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

Don’t Wait for the FED on Jan 30th to Refi–It May Cost You

January 28, 2008 by 1 Comment

Since I’ve been saying this over and over again this past week…I thought I might as well blog it too.   PLEASE DON’T WAIT UNTIL WEDNESDAY TO REFI OR LOCK YOUR RATE.   When the FOMC moves the Fed Funds Rate, it does not directly change mortgage rates.  If you have a HELOC (home equity line of credit), when the Fed Funds rate is adjusted your heloc is impacted because the Prime Rate is based on the Fed Funds Rate (Prime Rate = 3 percent plus the Fed Funds Rate).

Mortgage rates may react to the adjustments made to the Fed Funds Rate.  Mortgage rates are not controlled by the Fed.  Mortgage interest rates are based on mortgage backed securities (bonds).  Mortgage interest rates may change often…sometimes several times a day based on trading. 

Often times, if the stock market is doing great, bonds will suffer because investors are pulling funds out of bonds to gain a better return in the stock market.  Therefore, mortgage rates go up in order to attract investors back with a better return.  The reverse is also true.  If the stock market is tanking, investors may seek the safety of bonds, like mortgage backed securities. The result is that mortgage rates will improve as more traders seek their shelter.

Much of trading is based on speculation.  Currently (at least the last report I heard today) traders are anticipating anywhere from a 0.25% – 0.50% cut to the Fed Funds rate on Wednesday.  Again, good news for those of you have a HELOC…not so, perhaps, for those who have not locked in your interest rate and are hoping to close in the next 30-40 days.   When things happen in the market that are not expected (like when the FOMC made the surprise 0.75% cut to the Fed Funds Rate), the market (traders) reacts dramatically for better or worse.   A cut to the Fed Funds rate is all ready priced into the market.  Traders expect it.  If the Fed does not cut 0.25 – 0.50% we will see more volatility with mortgage rates.  (We may have swings in trading whether the FED cuts 0.25% or 0.50% because different "trader camps" are expecting one or the other).      

Wednesday of last week, rates were at a low we haven’t seen in years and by the next day, we had popped up 0.5% to rate!  Lenders were inundated with people wanting to refi and many were not able to do so.  I heard from several home owners that they think rates will go down further or that a well-meaning friend thinks this or that with rates.   Please learn as much as you can about how mortgage backed securities work and/or rely on a Mortgage Professional to help guide you through these historic times in the mortgage industry.

This week is heavy duty for data that impacts mortgage interest rates.  Ask your mortgage advisor (who ever you’re getting mortgage advice from: a Loan Originator, CPA, friend, family or co-worker) what major events are scheduled to take place this week that may impact mortgage rates?  If they can’t answer, should you rely on them for mortgage advice?   

Here’s a clue to the answer.

Graph courtesy of Loan Tool Box.   

Filed Under: Current Affairs, Interest Rates, The Fed - FOMC

Picking your next mortgage by rate shopping? You might as well be playing Liar’s Poker.

October 23, 2007 by 8 Comments

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Rate shopping to select who will be assisting you with your next mortgage is similar to playing “liars poker”.  The Loan Originator who is the most successful at bluffing wins.  The fact is, unless you’re locking in the rate at the moment you’re shopping, you don’t have that rate.  It’s a rate quote–that’s all. Mortgage rates change throughout the day.  They are based on mortgage backed securities: bonds.   Some lenders I work with offer “live pricing” and others issue rate sheets; sometimes we can have several rate sheets offered by a lender during one day.

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Filed Under: Financial Planning, First Time Home Buyer, Interest Rates, Mortgage, Predatory Lending, Refinance, Residential Purchase

It’s B Day…Big Ben decides to…

September 18, 2007 by Leave a Comment

Wow!  Cut the Fed Funds to 4.75% and the Discount Rates to 5.25%; a reduction of 0.50% EACH.   Ben is showing Greenspan (who’s been very active promoting his new book) that he has his own moves.

"Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally."

More info to follow soon on how this will impact mortgage interest rates in the near future.   Will this send inflation shock waves?  Will traders seek bonds for safety?   

Today, if you have a home equity line of credit, your interest rate reduced by 0.50%.   Prime rate is now 7.75%.

Stay tuned.

Read the entire press release here.

Filed Under: Current Affairs, Interest Rates

Are You Preapproved for an Interest Only Mortgage?

July 20, 2007 by Leave a Comment

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You better double check with your Mortgage Professional.  As of Sunday, July 22, 2007 underwriting guidelines are tightening up for interest only conventional (loan amounts $417,000 and lower) mortgages.

  • Fixed Rate Mortgages (ex. 30 year fixed with 10 year interest only payments) will be based on the full PITI payment using the Note Rate.  (If there is a temporary buy down, the qualifying is still based on the Note Rate).
  • Interest Only ARMs:  Qualifying is based on the full principal and interest payment (PITI) at the fully indexed rate (index + margin).
  • Negative Am. (deferred interest) ARMs:  Qualifying will be based on the full PITI at the fully indexed rate amortized over the full repayment term using the loan amount based on the amortization cap.   (I am not a fan of Option ARMs and I have never provided one to any of my clients.  For some people, they have probably been very successful tools…most of my clients, once they understood how the mortgage works, would opt for an interest only ARM instead of this mortgage).

So what does this mean?

Previous Guidelines:  If a buyer was preapproved using a 5/1 Interest Only LIBOR ARM based on an interest rate of 6.125% (note: this is NOT a rate quote and is only for purpose of illustrating the guideline changes) earlier this week qualified for a payment in the amount of $2041 (plus taxes and insurance), they could borrow $400,000.

New Guidelines:  The current index for LIBOR is 5.4 plus the margin of 2.375% for this particle loan program = a fully indexed rate of 7.775% for the same ARM mentioned above.   Qualifying the borrower for a $2041 payment based on a 30 year amortization at 7.775% means the borrower now qualifies for a loan amount of $284,200.

This will obviously have a dramatic impact on purchases and refinancing out of interest only products.   This is still very new and we’ll see if non-conforming products follow suit.

Here’s what you need to do:

  1. Agents:  Contact your Mortgage Professional today to see if you have clients who are preapproved for conventional financing with any interest only payments.   Confirm your buyer is still qualified.  (Your LO may need to check Fannie Mae guidelines).
  2. Buyers/Borrowers:  If you’re using interest only products with loan amounts of $417,000 or less, contact your Mortgage Professional to verify you are still approved.
  3. Buyers:  Now more than ever, it’s crucial that you meet with a Mortgage Professional prior to buying a home to become preapproved.   With mortgage programs and underwriting “tightening”, there will be less options compared to just a few months ago.
  4. Buyers/Borrowers:  Having solid credit is also more important.   You should review your credit a couple times a year.  If your scores are below 680, work on improving your credit.
  5. Borrowers who currently have ARMs:  Do not wait until just before your ARM is about to adjust if you are considering retaining your home.   Contact your Mortgage Professional six months in advance to review your credit in case you need to make adjustments and/or repairs.

This is not the time to be hiding or not dealing with your mortgage…guidelines are changing quickly and you need to be proactive and responsible with your largest investment.   If you need help, find a qualified Mortgage Professional such as a Certified Mortgage Planning Specialist, who has been acquired additional training and education or get a referral from someone you trust and respect.

Filed Under: Adjustable Rate Mortgage (ARM), Interest Rates, Mortgage, Refinance, Residential Purchase

What will mortgage interest rates be in October?

July 18, 2007 by Leave a Comment

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Who knows…it could be a trick or a treat!  This is a question asked earlier this week  from one of my past clients.   She has a friend who is buying a home that is new construction.   The builder has "encouraged" her friend to use their preferred lender by offering $5,000 towards closing costs.  The builder’s lender is refusing to quote rates, which unless they’re locking for 120 days or more…the rates they quote are useless.  Technically, if the LO has taken a loan application, they are required to provide a Good Faith Estimate within 3 days.

Lenders do offer 120 day locks.   There may be a non-refundable upfront fee and the rate is the higher (the longer the term of the lock, the higher the rate or cost for that rate will be).   If rates are lower in October than they are today for a 120 day lock, you’ve lost your upfront fee.   Even if you decide not to close on that property, that fee is gone.    Not to mention, 9 times out of 10, builders take longer than they anticipate to complete construction of the home.    At this point, they’re just pouring the foundation. The LO knows the buyer cannot or will not lock that rate yet.

I should add that this home buyer is well qualifed so being preapproved is not an issue.   I don’t advise getting preapproved from a Mortgage Professional and then ditching them over 0.125% in interest rate.   It’s very possible that the builder may require you to get preapproved from their lender even if you’re seeking financing elsewhere, in this case, I wouldn’t feel too badly about shopping them.   It’s not your fault you’re being forced to provide your financial information to a lender who’s shacked up with a builder.

My advice to my past client’s friend is to:

  • Request a Good Faith Estimate based on a 30 day quote just to see for the heck of it what the LO would disclose for fees associated with the rate.
  • Compare other lenders using the same scenario to get an idea of what the builder’s lender fees are compared to other lenders offering the same rate.
  • When the construction is closer to 60 days out, obtain updated GFEs.  At that point, you’re in a good position to lock in  your rate.   
  • It doesn’t hurt to ask!  The $5,000 credit may be legit or built into the rate.  It was probably all ready factored into the sales price of the home, however it’s too late to negotiate that once the purchase and sale agreement has been signed and some builders will not budge.   Should you want to work with your lender vs. the builder’s lender, there is no reason why your agent cannot submit an offer asking for the same credit.   
Filed Under: Interest Rates, Residential Purchase

Rescuing Homebuyers from Lending Tree

July 16, 2007 by 4 Comments

Wonderwoman

I have a couple of clients who did not feel like “winners” having banks compete for them via Lending Tree.  Recently, I helped a family by closing their purchase in 5 days…the lender they obtained from Lending Tree did not perform after having their loan for over 30 days.   Here are a few nice words from my new clients:

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Filed Under: Interest Rates, Mortgage, Residential Purchase, Testimonials Tagged With: ,
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