Burlingame, CA

I have found that many people that many people do not understand how mortgage rates get locked here in Burlingame, California, and in many other areas.

As a mortgage broker, I receive mortgage rates from our lending partners every day (sometimes more than once, but that is a story for another post). Each lender has the mortgage rates for each of their programs (30 year fixed, 15 year fixed, etc.) published on a ratesheet.

Most people realize that there are many mortgage rates for each loan program. What they do not realize is that the points charged for the mortgage rates offered vary by the rate lock period.

Many lenders base the points charged in 15 day increments. Let's look at an example of mortgage rates for a 30 year fixed rate (these rates are for illustration purposes only, not truly a reflection of current mortgage rates).

Rate 15 Day 30 Day 45 Day 60 Day

8.00% 1.00 1.25 1.50 1.75

In this example, the 8% mortgage rate would cost a borrower 1 point for a 15 day lock, 1.25 points for a 30 day lock, 1.50 points for a 45 day lock, and 1.75 points for a 60 day lock.

This example raises two questions about mortgage rates for a homeowner or homebuyer: first, why would I lock for any longer than 15 days since the 15 day lock is cheaper than any of the other lock periods? Second, what needs to happen in order to get the 15 day rate lock?

Let's answer the first question - there are two reasons why mortgage rates should be locked in longer than 15 days. The first reason is because mortgage transactions typically take longer than 15 days. Refinances are harder to close faster than purchases because of the requirement that the borrower has three business days after signing the final loan documents to rescind the transaction. Purchases do not have this requirement.

The second reason why mortgage rates should be locked in longer than 15 days is because it is protection for the homeowner or home buyer in a rising interest rate environment. Most of my clients are happy to pay a little bit more by locking in for 30 days or 45 days to guarantee they will get the mortgage rates they have been offered, provided their application is approved.

Let's answer the second question - what needs to happen to get a 15 day rate lock? The answer to this question is to work as a team with your mortgage broker.

Mortgage rates are volatile - we often have our lenders update their mortgage rates two or three times per day. Your mortgage broker should use a rate alert service in order to stay on top of the daily activity in the mortgage market. If there is a rate change he should be alerting you about the change.

The mortgage applicant needs to do his part also in order to get the 15 day rate lock. Documentation needs to be completed in full. Most of our lending partners will not lock mortgage rates until the loan application has been approved, and all conditions for closing have been signed off by the underwriter. As you can see, speed, cooperation and teamwork is required by the applicant and mortgage broker.

Here is a strategy I advocate to get the 15 day rate lock in a declining rate environment. Let your mortgage broker know what mortgage rate and point structure you would like to target. When the mortgage rates are within .25% of your target, get your documentation submitted to your mortgage broker and try to get it approved ASAP. With an approval you can just wait until the rate targeted hits. Again, this takes great cooperation and communication

with the client and the mortgage broker. I have used this strategy with my clients here in Burlingame, California, with excellent success.

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Recently a friend of mine called me and said that he needed a construction loan to remodel his house in Burlingame, CA. I asked him if he had a construction contract and plans. He said not only did he have those items, he had already started construction!

I asked him why he was calling me now, didn't he already have a construction loan in place? He said no - he was approved for an equity line of credit, but when the lender found out that construction had already started, they could not fund the loan.

I told him I would do my best to find him a construction loan, but I could not guarantee anything. Lenders usually do not like to approve a construction loan application after the project has started.

After making several phone calls, I found a bank that was interested in funding this construction loan. Luckily, my client was financially qualified, and very organized with his paperwork. We got the loan approved, and it recently closed escrow!

There are several lessons homeowners should know that my client learned from going through this process to obtain a construction loan.

Before starting construction, a homeowner should make sure he has the financing of the project approved. It could be a construction loan, a line of credit, a margin loan, etc. No matter what type of financing it is - have it nailed down. Having financing in place not only makes sure the homeowner can finance the project, but also will save the homeowner from a lot of paperwork headaches and stress!

Another tip when obtaining a construction loan is to alert your contractor that he will need to supply documentation to the lender. This documentation usually is made up of a resume, list of completed projects, insurance, and financial statements.

Regarding financial statements of the contractor, it is a good idea to find out the amount of working capital your contractor has. In many cases suppliers will ask to be paid prior to the bank supplying funds from the construction loan. If the contractor does not have enough working capital to fund the suppliers, they may place a mechanics lien on the project. A homeowner may want to consider writing into their construction contract the ability to pay a supplier or sub-contractor directly if the contractor is unable to. This ability can help avoid an issue with a mechanics lien.

If for some reason construction has commenced prior to obtaining a construction loan, make sure that you keep copies of all receipts and cancelled checks. The construction loan lender will want to see these.

Finally, make sure you understand all the terms of the construction loan. The key points to know are:

• the interest rate and how it can change
• the term of the loan
• how often funds are disbursed
• who the check for funds is made payable to (homeowner, contractor, or both)
• whether or not the bank will provide a permanent loan to take out the construction loan upon completion

Are you interested in mortgage refinancing in Burlingame CA? I have great news! Mortgage refinancing can now be customized to closely match the term of your current mortgage.

You may not want a mortgage refinancing because you are thinking "Oh great, I have been paying on my 30 year mortgage for three years, now I am going to start over with a new 30 year mortgage!" You don't want to start over. You don't want to turn back the clock.

Here is the new mortgage refinancing solution for this problem: customized loan terms. Let's look at an example.

Suppose you have paid on your 30 year mortgage for three years, as above. You notice that interest rates are less than what you are paying on your current mortgage, so you are contemplating a mortgage refinancing. Instead of obtaining a 30 year mortgage, you are now able to customize the terms to a 27 year mortgage!

By customizing the terms with your mortgage refinancing, you do not have to turn back the clock! You can stay on the same amortization schedule to get your mortgage paid off.

The rates for this type of mortgage refinancing are determined by rounding up to the nearest published amortization term. In this example, the rates for a 30 year mortgage would be used for a 27 year mortgage.

Suppose you are 53 years old, and you would like to retire at age 65. You could apply for a 12 year mortgage refinancing to have your home paid off at the time of retirement. In this example, rates for a 15 year mortgage would be used because this term is the closest higher amortization term.

Customized mortgage terms are available with amortizations from 10 years to 29 years. Conforming loans and agency jumbo loans (loan amounts up to $729,750 for single family residences in certain counties) are available for customized mortgage refinancing solutions. Properties can be located not only in Burlingame Ca, but also in all parts of California.

Would you like to calculate your customized mortgage payment? Look over to the right under my picture and figure out what your payment will be with a mortgage refinancing.

Do you want to find out the current rates? Contact Me

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The OLA Fun Faire takes place this weekend. The theme this year is Ireland By The Bay. The times are Friday September 18th from 6 to 10, and Saturday September 19th from 2 to 10.

There are all kinds of fun activities for all ages. For the kids, there are rides, rock climbing, and bunjee jumping. In addition, there are all kinds of game booths for the kids to enjoy.

For the parents, there will be a silent auction, a tasty Irish dinner, and plenty of beverages to keep you cool during what should be a very warm weekend.

I hope to see you at the OLA Fun Faire this weekend!