than the FHA 96.5%.  A major difference with private insurers, however, is that they do their own appraisals, whereas FHA trusts the bank's appraisal.  This can create issues in a market where prices are moving up quickly.  The bank may have agreed to financing based on 95% of an appraised value of $300,000.  But the private premium mortgage insurance provider might feel the home is only worth $290,000, and therefore only be willing to insure the lesser amount.

A major benefit of the private plans is that they are generally only paid for two years.  

Choosing between FHA and private PMI providers, figuring out what to do when appraisals come in too low, and similar hiccups in the loan process are the benefits of working with a mortgage broker.  The resources available to a broker are much broader and deeper than a bank loan officer.  The broker wants to make the deal work.  That is how he gets paid.  He is constantly looking for the creative way to get past the hurdles.

Tweet This:   FHA Mortgage Insurance Rules to Change June 1, 2013.  Move quickly to save money.  What is PMI?

PMI Seems Expensive, But in Many Cases it Is a Really Good Deal

When is PMI the clear choice?
  • When you don't have 20% down, but you can afford the payments and insurance
  • English: Mortgage rates historical trends
    English: Mortgage rates historical trends (Photo credit: Wikipedia)
  • When you would rather hold on to your cash for other opportunities or investments
The first reason for selecting PMI is obvious.  But what about the second reason?  We are in a very unique lending environment.  With 30 year fixed loans around 3.5%, and ARM's (adjustable rate mortgages) even lower, using your cash to increase the equity in your home may not be a good financial decision.  It may give you more peace of mind and lower your monthly payments, but borrowing money at 3.5% that you can use for any purpose and lock in for decades may be a smarter financial move.   You could use that other 15% not paid into the down payment for:
  • Improvements to your new home
  • Buying other investment vehicles, including other property
  • Increase your payment into your tax deferred pension plan
  • Invest in your business - See our article on using a mortgage to grow your business
  • Use the money for college tuition and expenses
  • Keep the money in savings for a rainy day
Money in your home equity is doing no work for you.  It reduces the interest you pay and that is all it does.  You have lost opportunity costs associated with the otherwise dead money in equity.  It feels good, but it may not be as beneficial in the long run.

Refinance with FHA or PMI

Getting a 95% or 96.5% loan on your home is not limited to purchases.  You can use this approach to do a refinance as well.  You may also want to explore Home Equity Loans or HELOC's as an alternative.  However, these are generally limited to 90% of the value of your home.  

Was this article helpful??  If yes, it might be helpful to others.  Please +1 or Like us.  We do posts like this two or three times a week, so you may want to subscribe or follow us.

If you still have questions about the FHA, PMI, or any other part of the mortgage process, don't hesitate to call Bill Rayman for more information at absolutely no charge.  310-295-2900 ext 113

Related Post:  Should You Pay Off Your Mortgage as Quickly as Possible?

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Wednesday, March 27, 2013

How to finance Your Business With A Home Mortgage

Why Might It Be Wise to Use My Home's Equity to Finance My Business

No matter what business you are in, there usually comes a time when you need outside cash.  Whether a retailer or wholesaler who needs inventory, a manufacturer who needs accounts receivable financing, or a professional services company needed equipment, computers, or furnishings, there is often a need to use OP money.

While the chances of getting money at a reasonable rate changes with the financial season, here is a fairly exhaustive list of potential sources of borrowing for small business today.  These are listed roughly in order of cost of the funds:
  1. Borrowing from a family member
  2. Supplier financing through normal or extended terms
  3. Home Mortgage or Home Equity Line of Credit
  4. Borrowing against other assets such as insurance policies
  5. Bank Financing (may require personal guarantee including home)
  6. Borrowing from friends
  7. Selling Stock
  8. Equipment Leases
  9. Credit Cards
  10. Personal Finance Companies
  11. Accounts Receivable Lines of Credit (May require home as collateral)
  12. Factors
  13. Guido 
  14. (I've left off crowd sourcing for now as it is not borrowing)
Of course, the interest rates, finance charges, and other costs associated with the above list change.  There are times when a mortgage may not be so high on the list as an inexpensive way to borrow.   At this particular moment in time, there is a perfect storm for some business owners who are also home owners.  Rising home prices and historically low interest rates.

Making the Case for SMB Financing with a Home Mortgage

Says Catherine Clifford at Entrepreneur Magazine:
Catherine Clifford
The average interest rate for the benchmark 30-year fixed mortgage was 3.78 percent this week, according to the most recent national weekly mortgage survey from, the online personal finance resource headquartered in North Palm Beach, Fla. That average includes 0.37 discount and origination points. With mortgage interest rates hovering below 4 percent, refinancing your home mortgage right now can lower your monthly payment and free up capital for your business. 
Since the credit crunch hit several years ago, it's been largely difficult for many business owners to secure a mortgage refinancing. While interest rates remain at near-historic attractive levels, approvals haven't gotten appreciably easier.

Depending on where you live, how long you've owned the property, and whether you have been borrowing on it over the years for various reasons, you might have available equity to borrow $20,000, $100,000, or more with anywhere from 10 - 40 years to repay.

Borrowing Money on Your Home While Reducing Your Monthly Payment

What is doubly ironic when given the horrific financial times of the last 6 years, you may be able to borrow $100,000 on your $500,000 home and see your payments decline.  Some, who have been stuck with mortgage interest rates of 5% or higher, can save so much on the interest charges that the loan has no effect on their payments or even sees them reduced.  Of course, the interest payments are tax deductible.

What Steps Do I Take If I Want to Borrow Against My Home for Business Financing

The lender does have some interest in the use of funds.  Depending on the remaining equity in the home and your proof of income, they may feel it is important to also see your business profit and loss statements, tax returns, and balance sheet.  Your personal income that your derive from the business will also be scrutinized.  If you take a regular payroll check and always cash it, then there will be little concern.  However, if you take draws, loan your company money, don't cash checks you take, or have off books income (no help at all), you will need documentation.

Aggressive Tax Practices May Hurt Your Borrowing Chances

The IRS and your lender have competing interests.  You may prefer to minimize your income as a business and personally in order to reduce or defer taxes.  When you present your company and business income information, however, they want to see plenty of income to prove your ability to repay the loan.  It is often recommended that you may need to change some of your tax reduction approaches for a year or two in order to shore up your income statement.  This is not only true for mortgages, but for any lender or investor looking at your company.

Credit Scores and History

Some business owners have had a tough year or years where their business income impacts their personal credit history.  If that is the case for you, giving yourself some time to fix your credit score may be in order.  Depending on the damage, it may take three months to several years to get your credit score back to a place where mortgage lenders will be satisfied.

You will need a score of 620 to get in the door, but expect a tougher go and higher interest rates.  At 680 - 700 you are in the sweet spot for an easier application process and a top interest rate.  At 760 you are golden.  

You can do a lot to fix your credit scoreCheck out this article for a DIY method

Step-by-Step Detailed Plan for Getting A Mortgage in 2013 Here:  The Genius Bar: 10 Mortgage Tips for 2013

Monday, March 25, 2013

Should I Use A Credit Repair Company to Help Get A Mortgage

Three Steps to Do It Yourself Credit Rating Repair

There is absolutely no doubt that your credit score is going to effect the mortgage interest rate you are offered by a potential lender, the other terms of any mortgage, and even whether or not you can get a mortgage without a huge down payment.  In today's market place you will need at least a 620 rating to be considered for most mortgages and a 680-700 or higher for the best interest rates, and a 760 will give you lots of negotiating power.

There is much wisdom in doing some credit score tweaking prior to applying for a mortgage.  A few points can make a big difference in the entire process.  Here is another even more critical mortgage proverb worth noting:  Don't change your credit habits once approved.  Don't borrow heavily on existing accounts, don't add new credit or loan accounts, don't pay off or close any accounts.  Any such activity could disrupt the process, extend the time for closing, or even result in the lender backing out of the commitment.  They leave themselves plenty of room to do so.

I'm 20 point short of where I need to be.  Should I hire a credit repair firm?


One should never say never, but in almost no case should you hire a credit repair company.  There are several reasons for this:
  • The process is easy to do yourself
  • Many credit repair companies are not reputable 
  • Even some of the best credit repair firms will suggest fraudulent practices
  • 3rd party reporting has shown that most of these companies do almost nothing to help
  • The fastest talking companies will try to charge $800 - $3000 or more - up front.
There are dozens and dozens of online helps for doing this yourself.  There are also books on the subject.  However, even some of the techniques offered by these free blogs or articles are designed to distract or abuse the credit system in ways that could get you in trouble.  As my lawyer friends like to say, "If it smells, looks, and feels like it is illegal, it probably is."

Here are things to watch out for according to Linda Duell at MoneyTalks News:
Linda Doell at MoneyTalks News

"If you follow a credit repair company’s advice and commit fraud, you might find yourself in legal trouble. It’s a federal crime to:
  • lie on a credit or loan application
  • misrepresent your Social Security number
  • obtain an EIN from the IRS under false pretenses
Another common technique in credit repair is to dispute every negative item within a credit report. By law, disputed entries must be removed from your credit history while under investigation – a process that typically takes a few weeks. While the negative entries are being investigated and aren’t showing up, you quickly apply for new credit.
The problem: Challenging negative entries you know to be accurate in order to temporarily appear to have better credit is also fraudulent."

Here is How You Can Do Credit Repair Using the DIY Method


Before you start the process, you need the information.  Linda provides you with 4 links that will get you everything you will need to get the job done.

"The first step is to look at the information that’s in your credit report right now. Since different CRAs may keep different information, it’s a good idea to check with the three biggies: EquifaxExperian, and TransUnion. You can get one free credit report a year from all three by going to"

Find and Fix any Mistakes


It has been in the news of late that at least 20% of all credit reports have consequential errors in them.  Not sure about your job, but if most folks would be fired if they were messing up 20% of the time!  So go through these reports to see if you can identify and errors.  Scrutinize every negative entry.  Is it possible that you would have been late on that gas card?  Do you recall having a collection call regarding your car loan?

If you find mistakes of any kind, you can use a form found on the FTC website that will help you provide the needed information for dealing with the credit agency that made the error.  The FTC form is designed to give you the best chance to get action from the agency.

Deal with the Actual Issues Through Negotiation


I can't make the recommendation any stronger or more clearly than Linda Doell does in her article.  But to save you the click, here is the detail and the link if you like. 

Eventually negative information in your history will go away by itself, but not for a long time – seven years, unless it’s a Chapter 7 bankruptcy, in which case it’s there for 10.
But here’s the good news. You don’t have to wait years for negative stuff to die a natural death. You can actually get rid of negative things on your credit report anytime, at least theoretically.
There’s no law that says creditors have to report delinquencies or other negatives. In fact, they don’t have to report anything. And anything that has been reported can be removed at the whim of whoever reported it in the first place. And that’s the secret to fixing your credit history.
A friend of mine had a slew of negative stuff in her credit history, all the result of a time in her life when she was a lot less responsible than she is today. She’s been patiently working for a number of years, off and on, to restore her credit history to pristine condition. How? She simply writes a letter to each creditor that reported a negative item and asks them to remove it. This is a particularly effective technique in either of two situations: when you’re still a customer of the creditor or when you have an unpaid balance that you can negotiate with. Following is a letter she wrote to a credit card company that she still deals with:
August 19, 2010
Sally Sample
123 Maple Street
Anytown, USA 12345
BankCard Services
PO Box 12345
Wilmington, DE 12345
Regarding: MasterCard account #1234-4567-8910
Dear People,
As you know, I have been a loyal customer of your company for more than seven years. Over that time period, I have received many offers from other companies for credit cards with lower interest rates or other terms that could have been more attractive, yet I’ve remained with your company.
I recently obtained a copy of my Equifax credit report and was dismayed to learn that your company has reported that I made two late payments four years ago. I’m writing today to ask you to have this negative information removed from my credit history. Having become conversant with the Fair Credit Reporting Act, I’ve learned that this is easily accomplished.
As you are well aware, my record of paying on time is unblemished with those two exceptions. Since even one negative item in my credit history is one too many, please repay my loyalty and responsibility by helping me have these items removed.
Thank you in advance for your timely response. I look forward to continuing our mutually beneficial relationship for many years to come.
Sally Sample
Believe it or not, this simple letter, or a variation thereof, worked for her in some, but not all, instances. Still, it doesn’t hurt to try.
If you have an unpaid balance, you might also use that to negotiate. You can offer to settle the debt completely by paying part of what’s owed, along with getting any and all negatives removed from your credit history. Crucial, however: Get a written agreement that it’s going to occur before you pay. Some creditors will happily tell you anything to get your money, then refuse to follow through on their promises. Make notes of any phone calls, including dates, times, and names. And always, always get everything in writing.
These examples rely on using leverage – being a current customer or owing money – to negotiate from a position of strength. How can you get negative items removed when you’re not a customer and don’t have an unpaid balance?
Well, you can and should still write your creditors. Simply build a case that you shouldn’t have to suffer for years simply because you made a few mistakes, especially since you’re now a new, responsible citizen. If you had problems that caused the delinquencies way back when (medical bills, lost job, etc.), don’t be shy about playing a little verbal violin music.
While it’s sometimes hard to believe, the readers of these letters are actual human beings just like you, which means they’re susceptible to the powers of persuasion. And you have nothing to lose, except maybe a stamp and a few minutes.

Explaining Isn't the Same as Making an Excuse

Some folks with impeccable credit for 20, 30, 40 years or longer, have one or two tough patches.  And unfortunately, sometimes those tough times come just when you need all the credit score points possible to qualify for that mortgage.

Therefore, if you have done all you can to erase all the credit issues on your report, and you're still a few points shy of where you need to be, try writing out a short, clear, non-defensive, explanation.  You are unlikely to win any concessions if you were lazy, spent all your money on gambling, or forgot you owed the IRS a huge amount.  On the other hand, if you were unemployed for a short period, had a medical issue, or some type of emergency that can be explained, go for it.

Believe it or not, you can apply for a mortgage within two years of a short sale, foreclosure, or even a bankruptcy.  So some lenders will listen compassionately and reasonably to your circumstances that might have been unusual in light of everything else they can see on your application.

Should I Ever Consult a Credit Repair Company?

There are firms who are reputable and that will do for you what we have outlined above.  They will potentially have some contacts and methods that will be better than you could do on your own.  If that is the case, they will have lots of satisfied customers.  Ask to speak to ten!  Not three.  Everybody has three references they can use.

How long have they been in business?  Are they listed by the BBB?  Do they belong to the BBB?  Is there any negative chatter about them online in places like Google+, or
If they pass all of those tests, by all means take a risk.  You may hate doing the kinds of effort outlined here on a DIY basis, and are willing to pay someone else to do so.  Then give us a call to discuss your mortgage.  We will help you through the process.

If you liked this article, may we also recommend.  Your Real Credit Score!  Don't Be Fooled.

 Please take a moment to +1 us just below the post.  You may also want to get updates on future posts.  You can do that by subscribing or adding us to your RSS feed. 

Wednesday, March 20, 2013

Should You Pay Off Your Mortgage As Quickly As Possible?

 Paying Your Mortgage Off Faster May Be A Great Idea or A Horrible Idea

Los Angeles based Mortgage Broker, Bill Rayman of Mortgage Capital Partners, addresses a number of myths and misunderstandings about the mortgage business and in particular how it can affect you in refinancing and even whether or not you should consider refinancing. 

Myth #3: Should I pay off my Home Loan as Soon as Possible or Interest-Only Loans are Bad!

Myth number three is that it makes sense to pay off the home as quickly as possible.  A corollary of that myth is that interest-only loans are bad.  The fact is, it is not necessarily bad to pay off your home, and often it is simply not a good choice what so ever.  There are several components to this answer. 

Not All Debt Is Bad

The first is, not all debt is bad debt.  Considering that you might be borrowing potentially hundreds of thousands of dollars for ten, twenty or thirty years, and you can lock that interest rate in today at 4% or even lower.  Plus, the interest on that money is very likely tax deductible.  Therefore, if you are in a 25% tax bracket which is close to the national average, a 4% interest rate means your effectively borrowing at 3%.  Where else can you get debt like that?  Certainly not from your credit cards.

How Might You Use the Funds You Have Rather Than Paying Off Your Mortgage?

The second reason to consider not paying off your mortgage is this; think about the use of the funds.  Paying down the principle, which is to say increasing your equity in the house, feels like a good thing and I respect that a really good reason to do it something is merely that it feels good.

From a strict financial point of view, however, your house is an asset.  When you put money into any asset you want to see that the asset appreciates in value... that it grows.  It sounds somewhat counter intuitive until you realize no matter how much you put in to your house in terms of the equity, but whether you put down 100%, or you borrow 100%, the price of your home is established by the market.  Therefore, paying money into your mortgage is technically a zero rate of return.

With that in mind, the issue that comes up is the big one.   If you don't put it into your home by paying down principle, what else could you do with it?  Right now, the investments in the market are very poor.  CDs are paying on average 1.6% in the country, but that’s today.  Looking further down the road, we’ve been accustomed to five, six, seven, eight percent returns on investments.  So if you can borrow from the bank at three, four, or five percent, you can put it in stocks or even just very secure treasury bonds and end up with a positive result.   You are doing what a bank does,  borrowing low, and you’re investing high at a secure rate.

Another reason for holding on to your cash is this.  You might have been dutifully paying down your mortgage over the years.  Now you are sick and need cash, or have other reasons why the cash would be very helpful.  But for a variety of reasons you can no longer refinance. You are now in a situation where you don’t have cash in the bank, but have a ton of cash in your home's equity.  If the money that went into paying down the mortgage had gone into a savings account, it would now be readily available.

Think in Terms of Net Worth.  Paying Off the Mortgage Is Old School

The key words that you should be thinking about are net worth.  When you add up your home and all your other liquid assets, less your liabilities, that’s what your worth is.  So whether you own a $100,000 home of which you owe $90,000 and therefore you have a net worth of $10,000; or you have a $100,000 home of which you owe $100,000 but you have $10,000 in the bank, you still have a net worth of $10,000.  They are the same, except from my own recent personal experience, I couldn’t count the number of people that would have been better off having the cash outside the house. 

Home Equity Is A Tempting Asset If You Should Lose a Lawsuit

A third reason to consider not paying off your mortgage is to recognize that the more you own of your home, the greater your equity share.   Arguably the more visible that asset is to a potential creditor the more likely they are going to be looking to claim it.

There is a wonderful story from the 1930s, where Walt Disney owed Bank of America $7 million dollars that he had borrowed to finance Snow White.  He and his brother laughed, because they realized that the last thing Bank of America was going to do was foreclose on them.  In fact, the bank wound up giving them more money because they couldn’t afford to take the studio from them.  Luckily for both Disney and Bank of America, Snow White was a hit and they were able to pay the loan.

For you, it is similar.  Just imagine if you own a home that is completely paid off versus your neighbor who has the exact same home but owes the bank 90% of the money.  You both have some kind of financial problem.  I can’t promise you, but hypothetically I’ll promise you, if the bank has to choose who to go after, they’re coming after you because your house they could put on the market and sell and get their money back.  The person who owes the bank a lot of money, that house isn’t worth anything and they are more likely to keep the house. 

If You Want to Make Those Extra Payment, Here Are the Best Methods

If you decide that you have plenty of cash on hand to deal with emergencies, don't really want to use your cash to invest in other places, and want to feel good by paying the mortgage off faster, you have choices of how to do that. 

One is to make extra payments.  Some folk decide to pay an extra payment every quarter.  Or you can just add money to each payment.  You can also just send a check any time you feel like paying off some principle.

A second method employes a tool called a home accelerator loans that give you a lot of flexibility on how to do that.

An excellent method is to refinance to a loan that has a shorter term to it.  Now the shorter the term means your going to make a larger payment, but that payment is going to be largely equity.  The shorter-term loans and here I’m talking about a ten, fifteen, or twenty-year loan.  Not only will you pay it off quicker because the timing is shorter, but the interest rates on the shorter-term loans are generally anywhere from a quarter to three-quarters of a point less than a thirty year fixed.

Using a $500,000 mortgage at a 30-year fixed rate; over 30 years you will pay $466,000 in interest.  If instead you did a 15-year loan, the interest rate is a little bit lower.  At the end of 15 years you will have paid $176,000 in interest.  The difference is roughly a little short of $300,000 in interest.  Well if you figure the interest you don’t pay over 15 years you’re really saving legitimately, out of pocket, roughly $20,000 a year.  So if you can afford the higher payment and the goal is to pay down the house quickly, save yourself a lot of interest and do a shorter term loan.

Thursday, March 14, 2013

Tutorial on Adjustable and Fixed Rate Home Loans

Fixed Rate Mortgages Seem Safer, but Adjustable Rate Mortgages Tend to Be the Better Deal Over Time

Bill explains adjustable and fixed-rate mortgages.

When you are getting ready to buy a new home or refinance, you will be faced with many questions.  One of the goals of this blog is to help you know as much as you possibly can about your decision.  The more you know, the better the decisions you are likely to make. 

The choice of Fixed vs Adjustable Home Mortgage Loans is not one that the Lender or the mortgage broker can make for you.  It really has much to do with how long you are going to keep the home and how much risk you want to assume.  In the video above, Bill Rayman discusses in detail the reason why adjustable home mortgages are generally less expensive.  It is all about who will assume the most risk, you are the bank. 

Here are the definitions Fixed Rate Mortgages and Adjustable Rate Mortgages

  • Fixed Rate Home Mortgage Loans
    If you would like the security of never having your monthly payment change, this is the mortgage that you will prefer. Your mortgage rate and payment are fixed for the life of your loan, whether the loan is 10, 15, 30 or 40 years. With current low rates on fixed rate home mortgages, this is an ideal solution for most borrowers. When rates are high, it sometimes makes sense to use an adjustable rate in hopes of lowering future interest costs.

  • Adjustable Rate Home Mortgage Loans In some markets it may make sense to lower your monthly mortgage loan payment during the early years of your mortgage. Mortgage rates for ARMs are usually lower in the early years than traditional fixed rate programs. This can be especially true if you plan on selling or refinancing your home in less than 10 years. However, some adjustable rate home mortgage loans do not amortize fully or may even include reverse amortization. This means that you are not increasing the equity in your home as fast as you would in a conventional loan. If you lock in a rate for several years only, you risk interest rates increasing which in turn could result in your monthly payments going up. 

If this was useful, you might also like:  The Mortgage Genius Bar - Ten Tips that Could Help You in 2013

Monday, March 11, 2013

Los Angeles Mortgage Broker, Bill Rayman, On KFWB Wed 3/13, 9:00 AM

West Los Angeles Mortgage and Real Estate Market 2013 Subject of KFWB Money 101, Wed March 13, 9:00

If you can find a house to buy in WLA, Santa Monica, or Beverly Hills today, can you get a mortgage? Learn tips & insider secrets during the March 13, 9-11 AM, Money 101 Radio Show on KFWB with Bob McCormick. Mortgage Broker Bill Rayman is the guest

Bill Rayman - Guest on KFWB Money 101 3/13/2013  9:00
Bill Rayman - Guest on KFWB Money 101 3/13/2013 9:00
PRLog (Press Release) - Mar. 10, 2013 - LOS ANGELES, Calif. -- If you are looking to purchase a home, condo, duplex, apartment building or any kind of property in West Los Angeles, you won't want to miss veteran newsman and Money 101 anchor Bob McCormick this Wed March 13.  On this show, McCormick takes a look at the Westside real estate and mortgage market with Guest Bill Rayman, a WLA based Mortgage Broker and Lender.

The show is on from 9:00 to 11:00, so if you want to call in with your questions, you will want to be tuned in at that time.  Of course, the show will be taped and available after the show at

Basic Info In LA RE and Mortgage Market - Bill Rayman on KFWB with Bob McCormick  Tweet This

2013 may long be remembered as the year the real estate and mortgage industries went through the most radical transformation in history.  Dodd-Frank regulations are coming into effect.  The FHA is tightening regulations.  Premium mortgage insurance is now life-of-the-mortgage.

With no inventory of homes to sell, and none being built, prices are skyrocketing. But this means that appraisals are difficult to tie down.  The problem is that values reflect today’s demand and tomorrow’s expectations, while appraisals are based on yesterday’s activity.  The market may say that the home is worth $650,000 but the appraiser may not be able to justify that number based on recent sales.

Anyone paying attention to the issues of home mortgages knows that after the housing crash of 2007, banks tightened up lending practices.  What does it take to qualify today?  What should someone looking for a mortgage do to improve their chances of securing a mortgage in these times?

Guest Bill Rayman has been through the crazy times of the early 2000's, and the crash and slow times of the latest period in the mortgage business.  He has amassed a network of contacts and wealth of knowledge about how to get almost any deal done.  "Each market condition has its challenges," according to Rayman.  “Even in the go-go days before the 2007 collapse, some people had to jump through hoops – and many were still turned down.   And those were the good times!“

Rayman continues, “This market is the toughest in my experience.  But banks are healthy and in business, and I’ve learned ways to get them to lend to people who can afford the payments.  It’s a matter of knowing how to structure a transaction, which kinds of deals each bank favors, and having the clout with those underwriters to ensure each of my clients gets the best loan that meets their needs and makes them happy.”  

One of the things that should be helpful to those who listen to the show this Wednesday is learning some of the steps a borrower can take to prepare their credit and personal financial information.  “The banks like to see a conservative credit history.  Don’t buy a new car or run up credit card debt for a trip to Maui just before you want to secure a home loan.” Laughs Rayman, “Treat yourself after you get your money.”

If you would like to contact Bill Rayman or learn more about him or ask your own specific questions about your mortgage needs, visit his website at, see his many videos by searching his name on YouTube, or just call 310-295-6213

Also read:  The Mortgage Genius Bar: 10 Mortgage Tips for 2013.  

For an update on the LA Real Estate Market readMortgage Rates Still at Historic Lows.  Ignore the Headlines

Friday, March 8, 2013

PITI (Principal Interest Taxes and Insurance) Explained by Refinance Expert in Los Angeles

How To Know What You Need to Know About Your Mortgage

Bill Rayman, Los Angeles mortgage rate specialist in his role as mortgage lender and broker, explains in what you need to know about PITI.  He'll help you to understand in simple, easy to comprehend language what Principal, Interest, Taxes, and Insurance is, and how your PITI affects your loan prospects. 

Did You Miss
What Is a Rate Lock?  When Do I Use It?  What Does It Cost?

If you choose to work with Bill Rayman when you buy or refinance in Los Angeles, Bill will be your partner through the whole process. Just like in this video, he will be able to break down mysterious industry lingo for you, so that you have clarity about your contract terms and other aspects of the mortgage lending process. It doesn't have to be a confusing and mysterious process. You can get empowered with the information you need to make the best financial choices available to you.

New Contact Information for Bill Rayman

Bill Rayman Home Mortgage

12121 Wilshire Blvd
Suite 350
LA CA 90025


Wednesday, March 6, 2013

Four Refinancing Errors Could Cost You - Yahoo Interview with BIll Rayman

Refinancing Your Home Is the Topic of Bill Rayman, Los Angeles Mortgage Broker, Interview with Yahoo

Jennifer Berry recently recorded several interviews with Bill Rayman related to conditions in the home mortgage market.  One of those interviews went live today on the Yahoo site.

"Getting a loan these days isn't easy," says Bill Rayman, a mortgage consultant with Mortgage Capital. "Anything you might do that makes the process harder or less likely to go through smoothly can be a big mistake."
So what are some things that might delay or jeopardize your refinance? Take a moment to look over these mistakes - and learn how you can avoid them.

Bill goes on to innumerate four of the most likely ways you can Avoid these four costly errors when refinancing your mortgage.  For the complete interview go to Yahoo at

Bill has been receiving many requests for interviews and he is happy to help as time allows.  If you would like to reach Bill Rayman to discuss interviews, speaking opportunities, or Google Hangout participation, please give him a call at 310-295-6213. 

Monday, March 4, 2013

The Mortgage Genius Bar: 10 Mortgage Tips

10 tips to get your mortgage approved from Los Angeles, CA Mortgage Banker and Mortgage Broker Bill Rayman

With mortgage rates at historic lows and likely to stay that way for the next few months, you may be thinking that this would be a good time to buy a new home, a vacation home, a residential investment property, or to refinance existing mortgages you hold.  One thing can be said for certain: there has never been a better time to get a mortgage.  That is, if you can get one!  The news is full of reasons why you can’t.

Your frustration at being approved by a lender is shared among professionals in every part of the real estate industry.  Low prices on properties coupled with unbelievably low rates on loans should mean a robust market.  But by some analyses more than 50% of all loan applications are turned down. 

Here is the first of 10 practical steps you can take to optimize your chances for being approved.  Subscribe to this blog to receive automatic updates. 

1.      Income Clarity

Unlike the heady days of the 2000’s, today you will need to prove your income.  If you are employed, make sure that your employer is showing all income.  If you are receiving any income in the form of cash, gifts, barter or another form that do not show on your W-2, it would be far better to change it and place everything on the payroll.

If you own your own company, you may have some of the same issues as a wage earner.  If you are self-employed or a are a substantial owner of your company, you will need at least two years of history as well as current profit and loss statements.  As with the payroll issue, you will qualify for a better, higher mortgage if you choose to show excellent profits rather than using every possible way to reduce income to reduce your tax bill.   If you believe that your W-2 or business income can be improved with some changes in your methods, you may want to hold off on the mortgage for a few months until these changes are effective and clear.

There are other ways to boost income without altering your actual receipts or taxes.  For example, you might also be able to impute income from assets even though they do not provide actual income.  We can help you assess the potential to show such income on your application.

Call Bill Raymond for a free consultation.  310-295-6213

2.   Credit Score Improvement

Your credit score can keep you from getting a mortgage and will dramatically impact the rate and other terms of any mortgage you get.  There are many on-line resources for checking a credit score and you can get a free report once every 12 months from each of the three credit reporting companies: Experian, TransUnion and Equifax.  Something to know: not all credit scores are the same.  Lenders use a financial score which can differ significantly from a consumer score (your on-line report) and from scores that other industries utilize.  You may want to call me at 310-295-6213 and I will get you a financial credit score that mortgage lenders rely on.

A credit score under 620 will very likely disqualify you from any standard mortgage.  A credit score above 740 will generally qualify you for the best programs, rates and terms.  In between these two results a great broker can help you to get the best possible deal.  Your credit score can save $1000’s in interest charges over the years.  A single percentage point difference in a $400,000 loan can cost over $87,000 over the life of the loan.

Once you have your credit report, check to see if there are any errors.  Report these to all reporting agencies or directly with the company that issued the incorrect information.  It can 90 days to resolve such issues.

Tip: Don’t close unused credit cards.  Use them.  Credit scores measure financial responsibility.  By borrowing and promptly paying the bill you boost your scores.  But don’t open new cards!  

If these efforts are not enough or if you have substantial problems on your credit reports, you may want to use a professional to help you improve your score.  Many companies who offer these services are more talk than action.  Call me for the name of a trusted credit repair company.  310-295-6213


3.  How to Set Up a Mortgage Plan

Start your planning process by creating a realistic budget to determine how much of a monthly payment you can handle.  There are many excellent free budgeting formats on-line.  If you are considering purchasing your first home, keep in mind that there are many expenses associated with home ownership that you don’t now have with a rental.  Among other items, you need to include in your plan: utilities cost more; repairs and maintenance expenses; furnishings, flooring, and window treatments in and of themselves are huge expenses; gardening and lawn care; appliance purchases; property taxes; and, property insurance.

One of the benefits of home ownership is the tax deductibility of many of its costs.  The interest on your mortgage, property taxes, potentially your mortgage insurance, some part of any HOA dues, and some home expenses can reduce your taxable income.  Besides reaping the savings, this will improve your monthly cash flow. Even though you don’t get the tax relief until you file with the IRS, you can plan to take advantage during the year by adjusting the withholding on your wages or on your estimated tax payments.  Consult with your tax preparer to determine the best way to achieve those savings.

If you need someone to help you with all the steps outlined in this series, or just want to select a mortgage broker who cares enough to make sure your needs are met at every level, give me a call at 310-295-6213 for a no cost, no obligation evaluation of your plan. West Los Angeles Mortgage Broker Bill Rayman Explains How to Shop for the Lender.

Since the market collapse in 2008, many mortgage lenders have been far from eager to write new mortgages.  Also in reaction to the calamity, new restrictions imposed by the government and rules promulgated by banking regulators have made lending standards much more strict.  The result is that you will need to shop harder than ever to get a bank to agree to loan you money on reasonable terms.

Because I only make money by completing transactions, I have a huge incentive to close loans successfully for my clients.  Most helpfully, my firm is a mortgage bank, and more than 80% of the loans I originate are done in-house.  And as a mortgage broker, I have access to many other banks and lenders including those who specialize in jumbo, construction,  commercial, stated income and hard money loans.  In this way I shop for you to find the best possible resources.

When shopping, we look at every aspect of the cost of the loan: the type of loan, interest rate, discount fees, processing costs, and mortgage insurance (as mentioned in #4).  As a direct lender we don’t charge points or application fees, nor charge for many items people consider “nickel and-diming” such as credit reports and tax service.

To learn more about Bill Rayman, see his life story @


4.   How to Choose What Is the Best Home Loan for You

Example of different mortgage rates on July 20, 2012
Fixed rate mortgages provide the security of knowing your interest rate and payments will never rise.  With rates currently at record lows, most people are deciding that a fixed rate loan is their best option.

Fixed rate mortgages can provide different terms options.  A 15-year fixed term offers a lower interest rate than a 30-year term; however, the longer term will help keep monthly payments lower.  If your budget can handle it, the shorter term and lower rate will save you tens of thousands of dollars over the life of the mortgage.  For example, a $300,000 mortgage at 3.500% for 30 years and monthly payment of $1,347 will cost you $185,000 in interest.  A 15-year term at 3.000% may have a higher payment of $2,071 but total interest for the loan is only $73,000 – a savings of $112,000 in just the first 15 years, roughly $7,500 per year.
Adjustable rate mortgages (ARMs)
provide the lowest starting rates which can be fixed for the first five seven of 10 years.  Historically, ARMs offer the least expensive approach over the term of the loan and are an excellent choice if you expect to move within a few years.  Because the rates will change after the fixed period, they are not the right choice if you are not confident of being able to handle larger payments in future years.
 FHA Home Loans and Private Premium Mortgage Insurance (PMI).  For purchases, lenders typically want 20% down payment; any amount less and they can require you to pay additional monthly fees for mortgage insurance (MI) which insures the lender against default.  Whether you don’t have the 20% or choose to use a smaller down payment, MI is a viable, often unappreciated, path.  There are two types of insured loans.  One is from the FHA which lets you move into a home with as little as 3.5% down.  The cost for putting so little of your own money down is an upfront fee to the FHA of 1.75% of the loan amount (you don’t need cash; they will add it to the loan) as well as a monthly fee of 1.25% of the loan for at least 5 years.
Please view our video on FHA Loans for a more in-depth discussion.

The other type of insured mortgage is a conventional loan with Private mortgage insurance(PMI).   These require at least 5% down, but there is no upfront fee and typically less than 1.00% per month depending on the borrower’s credit score and down payment percentage.  Another advantage of PMI: it can be cancelled after 2 years when there is 20% equity in the home from any combination of paying down the loan and the home appreciating in value.  Typically insurers require higher FICO scores than the FHA allows.

5.   How to Shop for the Lender.

Since the market collapse in 2008, many mortgage lenders have been far from eager to write new mortgages.  Also in reaction to the calamity, new restrictions imposed by the government and rules promulgated by banking regulators have made lending standards much more strict.  The result is that you will need to shop harder than ever to get a bank to agree to loan you money on reasonable terms.

Because I only make money by completing transactions, I have a huge incentive to close loans successfully for my clients.  Most helpfully, my firm is a mortgage bank, and more than 80% of the loans I originate are done in-house.  And as a mortgage broker, I have access to many other banks and lenders including those who specialize in jumbo, construction,  commercial, stated income and hard money loans.  In this way I shop for you to find the best possible resources.

When shopping, we look at every aspect of the cost of the loan: the type of loan, interest rate, discount fees, processing costs, and mortgage insurance (as mentioned in #4).  As a direct lender we don’t charge points or application fees, nor charge for many items people consider “nickel and-diming” such as credit reports and tax service.

6.  How to Get Pre-Approved for You Home Mortgage Loan


Sellers increasingly demand to know up front whether a buyer can legitimately get the loan required to make a purchase, and they look to ta lender for authentication of which there are two types. 

One is a Pre-Qualification letter.  This type of letter provides an informal estimate of the loan you can handle.  The lender often sees no documents, just bases the amount on verbal information from the buyer. 

A Pre-Approval letter is more meaningful, and therefore more preferable.  To issue this, a lender generally requires a buyer’s taxes, assets, income proof and credit.  A Pre-Approval letter assures a seller that the buyer meets the guidelines to get the loan needed.

Being able to provide a Pre-Approval letter from a recognized lender or broker from a well-known company makes the seller know you are serious which can help you in a competitive bidding situation.  Cash offers speak the loudest, but a strong Pre-Approved buyer may be chosen over other would-be buyers even if their bids are higher.

If you would like to get pre-approved for a mortgage loan, call today and we will help you through the process.  Loan Rates are at record lows, but you will find that the banks and federal regulations are making it hard to get loans.  We are a bank and a mortgage broker, so we can provide you with the best chance of getting a great loan.

If you have not seen the first five parts of the series, just go to and scroll down to see all the previous parts.  

You might also find some great direction with regard to more minor details by checking out the forty plus videos on our video channel at

7.  Details Matter, says Los Angeles Mortgage Consultant Bill Rayman

Lenders granted loans during the go-go years between 1998 and 2007, often with little more documentation than the application.  Today, the pendulum has swung to the opposite side.  Everything is scrutinized.  To be certain that everything is accurate and true, every underwriter checks virtually every piece of information – work that is often double-checked by a 2nd underwriter.

Examples of details they check include:
  • the source of any deposits made to a bank account
  • the reason behind each credit inquiry
  • other proof besides tax returns that a borrower is self-employed
  • every page of an asset statement even if it’s blank
When you use a mortgage broker to help you with your loan, you have someone who is your advocate.  Unlike a banker, it isn't my job to find reasons to turn you down, it is my job to find a way to get you a great mortgage, and get it closed.  Call 310-295-6213

8.  Paperwork Rules.

Because the details of a loan transaction matter so much, be prepared to provide proof of everything.   The vast majority of loans are sold to Fannie Mae or Freddie Mac.  Their requirements for buying a loan (a Conforming loan means it conforms to Fannie’s and Freddie’s guidelines) are stringent, which puts pressure on the bank to make sure everything is exact and correct.   You will be asked for tax returns, pay stubs, rent receipts, banking information, business financial statements, employment verification, and proving many types of assets.

In a very real way, loans have become impersonal.  The days of a friendly banker giving you the benefit of doubt or bending a rule because you’re a good customer are no more.  In this climate, lenders fear that if they miss a detail, the loan could be unsalable, so they’re thinking down the road.  An issue that could be explained by a borrower personally will not be communicated as the loan moves into the secondary market.  Asking for documentation now assures lenders of recouping their investment later. 

You can cut down on the time required to close a loan by having these types of documents organized well in advance.

9.  What Is Rate Locking and When Should You Do It?

Some loans close in less than 30 days.  Others can drag on for 90 days – or more.  During the period between the formal application for the loan and the final closing, rates will invariably change.  Whether they will go up or down is a question each borrower must decide for himself.  This decision is probably the toughest one for any borrower.

The crux of the issue is this.  Because a bank takes a risk that rates will rise after you lock in a low rate, they will charge more – in fee or rate - for locks of longer duration than short ones.  You can choose to lock at any point from the application to the close.  If you believe rates will remain low during the loan process, you’re best off waiting to lock till the end.  If you believe they’ll rise, you benefit by locking early.

Unless and until you lock a rate, you will pay the prevailing market rate at the time of your close.  Some lenders allow a short term lock for free, so be sure to ask for it.  Few lenders will allow locks longer than 60 days, but with interest rates this low, it’s worth considering paying a small fee to secure a low rate early in the process.

Remember: locking is a two-way street.  It protects you from rates rising, and it protects lenders against rates falling.  There are practices lenders enact that prevent people from cancelling locks or renegotiating for lower rates.

For a much more in depth look at locking, check out my video on mortgage rate locking

10.  It Ain’t Over Till It’s Over

Another result of the closer scrutiny from Fannie, Freddie, the FHA and lenders themselves is that all your key financial qualifications are freshly re-examined before the lender issues docs for an approved loan.  They will pull a credit supplement to see if you’ve applied for any new debt.  They re-verify your employment to make sure you’re still working.  They do a nationwide search to see if you own any other property.  They get a transcript from the IRS to confirm that the taxes you supplied are in fact the same you filed.

It is far from unusual for loans to be thrown into limbo or rejected after this final check.  Before you apply for a loan, and particularly once you’ve begun the loan process, make sure to keep your financial ducks in a row.  Do not change jobs.  Do not make any major purchases or sign car leases, student loans or co-sign someone else’s loan.  Do not miss any payments.  And if you have an issue with a creditor, do not file  a dispute with the credit bureaus.

In Conclusion

None of these 10 recommendations for smoothing the process to obtain a loan should discourage you from applying.  Rates are unbelievably low and there are myriad programs available so that many people can qualify that may think otherwise.  Even though almost every loan has its share of problems, my firm has brought more than 95% of our applicants across the finish line.  We are experts at spotting and solving issues.  For more than 20 years, we’ve helped qualified buyers accomplish their dreams and goals.

For a free mortgage loan consultation with absolutely no obligation, call me, Bill Rayman, at 310-295-6213

Friday, March 1, 2013

Los Angeles Homebuyer Mortgage Affordability Calculator

First Time Homebuyer, Moving Up to a Bigger Home, Consolidating you Credit, Refinancing for a Home Remodel - See if You Can Afford the New Mortgage

We assist people in evaluating their options for home buying in Los Angeles, including FHA loans and traditional loans. We have a free calculator on our website that you can use to find out how much of a mortgage you will qualify for.

In some ways determining the amount that you can afford to pay for a new home may seem simple. 

You figure out your net income after taxes, and subtract all of your other payments and expenses other than housing. The answer you get is how much per month you can afford for your new home. You would be right, of course, but it isn't quite that simple.

First of all, lenders have standards that you must meet in order to get a mortgage from them. These standards vary from company to company, but generally, the total mortgage payment plus property tax plus homeowners insurance AND any association dues, should not exceed 28% of your net income.

The other thing you must add is all other monthly debt payments you have (school, car, credit, etc.). Add this total to the total of your cost of home ownership that you calculated previously. The total should not exceed 40% of your net income.

FREE Home Mortgage Loan Consultation Available 

The calculator will give you part of the story.  But a few minutes on the phone with me will fill out the rest.  I have helped hundreds of families through the mortgage process, and I have resources that might make it possible for you to reduce payments or interest, move in with a small down payment, or even get a loan with proof of income.  The consultation is completely free and carries no obligation.