Sept. 05
Interest Only Loans

This is the second article of an abbreviated column talking about interest only (I/O) loans. Last month’s article described the positive issues of this type of loan. This article will discuss some of the concerns that you must be aware of when making the decision about an I/O loan.

CONCERNS
 
QUALIFYING FOR A LARGER LOAN
I/O loans allow a borrower to qualify for a larger home. This could be a challenge because the borrowers are not building equity, so when the I/O period ends, they face a higher monthly payment for a home that originally may have been to expensive for them.

THE LENDERS CONCERN
There is a possibility that as rates increase and borrowers cannot afford their payment after the I/O period, foreclosures will rise. With interest on the rise, the fully amortized loan can become adjustable which causes payments to steeply rise. Some lenders, therefore, are charging a higher interest rate for the I/O options as these loans carry a greater risk of default.

IT IS ALSO IMPORTANT TO REMEMBER THAT I/O LOANS:
1) Do not carry a lower interest rate
2) Do not allow the borrower to avoid private mortgage insurance, if required
3) Are not less costly to amortize
4) Do not mean that the interest rate is fixed automatically for the interest only period

To avoid trouble down the road, we must all take the responsibility of educating ourselves on the best loan options that are available to us individually.
 
If you have any questions or if you would like to discuss a particular subject, please contact me at SUNRISE FINANCIAL INC. at (928)-775-4929, or e-mail me at service@sunriseaz.net .

This column is for you because YOUR MORTGAGE MATTERS!

MIKE CHONKA
710-1463 cell
775-4929 office

NA-Not available at this time.
 * Average Selling Price       ** Average List Price
- Nothing sold or listed through the PAAR MLS in this subdivision in the past six months.  Properties pending  are not included.

Real Estate Transactions in this section are provided by Karen Benson, Kooiman Realty, Prescott Valley. For more information or questions, call 928-775-8880 or visit Kooiman’s website at www.kooimanrealty.com.

Above chart is from the PAAR Multiple Listing Service for the period of  June 1 through December 1, 2005, unless noted. This information is deemed to be reliable, but not guaranteed.  This information is not intended as a solicitation. If your property is currently listed, we fully cooperate with the PAAR MLS System.

1 These statistics are homes sold / listed through the PAAR MLS system only. Some subdivisions have their own sales office and these statistics are not included in these numbers because they are sold outside the PAAR MLS system. Call the individual subdivision’s sales office for more information.

2 This subdivision has their own sales office. The above statistics do not reflect sales information sold / listed through subdivision’s private sales office. Call this individual sales office for more information. Contact information available in the subdivision section of this newsletter.

1Real Estate Values and Information Taken From PAAR MLS System

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Aug 2005
Your Mortgage Matters
 The following question prompts a very long explanation that I cannot answer in a single newspaper column. Therefore, I will divide it into two columns and still be able to bring out only the basics.

Dear Mike:
I’m not sure if I want to get into this new Interest Only loan idea that everyone is talking about. What should I know about these loans and why are they so popular?                                                                                Confused

Dear Confused:
An Interest Only (I/O) loan is not a type of loan, but rather an option that a borrower can have when paying his mortgage. Interest Only loans have been around since the 1920’s, but they disappeared during the Great Depression. I/O is a loan that allows the borrower to pay only the interest for a specified period of time, usually 5 or 10 years. The required monthly mortgage payment includes no repayment of principal, although borrowers can make such payments if they choose to in any given month.

ADVANTAGES:

1. Pay principal when convenient
Borrowers with fluctuating income have the ability to choose how much extra or how little, if any, that they want to pay on the principal.
2. Substantial payments to reduce principal
If you are expecting large amounts of cash in the future, you can pay down a huge chunk of principal often without a prepayment penalty.

3. Use of extra cash flow
By paying only I/O, the extra money that you are keeping can be utilized to pay down higher interest credit card bills, car payments, or even start a retirement program.

4. Short term residence
If you are planning on living in your home for a short term (2 or 3 years), you pay little toward the principal reduction. Therefore by paying I/O you are not jeopardizing equity that you may have paid down.
This, of course, is just the tip of the iceberg. The next issue will deal with some of the concerns that you need to be aware of before you make a decision about I/O options.

I am very excited about the opportunity to share this information with you and I hope to be able to earn your readership. If you have any questions or if you would desire a particular subject to be discussed, please call me at SUNRISE FINANCIAL, INC. at (928) 775-4929; or email me at service@sunriseaz.net . This column is for you because YOUR MORTGAGE MATTERS!

Mike Chonka

July 2005

Your Mortgage Matters

Dear Friends,
Since this is my inaugural column in the newspaper, I feel that I should share with you my purpose of writing the future articles. I hope to convey the many decisions that it takes to intelligently consider the purchasing of a mortgage. I will not, however, make any decisions for you. That my friends, is a weight that you alone must carry.  I will in my column in the LONESOME VALLEY NEWSLETTER  however, bring out subjects that allow contemplation of the mortgage matters.

Personally having mortgages in the past and one now in the present, I fully understand the anxiety that is created by this decision making process. (That may surprise you since I am in the mortgage business!) A home is the largest single expense that a person will buy except for the possibility of  a business / investment.  In all truthfulness, our homes have turned into a business. The mathematical equation of this unrecognized fact is: 

MORTGAGE = OPTIONS =DECISIONS = HOME = APPRECIATION =BUSINESS

Therefore, if  along the way any of these steps are incorrect for you,  the realization of your choices may or may not be what you desired. My goal in future articles in the LONESOME VALLEY NEWSLETTER, is to bring out topics that will cause you to think  and to ask questions to the professionals that you have chosen to take your business to.  I am not here to give legal advise nor am I a policing agency. I will only bring to your attention certain aspects of subjects that will allow you to research on your own and reach a conclusion on your own.

Some of the subjects that I will be addressing in future issues are: mortgage options, ARMS vs. fixed rates, credit reports and credit repair,  home ownership or renting, property appraisal issues, and interviews from various professionals in the real estate industry.

I am very excited about the opportunity to share this information with you and I hope to be able to earn your readership.  If you have any questions or if you would desire a particular subject to be discussed, please call me at SUNRISE FINANCIAL, INC. at (928) 775-4929; or email me at  service@sunriseaz.net .

This column is for you because YOUR MORTGAGE MATTERS!                                                            
Mike Chonka

 YOUR MORTGAGE MATTERS

12/05
Credit Reporting Issues

When a borrower comes into my office for a loan, of the entire process, the most anxiety stricken part of the process is in retrieving their personal credit report histories.
 
Lenders use credit reports as a predictability factor in evaluating an applicant’s ability to take on, and successfully repay new debt. In this month’s article we will share in the answers to two of the most popular questions asked regarding the process of evaluating credit:

1.)    I have paid these collections - why haven’t they been removed for my report?
2.)    How do they calculate my credit scores?

In answering the first question, and with the exception of bankruptcies and tax liens, negative information reports on your credit history for seven years. The scoring model used in calculating credit scores is based largely on information currently reporting on your history. For example, let’s say that a person pays off a four year old collection account of $100. The scoring model used focuses on activity within the past 18-24 months, so this unpaid item does not have a significant effect on their current score. After a client makes this payment, however, the last activity date becomes current, often times generating a change in their scores. In the scoring system, the recent update of negative history will often decrease the borrower’s credit scores, rather than improve them.  Frustrated, borrower’s can sometimes feel as if they’ve been penalized for paying off old debts, though they were acting in good faith by bringing current their delinquent accounts.

In answering the second question posed, we must consider many different facets. The three major reporting agencies (bureaus) – Experian, Equifax, and TransUnion – are the authorities in reflecting reported histories, and calculating subsequent scores. Gaining authority in the late 1980’s and early 1990’s, the factors used in their scoring systems are as follows:

Payment History –  35% of your score is calculated from histories reported to all three bureaus.

If a person has become late on a payment, the most important thing is to get current! 30-day ‘lates’ vs. 60 and 90+ day ‘lates’ - ‘Catching up’ and staying current with your payment will help you to avoid the ‘lates’ reporting in excess of 30 days, which are more severely scored,  the more delinquent in days they become. Furthermore, different types of account payment histories may decrease a client’s score more so than others. For example, a late payment on a home mortgage will have a more significant impact against a score than that of a late credit card payment.

  Amount Owed – 30% of your score is calculated by evaluating the outstanding balances owed on your accounts.

Commonly referred to as the ‘debt-to-credit ratio,’ we divide the account balances owed by the credit limits of the accounts.  These ratios are used in the lender’s predictability for a borrower to be able to successfully take on and repay new debt. Ideally, lenders like to find the ratios below 30%. The higher the debt ratio, the lower one will tend to find their credit scores. For example, ratios falling between 30-50% will pose a lower score than ratios below 30%. Likewise, anything above the 70% range consequently drops your scores dramatically.

Credit History Depth –  15% of your score is calculated by evaluating the depth, or length of time, of your accounts.

Longer reporting histories generate higher scores than those reporting with shorter histories. Accounts reporting a minimum of twelve months, and in good payment history, help to establish credit depth and aid in generating positive scores.

New Credit –   10% of your score is calculated by evaluating how much new credit has been established.

In applying for new credit, creditors will check your credit history to determine new credit approval. Multiple credit inquiries negatively impact your credit score. Also, in applying for new credit, keep in mind that opening too many accounts within a short period of time of each other will lower the ‘average age’ of all accounts, possibly lowering your credit score. Furthermore, accounts are rated differently. It is advisable to stay away from taking on new department store credit or that of secured credit cards. Both types are rated much lower than conventional credit cards.

Number of Accounts / Credit Types –   10% of your score is calculated by evaluating the number of accounts and types of credit within your history.
Having too many accounts with available balances can negatively impact your score. Since varying types of credit score differently, it makes sense to stay away from too much credit and too many different types of accounts. Limit the number of accounts you keep open, closing accounts that aren’t frequently used. Given the prevalence of over-extension, lenders are weary to lend to borrowers who have too many revolving account balances, in which payments increase in accord with increased balances.

Too many available, unsecured credit accounts can further diminish a borrower’s predictability to successfully take on and repay new debt.

For further questions regarding the process of evaluation of credit, or if you have any questions about financing your home or investment properties, please feel free to contact me at Sunrise Financial, Inc. (928) 775-4929, or by e-mail at service@sunriseaz.net, because… Your Mortgage Matters.

Mike Chonka

* Thank you very much for all your support throughout 2005. We appreciate your trust and look forward to a very productive 2006.

11/05
YOUR MORTGAGE MATTERS

THE BLURRING OF YOUR LOAN

 As the mortgage industry has become more sophisticated with a larger base of loan products, there is now a gray area between prime, alt-A (alternative prime), and subprime loans.

 PRIME LOANS
“Prime loans” were known as the best loans to capture for your mortgage. Traditionally, they had the lowest interest rates, lowest cost, and were reserved for borrowers who had high credit scores.

Alt-A
These loans are for people who may be self-employed, cannot verify their income, but still have good credit scores.

Subprime Loans
This classification of loans is for people who may have had credit problems in the past due to loss of job, collections, or medical difficulties.

 With the change of our society in the last decade, the lending rules have changed also. Often times now, people who were strictly “prime” borrowers find it easier and sometimes less expensive to go into an alt-A loan. The same works for someone who may be an alt-A borrower. They often can get into a subprime loan faster and easier than trying to fit into an alt-A loan product.

This is all due to the fact that Americans are becoming less traditional in their lifestyles (changing careers, financial upswings and downfalls, moving to different parts of the country). This change in the lending industry is known as “credit drift.”

The terms prime, alt-A, and subprime will not disappear soon. However the definitions are not as black and white as they once were and these lines will continue to blur more in the future.
 
Please feel free to contact me at SUNRISE FINANCIAL, INC. (928)-775-4929 or at service@sunriseaz.net because.... YOUR MORTGAGE MATTERS…

MIKE CHONKA

10/05
YOUR MORTGAGE MATTERS

PRIVATE MONEY: AN ALTERNATIVE TO YOUR PROBLEMS

What happens when your needs do not fit into a “regular” loan? You may need a loan that no one offers or no one seems to want to lend on.

The answer is private money loans. Private money lenders lend to borrowers based on the property’s equity with less emphasis on your credit report or income documentation.
 
Now the interest rate may be higher than traditional rates (often 10-15%). Private money lenders are looking for a good return on their investment, plus security in the equity of the property.

Private money borrowers are looking for flexible terms, no income verification, and the ability to borrow on non-typical properties.

Private money lenders look at the ability of a borrower to repay the loan amount. The closing of the loan is often within 5-10 days, with no appraisal required. This obviously is only a short-term solution to your borrowing dilemma. You should not plan on using this type of loan for more than 1or 2 years. This gives you the time to repair your financial life so that you can refinance to a more traditional loan product. The speed of closing, the loan to value, and the ability of not going through the “red tape” is what attracts people to the private money lenders.

Although this may not be a solution to all of your borrowing needs, it may be a solution to one of your borrowing needs. I would be happy to visit with you more about this alternative solution. Please feel free to contact me at SUNRISE FINANCIAL, INC. (928)-775-4929 or at service@sunriseaz.net because....
YOUR MORTGAGE MATTERS…

MIKE CHONKA

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DEC 2005

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