Richard Cohen, author of "It’s Not About Rate–The Right Way To Get a Mortgage", was kind enough to send me his book to review. For a short book (we’re talking 76 pages) it covers a great deal of mortgage material without being overwhelming to a first time home buyer. I appreciate how Richard injected bits of humor along with solid information about mortgages. This is very readable and I highly recommend this book for consumers considering buying or refinancing their first home.
Book Review: It’s Not About Rate
May 2, 2007 by 1 Comment
Would You Like Your Mortgage Blended, Shaken or Stirred?
March 27, 2007 by 4 Comments
Many home owners have two mortgages on their properties. A first mortgage and a second mortgage that may either be fixed or a home equity line of credit. Do you know what your effective rate is? Basically, this is if you factor in what your paying on both mortgages, and then figured out what your interest rate is on your payment.
Here’s how to determine what your “blended rate” is:
How Strong Are Your Legs?
February 25, 2007 by 1 Comment
A borrower in a mortgage transaction is kind of viewed like a chair with four legs. The legs on the chair provide strength to the base or seat of the chair. If one leg is shorter than the others, the chair is still strong, but may wobble a bit. Shorten two legs and the chair becomes less stable. Three week legs and the chair is just waiting to tip over on you.
So how strong are the legs of your chair?
Consider each of these items as one leg in your chair.
- Employment. Having a minimum 2 year history in your line of work (this can include education). Employment gaps that don’t make sense to an underwriter, may cause issues with getting your mortgage approved. A lender wants to know that you are going to be able to keep your job and therefore, make your mortgage payments on time.
- Income. If paid salary and regular hours, this can be pretty easy to compute. When your hours vary, the income needs to be averaged. Also, if you’re paid bonuses or commission and going for the best interest rate (not stated income or no income verified), then your bonuses and commissions are typically averaged for the past two years. Debt-to-income ratios are crucial for qualifying for mortgages. A $500 car payment equals $50,000 less home that you can purchase.
- Savings and assets. There are many zero down loans, even if you are considering that route, it is in your best interest to have at least three months of your future mortgage payments in savings after all closing costs are paid. The more money you can put down towards a home, the better your interest rate will be.
- Credit Scores. Having scores above 680 are a worthy goal. A score 700 or more is even better! Pay your accounts on time. Keep your balances below 30% of the credit limit for the best scores. Take care of your credit and it will take care of you. Credit is reflective. If your credit score is on the low end, meet with a Mortgage Planner to help you develop a plan to improve your score.
All of these factors impact how a borrower qualifies for a mortgage. The more strong legs you have reduces the risk to the lender, which in turn means a better interest rate for you!
President’s Day
February 17, 2007 by 2 Comments
Just a friendly reminder that Mortgage Master will be closed in observance of President’s Day on Monday, February 19, 2007. Banks and government offices will be closed, too.
I’m just planning on hanging around and gardening so if you need any mortgage help, drop me a line.
Mortgage Master will reopen for business as usual on Tuesday, February 20, 2007.
Hang On…It’s Going to be a Bumpy Ride
January 30, 2007 by Leave a Comment
This week, we’re in for a bumpy ride with mortgage interest rates. Fueling the fire are several important economic indicators which will begin to hit us on Wednesday and continue through Friday.
On Wednesday, not only does the FOMC (the Fed) meet, we also have several news releases including the Gross Domestic Product (GPD) and the Chicago PMI (the Business Barometer). The drama continues on Thursday with the Core PCE (Personal Consumption Expenditure). We finish Friday with the big daddy…the Jobs Report.
These factors help predict inflationary and economic trends and typically have a high impact on mortgage interest rates.
I just read an excellent blog on The Mortgage Report, by fellow CMPS, Dan Green. To find our why you should lock before Friday’s job report, click here…
The “R” Word
January 4, 2007 by 2 Comments
Resolutions. I was not going to post New Years resolutions since they are everywhere.
..however, I can’t pass up this opportunity. Beyond the perennial lose 10 pounds, start excising, or stop smoking; here are a few goals to consider for your financial health. I plan on revisiting these goals more indepth on future blogs…so I’ll try to be brief for now.
- Have an emergency fund established with at least 3 months of living expenses in an accessible account. You can also use a HELOC for an emergency fund account IF you have the discipline to leave it alone. A HELOC can be an excellent tool and should be applied for before you have an emergency situation (loss of employment, medical, or a tree landing on your house from sweet Mother Nature) and may not be able to obtain one. In the event of an emergency, do you have your finances organized? A recent article I read from the Financial Planning Association recommends having copies of all your pertinent financial documents in a binder that you can find quickly in the event you need to evacuate your home.
- Know your score, or at least what is being reported on your credit history currently. Credit scores are not only used for determining what mortgage programs and rates you qualify for. They also impact insurance, credit card rates and auto loans to name a few. In addition, reviewing your credit will help determine if you credit is being used without your knowledge (identity theft). You can visit www.annualcreditreport.com for a free credit report. This is provided by the “big 3 bureaus” and it may not provide your score without paying an additional fee. As you are allowed one report from each bureau annually, I would recommend that you pull your report from one bureau every four months to keep a constant monitor on your credit activity. There may be simple ways to improve your credit score that you can determine once you have the information available.
- Create or review your Will. I had a pretty cheesy will until I married last year. My husband and I spent quite a bit of time with an attorney to make sure we have everything set up as we wish it to be instead of letting the government have it. You would be surprised how easy, with home values, a retirement account, etc. that your net worth can grow. Whether you have children or not, a will is a must. After you have a will, it’s a good idea to have your information organized for your loved ones. A great website to check out is www.readyornot.biz.
- Get a mortgage check-up. If your mortgage has an adjustable rate (ARM), if you are paying private mortgage insurance (PMI) or if you have two mortgages on your home, this could be a great time to review your current scenario to see if you can reduce your monthly payments. There is no sense in paying more than you need to, unless you plan on selling the home soon. An Annual Mortgage Review is more in-depth than checking out your mortgage to current rates and products.
- Eliminate credit card debts. It is too easy to fall into credit card debt. Banks do not want you to ever pay them off with all the interest they earn. Start with paying additional towards your smaller debts and then work toward the next one. This is a slow process, but worth it. It is boggling how much the interest can mount up on these types of loans with no tax benefit to you. Improving monthly cash flow reduces stress and allows you to eventually save for more important life items such as retirement and college.
I know this is a few days past New Years…however, it’s always relevant. I wish you and yours a very happy, healthy and prosperous New Year. Cheers!
Credit Unions, Banks and Brokers…OH MY!!!
January 2, 2007 by 2 Comments
Recently I found myself drawn into a blog on Rain City Guide. The topic that got my attention is 
authored by Jillayne Schlicke titled “Hot or Not” which featured various tips for first time homebuyers from an USA Today article. The specific “hot” tip that forced me off of the sidelines and onto the paying field (it was New Years weekend…football…etc.) was:
"Hot: The author also suggests comparing rates and fees from three different lending sources: a mortgage broker, a banker and a credit union".
After a few friendly banters back and forth debating our points, I realized what my real issue was…it’s not the institution, it is the person. I do believe that a broker is going to offer a consumer more products and rates from many different sources than a bank or credit union…and I’ll still stick by my guns to say a “licensed originator” (banks and credit union loan officers do not have to pass background test and exams and be licensed) is probably better suited to serve a consumers mortgage needs. Credit unions and banks typically just offer their products and rates. If a bank loan originator elects to "broker" and not use a bank product, they are often paid a lower commission. Brokers typically work many different banks (For example, the Broker I work for, Mortgage Master, works with over 80 different lenders, banks, etc.) and all of their products and rates.
My recommendation is that a consumer should, instead of going to a bank, credit union and mortgage broker for rate and fees, consider these three options:
1) Referral from a family member, co-worker or friend who has just bought or refinanced their home.
2) Recommendation from their Realtor and, ask the Realtor why they prefer the lender over others.
3) Recommendation from their CPA or CFP for the lender they endorse.
If a consumer does not yet have a Realtor, CPA or CFP, then I would recommend they ask a friend, family member and a co-worker for their lender.
The whole idea of rate shopping is misleading and a potential for disaster for home buyers or people who want to refinance. A rate shopper really needs to be educated before picking up the phone, going to the internet, or picking up the "liars list" in the newspaper. It really does come down to the individual providing you the quote, their ethics and expertise…how do you measure (or “shop”) for that?
A mortgage is one of the largest investments most people will make in their lifetimes. I cannot imagine allowing anyone providing me advice unless they could demonstrate they are competent, dedicated, educated and equipped with the latest mortgage programs available.
Does licensing or an earned designation prove this? I think it’s a step in the right direction. I am one of the few loan originators in the fine State of Washington (grey, rainy and windy today) who has taken the steps to become a Certified Mortgage Planning Specialist (CMPS) and who is looking forward to having brokers become licensed…it’s just too bad the licensing does not apply across the board to EVERYONE originating any type of mortgage loan. Alas, it’s only for Mortgage Brokers (Countrywide, Washington Mutual, Wells Fargo, Chase Manhattan are just a few of the loan officers who will not have to pass the test). I predict that once the testing takes place (estimated mid 2007) you will see a shift of loan originators who use to work for brokers, leaping to mortgage banks to either avoid the test and background test, or because they could not pass the states requirements.
The true test of mortgage broker licensing will not be known to us until we actually take the exam late this year. Measuring the ethics of anyone, let alone a loan originator, can be a tricky task…I guess that’s where I keep coming back to getting a referral from resources you trust.
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