Mortgage chat transcript

Peter Milewski, director of mortgage insurance for MassHousing, was our chat guest on Monday, Sept. 17. Mr. Milewski's career covers thirty-eight years in banking, mortgage lending and mortgage insurance. He is a past president of the Massachusetts Mortgage Banker's Association, and has served on the State Division of Bank's Foreclosure Prevention Work Group.

Bostondotcom: Welcome Peter!

Peter_Milewski: It is a pleasure to be here today. With all the problems that seem to be occurring in the mortgage lending industry today, borrowers coping with the terms of non-traditional mortgages, the rise in delinquencies and foreclosures, and failure of many mortgage companies, this isn't a bad time to discuss the issues that concern borrowers and prospective homebuyers.

Peter_Milewski: Despite everyone's concerns about the real estate market there may never be a better time to buy and finance a home than right now.

PatriciaJane__Guest_: With real-estate prices down, my dad and I are thinking of investing in a rental property. What do we need to keep in mind about today's market?

Peter_Milewski: The key thing about investment property is to insure that the rental income can carry the property on a cash basis and to look for mortgages that provide you with some certainty in the monthly debt service coverage. there are some great deals out there today.

TroubledWorker__Guest_: I got laid off last week, and it looks like it will take a few months for me to get a new job. Even with unemployment, we will have trouble making our mortgage payments. What's the best way to deal with this? Should I just put the house on the market now?

Peter_Milewski: The first thing to do is to contact your mortgage servicer and begin a dialogue regarding your personal financial situation. most lenders will be happy to work with you. If you feel that your unemployment situation may be a long term issue, selling your home and deriving some benefit from the equity you have built up is always an alternative worth considering.

guest: Are Masshousing loans popular in high priced areas such as Barnstable County(Cape Cod)?

Peter_Milewski: MassHousing's programs could have financed up to 50% of the homes sold on the cape last year. The median sales price of owner-occupied homes in Barnstable County is well within the sales price and mortgage loan limits of MassHousing.

PE__Guest_: I am talking to two lenders, a company working for my credit union and a direct mortgage company. Which source has more credibility, reliability and stability at this time?

Peter_Milewski: Your credit union may have already done some due diligence in screening the lender they are referring you to. That's a plus. Another thing to do is check with the Division of Banks to make sure they are a licensed lender in good standing. Check the Better Business Bureau for possible complaints. The more regulated the lender the more security you have in dealing with them on your mortgage.

Ranch_house__Guest_: Hi Peter. I don't know much about mortgages, but I'm getting married next year and was planning on starting that process in the summer. Should I be looking into this earlier? Would I be better off applying for a mortgage now than next summer?

Peter_Milewski: Getting ready to buy a home does take time. I would strongly recommend enrolling in a homebuyer counseling course offered by one of the many MassHousing approved counseling agencies you can identify on our website MassHousing.com. Homebuyer counseling will help you understand all the issues you need to know before you buy a home and take out a mortgage.

mm__Guest_: Do you have any recommendations for a first time homebuyer (27 years old with 5% down payment)?

Peter_Milewski: MassHousing has a number of programs that would be perfect for a 27 year-old first time homebuyer with 5% down. Check out our website at MassHousing.com for a description of our programs and a list of participating lenders. Our programs offer safe, affordable, low-cost financing for people such as yourself.

PE__Guest_: In refinancing discussions w/ potential lenders, what answers should I be wary off?

Peter_Milewski: The key is for you to ask the questions... Is this a fixed rate mortgage? What are the closing costs and fees? Are there prepayment penalties?

Peter_Milewski: I strongly recommend moving from an adjustable rate to a fixed rate at this time in this market. look for the lowest rate with the lowest fees and no prepayment penalties.

Peter_Milewski: Shop and ask questions.

Ranch_house__Guest_: About the home-buying courses ... how do these work? Are they available online? And how long does it typically take to get all the info I need to make a smart decision?

Peter_Milewski: The best homebuyer counseling courses are face-to-face classroom courses that allow questions and discussions. They usually require that you attend two classes that last from three to four hours each. Sometimes there is a modest cost, but most are free. The educational value of these sessions is invaluable to a first-time homebuyer. My children each recently purchased homes and initially didn't want to attend homebuyer counseling. Once they did they were glad that they had the information given out at the training.

2x2: I may refinance in about 3 years (depending on what rates are doing, currently at 4.1%) when my ARM kicks in. Do you see an advantage to creating an LLC and having the mortgage/title within the LLC?

Peter_Milewski: I am not an attorney and I don't play one online so I can't give you legal advice on the best form of ownership for your home. Standard fee simple or joint ownership usually work well for most homebuyers. A Homestead filing can provide additional protection for the average homebuyer borrower.

b__Guest_: because of increase in taxes our monthly payment on our primary residence has gone up. We are thinking of selling an investment property to apply cash to our mortgage and refinance for a low payment on our primary. is this a good idea? I know we will end up with a higher interest rate than we currently have.

Peter_Milewski: Most decisions on real estate as investment are based on cash flow. If the investment property is providing you with a greater cash flow benefit than investing its equity in your existing home will do you're better off staying put. If the investment property is a drain and you can draw the equity to improve your cash flow on your home, do it.

guest: When I purchased my home 10+ years ago, my Lawyer never gave me my title. I got a copy from the state office, should I do anything else?

Peter_Milewski: There are two forms of title in Massachusetts, quitclaim deed and certificate of title. I'm not sure what your attorney gave you or what your concern is but a visit to the registry of deeds and most staff can answer questions on the title and ownership of your home.

p__Guest_: I have a good ARM rate that expires in 2010 @ 4.75%. Does it make sense to refinance now? I will not get a better rate today. Or does it make sense to wait and refinance when my ARM expires? Why should I refinance now?

Peter_Milewski: 2010 sounds like a ling way off but it is only as close or far away as your plans are for living in the home. If you plan on living in your home for only a few years the benefit of your current low rate serves you well. If you plan to live in your home for a long time you may wish to refinance into a fixed rate. Today's rates will be between 6.375% and 6.50% so you give up something short term for the benefit over the long haul. Remember you can always refinance a fixed rate loan to a lower rate if interest rates drop.

Bill__Guest_: Any news on the number of borrowers coming in to the rescue program?

Peter_Milewski: There are a significant number currently going through screening with local counseling agencies. The difficulty is discerning who we can help. Many borrowers were put into loans they couldn't afford and still cant' afford even our rescue program. Our program is also designed to help victims of predatory lending and many borrowers looking for help simply made bad choices, and we don't have enough resources to help everyone that made a bad choice.

PE__Guest_: Should a lawyer be brought in to protect my interests in a refinance deal?

Peter_Milewski: I am a strong believer in hiring a competent real estate attorney to help anytime you are going into a mortgage closing. The small cost for an attorney ($500 to $1,000) is usually less than the fees the lender charges and they can protect you from making a serious mistake. It is also relatively cheap when you consider what you have at risk and what you will repay your lender in interest over the life of the loan.

Guest: I have significant equity in the home I co-own. We initially wanted to about 100K for debt reduction. There are pressing home maintenance costs looming,. (Roof, gutters, furnace replacement, etc.) should I be thinking about adding on any these at this time?

Peter_Milewski: It would depend on who you own your home with and how they will benefit from your debt consolidation and property repair. many borrowers got into trouble using the equity in their home like a credit card. I suggest debt consolidation refinances only if you have the ability and willingness to discipline yourself to cut up your cards and avoid going into additional debt. Home improvement can be a great investment in a property if the improvements are well thought out and planned with competent contractors.

jms__Guest_: I am closing on a house next Fri. and locked my 30 year fixed rate at 6.75 no points/ no closing. Since then the rates have dropped substantially. Do I have any options for getting the lower rate this close to closing?

Peter_Milewski: There is an old Wall Street saying..."if it is a good deal today it is a good deal tomorrow" the 6.75% and no points is not that far above the market. The time and additional money you risk trying to find a cheaper alternative between now and next Friday probably isn't worth the risk and aggravation.

Peter_Milewski: A popular program today for borrowers over 62 is a reverse mortgage. It works well for borrowers with considerable equity in the home or the property they want to purchase because it can eliminate the mortgage payment altogether. It is a complex product and not for everyone. the best people to talk to about a reverse mortgage are the people at Homeownership Options for Massachusetts Elders (HOME) the have offices in Braintree but serve the entire state and are a non-profit organization who gives great advice.

mms_2__Guest_: Are there any special programs to keep someone over 62 in their house?

Peter_Milewski: See previous answer

Bostondotcom: Folks, we only have Peter for about 10 more minutes, so get your questions in now!

shopping_soon__Guest_: I am thinking of cleaning out my bank account to put 20 percent down for a new home. Am I stupid to put all of my savings into a down payment, or does it not really make that big a difference in the mortgage I'll get (i.e. should I put 10% down and keep the rest).

Peter_Milewski: I am a firm believer when buying your first home, to buy as much home as you can afford with as little down payment as possible, keeping as much money in the bank for the proverbial rainy day that always occurs right after you buy a home. There isn't as much a cost difference between 5%, 10% and 20% down as there used to be. MI premium costs are lower and MassHousing's mortgage insurance product provides homebuyers with mortgage payment protection in the event that you lose your job. Remember that if you are borrowing with minimal or now down payment the best product is always a fixed rate mortgage.

Guest: I currently have a high fixed mortgage, so anything under 7% looks good to me. Both sources say we can get a loan, though one letter has the line " the interest rate on your loan is floating. My loan request has been qualified at the 6.250% (APR 6.31%) noted. If I want to lock in at a higher rate my request will require further review? What does this mean and what do you recommend?

Peter_Milewski: It's all very confusing to me. When a lender quotes you a rate they should be willing to lock your rate in for a period of time. Sometimes they charge a rate lock fee, many do not. If you are refinancing today you should be looking at rates in the mid 6's with no points and shop for low closing costs. Your lender's offer is very confusing to me.

2x2: Can you comment on the protection offered by establishing a "Homestead"?

Peter_Milewski: Homestead is a filing that protects the equity in your home for attachment or lien. It isn't a lot but it is a sound practice for most homebuyers. Check with a good real estate attorney to see what the benefits would be for you.

harry_finh__Guest_: Hi, my fiancee and I are looking into buying a house, but we're kind of clueless as to the best place to get a mortgage. Any suggestions?

Peter_Milewski: MassHousing has over 120 approved lenders who have passed our rigorous standards for financial strength and professional conduct. They also all offer MassHousing products and programs which are great for first time homebuyers. Visit our website at www.masshousing.com for a list of lenders that we can recommend highly.

billy_blanks__Guest_: I am looking at a house, but with all the sub-prime woes I'm not scared. I've been told this won't really affect me (I have good credit), but I've been told rates have jumped across the board. Is this true? Should I wait another year?

Bostondotcom: Time for one more question ...

Peter_Milewski: Most borrowers with good credit who would borrower less than the conforming loan limit of $417,000 have nothing to worry about. Choose your lender wisely...A MassHousing lender is also a safe bet. If you have good credit, don't need a jumbo loan (above $417,000) and go to a reputable lender you should be fine. Remember my previous advice to hire a real estate attorney to hold your hand during the purchase and financing process. With that security you should be fine.

DJ__Guest_: Hi Peter. My wife and I are one class from earning 1st time home buyer certification from MAHA. Are we eligible for MassHousing loan programs too?

Peter_Milewski: MAHA is a great counseling resource and their certification program meets all of our requirements. Taking a homebuyer course from MAHA is like taking a graduate school course in home buying. Good luck!

Bostondotcom: Chatters, that's all the time we have today.

Bostondotcom: And a big thanks to Peter for joining us today. Great chat, thanks Peter!

Peter_Milewski: You're welcome. For more information on MassHousing visit our website at www.masshousing.com.

Bostondotcom: Thanks again Peter.

Bostondotcom: Also, be sure to check out boston.com/bigmove through the rest of the week. Thanks for joining us everybody!

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