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Archive for Tips – Page 2

Can You Refinance an Upside Down Mortgage? Hint: the answer is Yes…

By BankAim · Comments (0)
Wednesday, October 13th, 2010

Until recently I did not realize that it was even possible to refinance a mortgage that was upside down.  I assumed that if someone owed more on their home then it was worth they were out of luck.  I figured these record low rates were just out of reach for them.  In fact… Out of reach for ME.

Yes… just like hundreds of thousands of other American home owners I now owe more on my home then it is worth.  At least it is really close.  I may be able to break even.

I am watching the interest rates drop and drop and drop and drop… you get the picture, and I just have to sit on my “terrible” 5.5% 30 year fix.

Well I have some great news for those of you in this situation.

There is a loan specifically created for people in this scenario.  There are a few guidelines and here is what we know so far.

  • You current loan has to be a Fannie Mae or Freddie Mac loan to qualify as this is a Feddie/Fannie loan.  This is easy to find out.  For Fannie Mae click here. For Freddie Mac click here.
  • You cannot be over 105% LTV (loan to value). This simply means that your house value can only be 5% lower than what you owe on it.  (ie. If you owe 210K, your house could be worth 200K)
  • In order to avoid mortgage insurance your current loan cannot have it.
  • You must have a credit score of 680.

These are the main guidelines for this loan.  If you are in a similar situation it may be worth calling your loan officer to see what they can do for you.

If I can qualify for this loan I would personally drop my rate into the low 4% range and save big bucks every month.  I already have my application in as we speak.

If you are in Washington State check out Clark Davis.

Remember that your loan scenario is going to differ from others.  Contact a professional to get all the details you will need to see if you qualify.

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Categories : Mortgage, Personal Finance, Tips
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Mortgage Rates Drop Again – New Record Oct 7th

By BankAim · Comments (0)
Thursday, October 7th, 2010

According to the Primary Mortgage Market Survey from Freddie Mac the new average mortgage rates have yet again hit a new low.

October 7, 2010 30-Yr FRM 15-Yr FRM 5/1-Yr ARM 1-Yr ARM
Average Rates 4.27 % 3.72 % 3.47 % 3.40 %
Fees & Points 0.8 0.7 0.6 0.7

This information is based on Mortgage Companies all over the nation.  Freddie Mac compiles the information and averages it out to determine where rates stand today.

Is time to take Action?

You know from reading my mortgage updates in the past that I believe it is no time to drag your feet.  If you are in a position to be able to refinance now is the time to jump on board.

What if you are say 12 years into a 30 Year mortgage, is it worth refinancing then?

This is an excellent question and one that takes some research on your part to answer.  If you are around 12 – 15 years into your mortgage then chances are you are paying much more of the principle with each and every payment.  (Interest is front loaded and you pay nearly 90% interest in the first 10 years of a mortgage.)

Therefor if you are paying mostly principle now why refinance.  Well in this case there are only three factors you need to consider and that is TERM, TERM and TERM.

If you can refinance into a 10 year mortgage and have a similar payment because rates are so low, you just knocked 8 years of your mortgage.  Do not and I repeat DO NOT refinance into another 30 year mortgage if you are many years into your current 30 year fixed.

Consider your options and have your loan officer show you the options for a 10 year and 15 year mortgage.

If you want some more help check out our mortgage tips.

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What Does it Mean for Mortgage Rates when the Feds Cut the Prime Rate?

By BankAim · Comments (0)
Tuesday, October 5th, 2010

Every so often you will hear that the feds are cutting the prime interest rate.  When I was a loan officer I would get inundated with phone calls from clients after an announcement like this.  Over and over I would have to explain to them how the feds interest rate cut does not directly affect mortgage rates.

Here is why.

When the Federal Reserve (the Feds) raise or cut interest rates they are changing the prime rate of short term loans.  Short term is the key here.  Short term loans are loans such as auto loans or lines of credit.  The most simplistic way to describe it is that banks and lenders use the prime rate as there base and any additions to the rates they offer on short term loans get added onto the prime rate.

If you have an adjustable rate line of credit and the Feds cut the prime rate by .25%, the rate on your adjustable line of credit will decrease.

Now long term loans such as mortgages are based on an entirely different system for determining what the rates will be.  Explaining this system is another article entirely, but has much more to do with the bond markets and mortgage backed securities.

The rate cuts or rate hikes from the feds has absolutely no direct affect on long term loan rates.  Now it can have an indirect affect on them just not directly.  Sometimes long term rates do not do anything when the Feds meet.  Historically long terms rates are just about split when it comes to going up or down after the prime rate has been cut.

Check out Average Closing Costs for a Home Mortgage.

Short term loans and long term loans have two completely different methods for determining interest rates.  Using one to help gauge the other means you will be misinformed.

If you are in the market for a mortgage be sure your loan officer has a good pulse on what is happening with long term rates.  Right now it is pretty easy; they are low, really low.  But when the economy starts making headway it is going to be a different game.  Educate yourself and surround yourself with professionals who can help you make the right choices.

For more tips visit mortgage loan help.

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Do Not Listen to Mortgage Company Referrals.

By BankAim · Comments (0)
Monday, September 27th, 2010

Mortgage ConfusionIf you are in the market for a mortgage, whether it is for a refinance or a purchase, chances are you start looking for a mortgage company by asking your friends.

Many of your friends will tell you to avoid certain companies and others will tell you their experience with a certain company was great.

I’m telling you right now… Ignore all Referrals to “Companies”.

I worked in 3 different mortgage offices and let me tell you… there were people I worked with that I wouldn’t even trust to buy me milk and eggs at the store let alone handle my personal finances.

Loan officers see pretty much every aspect of your financial situation.  They know…

  • How bad your credit is (or good).
  • How much debt you have.
  • If you have collections.
  • Any Foreclosures or Bankruptcies.
  • How much money you make.
  • Where you work.
  • Where you live.
  • How many kids you have.
  • You middle name.
  • Your moms middle name.
  • You cats middle name.
  • ETC ETC.

The point is that you need to be able to trust this person that handles so much of your personal information.

Secondly you should not have a friend or family member do your loan if you do not want them to see all this information.

So there is a fine balance.

The reason why you should ignore referrals to companies is because you want to find out which INDIVIDUAL loan officer within that company is trustworthy and competent.

If you just call up the company they will assign you to which ever loan officer is on the list… this is too risky.

If your friend tells you “I used ABC Mortgage and they did a great job.”  That reflects mostly on the individual who completed the loan for them.  Ask them for a name and a direct phone number.  If they do not have a name ask them to check their paperwork and the loan officers name will be on the paperwork.  It has to be… they sign it.

Referrals should be based on people, not companies.

Remember to checkout our Mortgage Help Tips.

*If you live in Washington State and need a quality loan officer you can check out Clark Davis.  I just sent my own parents to Clark, that is how much I trust him.

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Do Not Be Fooled By Radio Mortgage Ads

By BankAim · Comments (0)
Wednesday, September 8th, 2010

Radio Playing Mortgage AdvertisingSome of these radio ads I hear for mortgage rates and mortgage offers just make me laugh.

I worked as a loan officer for 5 years so I know the reality behind the sneaky little marketing tricks mortgage companies try to pull on radio listeners every day.

Here is one for you…

“We will pay all your closing cost for you.  If you come in with a 2 hundred thousand dollar loan, you will leave with a 2 hundred thousand dollar loan.”

Now here is the truth.

Yes mortgage companies can pay all the closing costs on your loan for you, but it sure is not coming out of there “generous” pockets.  No no… YOU will be the one footing this bill.

Just like pretty much everything else in life this offer IS too good to be true.

Here is how they do it.

When a mortgage broker chooses a bank to fund the refinance or purchase that you are doing, the bank will actually pay the broker for that business and if they offer you a higher interest rate.  They do this through something called Yield Spread Premium or YSP. (see our Mortgage Help for a more detailed explanation of YSP).

If the base rate for the day is 4% the broker could tell you that the rate is 4.25% today and the bank would pay them say 1% of the loan amount to lock at the higher rate.  YSP is not the tricky marketing tactic.  YSP is a normal part of loans that is fully disclosed and you can learn to use YSP to your advantage.

The problem lies in the fact that all a “We will pay all your closing cost for you” loan is that it is a loan with a much higher interest rate so that the YSP is greater.  Then the mortgage broker uses the YSP money to pay the closing costs.  But remember the mortgage brokers are in it to make money so they will also be sure to include enough left over for them to make money, this only makes your rate even higher.

These types of loans only leave you with a much higher interest rate than you could have gotten.

This loan will work in one situation.

This loan will work if you are planing on being in the loan short term.  If you stay in the loan for just a few years the higher interest rate payments will catch up and eventually overtake the amount you saved by doing a no closing cost loan.

Since it is meant to be a short term loan you should look into a 5/1 Adjustable Rate Mortgage. This will save you more money because the interest rate will be lower.

Now you know.

So now you know the how the “We’ll pay the closing cost for you” loans work.  Do not be fooled into thinking they are something greater then they actually are.

If you are looking for a stable fixed mortgage find a bank or broker with more straight forward, honest advertising.  Or even better, ask your friends who they recommend.

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Categories : Mortgage, Personal Finance, Tips
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How to Choose the Right Loan Officer

By BankAim · Comments (0)
Sunday, July 25th, 2010

Are you planning on purchasing a home or refinancing your home soon?  If so then you will need an educated, hard working, competent loan officer.  But how do you find a loan officer with the right qualifications?

Getting the Wrong Loan Officer

First off let me explain to you the headache it can cause if you get a poor loan officer.  You are putting all your eggs into one basket when you pick a loan officer.  If you are using a broker the LO will select a bank, issue the paper work, follow up on conditions and pretty much has a hand in every aspect of the loan.  Not to mention they will have access to all your personal information.  If you use a bank the LO may or may not be as involved, but will have access and most the responsibilities as a broker.

If the LO is slow, a poor communicator, unorganized, doesn’t enjoy what they do, these things will make your experience terrible and frustrating.

I have worked along side some Loan Officers that I wouldn’t even trust to make me a sandwich, so choose wisely.

Where to start?

The absolute best place to start looking for a loan officer is with trusted friends and family.  Referrals are the safest way to go.  If you know someone that has had a bad or good experience talk to them.  If you think you don’t know of anyone that can refer you to someone ask around, you may be surprised.

If referrals from friends and family don’t pan out check with a real estate agent.  A real estate agent does a lot of work with loan officers and typically want to work with the best.  Now you need to be sure the real estate agent isn’t a dud themselves, but otherwise they could be a great source.

Interview

It is okay to ask your prospective loan officer some questions before working with them.  Here are a few questions you could ask…

  • How long have you been a loan officer? - Experience can be a big factor.
  • How many loans are currently in your pipe? - You want to ask this because you want someone who is moderately busy working on your loan.  If you get someone who has 0 or 1 loan in their pipe the danger is that they don’t have enough to keep them busy and may have distractions elsewhere.  Too many loans may mean they are too busy and won’t have time for you.  A good loan officer typically has about 2 -12 loans going.  Within that range is doable.
  • How will you disclose Yield Spread Premium to me? - This is a question that will separate the best from the average.  If you don’t know what yield spread premium is jump over and read our mortgage help post.  Look for a loan officer that will fully disclose the details of the loan and give you a straight answer.
  • What is your origination? - A good loan officer deserves 2% – 2.5% on the loan.  Typically that is divided between 1% on the front (origination) and 1% – 1.5% on the back (yield spread premium).
  • What has been the average amount of days to close your last 10 loans? – Now this could vary greatly because of the many different scenarios and condition of banks which are lending the money.  30 days used to be pretty standard, but 45 days has become more normal.  This is due to more guidelines and regulations that the lenders are requiring.   On normal purchases and refinance it should be in the 25 – 45 day range.  Short sales and other types of loans may take longer.
  • How often will you contact me? - The best answer you could hear is, “How often do you want me to contact you?”
    • Now the big test is asking them to follow up with you once or twice by email and once by phone after the meeting is over.  You have not agreed to anything yet, you just want to see if they will indeed follow up.  Give them precise times to contact you.  Something like, “Can you follow up and email me Tomorrow Morning around 10am, and can you give me a call in 2 days at 3:30pm?”
    • This will test their organization and ability to contact you when you ask.

It is completely okay for you to interview prospective loan officers.  If you had $100,000 to invest you would want someone who knew what they were doing.  Well getting a good loan officer who can get you the best deal can save you thousands and thousands of dollars over the life of your loan.

If you have any tips, stories, or great loan officers in your area please leave us a comment. And if you are from Washington State we recommend Clark Davis from Mortgage Master.

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