John's Mortgage Blog

7. Do you know what the lender looks for when analyzing your loan package?

2010-08-12T05:31:00.000-07:00

Regardless of where you seek funding - from a bank, a local development corporation or a relative - a prospective lender will review your creditworthiness. A complete and thoroughly documented loan request (including a business plan) will help the lender understand you and your business. The "Five C's" are the basic components of credit analysis. They are described here to help you understand what the lender looks for.

The 5C's

1. Capacity to repay is the most critical of the five factors, it is the primary source of repayment - cash. The prospective lender will want to know exactly how you intend to repay the loan. The lender will consider the cash flow from the business, the timing of the repayment, and the probability of successful repayment of the loan. Payment history on existing credit relationships - personal or commercial- is considered an indicator of future payment performance. Potential lenders also will want to know about other possible sources of repayment.

2. Capital is the money you personally have invested in the business and is an indication of how much you have at risk should the business fail. Interested lenders and investors will expect you to have contributed from your own assets and to have undertaken personal financial risk to establish the business before asking them to commit any funding.

3. Collateral or guarantees are additional forms of security you can provide the lender. Giving a lender collateral means that you pledge an asset you own, such as your home, to the lender with the agreement that it will be the repayment source in case you can't repay the loan. A guarantee, on the other hand, is just that - someone else signs a guarantee document promising to repay the loan if you can't. Some lenders may require such a guarantee in addition to collateral as security for a loan.

4. Conditions describe the intended purpose of the loan. Will the money be used for working capital, additional equipment or inventory? The lender will also consider local economic conditions and the overall climate, both within your industry and in other industries that could affect your business.

5. Character is the general impression you make on the prospective lender or investor. The lender will form a subjective opinion as to whether or not you are sufficiently trustworthy to repay the loan or generate a return on funds invested in your company. Your educational background and experience in business and in your industry will be considered. The quality of you references and the background and experience levels of your employees will also be reviewed.

6. A Community Built on Conserving and Saving the Earth Right in our Back Yard!

2010-07-23T13:39:00.000-07:00

     No one embodies Green Building more than our friends over in Three Groves Ecovillage.  They are in the planning process of building a community that has the highest level of environmental performance, which is known as LEED Platinum Certification. They are conviently located in London Grove Township, which is on the south edge of West Grove Township, Pa. They are hoping to seek new members, who might purchase a home in their ecovillage.   Check out all that Three Groves Ecovillage is doing at: http://www.threegrovesecovillage.org/.

     Remember that if you believe in protecting the earth and are buying a home soon, the lending profession is offering Energy Efficient Mortgages which do all of the following:

Allows you to roll in the cost of making specific energy saving upgrades to your purchase.
Allows you to stretch your debt to income ratio.
Although this will increase your mortgage payment slightly, your investment dollars will give you the upgrades that will drastically lower your monthly energy bills year in and year out.

     Thank you again for chatting and I hope you enjoy John’s Mortgage Blog! It is a pleasure and honor!Comments or suggestions are always welcome. I will continue to inform you on Real Estate Lending updates and I hope this information serves you as you embark on the journey of purchasing your dream home. Energy Efficient Homes are the stregnth of America’s future!   Come back to hear about whats really inportant to look for when purchasing your new "Green" Home.  What do you think makes it really "Green"? You'll find out soon!

     Take care,
     John

5. Potential Savings from an Energy Efficient Mortgage

2010-07-09T04:21:00.000-07:00

Hello everyone,

        I hope your having a lovely summer day! Let's get started! This example illistrates how an Energy Efficient Mortgage will save you money month after month reducing your overhead in a very prudent way. One of the biggest perks is that you can buy more home for your money with an EEM versus a conventional mortgage. That saves you money today. Take a look and see that you will save big with continual savings when purchasing your new "green" home:

                               Traditional MTG        Energy Efficient MTG.

Home price                             $ 150,000                         $ 154,816
(90% Mtg., 8% Int.)

Loan amount                         $ 135,000                          $ 139,334

Monthly payment*             $ 991                                    $ 1,023

Energy bills                            $ 186                                    $ 93

Actual Monthly
Cost of Home Ownership   $ 1,177                              $ 1,116

Monthly savings                                                            $ 61

*Estimated mortgage payments are based upon principle and interest only, and do not include taxes and insurance. Comparison given on the home without energy upgrades and then the home's savings after recieving an Energy Efficient Mortgage with energy upgrades. Value indicated here is for comparison only, and will vary from home to home.
*(Source: U.S. Department of Housing and Urban Development; URL: http://www.hud.gov/offices/hsg/sfh/eem/eemhog96.cfm.

     This example comes from a homeowner who refinanced using an Energy Efficient Mortgage. Significant amount of money right now was saved as well as in the distant future.  This customer also gets the great perk of installing energy efficient additions so that he can be more comfortable now. In addition, this individual's house is now on the competitive edge in the housing market. You can just imagine how much more money you could possibly save in a Green home that it's central purpose is to be energy efficient.  Recieving an Energy Efficient Mortgage is a win-win situation!!! You can't lose!!! In our next discussion, I am thrilled to be discussing more about "Green" Homes and how Energy Efficient Mortgages are the perfect fit for these house sales! Enjoy reading!!!

      Have a wonderful day,

                  John Lodise

What does the Green Mortgage Process look like?

2010-06-30T04:14:00.001-07:00

     Hello again on this beautiful summer day! Here is some pertinent information regarding an Energy Efficient Mortgage. We hope you benefit!

     When purchasing your energy efficient home, there are only a few simple steps that you will need to go through for the process to be complete. In fact, the process is the same as a conventional mortgage with one exception of have an energy audit (HERS) performed which is similar to a miles-per-gallon rating on a car. Basically, a HERS report provides the evaluations of an individual home’s energy-efficiency, which in turn will show you how much you’ll save.

     Once the purchase of your home has begun and the home inspection and property appraisal is complete, you can schedule your home energy audit. Order it as soon as possible so once these reports come back, the loan officer will finish the remaining paperwork which includes the application for the EEM and the energy audit report. Your lender then completes a two page Energy Addendum form to include with the rest of the loan paperwork. During the final step of the process, you will receive the amount of the savings that the energy efficient upgrades in your home will give to you each month and the total amount of your mortgage.

     Being an informed energy efficient homebuyer gives you peace of mind. As you can see the process of an EEM is quite simple! It is a positive option that will pay back dividends. Another benefit is that your stretched income to debt ratio allows you to receive more for your money! And the best part is that you do not need to put any extra downpayment on the mortgage than a conventional mortgage requires. It’s most exciting to know that a person who could not buy a “green” house because it was out of his or her loan limits, could indeed buy that house while enjoying the comfort, joy and savings of their super energy efficient house. Who wouldn’t want to go “green”?

     Goodbye for now,

              John

Doing things the right way

2010-05-20T11:20:00.000-07:00

I am so proud to be a part of The Bryn Mawr Trust Company.

BMTC is so unique in that we really take you by the hand and guide you through the mortgage approval process. The Team at BMTC REALLY cares about the Customer and we make the mortgage approval process as painless as possible in a few different ways:

1. We REALLY know our stuff!

2. We do all approvals in house - thus eliminating the constant need for "more information".

3. Most requests are finalized within ten days!

4. We have over 100 years committed to our community.

It's great to know that when I make a promise to a customer, it is backed up by my team at BMTC! To be a part of something special is unique and gratifying.

Speaking of something special, I am visiting with my friends at Three Groves EcoVillage this weekend. If you have not heard of them or what they are doing, please check them out at www.threegrovesecovillage.com. They are having a pot-luck Meeting at the West Grove Friends Meeting on Sunday May 23rd from 4:30 - 7:30. If you are dreaming of living in a sustainable society that is built under the guidelines of Platinum standard LEED certification, than you may want to join me! Let me know if you would like to attend. Remember - it's a pot luck meeting, so you'll need to bring a dish!

The Folks a Three Groves EcoVillage are doing things the right way...just as the Folks at Bryn Mawr Trust Company have been doing things the right way for over 100 years! You deserve a home that is built the right way and a mortgage that can help you settle in that home. If I can be of any service at all, please don't hesitate to call.

Until next time.....John

Types of Green Mortgages

2010-05-10T12:27:00.000-07:00

Hello and welcome back. If you had a chance to read my last blog, you learned a bit about what "green mortgages" are. In this post you will learn what different types are available. They are as follows:

Conventional Energy Efficient Mortgages

Conventional EEMs can be offered by lenders that sell their loans to Fannie Mae and Freddie Mac. Conventional EEMs will increase your purchasing power for buying an energy efficient home by allowing the lender to increase your borrowing income by a dollar amount equal to the estimated energy savings. The Fannie Mae loan adjusts the value of the home to reflect the value of the energy efficiency measures.

FHA Energy Efficient Mortgages
FHA EEMs allow lenders to add 100% of the additional cost of cost-effective energy efficiency improvements to an already approved mortgage loan (as long as the additional costs do not exceed $4000 or 5% of the value of the home, up to a max of $8000, whichever is greater). No additional down payment is required and the FHA loan limits won't interfere with the process of obtaining the EEM. FHA EEMs are available for site-built as well as manufactured homes.

VA Energy Efficient Mortgages
The Veterans Administration (VA) EEM is available to qualified military personnel, reservists and veterans for energy improvements when purchasing an existing home. The VA EEM caps energy improvements at $3000 - $6000. Borrowers should ask their lender about a VA EEM at the beginning of the lending process.

So this should give you a good idea about the types of Green Mortgages available. Please don't hesitate to call me if you think you qualify of if I may help you in any way.

Talk to you soon - John

Green Mortgages- Part 1

2010-04-22T13:41:00.000-07:00

Hello everyone and welcome to the first edition of John's Mortgage Blog. For my first topic, I want to address the "Green" mortgage. What is it, is it limited to new construction, who offers it and what are the benefits of a green mortgage are some of the questions I have received.

Here is part one in a series on this topic as referenced from the Energy Star Council.

What is an Energy Efficient Mortgage?

An Energy Efficient Mortgage (EEM) is a mortgage that credits a home’s energy efficiency in the mortgage itself. EEMs give borrowers the opportunity to finance cost-effective, energy-saving measures as part of a single mortgage and stretch debt-to-income qualifying ratios on loans thereby allowing borrowers to qualify for a larger loan amount and a better, more energy-efficient home.

To get an EEM a borrower typically has to have a home energy rater conduct a home energy rating before financing is approved. This rating verifies for the lender that the home is energy-efficient.

EEMs are typically used to purchase a new home that is already energy efficient such as an ENERGY STAR qualified home. The term EEM is commonly used to refer to all types of energy mortgages including Energy Improvement Mortgages (EIMs), which are used to purchase existing homes that will have energy efficiency improvements made to them. EIMs allow borrowers to include the cost of energy-efficiency improvements to an existing home in the mortgage without increasing the down payment. EIMs allow the borrower to use the money saved in utility bills to finance energy improvements. Both EEMs and EIMs typically require a home energy rating to provide the lender with the estimated monthly energy savings and the value of the energy efficiency measures — known as the Energy Savings Value.

EEMs (and EIMs) are sponsored by federally insured mortgage programs (FHA and VA) and the conventional secondary mortgage market (Fannie Mae and Freddie Mac). Lenders can offer conventional EEMs, FHA EEMs, or VA EEMs.

Next time I will discuss the different green mortgage programs that are available. I hope you enjoy reading my blog and would appreciate your passing it along!

Take care - John.