Getting A Proper Rate Quote Is Important!

May 1st, 2012 |  Mortgage Rates, Home Loan Information, corona home loans, Getting A Proper Rate Quote Is Important!

Getting A Proper Rate Quote Is Important!

Mortgage rates can be very complex.  It doesn't matter if you're looking for a home loan in Corona, Newport Beach or anywhere between!  They can change several times a day. Yes – mortgage rates can increase and decrease multiple times on any given day.  Rates can, at times, be difficult to predict and just as difficult to properly quote.

Ensure All Things Are Equal

Here are some questions to consider asking:

• What type of loan are you offering? (30 yr., 15 yr., etc.)
• Is this a fixed rate or an adjustible rate loan?
• Can you show me a list of closing costs associated with this loan?
• Will you be paying for any closing costs?
• If you will be paying for closing costs, how much do I need to bring in to close the loan?
• Will any costs or fees be placed on top of the home loan?
• How much are you making on my home loan?
• Is there a Yield Spread Premium and if so, what is it?

Here's Why

You can’t compare a 15 year fixed rate loan with a 7 year interest only loan.  They are completely different home loans with completely different rates and pricing.  Where did you hear about the rate – from an ad?  Rates you may have heard about on the radio, seen on television or read in the paper are often several weeks old (at least) and many are teaser rates (an introductory rate which is extremely low and will adjust) offered to gain interest.  I’ve seen the same television ads offering the same rates run for weeks!

As I’ve said before, rates change.  A three week old mortgage rate advertisement will most likely be useless.  Again, make sure all things are equal.  Ask questions – if a loan officer is hesitant to answer any question in a straight forward manner, consider walking away!  You do not want to be in the middle of escrow when everything starts falling apart!

How Do I Stay Current With Mortgage Rates?

First off, it’s my job to stay current on rates.  That’s one of the very basic requirements associated with my job.  If I didn’t stay current on rates I’d run out of business real quick! Here’s how I stay current:

• I receive wholesale mortgage rate sheets from numerous lenders daily (first thing in the morning)
• I receive updates throughout the day anytime a rate changes
• All rate changes are updated directly to my smart phone
• I use a software program that allows me to see mortgage rates from each lender we utilize in a “real time” fashion
• I subscribe to a mortgage rate alert program that keeps me updated on the latest mortgage market trends which allows me to see when mortgage rates are heading up or down.

These tools have proven to be very effective.  I will continue to say – It’s my job to stay current on the mortgage market!  Contact me anytime for a free, no-obligation rate quote! 

Mortgage Rates - How They Work

April 29th, 2012 |  Mortgage Rates, Home Loan Information, Mortgage Rates - How They Work

Mortgage rates can be very complex and very easy, all in the same day!  The reality is this – Not too many home buyers understand how mortgage rates really work. Who can blame them?  Look at the large number of mortgage rate advertisements out today.  Television, radio and newspaper ads; all claiming the same thing.  Do any of these sound familiar?

Rock-bottom pricing - Lowest rates around - We beat any rate, guaranteed - We pay closing costs - Best mortgage rates around - No cost to you - And the list goes on and on……..

How are they sure they can get you the best rate?  What exactly is “the best rate”?  Do they know your credit score?  Do they know if you’ve been late on any payments?  Do they have any idea what your debt to income is?  The simple fact is – they don’t know!  They have one goal in mind – To get you to call….That’s it…just call!  Once you’re on the phone they can “wing it” the rest of the way.  In other words, they’ll worry about the “other stuff” later.  How can they do this?  One word….Assumption (at the bottom of every ad in small print).

Simply put - A company will ”assume” that you will meet a certain loan criteria in order for you to receive the advertised rate.  Most consumers, however, do not meet the stringent loan criteria, but hey, they got you to call!  Here’s an example of an assumption:

30-Year Fixed-Rate Mortgage: This rate is based on a $300,000 30-year Fixed Rate Loan at 3.99% and 70% loan-to-value (LTV) with 1.375 points due at closing.  The Annual Percentage Rate (APR) is 4.154%.  Payment does not include taxes and insurance premiums.  The actual payment amount will be greater.  Some state and county maximum loan amount restrictions may apply.  Minimum 740 FICO.

If there is anything different than what’s assumed above, the rate advertised is no longer an option!  It’s no wonder why many get confused and frustrated.  Look at the assumption, how many homebuyers can put 30% down on a new home?  How many buyers have a 740 FICO score?  I could go on and on asking questions…..It’s ridiculous!

Let Me Simplify This!

I’ll start with the very basics on how mortgage rates work.  Mortgage interest rates are based primarily on Mortgage Backed Securities (MBS). Short version - MBS are fixed-income investments that generate interest revenue through pools of home loan mortgages.  Mortgage loans are grouped together and sold to Fannie Mae, Freddie Mac, or other investors in the secondary mortgage market, who in turn securitize the loans.  They are used as collateral for the bonds they issue.  Investors buy and sell these bonds.

Generally speaking, if bonds sell low, mortgage interest rates rise.  If bonds sell high, mortgage interest rates fall.  Mortgage rates are often based on a reflection of the markets.  They can change several times a day.  Just like stocks and bonds go up and down, so goes the mortgage rates.  There is a little more involved when it comes to interest rates, but we can visit that another day!  What this means:

Banks, mortgage brokers and mortgage bankers do not set mortgage rates. They set pricing on the rates.

Now that we’ve got that out of the way let’s move on.  I would like to show you a few other things that can affect your mortgage rate and hopefully help you out along the way.

Although mortgage rates are based on MBS, there is room for individual difference.  In other words, will you qualify for a 4.5% or 4.75% rate?  This is where you can help yourself.  Your individual mortgage rate will be primarily determined by your income, job history and credit history.  Here are a few things that may help you obtain a better individual mortgage rate:

• Job stability (How long have you been employed? Any gaps of unemployment?)
• Credit history (Have you displayed a responsible pattern of paying off debt?)
• Credit score (Do you have a solid credit score?)
• Monthly income (This will help determine your debt to income ratio)
• Cash reserves (How much cash do you have available for this transaction?)
• Current debt (Do you have a $700.00 car payment?)
• Bankruptcies (Are there any bankruptcies, liens, short sales or foreclosures in your past?)
• Closing costs and fees (Can you afford the costs associated with this transaction?)

As you can see, there are many factors that are involved with mortgage rates.  Some things you have no control over (unemployment rate, secondary mortgage market, inflation, etc.) and other things you may be able to help yourself with.  I can’t stress enough the importance of working with a licensed professional.  I realize it may seen overwhelming, but this is what I do everyday.  I’m here to walk you through the entire process; from loan application to loan funding!  I put alot of work into understanding how mortgage rates work.  I understand how important it is to you.  It’s not something I take lightly and neither should you!

If you have any home loan questions, or would like a mortgage rate quote please contact me!  I can be reached by email at Rich@RichConley.com or by phone at 951.588.LOAN.  I will respond in a timely manner! 

What Is A HomePath Mortgage?

February 16th, 2012 |  Home Loan Information, What Is A HomePath Mortgage?

When you’re driving around the neighborhood looking for that perfect home to buy I know your eyes are immediately drawn to every single “For Sale” sign standing! Even if it’s halfway down the block you just passed! I remember those days. I always enjoyed driving around with my wife looking at nothing but potential! Great times indeed! Here’s my question: Did you ever notice a smaller sign at the top the reads something like this:

“HomePath Mortgage – low down payment, flexible mortgage terms, no lender-requested appraisal and no mortgage insurance”.

Here’s why I’m asking. Lately I’ve noticed quite a few Homepath Mortgage signs attached to the “For Sale” signs. The advertising is always positive and promising. I thought it’s time I explain the basics of what a Homepath Mortgage is; and is not.

A Homepath Mortgage approved property means that Fannie Mae owns the loan. Because Fannie Mae owns the loan they are in a position to offer certain incentives to a potential buyer of that property. Some of the incentives are:

• Low down payment and flexible mortgage terms (fixed rate, adjustable rate, or interest only).
• Down payment of at least 3% and can be funded by the borrower’s own savings, a gift, a grant, or a loan from a nonprofit organization, or employer.
• No lender requested appraisal required.
• No mortgage insurance required.
• Expanded seller contributions for closing costs allowed.
• Available for primary residences, second homes and investment properties.
• Many condo project requirements are waived.

These are great benefits for any potential home buyer – Now let’s dig deeper on what this really means. Fannie Mae, although offering these benefits, does not provide financing. (The Federal National Mortgage Association, commonly known as Fannie Mae, was founded in 1938. It’s purpose is to expand the secondary mortgage market by securitizing mortgages in the form of mortgage-backed securities (MBS), which allows lenders to reinvest their assets into more lending and in effect increase the number of lenders in the mortgage market).

What does this mean? Fannie Mae is merely “allowing” their loan to be purchased in a “less restrictive” manner. Well what does that mean? You still have to get out there and find a lender who is willing to give you a loan within the guidelines Fannie Mae is allowing!

This is about the point that a potential home buyer begins to get stressed. So please, continue reading! I promise I will make it a little easier!

There are many lenders out there who participate in the Homepath Mortgage program. (I happen to be one of them!). That’s not a problem. The problem (or confusion) starts with what many banks call “overlays”. Overlays are nothing more than bank guidelines above and beyond what Fannie Mae has agreed to. The banks position is it’s their money so they can add additional guidelines when warranted to protect their assets.

Assuming you’ve found a lender who participates in the Homepath Mortgage program, you now need to find out what, if any, overlays they have regarding this program. I know certain lenders have certain overlays. I will give you an example or two.

Example: Fannie Mae indicates that you need as little as 3% down. A lender, on the other hand, may require 5% down.

Example: Fannie Mae indicates that you may qualify with poor credit. Each lender may have a different view of what poor credit is. For some, you may need a 640 FICO score while others may require a 660 FICO score. Some may not want to see any late payments on rent or mortgage for 12 months while others may be fine with a 6 month history.

Are you seeing the trend?

Example: The Homepath Mortgage, according to Fannie Mae, does not require mortgage insurance. Lenders may offer (require) a “blended rate”. Technically you do not have mortgage insurance but you may, however, receive a higher interest rate which will help offset the costs should you stop paying the loan – Kind of like mortgage insurance! Remember, the banks need to make sure they are covered as much as possible. It’s not rocket science!

I hope you are starting to see the picture. There is nothing wrong with this program. I just want you to know what to look for. Take full advantage of this program, just know what the rules are!

My parting words: This article was nothing more than an attempt to inform you of some very basics. I would encourage you to visit the Homepath website at http://homepath.com  for additional details.

If you have any questions concerning this program or any other home loan program please feel free to contact me anytime!

Questions I Would Ask My Loan Officer

January 19th, 2012 |  Home Loan Information, Questions I Would Ask My Loan Officer

Today, I decided to write about questions.  Questions I would ask my loan officer.  Questions I should have asked my loan officer but either didn't know or was to embarrassed to ask.  Ask and ask again.  While a mortgage loan officer will ask you quite a few questions in order to obtain information for a home loan, there are critical questions you should ask the loan officer as well.  Doing your research, asking the questions, and taking the time to understand the mortgage loan you are being offered will result in a smoother transaction.  Here are just a few questions I would ask my loan officer:

Are you licensed as a mortgage loan officer?

New laws require all mortgage loan officers to pass background checks and maintain licensing with the National Mortgage Licensing System and the Department of Real Estate.   

When are you available?

Can I call you anytime or only during "normal working hours". 

How long will it take you to pre-qualify me?

How long does it take for the loan officer to pre-qualify the client and issue a loan status report? 

What is the estimated time-line to close my loan?

Loans are often closed within 30 - 45 days of escrow being opened.  Missing paperwork, application mistakes, appraisal scheduling and underwriting issues can result in delays.

What is the rate and terms of my loan?

Each loan is unique.  Fixed rate, adjustable rate and interest only are just a few of the many loan products out there.  Be absolutely sure you know the type of loan along with other important things such as balloon payments, pre-payment penalties, etc.

What will my closing costs be?

Closing costs very and can be handled in several ways.  Ensure your loan officer is capable of explaining all closing costs to you.  If you don't understand, keep asking.

Which type of loan is the best?

Your loan officer should ask you several questions before offering advice or suggesting a home loan that’s right for you.  Be cautious if they continue to push a certain type of loan when it just doesn't make sense.

Can you explain the Good Faith Estimate?

This form can look complicated.  A lot of numbers and they all have a dollar sign!

These questions were pretty basic but needed.  I think I will dig a little deeper on my next blog.  I think I'll provide some questions you can ask that some loan officers, direct lenders and banks don't want to answer!  It should be pretty good!

Have a great day!
Rich Conley - MLO