A Good Faith Estimate is Not a Commitment

March 18, 2008 by 2 Comments

It’s very important to know that when you receive a Good Faith Estimate from any loan originator, it is not an offer nor is it a commitment to lend.  It concerns me when I’m dealing with a rate shopper (especially in a volatile market where rates may drastically change 3-5 times a day) and they are going to select who handles their mortgage transaction by the good faith estimate.  Here’s a quote from an email I recently received that prompted me to write this post:

"We do appreciate all your kind attention and the fine offer you made to us."

This couple had contacted for the past few months while shopping for homes requesting good faith estimates.  I appreciate that they were upfront with me by letting me know they were receiving quotes from someone else as well.  Depending on the day (actually the time of the day) the quote was prepared, they may have actually selected a lender who is quoting a higher rate than I would have.   Fact is, I only provided them good faith estimates when they requested them; I never provided them any "offers" or "commitments".

A Good Faith Estimate is a detailed interest rate quote for that moment (unless the LO doesn’t track the markets and is simply going off the morning "rate sheets") with the closing costs associated with that rate.  I’m actually considering adding a time/stamp to my GFE’s when I send them just because rates are changing that often (for better or worse) in this climate.

A Good Faith Estimate is not a guarantee of interest rate or closing costs.   In fact, the rate may all ready be different, or the cost to obtain the rate (higher or lower) by the time it’s been created and delivered to the borrower.  Make sure you receive a Lock Commitment from your lender and ask them to guarantee their closing costs.  As a matter of fact, certain situations may cause your rate or closing costs to change from the lock and/or good faith estimate, such as:

  • Appraised value – LTV (higher or lower than estimated)
  • Change in employment
  • Credit scores not what estimated prior to quote.
  • Closing time extended beyond the lock period.

If we have a change to cost (perhaps the appraisal cost less or the LTV is lower than expected changing the loan amount or cost for the rate) I will provide an updated Good Faith Estimate.

My last little bit of advise for you is (if you’re still insisting on shopping lenders by rate) to see if your lender offers a one time interest rate "float down" should the rate improve by more than 0.125%.   This provides you with a ceiling that your rate will never go higher than "x" and allows you to receive the benefit of a lower rate should they improve more than 0.125%.

Just because you have received a GFE from a lender, does not mean that you are qualifed for the mortgage.   It really just means that the lender is quoting this rate with those closing costs on that moment of the day.  Rates are a moving target, and without a lock–it’s just a quote.

Filed Under: Interest Rates, Mortgage

Qualify a Loan Originator with this One Simple Question

February 27, 2008 by Leave a Comment

How do you track mortgage rates?

If the person who will potentially helping you obtain a mortgage answers:

“I get rate sheets in the morning and later if they change during the day.”

Run!  Anyone who is gauging interest rates by when lenders issue new rate sheets is behind the market.  The rates have all ready adjusted.

“I watch CNBC (or something along those lines) and keep tabs on how the 10 Year Note is performing.”

Wrong again.  Mortgage interest rates are not based on the 10 year note.  However you will hear the media and other professionals incorrectly state this is what rates are based on.  If you or your loan originator are tracking the 10 year based on when to lock, it will cost you.

The correct answer:

“I keep a close eye on mortgage backed securities.  I am committed to my mortgage practice and this is why I subscribe to a service (such as Mortgage Market Guide) which allows me to do so.”

Now here’s my question for you:

If you are working with a Loan Originator who is not dedicated to their practice enough to subscribe to a service that allows them to track mortgage backed securities or (even worse) who does not know or care to track what influences mortgage rates: WHY?

Filed Under: Interest Rates, Mortgage

Bait and Switch Mortgage Rate Advertisements

February 26, 2008 by 4 Comments

EDITORS NOTE: Please notice this post is from February 2008! Wachovia is gone, 5.5% isn’t a great rate “right now” and I no longer publish rates at Rain City Guide or weekly here at Mortgage Porter. It simply takes too much time. I’m happy to provide your personal rate quote for your home located in Washington.  10/16/11.

Nommag72008

Bait and switch is when a consumer is offered something tempting (bait) that is no longer available and then they are offered something else (switch).   I see this over and over again when lenders of all types promote rates in main steam media such as the radio, print ads, bill boards, television…you get the picture.

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Filed Under: Interest Rates, Predatory Lending, Rant

The Trigger Finger on Mortgage Interest Rates

February 19, 2008 by 1 Comment

TriggerfingerVolatile times with our economy are giving lenders an itchy trigger finger when it comes to issuing rate sheets.  Just today, one of the lenders we work with issued 4 different rate sheets with various price change.

Lenders are just simply jumping at the bit…if you look at them cross-eyed they will issue a new rate sheet. It makes for very interesting times for Loan Originators when you’re trying to lock in a rate that you have just told a borrower is available.   During a rate change, many bank systems will hold or freeze during the change and you have to wait until the change is complete before you can see how it will impact you.  Those few minutes are enough to drive you crazy and you’ll will either be a hero to your client or not after the rate change takes place.

These days, several rate changes are the norm and not the exception.   Consider this, based on the last 30 days with a conservative lender who only offered two rate changes today (vs. the four another lender did today):

  • Days of daily rate sheet without changes in last 30 days: 7
  • Days with two intra-day price changes for a specific day within the last 30 days: 10
  • Days of three intra-day price changes for a specific day within the last 30 days: 5

A lender with a trigger finger can work in your favor when rates are improving.  Even better, a Mortgage Professional who works with several resources, such as a mortgage broker or correspondent lender, may be in your very best interest.

More drama is on the slate for tomorrow for mortgage interest rates with the CPI being released…stay tuned!

Filed Under: Interest Rates

Don’t Ask at the Signing Table “How’s My Rate?”

February 9, 2008 by 1 Comment

I just read a great post by S-Crow at Seattle Bubble about his frustrations over the rates he sees when he’s signing clients at his escrow company.   I relate since before April Fools 2000, I was in the title and escrow industry for 14 years and often times, at signing, borrowers ask something along the lines of “How is my rate?”

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Filed Under: Escrow and closing, Interest Rates

Tomorrow Morning I’ll Either Look Like a Hero or a Zero

February 6, 2008 by 3 Comments

Hero

Just before 5 tonight I provided a Good Faith Estimate along with a Total Cost Analysis comparing four price points for a 30 year fixed rate purchase closing at the end of March.   You see most lenders are not allowing locks to take place “after hours”; you have to wait until the markets re-open in the morning.  This home buyer is still shopping rates with various lenders and so when she calls them tomorrow, my estimate is either going to look outstanding because rates have increased (and I won’t be able honor it since it’s not locked tonight) or I’m going to look like a mooch with higher rates because the market has improved.  Unless rates are unchanged, the rate on my good faith estimate is worthless.

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Filed Under: Interest Rates, Mortgage, Residential Purchase

Join the Mortgage Porter Rate Watch

February 2, 2008 by 2 Comments

UPDATE:  Sadly the service that I used to provide this (Mortgage Coach) no longer offers this program. HOWEVER, Mortgage Master Service Corporation has added a new program which watch mortgage rates and email an alert once we have reached your target rate.  I still adopt mortgages and help Washington home owners with refinances…I’m just not able to provide the report. 

A few months ago, I wrote about adopting mortgages for borrowers who have adjustable rate mortgages and who do not have a Mortgage Professional to assist them.  If you have not heard from your Loan Originator since your transaction closed, or even within the last few months, they either

  1. Are no longer in the mortgage industry originating mortgages, or
  2. Do not have a “post closing” system designed to help home owners stay informed about their mortgage, and
  3. Only care about originating and not what happens to borrowers afterwards.

Perhaps your Loan Originator has you on their mailing and email list and you’re just not that impressed with the level of service they offered you…you want to make a move.

Consider having your mortgage adopted by a Mortgage Professional you trust.  I personally enjoy adopting mortgages for Washington State families.   It’s a FREE service and more often than not, the current rate is fine for the family (no refinance is required).   At least the home owner knows that they have a Mortgage Professional who is watching out for them.   Refinancing a mortgage, when it makes sense, can save hundreds of dollars each month that can either be invested into savings, used to pay off debts or applied towards the principal of the new mortgage to shorten the term and reduce interest.  Bottom line, it saves home owners money and if the home owner is going to retain the mortgage long enough to break even, it’s almost crazy not to do it.   (It’s also crazy to refinance when their is no financial benefit).

I can tell many home owners do not have relationships with their loan originators because of the amount of rate quote request I receive from all over the country.  Currently, I can only help people with mortgages in Washington State (if you’re outside of Washington, I’m happy to refer you to fellow Mortgage Professionals).   

If you would like me to adopt your mortgage and add you to my rate watch, send me the following information:

  • Your Full Legal Name(s)
  • Property address
  • Estimated value of the property
  • Current mortgage balance(s)
  • Estimated credit score
  • Your email address/phone number (email is an excellent way for me to send a rate alert should mortgage interest rates drop)
  • How long you plan on keeping the property
  • Do you have taxes and insurance included in your mortgage payment

I will review your mortgage and send you a Personalized Mortgage Plan includGetthumbnailcak0vwpfing a  Total Cost Analysis which compares your existing mortgage to 3 other mortgage scenarios.   I just emailed one to a homeowner in Snoqualmie this morning showing him that he should not refinance at this time.

Again, there is no cost to you and no refinance required.  I’m happy to adopt your mortgage!

Filed Under: Financial Planning, Interest Rates, Mortgage, Refinance

Fed Cuts the Funds Rate Another 0.5%

January 30, 2008 by Leave a Comment

The Fed just dropped the Fed Funds Rate to 3.00%.  Great news if you have a HELOC.  Prime will now be reduced to 6.00% and home equity lines of credit are based on the Prime Rate.  The Prime Rate = Fed Funds Rate plus 3 points.   The Fed also reduced the Discount Rate to 3.5%.

The market is currently rallying…I’ll let you know if mortgage rates adjust with the rallying market with an update to this post.  I hope you locked in your rate!

The Fed is leaving the door open for future rate cuts:

Financial markets remain under considerable stress, and credit has tightened further for some businesses and households.  Moreover, recent information indicates a deepening of the housing contraction as well as some softening in labor markets.

The Committee expects inflation to moderate in coming quarters, but it will be necessary to continue to monitor inflation developments carefully.

Today’s policy action, combined with those taken earlier, should help to promote moderate growth over time and to mitigate the risks to economic activity.  However, downside risks to growth remain.  The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks.

We still have big time economic indicators that historically impact mortgage rates scheduled for the rest of the week:  Thursday’s PCE and Friday’s Job Report.

As always, I advise locking your interest rate if you’re closing within the next 30 days.

Filed Under: Interest Rates, The Fed - FOMC
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