Wow. The last 2 weeks have been crazy! A tremendous number of inquiries and lots of people taking advantage of the lower rates. I have seen banks below 4% for the first time in my 10 years in the business and from all indications, these are the lowest rates in history.
Anyone who has a mortgage rate of 5%, regardless of the type of loan it is, has the ability to save money on a monthly basis. But its crucial to make try and check every aspect of your deal before submitting your file to the bank. Here are some things that you must think about prior to submission:
1. Type of property- If its a single family home, then its simple. If its a co op or a condo, make sure the building is checked. Just because the bank did a loan in the building 2 months ago, does not mean the building is still approved.
2. Income, assets and credit- Everyone should know this one. Make sure you meet the credit and debt ratio requirements of the bank.
3. Home value- With values continuing to fall, you must be careful and try to assess the value as best you can prior to the appraisal. Federal law no longer allows the appraisal to be ordered before you submit your file to the bank. A law that I believe has hurt the real estate market. Too many people have spent money on an appraisal only to find out the value isnt there and the refinance dies.
If you are thinking about refinancing, now is the time to do it because short of a tax cut, there is no better way to put money in your pocket. Just make sure you have done your homework with an experienced loan officer before moving forward.
Friday, August 19, 2011
Friday, August 5, 2011
Mortgage rates are down. Refinance activity up
I must say that I am really starting to love twitter. The instantaneous information is terrific but the downside is that its quite hard to make coherent statements in 140 letters. Thank goodness for the blog.
Unless you have been under a rock for the last 10 days, you know that the stock market has tanked. You probably also know that mortgage rates have come down. The typical rule of thumb is that when the stock market declines, there is a flight to safety to bonds and that causes mortgage rates to go down. Talk about the definition of mixed emotions! We are seeing 30 year fixed rates at about 4.125% for a conforming loan and 4.875% for a jumbo. Adjustable rate mortgage are just at obscene numbers. 5 year ARMs in the low 3% range and in some cases, below 3%. Even a 10 year ARM is at 4%.
Several months ago, we actually saw the 30 year fixed below that at 4% and it was always my contention that if it ever hit 4%, there would be a massive refinance boom in which the whole world would take lower rates and put money in their pocket. Well, I was wrong on that one. I will explain that in a bit. Some thought the purchase market would take off and get those that were on the fence, off it. I thought that to be total hogwash and on that one I turned out to be right. My feeling was and is that people prioritize what's important. Will I have my job in 3 months? Will I get a bonus this year? How will I pay for my kids college education? A lower interest rate simply is not enough incentive to overtake the other questions and jump in and buy.
Let's get back to the qyuestion as to why people didnt refinance when the rates hit 4%. I think the answers may tell us why it might not happen again:
1. Much tougher underwriting guidelines knocked many out of the box. Although the financial pedigree may be good, there is a line the banks will no longer cross and too many people were sitting on that line.
2. Many people already had rates in the low to mid 5's because they either bought when rates were really good or they refinanced between 2002 and 2004 when the rates were just as good.
3. Declining home values knocked so many people out of the box. Think about it simply. Many, many people bought their homes with 20% or less as a down payment. Now, values are down 20% to 30% in some cases through no fault of their own. So you start the refinance application and when the house is reappraised, you are hit with a lighting bolt. The house you bought in 2006 for $600,000 with a mortgage of $480,000 is now valued at $500,000. Your loan to value just went from 80% to 96%. That's when you get a disturbing phone call from your loan officer telling you that the loan won't close.
4. Condominium and co op building approval guidelines have gotten much tougher. I can't tell you how many people I turned away because I couldnt even take them back to the same bank only months after the purchase. The argument that they would use with me was sound-"I don't understand. The bank did my loan and approved the building 6 months ago. Why in the world would they say no now?" It wasnt even a question of being qualified because they all were. It was that the building no longer met the guidelines.
So where will rates go? Will they go below 4%? Don't know but I am getting a lot of inquiries. Here is the best advice I can give when rates start to plummet:
Unless you have been under a rock for the last 10 days, you know that the stock market has tanked. You probably also know that mortgage rates have come down. The typical rule of thumb is that when the stock market declines, there is a flight to safety to bonds and that causes mortgage rates to go down. Talk about the definition of mixed emotions! We are seeing 30 year fixed rates at about 4.125% for a conforming loan and 4.875% for a jumbo. Adjustable rate mortgage are just at obscene numbers. 5 year ARMs in the low 3% range and in some cases, below 3%. Even a 10 year ARM is at 4%.
Several months ago, we actually saw the 30 year fixed below that at 4% and it was always my contention that if it ever hit 4%, there would be a massive refinance boom in which the whole world would take lower rates and put money in their pocket. Well, I was wrong on that one. I will explain that in a bit. Some thought the purchase market would take off and get those that were on the fence, off it. I thought that to be total hogwash and on that one I turned out to be right. My feeling was and is that people prioritize what's important. Will I have my job in 3 months? Will I get a bonus this year? How will I pay for my kids college education? A lower interest rate simply is not enough incentive to overtake the other questions and jump in and buy.
Let's get back to the qyuestion as to why people didnt refinance when the rates hit 4%. I think the answers may tell us why it might not happen again:
1. Much tougher underwriting guidelines knocked many out of the box. Although the financial pedigree may be good, there is a line the banks will no longer cross and too many people were sitting on that line.
2. Many people already had rates in the low to mid 5's because they either bought when rates were really good or they refinanced between 2002 and 2004 when the rates were just as good.
3. Declining home values knocked so many people out of the box. Think about it simply. Many, many people bought their homes with 20% or less as a down payment. Now, values are down 20% to 30% in some cases through no fault of their own. So you start the refinance application and when the house is reappraised, you are hit with a lighting bolt. The house you bought in 2006 for $600,000 with a mortgage of $480,000 is now valued at $500,000. Your loan to value just went from 80% to 96%. That's when you get a disturbing phone call from your loan officer telling you that the loan won't close.
4. Condominium and co op building approval guidelines have gotten much tougher. I can't tell you how many people I turned away because I couldnt even take them back to the same bank only months after the purchase. The argument that they would use with me was sound-"I don't understand. The bank did my loan and approved the building 6 months ago. Why in the world would they say no now?" It wasnt even a question of being qualified because they all were. It was that the building no longer met the guidelines.
So where will rates go? Will they go below 4%? Don't know but I am getting a lot of inquiries. Here is the best advice I can give when rates start to plummet:
- Don't have paralysis by analysis. If you like the rate you are quoted, take it. Overanalyzing will do you no good.
- Don't get greedy. You may wait because you think rates will continue to fall but you are taking a risk.
- Be prepared to strike at a moments notice. If you are interested in refinancing, contact your loan officer and ask them to prepare a package for you ahead of time.
- Getting loans to the bank and closed is much more laborious than it used to be. Be prepared to be efficient but have patience once the loan is submitted.
Monday, August 1, 2011
How to make the mortgage process a pleasant one
My father taught me a long time ago that you cannot do a job properly unless you use the right tool. At the time, I pondered the statement and finally said to myself "no duh"! It wasn't until I got older, went into the workforce, got married and had children that I realized this wasn't just a simple saying but rather one that could be applied to all aspects of life. In my case, the mortgage business and for me, the right tool is infomation. Who needs this information? The borrower, the real estate agent and the attorney.
Information that the borrower needs:
1. How much can I afford?
2. Do I have the proper down payment funds?
3. What are my closing costs?
4. Whom am I allowed to get a gift from?
5. Where are current rates?
6. Is a fixed rate or ARM product best for me?
7. What are the steps in the process?
8. What is my monthly payment?
Information the real estate agent needs:
1. Is my borrower qualified?
2. Is the co op or condo nuilding I want to show the potential buyer a viable one?
3. Do they have the post closing reserves to meet the requirements of the board?
4. Can the borrowers afford the house I want to show them?
5. Can my buyers buy the house before they sell their current one?
Information the attorney needs:
1. When will we receive the commitment letter?
2. Are there any conditions in the commitment that are of concern?
3. When will the appraisal be ordered?
4. When will the bank be ready to close?
Closing a loan these days feels like trying to coordinate the Super Bowl. Understanding that, the proper tool to achieve the goal is information and processing it properly. Just think about this-how many times have you called someone needing a price quote or information necessary to get a job done and not received a phone call back? Or, received a phone call after days or weeks? If you have the same experience as me, it happens all the time. Frankly, it amazes me how some people stay in business and thrive. delivering quick and efficient information is the key to a pleasant mortgage experience for al involved.
Information that the borrower needs:
1. How much can I afford?
2. Do I have the proper down payment funds?
3. What are my closing costs?
4. Whom am I allowed to get a gift from?
5. Where are current rates?
6. Is a fixed rate or ARM product best for me?
7. What are the steps in the process?
8. What is my monthly payment?
Information the real estate agent needs:
1. Is my borrower qualified?
2. Is the co op or condo nuilding I want to show the potential buyer a viable one?
3. Do they have the post closing reserves to meet the requirements of the board?
4. Can the borrowers afford the house I want to show them?
5. Can my buyers buy the house before they sell their current one?
Information the attorney needs:
1. When will we receive the commitment letter?
2. Are there any conditions in the commitment that are of concern?
3. When will the appraisal be ordered?
4. When will the bank be ready to close?
Closing a loan these days feels like trying to coordinate the Super Bowl. Understanding that, the proper tool to achieve the goal is information and processing it properly. Just think about this-how many times have you called someone needing a price quote or information necessary to get a job done and not received a phone call back? Or, received a phone call after days or weeks? If you have the same experience as me, it happens all the time. Frankly, it amazes me how some people stay in business and thrive. delivering quick and efficient information is the key to a pleasant mortgage experience for al involved.
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