Mortgage Rates - Lock or not to Lock? That is the question?

If you have been considering buying a home or even refinancing, you've probably been asking one of these questions? Should I refinance now? Should I buy now? What if rates go down again? With the economy this way, surely rates will have to drop again? I heard the Feds are going to lower rates again to stimulate the economy, should I wait to lock in an interest rate then?

These are all great questions and very valid. In the past, before all the housing bubble began, the answer to these questions might of been to wait. Times have changed! It's a whole new game in the mortgage world. If you are considering waiting to buy or refinance, below is a few reasons not to:

1. Mortgage Lenders are tightening guidelines to protect against future losses. Mortgage lenders are reducing loan to value limitations. They may require you to have 20% equity or more? If you are an investor or a jumbo borrower, those equity requirements are even higher. Someone who could qualify today, may not be able to qualify tomorrow.

2. The value of your home could decline, maybe it already has and could again? Foreclosures and short sales lower the market value of every home in your neighborhood and surrounding areas. A home that is comparable to yours that ends up selling for less than yours is going to lower your home's value. Lower appraisals lead to higher loan to values and, often, higher mortgage rates.

3. Have you or someone you know lost their job in the last two years? Job losses are happening at a very rapid rate. Many are being laid off as employers fear for the future stability of the company. Many are downsizing to offset lower prof ts (or no profits at all). Without a job and a steady paycheck, lenders won't give you a mortgage loan. I work with Business Fellowship International, a ministry that helps folks get connected and possibly into a new job. If this is you, please email me and I will help you in any way I can.

4. Another rise in cost is mortgage insurance or PMI. This is required if you have less than 20% equity or down payment in your home. PMI is an insurance that protects the lenders in the event of default. Remember hurricane Andrew and the impact it made on the insurance carriers? What's going on in the housing market right now, is comparable to that. Mortgage insurance carriers are raising rates and tightening guidelines as well, making it very hard to qualify or not allowing your payment to drop with the interest rate reductions.

5. What is your credit score? Most people assume their credit is good. But what is good anymore? To get the "preferred" or "going" interest rate, you have to have excellent credit scores, that means over 700 and sometimes over 720/740. Now don't get me wrong, we are still able to do loans under 700, but we would need to review your situation to see if it makes sense for you.

If you are thinking about buying or refinancing, now's the time to do it. The pendulum for mortgage loans has swung from one extreme to the other and it may be a long long while before lenders will consider loosening guidelines again. Financial crisis has it America.

But there is hope! Jeremiah 29:11 says, For I know the plans I have for you says the Lord, plans to prosper you, not to harm you, but to give you a future and a hope. 2 Chronicles 7:14 says If my people, which are called by my name, shall humble themselves, and pray, and seek my face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sin, and will heal their land. If you have a relationship with the Lord, He will see you through! If you don't, consider asking Jesus into your heart, ask Him to forgive you of your sin and to cleanse you and make you new. He loves you so much and wants only good for you!

Jewel and I, the InSight Team, are here to help you make sound choices with your mortgage. We have many valuable resources and offer a variety of mortgage products. Please give us a call or email us or visit us on the web at www.wantinsight.com.

Most Cordially

Michele "MAC" A. Cole
Business Development
michele@wantinsight.com

Jewel Callahan
Mortgage Consultant
816-510-1399

REFINANCING HELPFUL HINTS

Even with low, low interest rates and new government recovery programs, it can be a tough road to walk to get to the closing table on refinancing your home loan. At InSight Mortgage Group, we work to smooth out the few bumps you may encounter along the way – it’s our specialty.

Strangely, the tough part isn’t the “approval” process for borrowers, it’s keeping the approval!

I’ve recently blogged about the mortgage industry in general, starting in 2005, being understaffed. With these wonderful low rates, lenders are getting slammed with requests and are having a difficult time handling the volume. An underwriting logjam has been created.

These days taking a mortgage application from start to finish with some lenders can be as long as 2 months! That’s double the time it took about 6 months ago, when the average was 20 days to closing.

You know, a lot can happen in 60 days. More so than in 20 days. And while there are things outside your control which may affect the loan process, there are a number of things you can control.

Mortgage approvals are delicate things and nothing’s complete until it’s complete! Please keep in mind the following “rules” for the period of time when your loan is in underwriting and before it closes.

A. DON’T buy a new car, trade up to a bigger lease, etc. (incur more debt)
B. DON’T start a new company or quit your job
C. DON’T move to a commissioned job from a salaried job
D. DON’T transfer large sums of money between bank accounts
E. DON’T be late on paying your bills
F. DON’T open any new credit accounts -- even if it’s 0% interest for the next year
G. DON’T take a cash gift unless you have all the proper “gift” paperwork filled out
H. DON”T make random, undocumented deposits into your bank account

The above are red flags to an underwriter and only one is enough to slow or even derail the process. Situations arise, and it doesn’t mean that you can’t get a cash gift or buy a new car, it means talk to your loan officer first. We’re here to guide you each step of the way, so call us at 913-642-3334 or email me at michele@wantinsight.com to get started on your refinance.

RATES ARE LOW, BUT ....

Mortgage rates are low but there are costs associated with acquiring a loan. Those borrowers with less than perfect credit have incurred increased fees recently implemented by Freddie Mac and Fannie Mae. Many of us in the mortgage industry think that with the uncertainty in the mortgage market, other costs will increase as lenders look to reduce their costs and anticipate rates.

Lending standards are really tight which means that borrowers who qualify for the really low rates must meet a strict and narrow set of guidelines.

In general, to get the headline making rates, borrowers are often paying more points, or prepaid interest, that brings the mortgage rate down.

Over the past year and a half there has been many changes in mortgage pricing, and from the borrower’s standpoint, it’s mainly negative. Fees are added based on a borrower’s credit scores according to Fannie Mae and Freddie Mac’s new risk-based pricing. Now, borrower’s must have a FICO score of 740 or higher to avoid the extra fees, according to Dan Green, author of TheMortgageReports.com and loan officer with Mobium Mortgage in Cincinnati. Lenders incorporated the new rules into the rate sheets in the middle of January even though the official effective date is April.

These new fees, Loan Level Price Adjustments, are an unpleasant surprise for some borrowers wanting to take advantage of low rates. These fees create different pricing scenarios from one person to the next. What works for one borrower may cost the next person 1% more.

For those wanting to pull equity from their home through a cash-out refinance, fees have increased as well. And the lenders have added costs to condo financing.

A point is 1% of the mortgage amount, and is charged as prepaid interest. The more in points a borrower pays, the lower the rate. If points rise a bit, it’s a sign that lenders are looking for up front money as opposed to over time, thus covering a portion of their risk.

With government intervention in the mortgage market these days, rates are unpredictable, which generally causes lenders to price conservatively.

Why pay points? A borrower needs to decide whether paying a point (or more) makes more sense for them , or if a mortgage with a higher rate with no points would be better. Factors to consider would be how long does the borrower plan to stay in the home , and how long it will take for buying points to pay off. The more time a borrower plans to remain in the home, the more paying points makes financial sense. In the past one point in fees would buy a drop of 0.25% to 0.375%. These days the percentage is greater, dropping a rate 0.625% to 0.875%.

An example: A 30 yr fixed rate of 5.625% on a $417,000 loan with no points. By buying a point ($4,170), the rate dropped to 4.875%, which saves the borrower $261 monthly in interest cost. With that savings, it takes only 16 months to pay back the buy down. From this point on, everything is a benefit. Given traditional guidelines, the breakeven point would be double that 16 months.

Borrowers are also seeing some fee increases in underwriting and processing. It takes more expertise and work to process a fully documented file than the popular no-document loans of several years ago, thus the higher charges.

Mortgage rate lock fees are also more common. The largest increases in the title & settlement category are in the real estate transfer taxes charged by counties and cities. You may be able to save money when refinancing by using the same title insurance company who closed your first loan. Many title companies have gone out of business, or one company buys out another, so surviving companies are raising prices for title and settlement fees too.

A rule of thumb is that mortgage fees generally run 3% or so of the loan amount.

As a mortgage broker, InSight Mortgage Group has an advantage over the standard lender. We work with many different banks and lenders allowing us to shop around for you to find you the right product and best rate for your home financing. With so many banks and lenders discontinuing loan programs, constantly changing the guidelines or going out of business overnight, it’s good to have other options at our fingertips if the need arises. This keeps you from completely starting over.

Call us at 913-642-3344 for professional, integrity minded help in finding the right loan program for your specific needs. Or, email me at michele@wantinsight.com with your question or concern. My staff and I are ready to work for you. Have a blessed day.