Positive Press
Over the years we have been privileged to be featured in a number of NATIONAL PUBLICATIONS. In fact our mortgage strategies have been nationally recognized for over 17 years!
Note that many of the articles mention Service Savers. Service Savers is the parent company of ArcLoan and YouCanRefi,
The ArcLoan program is more than just a revolutionary concept. It is a mortgage management system designed to help existing and potential homeowners to increase their savings and reduce their debt using financial strategies known only to the most experienced mortgage bankers and financial planners.
If a consumer is purchasing, refinancing or consolidating debt, these strategies can help them save thousands of dollars – both at the beginning of the financing process, as well as during the life of the loan.
Click on any headline below to view the entire article:
Over the years we have been privileged to be featured in a number of NATIONAL PUBLICATIONS. In fact our mortgage strategies have been nationally recognized for over 17 years!
Note that many of the articles mention Service Savers. Service Savers is the parent company of ArcLoan and YouCanRefi,
The ArcLoan program is more than just a revolutionary concept. It is a mortgage management system designed to help existing and potential homeowners to increase their savings and reduce their debt using financial strategies known only to the most experienced mortgage bankers and financial planners.
If a consumer is purchasing, refinancing or consolidating debt, these strategies can help them save thousands of dollars – both at the beginning of the financing process, as well as during the life of the loan.
Click on any headline below to view the entire article:
At San Diego-based City Line Mortgage (see the box below for contact information), you'll be notified whenever the market average falls half a percentage point below your current rate. Once you submit proof you that your income hasn't dropped (a recent pay stub will do) you'll get the lower rate within days. All you'll pay is a few hundred dollars to cover escrow fees-far less than you likely pay to refinance. In late October, City Line's 8% rate for a 30-year fixed mortgage was right in line with other lenders'.
With Fairfax, Va. -based lender Service Savers, you'll pay a slightly higher interest rate up front (3/8% to 1/2% above the average) but no closing costs on the original mortgage. You'll be automatically notified of every quarter-point drop but can't take advantage of new lows more than once every 120 days.
What's the catch? Surprisingly, none. Since mortgage companies make a fixed fee for servicing a loan, no matter the rate, retaining creditworthy customers when the next refinancing wave begins is key-and worth absorbing the cost of multiple refinances.
-Joan Caplin
It sounds straightforward, yet it's a revolutionary concept in the mortgage industry. Since the advent of the modern 30-year amortizing home loan in the 1930s, the only widely adopted major pricing innovation in home financing has been the adjustable-rate mortgage, back in the 1970s. And ARMs, of course, carry interest rates that rise as well as fall.
Why not give home buyers a financing tool that cuts them in, at no charge and no hassle, whenever the cost of money drops, but that protects them against payment increases when interest rates rise?
The answer to that question is slowly emerging in scattered markets around the country, where consumer-savvy lenders -- primarily smaller mortgage companies -- have begun introducing what may be the mortgage of the 21st century. It goes by different names, but the concept is basically the same. On the East Coast, clients of Fairfax-based Service Saver Finance can refinance to a rate close to market level with no closing fees when their mortgage rate is as little as half a percentage point to three-quarters of a percentage point higher than the going market rate. There are no credit checks, no appraisals, no income verifications required. The sole requirement is that borrowers must have been on time with their mortgage payments during the prior 12 months.
In Southern California, Arizona and Washington, clients of San Diego-based City Line Mortgage Corp. are lining up for what the firm calls the "automatic rate reduction loan." Any time market rates drop by half a percentage point below the borrower's current rate, the mortgage bank will refinance the borrower to market level, with zero closing charges. To qualify for the reduction, clients must have a 12-month on-time payment record and maintain the "creditworthiness" and income levels they had when they obtained the original loan.
The automatic rate reduction concept could be heading to a lender near you as well. Service Saver Finance has begun pitching its program to large mortgage companies nationwide. Service Saver's approach emphasizes "customer retention" for mortgage bankers who typically lose borrowers in droves whenever rates fall and homeowners refinance with competitors. City Line Mortgage is working with groups of small lenders to spread the idea "as a fundamental product improvement for the home buyer," says President James C. Riley.
What's behind the rate reduction idea, and why might it change traditional mortgage practices? Bottom-line economics. Borrowers may not be aware of it, but some of the heftiest profits from a mortgage are generated by the "servicing" of the loan. Servicing means the ongoing administration of the mortgage after it is closed -- the monthly collection of escrow, principal and interest, payment of property taxes, record-keeping and the like. Servicers -- who frequently buy the rights to service a loan from the originating lender -- collect annual fees for their work, often 3/8 percent to 1/2 percent of the loan amount. Multiply those fees by the billions of dollars' worth of loans in many servicing portfolios, and you get some impressive income streams.
But every time a borrower refinances and switches to a new lender, the servicer loses money. The smart servicer, says Service Saver Managing Director Keith Kelly, "understands that the name of the game is retain their customers for as long as possible." The key to retention, say advocates such as Kelly and Riley, is to make borrowers an offer they can't rationally refuse: We'll lower your rate and charge you nothing for the reduction. You can start paying the lower rate next month.
How can lenders or servicers afford it? In City Line's case, the company both originates and services the loans it makes. By absorbing the closing costs of a refinancing -- title, credit, etc. -- the firm can avoid the servicing-income losses caused by mass refinancings. As a high-volume user, Riley also gets rock-bottom discount prices on key closing services -- 50 percent off on title charges, for example. Riley says the new plan has been effective in retaining 95 percent of the borrowers who qualify, plus it's pulling in substantial new-home loan business.
Service Saver's Kelly says his firm's program retains 90 percent of the customers who qualify. That's despite the fact that borrowers end up with rates slightly above the prevailing market -- 7 1/4 percent in today's 7 percent environment -- after the refinancing, to help defray the costs of the transaction.
How soon until you're offered an automatic, no-closing-cost rate reduction plan? Ask your servicer. And watch for lenders to start rolling it out in the months to come.
© Copyright 1999 The Washington Post Company
- Kenneth R. Harney May 1, 1999
The Washington Post
Most major mortgage servicers say it cannot be done. At least, they have not been able to retain even 50% of the refiable loans in their servicing portfolios since the latest refinancing boom started last year.
"The most aggressive mortgage servicers would kill to achieve a 20% recapture rate during heavy refinancing periods," notes Edward J. Elanjian, managing director of Cohane Rafferty Securities in Princeton, N.J., a servicing brokerage and financial advisory firm. "Of even the largest servicing firms, it's doubtful that as many as a dozen get close to that."
Enter the brothers Kelly, two entrepreneurs who say they can help servicers retain at least 80%. Indeed, the two managing directors of six-month-old Service Savers Financial in Fairfax, Va., say they have already helped one servicer retain some 90% of the customers they have contacted.
"If a financial institution gives us 10,000 names in their servicing portfolio, we believe that 80% or more will take the refinancing program offered them, staying on the books," says Keith Kelly, 36, managing director of marketing.
Bravado? Absolutely. The Kellys' 80%-plus retention rate has only been achieved on a test basis on a list of 350 mortgage servicing customers provided by Service Savers' first client, Customer One Mortgage Co. Customer One is a Fairfax-based subsidiary of FT Mortgage Companies, the 13th-largest mortgage banking servicer nationwide, with a servicing portfolio of $61.6 billion.
Many mortgage servicers may easily dismiss the two brothers as young upstarts trying to upset the servicing apple cart. Between them, though, they have 23 years of mortgage banking experience. Keith is the former owner of his own mortgage banking company, Markee Financial Corp. in Fairfax, which he sold in 1991. Joe was a loan originator for Markee and two other companies for nine years. Joe also spent six years as a sales and marketing manager for Prime Computer, which he left in 1989.
Customer One is clearly pleased with results to date. In early April, it gave Service Savers another 3,000 names -- and it may not be to long before other mortgage servicing companies sign on. "Of the 3,000 names we just received, we already have a 100% retention rate," jokes Keith Kelly, managing director of marketing, who had called the first two customers on the list earlier in the day.
Few mortgage servicers have worried about retaining existing customers during major refinancing periods, spending their energy and money instead on finding new servicing customers to replace the old under the theory that they are competing in a zero-sum game.
Keith and his partner, Joe Kelly, 37, who is general manager of operations, offer high profit margins. "The margins for our clients will be between 150 and 200 basis points," says Joe, who says their refinancing program actually has been under development for about five years. "So it's crazy, really, for mortgage servicers to devote their efforts first and foremost to bringing in new customers. They've got their priorities backward."
The Service Savers formula is simple. "A typical mortgage servicing telemarketer says he or she can lower a customer's interest rate on a mortgage say from 8 to 6.5%," says Joe. "The catch, of course, is that it will cost several thousand dollars in points and closing costs; of course, that's where they lose the customer.
"We don't do that," he says. "Homeowners want to have the lowest possible monthly payment at the least cost, and that's what we offer them. When we or our current telemarketing staff of five call customers, we offer them a lower rate at no expense to them. The program's so simple it's difficult to say no."
When making their sales presentations to bankers -- they have done so six times, based on marketing packages sent to the top 20 servicers late last year -- the two Kellys play unpaid "testimonials" from consumers, recorded on their laptop computers.
"When working with us, there is no staffing, marketing, processing or other capital expenses for the mortgage servicer," Joe emphasizes, "and that remains the case, whether we're dong a test or full-blown program for them.
Keith says mortgage servicers are taking their time responding to Service Savers' presentations partly because it has turned the industry's business model on its head. Most servicers measure their success on how much business they close per employee and on their per-loan costs.
"We're offering the mortgage servicing community a paradigm shift," says Joe. "The issue here isn't about increasing or reducing costs per employee because they're not hiring additional staff; we are. And while the industry's preoccupied with buzz phrases such as 'retention' and 'runoff reduction,' we're focused simply on saving the customer money without hassle and at no expense. We deliver high profitability to the servicer while bringing value to the customer. It's that simple."
Joe and Keith say they hope to break the servicing industry of what they consider a bad habit, staffing up when interest rates decrease and letting people go when the Fed raises them. "One of the things we emphasize is that our program isn't simply about reducing runoff," says Keith. "With Service Savers they're bringing in additional revenue in any interest rate environment. When rates are decreasing, we're proactive, calling customers and enabling them to refinance at lower rates. And when rates are increasing, they can move from an adjustable to fixed-rate mortgage or from one ARM to a less expensive ARM."
If their business proves successful, the Kelly brothers will likely attract a lot of imitators.
- Lawrence Richter Quinn American Banker
The "Joy" Of Getting a Mortgage If You Are Self-Employed | Nav
Joseph Kelly
Running a small business and obtaining a real estate mortgage are two areas that, when blended, create their own unique challenges. As a national mortgage professional with nearly 30 years in the industry, I’ve helped many borrowers navigate these challenges and offer this advice to help you do the same.
It may seem daunting when you hear “horror stories” of self-employed people who have gone through the mortgage process. I cannot ‘sugar coat’ this, it IS challenging and detailed. But hey, if you are successfully “self-employed” you can handle it.
The “short version” advice
Read the rest of this article to educate yourself. However, in the end if you want to be strategic, prepared and lessen the stress, speak with an experienced, ethical mortgage professional about your goals and current situation. Look for a professional who is not trying to “sell you” a mortgage but will build a relationship with you to help you reach your mortgage goals whether you qualify now, or will need time to get there.
The current mortgage environment for the self-employed
There are certainly many benefits to being self-employed. The potential of freedom, increased income, the satisfaction from building a business, tax benefits, etc. If we were still operating in the financial environment that existed not that long ago, the process of leveraging those benefits into obtaining mortgage financing was as simple as having a decent credit score and “stating your income” on a mortgage application. If the application showed sufficient income and business history to make the qualifying income and debt ratios work the loan was approved! One could even accomplish that with almost no documentation. I know it seems crazy that mortgage lenders were willing to make loans on those terms, and it was. In today’s environment, business owners are forced to jump over hurdles that may seem unfair, and do not make sense when obtaining a mortgage. However, it is part of the consequences from a decade ago.
Think of that past environment as one with a pendulum swung far to one side. Well, we now live in a lending environment where that pendulum has swung far to the other side. The consequences of the mortgage industry collapse from 2007-2010 and the recovering economy over the last five years has placed those individuals who choose to be “self-employed” in an arena that includes many challenges to obtaining a mortgage that salaried employees do not have to face.
“Self-employed” — What Does That Mean?
Let’s start with a basic definition of someone that is considered “self-employed.” Keep in mind that this article deals from the perspective of a mortgage lender. It may not be considered fair and sometimes it does not make sense. But if you are seeking a mortgage, “it is what it is” and
it is better to understand and strategically prepare in order to successfully obtain financing with the least amount of stress possible.
(Important note – guidelines change over time and there are smaller, niche lenders who may have more flexible guidelines for your situation. But there are trade-offs that may be contrary to what you looking for.)
You have no doubt heard of Fannie Mae (FNMA). FNMA exists, according to their website, “to provide reliable, large-scale access to affordable mortgage credit across the country at all times so people can buy, refinance, or rent homes.” They are the largest entity in the country for this purpose and nearly all mortgage lenders in the country follow their underwriting guidelines to some extent.
FNMA states that “Any individual who has a 25% or greater ownership interest in a business is considered to be self-employed.” It is a simple definition. And if you are considered self-employed your mortgage application will be underwritten under those guidelines.
This Part is Just Not Fair
Someone who receives a W2 (and owns less than 25% of their business) may earn income from a salary and that salary can be used to qualify for a mortgage even if they just started their job. Once they have verifiable employment and 30 days history of paystubs that income is considered stable enough to be used to qualify for a mortgage. Even though that person could lose their job at any time, from a mortgage underwriting standpoint they are considered “stable.”
I tell you this because it is an important perspective if you are trying to get mortgage financing. If you are at the stage where you are preparing to start a business and are not yet considered self-employed, you should consider seeking mortgage financing while you are still have W2 income. Even if you have started your business and still have W2 income (from another business which you do not own more than 25%) that W2 income can be used to qualify.
Once you are considered self-employed, the following factors will be analyzed (i.e. verified and underwritten) before receiving an approval for a mortgage:
- Stability of your income
- Location and nature of your business
- Demand for the product or service offered by your business
- Financial strength of your business
- Ability of your business to continue generating and distributing sufficient income to enable you to make the payments on the requested mortgage
Every mortgage requires documentation of three areas: income, assets, and credit. When you are self-employed, the documentation required includes those areas for both your personal and business arenas.
The following list should not be considered “black and white” or all inclusive. Different lenders and underwriters will have some variations. Think of this list kind of like the Pirates Laws from Pirates of the Caribbean; in other words, “more of a guideline.”
To document self-employed income you will need to provide:
- 2 years personal tax returns (including ALL schedules)
- 2 years business tax returns (if applicable)
- 2 months bank statements (minimum)
- Depending on the time of year of your application you may need to provide an “un-audited YTD P&L” documenting how your business income is for the time period since your last returns.
- Possible additional documentation may include K1’s if you receive them showing percentage of ownership, copies of business licenses, copies of long term contracts if they demonstrate “guaranteed income,” and a variety of other requests depending on your business.
Once a lender has the documentation they will review and analyze it. Lenders are required to create a “cash flow analysis” with your documentation.
Nearly all lenders will require at least two years history of self-employment. While it is true that it is possible to obtain a mortgage with less history, this article will not address those since it would only apply to a very very small percentage of loans.
Your two year history (that means 2 full years of tax returns) will need to show INCREASING INCOME. If your income is declining in the most recent full year, you will have significant challenges to face. The application may still be approved if there is a good reason AND if you qualify using just the income from the most recent year. Lenders tend to assume the worst when it comes to underwriting and if they see a decline in income they assume it will continue. However if your income was impacted by major expenses that can be considered as “one time” expenses the lender may be able to take those losses out of the analysis. That will be part of the cash-flow analysis the lender will do and will include a number of other factors such as depreciation, deductions, etc..
Keep in mind that while you may legally be able to claim a wide variety of write offs and deductions on your taxes your amount of income used for a mortgage qualification WILL BE AFFECTED by those write offs. One of the challenges is that if you anticipate needing mortgage financing you may be forced to limit certain deductions for a period of time in order to increase the bottom line for your qualifiable income.
Lenders will AVERAGE your income
Let’s say you earned $50,000 from your business two years ago and $100,000 last year. Your business is enjoying significant growth and even your YTD (year to date) income is showing even higher income for the current year. In most cases the lender will AVERAGE the LAST
TWO YEARS income for the purpose of qualifying. That means for this example that you would have $75,000/year income used for qualifying for a mortgage. This will be true even if, for example, you had $100,000 income three years ago! The basic guideline will be that they will look for income that is not significantly declining AND will average the past two years. Your YTD income will also need to show that it is on track to be at least last years income.
The bottom line
Whether you are on the way to being self-employed or have been self-employed for years, if you are looking to qualify for a mortgage it pays to educate yourself, be prepared and be strategic. There are countless scenarios for self-employed borrowers. Each case is different. The “basics” explained in this article should serve as a guideline to help prepare you, though it is very important to know that there are many different mortgage options from different types of lenders. Some are more flexible and lenient than others, though that may mean that the terms may not be as good.
From a lender’s perspective, working with self-employed borrowers is time consuming and complicated because of the variety of each borrower and the amount of documentation which must be gathered and reviewed. Seek out qualified mortgage professionals who are willing to take the time to work with you and help you. Be wary of any lender who tries to charge you anything for an application or approval! (You will have to pay for an appraisal but that should only be done after you have confidence that you will be qualified with that lender.)
Joseph Kelly is the creator of the ArcLoan Mortgage Management Program. Mr. Kelly has a unique blend of technical, marketing, sales and leadership experience. As a graduate of the University of Virginia with a degree in Aerospace Engineering (yes….a rocket scientist), he realized that the mortgage industry was lacking a critical component – consumer education. From 1991 to 1996, he was ranked among the top 1% of loan officers in the United States. He has also managed a national call center based mortgage business model since 1998. In 2007, Mr. Kelly joined a nationally licensed, ethical, pro-consumer mortgage company. This allows allows ArcLoan to offer its mortgage management programs/products in all 50 states.
With the economy strong, unemployment low and the Federal Reserve expected to raise short-term rates throughout the first half of the year, mortgage experts don't foresee relief any time soon.
Yet even in a rising-rate environment, home borrowers have plenty of options, especially with competition among lenders so fierce. Here are six ways to keep your mortgage payments down.
Consider adjustable s. Today almost a third of borrowers are opting for an adjustable-rate mortgage (ARM) but not necessarily a traditional one-year ARM. Even though one-year ARMs recently averaged 6.66%, that rate is still not low enough to compensate for the risk of a big rate hike next year. A safer bet is a hybrid ARM, whose rate is fixed for three to 10 years and then adjusts annually. The average rate on a five-year hybrid ARM was recently 7.67%, according to mortgage trackers HSH Associates (www.hsh.com ); a seven-year was 7.89%-almost half a point lower than what you'd pay on a 30-year loan.
The trade-off with these mortgages is that your payment could rise sharply once the initial rate expires. For that reason, try to match the fixed term to the length of time you plan to stay in your home. (If you can't, consider refinancing later.) Annual rate hikes are usually capped, but that ceiling can range from two to five percentage points. Look for the lowest you can find. Cut your rate later. In just the past nine months, several lenders have rolled out a new type of mortgage with a rate that drops when market rates fall but stays put when rates rise. "These products are really no-or low-cost refi's with the same lender," says Keith Gumbinger, vice president of HSH Associates. The selling point is that any fees you pay to cut your rate may be lower than what it would cost you to refinance. Not all of these trendy step-down mortgages are equally attractive, however; some charge a higher rate from the start. The ARC Loan from National City Mortgage (888-272-5626); www.arcloan.com) looks like the best of the breed. You can lower your rate for no fee every four months.
Spend more up front. Even at today's higher rates, fixed-rate loans are still best for many borrowers, especially if you expect to stay in your home indefinitely. That's because you can cut your rate by paying points (one point equals 1% of the loan amount). Typically, you'll trim your interest rate by one-eighth to on-quarter of a percent per point. For example, if you add two points to a $100,000 30-year fixed -rate loan at 8.25%, you could get a 7.75% rate. As long as you remain in the house for five years, you'll recoup the extra $2,000. After that, your savings kick in. Also, if you can scrape up a full 20% down payment, you'll avoid paying for private mortgage insurance, which can add $30 to $100 a month to your payments.
Close fast. Some lenders will trim your rate by one-eighth of a percent if you agree to close within 30 days rather than 45 or 60. Just make sure you'll have enough time to conduct all the necessary inspections, including testing the water and soil for contaminants.
Lock in the rate. In a hot housing market, getting pre-approved for a mortgage makes you a more attractive buyer. In a rising-rate market, pre-approval has another benefit: You lock in your interest rate, usually at no extra cost. If you don't lock in a rate in this market, "you can get burned," says Stephen Brandt, senior vice president at Countrywide Mortgage.
You can also pay about $250 for a rate lock with a float-down option-which means your rate will drop if market rates go down before you close. But with rates not expected to fall much this year, advises Sarah Campbell, senior vice president at Bankrate.com, it's probably not worth paying for a float-down option.
Agree to stay put. Some lenders will cut your interest rate by up to a quarter of a percent if you agree not to refinance in the first five years-or to pay a penalty of about 1% of your loan if you do. This is a common feature on ARM’s, although it's not available in all states.
Whether you should accept a prepayment penalty depends on the size of the penalty and the rate you're paying (or the rate you could pay if the loan is adjustable). If you get a $100,000 30-year fixed-rate mortgage with a prepayment penalty at 8.25% today and rates drop to 7% two years from now, you'll need 11 months of lower payments to make up the $1,000 penalty. - Judy Feldman, Money
The bright side is lenders are getting creative – expect new loan products, new strategic alliances and new delivery systems – as the downtime is spent strategizing. Easy come, easy go. Well, maybe not that easy, but easier than the last time business disappeared overnight. That seems to be the conclusion of the nation's mortgage community, as it bids farewell to the boom times of the past several years and – well, quite frankly – hunkers down for leaner times. ...new products, rethinking consumer approaches…
Others express the same concerns. "It is time for a fresh look at the mortgage industry," says Joe Kelly, manager of the Service Savers division of National City Mortgage in Miamisberg, Ohio, which grew its origination business this year. "It is not enough to revisit old programs and stress the same old good…"
- Lawrence Richter Quinn
- Mortgage Banking Magazine
Chapter 4 - Choosing the Best Mortgage
A newer type of loan program designed to help you take advantage of a drop in interest rates is the ARC Loan.
The interest rate and corresponding payment starts off 1/4% to 3/8% higher than current fixed mortgage rates, but every time mortgage rates fall by a quarter point or more, you are allowed to adjust your rate downward with no closing costs, points, or fees.
For FHA and VA borrowers, only your timely payment history is scrutinized each time your rate is lowered; for conventional loan borrowers, a short credit check, along with payment history and verification of income is required. With this system, your loan is “managed” internally. Although you must wait a minimum of 120 days for the first refinance opportunity, you may lock your rate before that time, and subsequent adjustments can occur as frequently as every 120 days. The program can be applied to fixed-rate or short-term fixed-rate programs.
Will Your Side Gig Keep You From Getting a Mortgage?
Joseph Kelly
This is a guest post by Joseph Kelly, mortgage expert and president of Arc Loan Mortgage Management.
An increasing number of people have side businesses, or “gigs,” that make up part of their financial picture, though few give much thought to the effect they will have when it comes to getting a mortgage, either to purchase or refinance a home. Sometimes having the extra income from a side job or business makes the deal work, but sadly sometimes it will kill it. Here are some of the aspects that mortgage lenders will look at so you have the chance to make adjustments, if necessary.
The majority of mortgages are called “traditional residential mortgages,” which include conventional, FHA, and VA mortgages underwritten to standard guidelines. That is the realm we’ll cover here. One may certainly also seek mortgages from private lenders, credit unions, and community banks, which might have other rules when it comes to considering the benefit or liability of a side business or job.
Let’s separate this topic into two categories of extra income. Note that for either category, you’ll usually need a two-year history showing that income in order for it to help you qualify for a mortgage. If your extra income is stable or rising, then you will be in good shape to use at least a two-year average of the income. However, if it is declining, then it will be unlikely you will be able to use it—though there are exceptions.
Working for Someone Else (a Job Plus a Side Gig)
If you have a second job working for someone else, you are probably paid in one of these ways: W-2 salary, hourly, commission, bonuses, or some combination. If your extra income varies from year to year, lenders will first look to see that the income is not declining, then they will average it for the amount of extra income you may use for qualifying.
If you have unreimbursed work expenses reported on your taxes, the lender may deduct those amounts from your earnings. For example, you make an extra $1,000 a month driving for Uber, but you deduct $400 a month on your taxes for various expenses. Thus your “net income” is really $600 a month.
Working for Yourself (a Business)
Ah, the joys of owning a business! There are many possible rewards, but when it comes to applying for a mortgage, be prepared for added paperwork. As with the first category, lenders will be looking first for:
- Income history (at least two years reported on tax returns),
- Level or increasing net income (declining income year-to-year could negate any benefit, or even hurt you if you show losses), and
- Year-to-date information like a profit and loss statement (does not need to be audited) to support that your income is in line with previous years.
Keep that in mind as you plan. And be prepared to provide documentation of additional income, including trends from previous years.
With mortgage rates now topping 8%, potential homebuyers might consider the unconventional; a 30-year loan with an adjustable rate that can only go down. Two lenders, www.arcloan.com and, in Western states, www.citylinemortgage.com, will notify you when prevailing rates drop as little as a quarter to half a point and will automatically refinance your mortgage. Sticking with the same company means you pay no hefty closing costs. You shell out for the new title at City Line and pay zip at ArcLoan. To qualify, you need to make timely mortgage payments. Julie Rawe, Time Magazine, Cut-Rate Mortgage
Service Savers (800-272-5626) lends in all states except Florida, New Jersey, and New York. Its rate was recently 7.75% for a 30- year mortgage with no points or closing costs, roughly equivalent to the 7.2% national average for loans with one point and standard closing costs.
Along the same lines, City Line Mortgage in San Diego offers a declining-rate loan you can refinance free whenever rates drop by 0.5% percentage points or more. Chief executive James Riley hopes the new mortgage will help the company retain customers and the monthly servicing fees they represent.
A loan servicer receives about 0.25% of the loan balance each year for handling payments and paying taxes.) Riley says the cost of drawing up new title and other paperwork is no more burdensome than finding new borrowers.
City Line lends to homeowners in California, Colorado, Nevada, Oregon, and Washington. The recent rate on a 30-year loan was a bit above the 7.2% average.
- Kiplinger's Personal Finance Magazine