Mortgage rates are priced with rebate, a credit towards closing cost, or discount points, an additional cost paid to reduce the interest rate (Note rate). The amount of the rebate or discount is based on a percentage of the loan amount. The difference in pricing (rebate or credit) varies throughout the day, just as mortgage interest rates change. In fact, it’s not so much that the mortgage rates change throughout the day, it’s actually the cost or credit associated with that rate.
Using Rebate Pricing to Reduce Closing Cost on your Refi or Home Purchase
August 21, 2011 by 6 Comments
Sunday Drive to San Juan Islands
August 21, 2011 by Leave a Comment
We recently took a family vacation and celebrated my husband’s birthday with our teens in the San Juan Islands. San Juan Island is beautiful and really not that far away from Seattle if you catch the non-stop ferry out of Anacortes.
Gardens at Roche Harbor.
The Mausoleum and exploring the history of Roche Harbor is a must when you visit San Juan Island.
Lighthouse at Lime Kiln State Park where you can watch whales in a distance.
Our ferry back home was delayed so we were able to spend a couple hours in Friday Harbor bowling and enjoying some ice cream. Here’s a link to more photos from my San Juan vacation.
Make Sure Your Loan is Locked
August 19, 2011 by Leave a Comment
I’m taking a few days off and thought I’d share an post I wrote a few years ago (April 2008) at Rain City Guide. It’s interesting how much higher the rates were back then. You can read the original post here.
I’ve been communicating with a home owner who thought their loan was locked in at a certain rate only to learn that this is not the case. Here’s their story:
Their existing ARM reset in March. In late February, they informed the LO they wanted to lock at 5.5%, no points, 30 year fixed, and close before April 1 and the LO said it was reasonable and doable. The appraisal was complete in late March with a LTV 79%. The LO did not lock in at that time. The LO presented a GFE 55 days after the application was signed and not the program that was agreed on…the LO admits he dropped the ball but cannot fix it with his bank.
Ouch. Big ouch.
Part of the problem that I can see by reviewing rates I’ve posted is that in late February (at least on Fridays) rates where in the high 5’s with 1 point. So a borrower could easily tell a Loan Originator, “this” is the rate I want you to lock me in at…and if that rate does not happen at that time, the LO will most likely not lock the borrower since this is what the borrower has instructed the LO to do.
For the LO to tell these borrowers “reasonable and doable” was a stretch. Reasonable, maybe but in this current market when we’re averaging two rate sheets/changes a day: almost anything and nothing may be reasonable and who’s to say what’s doable unless you’re the dough fronting the mortgage. The appraisal should not have been ordered without the borrowers consent. The LO could have easily told the borrowers, your rate has not become available, should we order the appraisal (worse case, borrower is out a couple hundred dollars) or would you like to wait to see if your rate becomes available? The Good Faith Estimate being presented almost two months of application is inexcusable.
Hindsight is so clear and you can see the warning signs about this transaction skidding down the wrong track. So what can you do to try to make sure your loan is actually locked?
Obtain a written Lock Confirmation. Your lock confirmation is not a guarantee. I’m sorry…I wish it were. If the information you provided on your application, your credit scores change (expired credit report), the appraisal comes in lower; may impact your interest rate and thus the lock. Once you request a lock from your LO, or they say your locked, get it in writing! If you don’t receive a Lock Confirmation by the following day, contact your Loan Originator to find out when you will have one.
I have recommended that this couple contact the LO’s supervisor…but here’s the challenge:
If the LO told them they were indeed locked, the bank might try to honor (eat) the lock, as they should. Based on today’s pricing, buying that rate would cost an additional 2 points. However, without documentation of any sort (no email or lock confirmation), it will be challenging to prove that the LO promised or committed to this rate. It’s your word against theirs. If the borrower stated, I want “x” rate at “y” cost and these factors never happened…the Loan Originator is off the hook. The LO cannot provide what is not available (specific rate/cost). It’s an expensive lesson.
But what if the borrowers rate/cost was available and the LO committed to locking in that rate? Mind you, rates can and do change even while they’re being locked–which is very frustrating. In that case, the LO should contact the borrower immediately to let them know there’s been a change for better or worse (usually better is no problem). Again, assuming the rates available and the LO either screws up and doesn’t lock the rate or tells the borrower it’s locked when in reality the LO is “gambling” the market. What can the consumer do if they discover their rate was never locked? I contacted fellow RCG contributor and attorney, Craig Blackmon regarding if there’s any recourse for someone with an unhonored written lock confirmation (assuming the program is still available and the other factors I mentioned above that may impact a lock):
Here’s Craig’s answer:
That would depend on the “written lock confirmation.” If that document constitutes a binding contract, then yes the borrower would have a breach of contract claim against the party to the contract for the difference between the promised rate and the actual rate. Even if the document does not constitute a contract, the borrower might still have a negligence claim (i.e. a malpractice claim) against the LO if the LO failed to exercise a reasonable degree of skill and care in attempting to lock in at the promised rate. In either event, the borrower’s recourse would be against the LO (I think — again, I would need to see the “confirmation” to confirm in regards to the breach of contract claim).
Bottom line, be sure to get documentation of your lock in writing. Lenders should provide lock confirmations with an updated Good Faith Estimate if the rate or cost have changed from the last one provided. If something smells fishy and they’re no cooperating or stalling, it’s probably shark. Oh…and last but not least, I don’t recommend chasing a rate. If you like the rate, lock it or be prepared to lose it.
UPDATE AUGUST 2011: Once a good faith estimate is issued (since 2010), a bona fide “changed circumstance” is required before a loan officer can reissue or update it…locking your loan (going from a float to a lock) is considered a “changed circumstance” and if a Good Faith Estimate has not been issued, one is required within 3 days.
Am I the Worst “Sales Person” in the World?
August 16, 2011 by Leave a Comment
I'm not a sales person. I never really have been. I will not cold call or push my business cards onto strangers, friends or family. I will not manipulate numbers or show fancy charts to pressure someone into a mortgage "right now". Hearing the word "leads" makes me cringe.
I used to debate Jillayne Schlicke over on old Rain City Guide posts whenever she would insinuate that I, and all mortgage originators, were sales people. I hate to admit, she's technically correct. We are "mortgage originators" and are paid to "originate mortgages". Pretty simple.
I prefer to view myself as someone who helps people make informed decisions about the financing of their home. My job, once someone decides to have me help them with their mortgage, is to guide them through the entire process. My goal is to have my clients have all of their mortgage questions answered BEFORE they're at the signing appointment. I think I feel strongly about this because of my years managing an escrow branch…a borrower should understand the terms of the mortgage before closing.I stay involved with my clients throughout the transaction. They're not pushed off to a coordinator or assistant so that I can focus on getting "more deals". Hopefully, if my clients are pleased with the level of service I provide them, they'll remember me when someone they know is considering buying a home or refinancing.
This is probably why I'm so passionate about blogging. I can help provide information to my readers and I'm fortunate that many of those who are buying or refinancing in Washington select me to be their mortgage originator. My business consists of those who find me from my social media efforts, returning clients and referrals from my clients, real estate professionals and financial advisers.
Yes, I originate mortgages but I won't "sell" you on one. I will provide you with a competitive rate and be dedicated to the successful closing of your transaction.
Will Other Big Real Estate Brokerages Abandon their Joint Ventures with Title, Escrow or Mortgage Companies?
August 8, 2011 by Leave a Comment
I’m hearing this morning that local real estate brokerage, John L. Scott has decided to terminate their joint venture business arrangement with Rainier Title and Escrow. After seven to eight years of touting that business arrangements like this benefit the consumer, apparently they’re singing another tune.
My stance has always been that arrangements such as this do not benefit the consumer. They can actually prevent consumers from receiving the lowest title and escrow rates and it discourages the consumer from shopping when the real estate agent does their best to please their broker and keep that title or escrow with their pre-arranged company. Typically the real estate companies who have business arrangements discourage their real estate agents from using any other company and will often make it difficult (if not impossible) for outside companies to attempt to have contact with their real estate agents.
So if the argument big companies like John L. Scott, to hold interest in title and escrow companies, like Rainier, is that it’s an advantage for the consumer – what’s changed? Could it possibly be that these arrangements are no longer the cash-cows they once were for the managing brokers?
It will be interesting to see if the other local real estate companies who have title and escrow business arrangements, like Windermere and Coldwell Banker Bain, follow John L. Scott.
To All the Rock Stars at The Talon Group
August 6, 2011 by Leave a Comment
It was announced a few days ago that First American is pulling in The Talon Group and Pacific NW Title. I've been thinking about all the fun and informative videos the group at Talon have created and thought I'd share "Rock Star" with you.
We get to enjoy these brands for a few more weeks until they're official absorbed by First American on October 1, 2011, when they all "combine forces".
For the record, I have enjoyed working with my escrow and title teams at The Talon Group for these past seven (?) years. I think you are all rock stars!
Shallow Credit can leave you in the Deep End when Qualifying for a Mortgage
August 5, 2011 by 2 Comments
When in comes to qualifying for a mortgage, lenders are generally looking for borrowers who have established a history of paying their obligations on time. Ideally this would consist of four accounts that have been open and used for the last one to two years. When someone does not have active accounts, or when their accounts are all new, their credit history appears “shallow” to some lenders. [Read more…]
Refi Window of Opportunity Closing Soon for Larger Loan Amounts
August 4, 2011 by Leave a Comment
I'm working with a couple in Seattle who are looking at refinancing their current adjustable rate mortgage to a 30 year fixed. Their proposed amount will be about $560,000 for a conforming high balance mortgage. If they wait too long to start the refinance process, this transaction will not be eligible to be a conforming high balance mortgage as the loan limits in King County are dropping to $506,000. Although Fannie Mae states the roll-back in conforming loan limits is based on Notes dated prior to October 1, 2011, lenders will implement their own deadlines well in advance in order to avoid being caught holding a mortgage they can no longer sale as conforming.
I know I've been writing about the pending deadlines a lot…whether or not you are for or against the reduction in loan limits, in my opinion, this will dramatically impact area home owners.
What's the difference between jumbo (non-conforming) and conforming high balance mortgages?
- Mortgage rates for fixed jumbo products are about 0.5% higher. A higher rate equates to a higher mortgage payment which of course means it's tougher to qualify for.
- Most jumbo loans require a low-mid credit score of 720 or higher. If a spouse has a mid-credit score of 719 or lower, and nothing can be done to rescore, you may not qualify for a jumbo loan.
- Most jumbo loans have a maximum loan to value of 80%. Some of our lenders will go up to 85% using a second mortgage, however they require a 720 or higher credit score.
- Jumbos tend to require the borrower has more assets in reserves than a conforming high balance mortgage.
Remember, it's not just conforming high balance loan limits that are dropping in a few weeks, FHA loan limits are too.
Many home owners who do not start the refinance process now are going to discover they no longer qualify for a refinance or the rate is not as attractive to where it makes sense. Some who do qualify may wind up considering an adjustable rate jumbo in order to have an improved rate for a fixed period of time.
What loan amounts are soon going to be classified as a "jumbo"? It depends on which county in Washington your home is located in:
King, Pierce and Snohomish Counties:
- Conventional loan amounts between $506,001 and $567,500.
- FHA loan amounts between $506,001 and $567,500.
Kitsap County:
- Conventional loan amounts between $417,001 and $475,000.
- FHA loan amounts between $307,050 and $475,000.
Jefferson County:
- Conventional loan amounts between $417,001 and 437,500.
- FHA loan limits between $322,001 and $437,500.
San Juan County:
- Conventional loan amounts between $483,001 and $593,750.
- FHA loan amounts between $483,001 and $593,750.
Clark and Skamania Counties:
- Conventional loan amounts between $417,001 and $418,750.
- FHA loan amounts between $362,251 and $418,750.Jefferson County
The following counties do not have "high balance conforming" loan limits. They will be seeing adjustments in FHA loan limits and have a short window to take advantage of these loan amounts:
Benton and Franklin Counties: FHA loan limits between $271,051 and $275,000.
Island County: FHA loan limits between $316,251 and $381,250.
Kittitas County: FHA loan limits between $271,051 and $328,750.
Mason County: FHA loan limits between $271,051 and $310,000.
Skagit County: FHA loan limits between $295,551 and $373,750.
Thurston County: FHA loan limits between $293,251 and $361,250.
Whatcom County: FHA loan limits between $304,751 and $375,000.
If you're considering a mortgage with a loan amounts addressed in this post in any of these Washington counties, please don't delay your refinance or you may not be able to take advantage of the benefits that conforming or FHA loans provide (better rates and easier underwriting guidelines). Fannie Mae has indicated that we may see loan limits further reduced effective 2012 (we won't have more information until around November of this year).
If you are in contract to purchase a home and potentially have a "future jumbo" loan amount (listed above), please contact your loan officer immediately to make sure you're closing in time or make sure that you qualify for a non-conforming mortgage if your closing date is beyond the deadline.
Please forward this post onto any of your friends, family or co-workers who may be impacted with the reduced loan amounts. I'm happy to help anyone who needs a mortgage for a home located in Washington state.
UPDATE August 19, 2011: HUD has announced that FHA to FHA refinances may exceed the new lower loan amounts if the refi meets certain requirements.
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