My Valentines Post on Commitment

February 14, 2008 by 3 Comments

Valentine

Just in time for Valentines Day, I thought I would revisit a word that used to horrify my husband before we married a couple years ago (on April Fools): commitment.   I’m thinking about this because I received this comment from a potential client, it’s a common one and I appreciate their honesty:

"I would like to go ahead with preapproval if it does not cost anything and does not bind me in any way to anything….How long can I shop after getting preapproved?"

There are many issues that this brings up.  My response to this home buyer in a chocolate covered nut-shell (you got to have chocolate on Valentines) is that I’m happy to provide a prequalification without obligation.  However, I will not do a preapproval at this stage in our relationship.   Here’s why:

  • A true preapproval involves more than just my efforts and time, which alone are valuable and limited.  With a preapproval, I may also be involving the time of my Processor and Underwriter. 
  • Back to my time:  I have to prioritize which clients I’m working with in any given day.  My first priority is to bona fide transactions.  I must take care of those who have committed to working with me first.  Especially in our current market.
  • Preapprovals also involve more costs.  There is a fee to underwriting and credit (minimal for credit).
  • Lenders are relying on our commitments as originators when we submit loans to them.  Having a higher "fall out" from clients who do not close a transaction jeopardizes our relationships with those lenders.  One lender I work with tracks "fall out" and charges a slight fee (0.05 bps) when our fall out ratio is too high.

Other Loan Originators may be perfectly happy to issue a preapproval letter to people who are not ready to commit to a Mortgage Professional.  The preapproval letter may or may not be legitimate.   

As a home buyer, would you rather work with a Loan Originator who is chasing ever rate shopper (which is a lot of work) or a Mortgage Professional who is committed to you, your transaction and sticking around for you after closing by continuing to keep you informed of news that may impact your mortgage?

Related Post:  When Are You Obligated to a Loan Originator?

My Favorite Valentine’s Post: There’s No Love for the Subprime Borrower

Filed Under: Refinance, Residential Purchase

New Mortgage Porter Feature: Weekly Tips

February 6, 2008 by Leave a Comment

Are you considering buying a home or refinancing in the future?  You can now sign up to receive weekly email tips on home buying, preparing to refinance and credit scoring.  Simply click on the links I’ve provided on the left side of Mortgage Porter under the green Mortgage Weekly box at Favorite Links. 

It’s simple, free and I won’t hound you (unless you want me to)!   

Filed Under: Credit Scores and Reporting, Refinance, Residential Purchase, Tech/Tools of the Trade

My Interview with Seattle Sweet Digs

February 4, 2008 by 2 Comments

Earlier this week, Katrina Munsell of Redfin’s Blog, Seattle Sweet Digs interviewed me regarding whether or not it’s time to refinance your home.   Her questions are quite timely as we’re waiting for the Senate to vote on the stimulus package which includes raising the conforming loan limits and many folks are not totally certain of when refinancing makes sense.   You can read the interview by clicking here.

Filed Under: Real Estate Agents, Refinance, Seattle, Weblogs Tagged With: ,

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

Should You Refi?

January 30, 2008 by 2 Comments

EDITORS NOTE: This post was written back in 2008 and mortgage rates have obviously changed 🙂  If you would like a mortgage rate quote based on current rates for your home located in Washington state, click here.

Last week I did a quick alert on the 30 year fixed hitting high 4’s-low 5s and I received an excellent comment from Sandy:

“…With all the costs and everything of refinancing, how much lower do rates need to be than what you currently have, before it makes sense to think about refinancing? I am just curious, as we have a 30yr fixed loan that is in the low 5s.”

You would think this is a simple question with a simple answer.  There’s much more to it.  Here are some things to consider if you considering refinancing your mortgage:

How long do you plan on staying in your home?   There are cost to the mortgage even if you’re getting a “no cost mortgage” where the hard costs are actually financed into the interest rate.   If you cannot break even on the cost before you plan on selling or refinancing again (low 4’s to high 5’s would be unlikely), then refinancing for the purpose of reducing your rate may not make sense.

Do you have an Adjustable Rate Mortgage?  If you’re going to retain your property longer than the remaining fixed term on the ARM (adjustable rate mortgage), you may want to consider refinancing into a fixed mortgage.

Do you have private mortgage insurance or a second mortgage?   Sometimes if someone has pmi or a piggy back second mortgage, refinancing may make sense if the can restructure the existing mortgages into one and if the blended rate of their existing mortgages are higher than what the new mortgage would provide.

Do you have a Jumbo mortgage?  Depending on what your mortgage balance is and your current rate, it may make sense to restructure your mortgage into a conforming mortgage.  This can be done by paying down the mortgage at closing or using a second mortgage, such as a HELOC or fixed second.

Would you like access to your home equity?   Refinancing can provide cash for home improvements, college tuition, debt consolidation, or what ever else you wish to do with your equity.   Most cash out refinances are priced higher than a rate term refinance.

Are you getting a divorce or separation?  If you have a mortgage with another person and the relationship is dissolving; you will need to refinance in order to remove the one who’s not staying in the home from the mortgage.   Divorce decrees and Quit Claim Deeds do not remove someone’s liability from the mortgage.  Plus, it’s a huge risk for the person who is no longer staying in the home.   Refinancing to remove an ex-spouse from the mortgage and to cash out their equity is not priced as a “cash out” refinance–it’s treated as a rate term refi.

Are you concerned about your home value declining?  Refinances are priced based on loan to value and there are underwriting guidelines that limit how high a loan to value may be.  In “declining markets” lenders have additional restrictions on loan to value lending limits.

Here are some quick “Do’s and Don’ts” for your refinance:

  • Do get a good faith estimate from your Mortgage Professional.  If you have not heard from your Mortgage Professional since you closed your loan or over the past few months, you might need a new one (they could be out of the business).
  • Do not rely on a simple “rate quote” without knowing the costs involved.
  • Do complete a loan application and provide the information your Mortgage Professional needs to lock in your interest rate.
  • Do not try to “play the market” and get the lowest rate…it’s far too volatile in this climate.   If the rate makes sense, lock it!

Must reads:

Picking your next mortgage by rate shopping?   You might as well be playing liars poker.

I’m happy to adopt your ARM.  No refi required.

 

Filed Under: Debt Restructuring, Jumbo/Non-Conforming, Mortgage, Mortgage Insurance, Refinance

Breaking Even on Your Refinance

January 27, 2008 by 3 Comments

I’m often asked "how many months will I break even on a refi?"    This is actually something very easy to figure out and worthwhile for anyone who’s considering restructuring their mortgage.  In a nutshell, you are taking the non-reoccurring closing costs and dividing the difference between your current mortgage payment and your proposed mortgage payment.   

To determine your closing costs, you are going to consider all fees except for your reserve account and prepaids (taxes, insurance and prorated interest).  This is what you are paying for your interest rate to refinance the mortgage. Your prepaids should not be factored into your closing costs because your existing balance of your prepaids/reserves from your current lender will be refunded to a few weeks after closing the new mortgage.   If you don’t wish to have your new reserve account financed into the new mortgage, you can bring cash to the closing table (a majority roll this cost into the new mortgage; but it’s totally up to you).  You can also opt to waive your reserve account all together if you meet the criteria, just know that there is a cost to doing this.

Next factor the difference between your current mortgage payment and your proposed mortgage payment.  Ideally, you should look at just principal, interest and mortgage insurance (excluding taxes and insurance).  Divide this figure into the closing costs and you have how many month’s it takes to break even on the refinance.

Here’s an example from a recent Good Faith Estimate I recently provided a client:

  • Current Payment: $1740 less the Proposed Payment: $1550 equals a monthly savings of $190.
  • Closing costs (excluding taxes, insurance and prepaid interest (Sections 900 – 1000 on the GFE) are $2390.   2390 divided by 190 equals 12.58 months to break even on the cost of the refinance.

If the borrower is staying in their home for over 13 months, the refinance makes sense.   They are "breaking even" on the cost of the refinance.   If the homeowner was only improving their monthly payment by $50 a month, it would take about 4 years to break even.   Does it still make sense?  This really depends on the individual home owner.  If they’re not likely to move and if the rate is low enough to where they’re not likely to refi, perhaps it still does.  This is just a tool to help consumers weigh the cost of refinancing.   Different pricing, such as with or without points or without closing costs, will also impact how soon someone will "break even" on their refi.   Watch for a follow up post on that!

Filed Under: Refinance

A Simple Visual on the Current Mortgage Landscape

January 18, 2008 by 2 Comments

Fellow Certified Mortgage Planning Specialist, Dan Green, has created a very easy to understand explanation of what has happened in the mortgage industry.   I highly encourage you to watch this short video presentation showing a history from 2000 to our present condition and how this situation impacts all of us, including "prime" borrowers.

The Mortgage Reports, is written in a very easy to understand style and packed with great informative content.   This is one of my must reads that I’m subscribed to…if you want to understand more about mortgages, perhaps you should too (and don’t forget to subscribe The Mortgage Porter in the upper right corner of this site)!

Friday’s rates will follow later this afternoon.

Filed Under: Mortgage, Refinance, Subprime Lending

NOW may be the time to refi if you have an ARM or Fixed over 6.5%

November 27, 2007 by Leave a Comment

Last night I posted that the 30 year fixed rate was at 5.625%…this morning, rates have been moving upwards (I’m all ready receiving new rate sheets from this morning for the worse).  Now may be the time to consider taking advantage of rates being below 6%.   

Just to recap…you should consider refinancing if:

  • You have an Adjustable Rate Mortgage with the fixed period ending in 24 months or less.
  • You have a 30 year fixed rate mortgage over 6.5%.
  • You have a piggy back (second) mortgage and enough equity to restructure the debt.
  • You are paying private mortgage insurance.
  • If you are concerned about the value of your home declining now or in the future (there are loan to value limits on refinances).   

If you’re concerned about your credit scores, FHA may be a great alternative for you as long as your credit history is fine.

If you have a prepayment penalty, it may or may not be worth refinancing at this time.  The penalty is considered prepaid interest so it does qualify as deductible mortgage interest (a small consolation).   

Questions?  Ask!  Don’t wait.   Mortgage rates change constantly and these days, mortgage programs do, too.    I’m here to help!   If you are unsure of your scenario, please contact your trusted Mortgage Professional right away.   It may be that you’re doing fine just where you’re at with your current mortgage and you need to do nothing…if so, at the very least, that 10 minute conversation with your CMPS provided you with a little piece of mind during these turbulent times in the mortgage industry.

PS:  NOW may also be a great time to buy and take advantage of 30 year fixed rates under 6.00%!

Filed Under: Refinance
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