Archives for June 2017

Buying Down The Rate

Years ago someone came up with the idea that a borrower could pay a fee to lower the interest rate. In the mortgage industry this has become known as “buying down the rate”. So what does that mean and how is it figured out? For starters buying down the rate on a new mortgage generally means you are going to pay a percentage of the loan Mortgage calculatoramount to get a lower mortgage rate however is some cases a loan officer may offer a lower rate based on the borrower paying the basic closing costs of underwriting, title and escrow fees.

Generally the buy down is 1% of the loan amount however it can be less or more than that. And when you pay that you’ll receive a lower mortgage rate than if you didn’t pay that amount. To figure out your cost associated with the buying down of the rate simply times the loan amount by 1% (or whatever the percent of the buy down is). When you buy down the rate it’s usually a costs in addition to regular closing fees. So for example; if you were getting a new mortgage with a 1% buy down plus closing costs and your loan amount was $300,000.00 then you would pay $3,000.00 plus the regular closing costs associated with the loan. On a refinance you usually can roll these costs into the loan however on a purchase they must be paid up front by either the buyer or with a seller credit towards closing costs.

Getting the best mortgage rate does not always mean getting the lowest mortgage rate. What do I mean by that? Let’s say you have two options when getting a new mortgage; option one is at 4.00% and your only costs are the regular closing costs fees and option 2 is with a 1% buy down plus closing costs with a rate of 3.75%. Now if you stick with the loan for a long time it usually makes sense however if you refinance or move too soon that that “lower rate” just cost you more money. Every situation is different but generally it’s questionable as to whether there is a benefit to buying down the rate based on current mortgage spreads. With some loan scenarios it does make sense so you certainly don’t want to be completely opposed to the idea. If you do buy down the rate make sure you’re clear on how long it will take for you to see the actual savings of the lower rate. For our company it’s probably less than 20% of the transactions actually have a buy down point.

Wondering who has the best mortgage rates in California? If you would like a quote on a new mortgage please contact us directly via the sidebar quote request or you can call us directly at 1-800-550-5538.  We’re a top rated company with the Better Business Bureau and have industry low rates.

Mortgage Pre Approval

If you are looking to buy your first home, looking to upgrade from your current home or buying a new rental property it’s always a great idea to get a pre-approval done by a knowledgeable loan officer with years of experience.  In fact most sellers require that a prospective buyer have a pre-approval completed prior to making an offer.  So what does is mean to a pre-approval done and what is the process?  Both excellent questions with fairly simple answers. Getting a pre-approval done means a loan officer has reviewed your credit report, income and assets to see if you qualify for a loan.  At that time the loan officer will provide a detailed quote however it’s important to know that it could change since the terms are not locked in.  Especially if you go weeks or months after the initial pre-approval before finding a home.  Reason is mortgage rates and terms change daily until you find a home and lock in your rate/terms.

What is the process like?  First step is to gather your income and asset documentation.  If you are a W-2 employee that means getting your two most recent W-2’s and your two most recent pay stubs (if you are paid weekly then it’s your four most recent pay stubs).  If you are self employed it means gathering your two most recent years of tax returns (personal and business).  In addition to your asset documentation you also need your asset documentation (the account in which your down payment will come from).  If you’re down payment is being gifted to you; you still may need to show some liquid assets so you should still gather those statements (covering the two most recent months).  Second step is to call a loan officer and let them know you’d like to pre-approved.  You’ll complete an application (over the phone it generally takes 10 minutes) and send over your documentation.  From there it’s up to he loan officer to review everything and determine if you qualify for a loan and how much house you can afford.

Generally it takes a loan officer 24-48 hours to review everything and determine if he/she can issue a pre-approval letter. Once that is completed you’re ready to go find a property!  One thing that is very important during the process is that it’s essential you ask questions to make sure you understand everything; especially if you are first time home buyer.

If you would like to get pre-approved with us you can contact us by way the sidebar quote request or call us directly at 1-800-550-5538.  We offer industry low rate, top notch customer service and we’ll be happy to answer any questions you have.

Loan Estimate

If you’ve purchased or refinanced a home years ago you’ll remember a document called the Good Faith Estimate (GFE).  However that was changed a few years back and now mortgage lenders issue the Loan Estimate (LE).  Why the change?  Regulators decided that the disclosure needed an overall and they also were trying to find a way to reduce the number of disclosures a loan officer had to provide to a borrower.  They came up with the Loan Estimate and it’s a combination of the Good Faith Estimate and the Truth-In-Lending disclosure.  The Loan Estimate was welcome change by the industry in general as it made it a bit easier to explain the details of the loan to a borrower.

The Loan Estimate has everything you need to know in terms of your mortgage rate, fees associated with the loan, your name and property information, the APR and on Page 3 it has some general disclosure information.  The general disclosure information on Page 3 includes information about the appraisal, if someone can assume your mortgage,  Homeowner’s insurance information, Late Payment, Loan Acceptance, Refinancing and Servicing of the loan disclosure information.  Sounds like a lot but it’s actually simple to read and fairly easy to understand.  What doesn’t it have?  We’ll it doesn’t answer general questions like “Who has the best mortgage rates in California?” or “Am I getting a good deal?” ….that you’ll have to figure out on your own.  The Loan Estimate only has information that pertains to the quote the loan officer provided to you.

What else does page 3 of the Loan Estimate have?  The A.P.R. which is your interest rate plus the costs of the loan expressed as a rate.  Some people get confused by the interest rate and the APR and that is understandable.  Just remember that your interest rate is what your mortgage payment is based on and your APR is your interest rate plus the fees you’re paying to do the loan.  One of the most important areas of the Loan Estimate is the on page 1; top right corner.  It clearly spells out your loan term, purpose, loan product, type and if the interest rate is locked.

When does a lender issue a Loan Estimate? A Loan Estimate is issued after a homeowner or potential homeowner applies for a new mortgage.  It’s very important to know that if you call a lender fora quote and don’t complete an application they will not send you a Loan Estimate.  To get a Loan Estimate you actually have to apply for a loan.

If you are looking to refinance your current mortgage or purchase a new home please be sure to give us a call at 1-800-550-5538.  We offer industry low mortgage rates, fast closings and top notch customer service.  And we’ll always take the time to answer questions you may have.

Mortgage Rates June 30, 2017

Mortgage rates for June 30, 2017 are starting off the day at similar levels seen towards the end of Thursday.  30 year fixed conforming rates are still below 4.00% and 15 year fixed conforming rates are below 3.25% (zero points).  There is a good chance it will be a quite day in the bond market as we head into the long holiday weekend.  While the mortgage interest ratemarket is open for some of the day on Monday; many professional investors will take the day off and make it a 4 day weekend with the 4th of July on Tuesday.  Also banks and mortgage lenders will be taking a half day (for those coming into the office).  So it might not be until Wednesday before we see any significant changes if we end the week at similar levels to yesterday.

The best mortgage rates for both fixed and adjustable rate mortgages are just above their 2017 lows as the market moved up a bit after comments made be the ECB head Mario Draghi earlier this week.  As the European economy recovers he has become more supportive of less ECB intervention in the European economy.  Also in the news this week were home prices and how they’ve moved up over the last 6-12 months.  San Diego, Irvine, Los Angeles and other California cities have all experienced a surge in home prices as mortgage rats remain low along with limited inventory.

This morning we had the Personal Spending, Income and Core PCE – all the readings came in as expected. PCE price index came in negative after the previous reading of 0.2.  For the most part the reaction to this morning’s data was muted as the 10y yield starts the day at the 2.26% level.  Later today we have the Chicago PMI – if that has a significant impact on the bond market/mortgage rates we’ll update the post with that information.

On Monday we have the ISM Manufacturing, ISM Prices Paid and Construction Spending readings. On Wednesday we have the ISM-New York and Factory orders readings, Thursday it’s the ADP employment report and on Friday the all important jobs report.  Also on Friday the average hours worked and paid (which have are important to the bond market).

If you are looking to refinance your current mortgage or if you’re looking to purchase a new home please give us a call for a no cost – no obligation quote on one of our fixed rate or adjustable rate loan programs.  We offer industry low rates, a high level of customer service and we have a top rating with the Better Business Bureau.  Our direct number is 1-800-550-5538.

Low Mortgage Rates Help Irvine Home Prices

Low mortgage rates are helping to push home prices up in Irvine California.  Five years ago the median home price for a condo in Orange county was around $281,000.00, in 2017 it’s almost $500,000.00.  The median price for a Single Family Residence in 2012 was around $495,000.00 and today it’s just over $755,000.00.  These are significant increases and many local/state economist believe housing prices will remain elevated for years.  Like most cities in Orange County Irvine has a short supply when it comes to homes; especially new homes.  This along with low mortgage rates in the Irvine area are pushing home values higher.

Generally speaking the economy and employment have been fairly robust over the last few years and good high paying jobs also help push home prices higher.  Some are concerned that we’re entering a bubble however the move higher in prices this time, when compared to pre-2008, is a bit different.  Back then so many homeowner’s had risky type mortgages;  option arms, stated income and sub-prime no money down type mortgage loans.  For the most part those loans don’t exist any more and gone are the days of the average worker owning 8 rental properties that he/she is hoping to flip in 90 days.  Are mortgage rates good enough to keep things going?  Yes they are and most economist believe mortgage rates will remain historically low for extended period of time.  The keys to seeing prices continue to move up are the economy, jobs and wage growth.  Without those three things it will be difficult for Irvine to see significant increases in home prices.