Archives for October 2012

Give yourself a raise: Refinance!

About three years ago, I helped a couple buy their first home. They were my first clients to lock in at 4.500%. I remember sitting across the table from them at a coffee shop in West Seattle and telling them that they would probably never need my services again since their rate was so low. I was wrong.

We are refinancing their mortgage of $359,000 into another 30 year fixed rate at 3.375% (apr 3.544) with net closing cost of $1145.  They are reducing their monthly mortgage payment by $418! That’s a significant amount of savings to put back into their household to pay off revolving debt, build savings or retirement or help fund a college account.

They could even take that $418 and apply it towards additional principal, making the same payment they have been for the past three years while whittling seven years off of their new mortgage. This would save them $67,000 over the life of the loan.

My point is that mortgage rates are extremely low. Even if your current rate is 4.5%, it may very well make sense to refinance.

If your home is located in Washington state and you would like me to provide you with a written rate quote, click here.

Comparing Closing Cost

Sometimes I see quotes from competitors that befuddle me. This morning, a home owner in Maple Valley asked me to review their FHA streamlined refinance quote that they received from a big bank.

The great big bank not only has a much higher interest rate, their closing cost are more expensive too. In fact, when I review the closing cost, it makes me wonder if the loan officer has originated many FHA loans.

Here are the bank’s closing cost for an FHA streamline refi…

Bank FHA
Big Bank’s Closing Costs

…and there’s only a $10 closing cost rebate with an interest rate that is 0.5% higher than mine! 

Compare this to my closing cost (BELOW), which are covered with a rebate credit (which also pays for my clients prepaids and reserves). 

My closing cost
My closing costs

I really don’t understand how our quotes could be so far apart…but you can see, they are. Many consumers would trust their bank would provide the most competitive rates and closing cost. The quotes I’m looking at today illustrate this isn’t always true. If this Maple Valley homeowner did not shop his rate quote and only trusted his big bank, he would be paying a much higher rate over the life of the loan and overpaying in fees. 

Yet those in Congress feel that mortgage originators who work for banks can be held to lower standards per the SAFE Act. Remember, bank mortgage originators are not required to be licensed, they are only registered. I recently met a nice loan officer who works for a different big bank and who presented herself to be NMLS licensed, when I asked her directly if she was “registered” or “licensed” she did correct herself. Believe me, there is a  difference.

If you are considering refinancing or buying a home anywhere in Washington state and have a rate quote from another lender or bank, I’m happy to review it to see if I can offer a better rate and/or lower closing cost. Send me an email with a pdf of the rate quote you would like me to review. Remember, I can only help with homes located in Washington state, where I’m Licensed to originate mortgages.

Mortgage Rate update for the week of October 8, 2012

Happy Columbus Day! Bond markets are closed in observance of this holiday.  

Here are a few of the economic indicators scheduled for this week that may impact mortgage rates:

Wednesday, October 10: Beige Book

Thursday, October 11: Initial Jobless Claims

Friday, October 12: Producer Price Index (PPI); Consumer Sentiment (UoM)

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Mortgage loans and the first Presidential Debate

Did you watch the Presidential debate last Wednesday?  At one point, President Obama and Mitt Romney discussed regulations that are impacting getting a mortgage – namely: Dodd Frank. When you hear media discussing that some borrowers are  having a difficult time qualifying for a mortgage or that the process is cumbersome, odds are it’s regulations like those you’ll find in Dodd Frank that are the cause. 

Here’s a bit from the debate:

President Obama:

…the reason we have been in such a enormous economic crisis was prompted by reckless behavior across the board. Now, it wasn’t just on Wall Street. You had…loan officers…giving loans and mortgages that really shouldn’t have been given, because they’re — the folks didn’t qualify. You had people who were borrowing money to buy a house that they couldn’t afford. You had credit agencies that were stamping these as A-1 (plus) great investments when they weren’t. But you also had banks making money hand-over-fist, churning out products that the bankers themselves didn’t even understand in order to make big profits, but knowing that it made the entire system vulnerable.

So what did we do? We stepped in and had the toughest reforms on Wall Street since the 1930s. We said you’ve got — banks, you’ve got to raise your capital requirements. You can’t engage in some of this risky behavior that is putting Main Street at risk. We’re going to make sure that you’ve got to have a living will, so — so we can know how you’re going to wind things down if you make a bad bet so we don’t have other taxpayer bailouts.

Mitt Romney:

Let me mention another regulation of Dodd-Frank. You say we were giving mortgages to people who weren’t qualified. That’s exactly right. It’s one of the reasons for the great financial calamity we had. And so Dodd-Frank correctly says we need to… have qualified mortgages, and if you give a mortgage that’s not qualified, there are big penalties. Except they didn’t ever go on to define what a qualified mortgage was… 

It’s been two years. We don’t know what a qualified mortgage is yet. So banks are reluctant to make loans, mortgages. Try and get a mortgage these days. It’s hurt the housing market…because Dodd-Frank didn’t anticipate putting in place the kinds of regulations you have to have. It’s not that Dodd- Frank always was wrong with too much regulation. Sometimes they didn’t come out with a clear regulation.

Read the full transcript of the Presidential Debate courtesy of NPR.

I was actually surprised to hear “qualified mortgages” (also referred to as QRM or qualified residential mortgage) brought  up in the debate. Banks have been waiting for the definition of what constitutes a QRM for some time. One of the biggest concerns is if the government uses loan to value (how much down payment or home equity) to qualify as a QRM

It’s quite possible that in order for a mortgage to be classified as a QRM, a home buyer may have to come up with 10 or even 20% down payment when they’re buying a home. I would imagine that mortgages that fall outside of the QRM criteria will have much higher rates to compensate for the risk that bank will be taking. First time home buyers or those without larger down payments (assuming loan to value is one of the factors) will be penalized. Obviously this would not help the housing market’s recovery nor help our economy.

The Center for Responsible Lending reports:

QRM mortgages requiring a 10% down payment would lock 40% of all creditworthy borrowers out of the market. A 20% down payment would exclude 60% of creditworthy borrowers.

In my opinion, it’s time to move forward with common sense underwriting. We don’t need the government creating underwriting guidelines for those who are wanting to buy or refinance their home (the flaws with “net tangible benefit” requirements illustrates this).

Stay tuned…

APR is not the best tool for shopping mortgage rates

MortgagePorter-APRAPR was created by our government to help consumers select a mortgage rate. It was intended to be a tool that would allow someone to simply compare various mortgage scenarios and shop mortgage lenders for the “best rate” at the lowest cost. Unfortunately, APR is probably not providing an accurate view of what the true cost of the mortgage, whether it’s for a home purchase or refinance, is. [Read more…]

Mortgage rate update for the week of October 1, 2012

mortgageporter-economyI cannot believe it’s October, can  you? Perhaps it’s our extended summery weather we are experiencing in Seattle. This being the first week of a month means that we have the Jobs Report being released this Friday. The Jobs Report tends to impact mortgage rates as it indicates how the economy is doing and the potential for wage inflation. It is anticipated that 120k jobs were added last month – we’ll see how the numbers pencil out on Friday when September’s Jobs Report is released. Wednesday is loaded with both the ADP National Employment Report and the release of the FOMC minutes.

[Read more…]