First: make sure you are working with an experienced, professional loan officer. The largest financial transaction of your life is far too important to place into the hands of someone who is not capable of advising you properly and troubleshooting the issues that may arise along the way. But how can you tell?
Here are FOUR SIMPLE QUESTIONS YOUR LENDER ABSOLUTELY MUST BE ABLE TO ANSWER CORRECTLY. IF THEY DO NOT KNOW THE ANSWERS…RUN…DON’T WALK… RUN…TO A LENDER THAT DOES!
More than likely, this is one of the largest and most important financial transactions you will ever make. You might do this only four or five times in your entire life… but we do this every single day. It’s your home and your future. It’s our profession and our passion. We're ready to work for your best interest.
Once you are satisfied that you are working with a top-quality professional mortgage advisor, here are the rules and secrets you must know to “shop” effectively.
First - IF IT SEEMS TOO GOOD TO BE TRUE, IT PROBABLY IS. But you didn’t really need us to tell you that, did you? Mortgage money and interest rates all come from the same places, and if something sounds really unbelievable, better ask a few more questions and find the hook. Is there a prepayment penalty? If the rate seems incredible, are there extra fees? What is the length of the lock-in? If fees are discounted, is it built into a higher interest rate?
Second - YOU GET WHAT YOU PAY FOR. If you are looking for the cheapest deal out there, understand that you are placing a hugely important process into the hands of the lowest bidder. Best case; expect very little advice, experience and personal service. Worst case; expect that you may not close at all. All too often, you don’t know until it’s too late that cheapest isn’t BEST. But if you want the cheapest quote – head on out to the Internet, and we wish you good luck. Just remember that if you’ve heard any horror stories from family members, friends or coworkers about missed closing dates, or big surprise changes at the last minute on interest rate or costs…these are often due to working with discount or internet lenders who may have a serious lack of experience. Most importantly, remember that the cheapest rate on the wrong strategy can cost you thousands more in the long run. This is the largest financial transaction most people will make in their lifetime. That being said – we are not the cheapest. Of course our rates and costs are very competitive, but we have also invested in the systems and team we need to ensure the top quality experience that you deserve.
Third - MAKE CORRECT COMPARISONS. When looking at estimates, don’t simply look at the bottom line. You absolutely must compare lender fees to lender fees, as these are the only ones that the lender controls. And make sure lender fees are not “hidden” down amongst the title or state fees. A lender is responsible for quoting other fees involved with a mortgage loan, but since they are third party fees – they are often under-quoted up front by a lender to make their bottom line appear lower, since they know that many consumers are not educated to NOT simply look at the bottom line! APR? Easily manipulated as well, and worthless as a tool of comparison.
Fourth - UNDERSTAND THAT INTEREST RATES AND CLOSING COSTS GO HAND IN HAND. This means that you can have any interest rate that you want – but you may pay more in costs if the rate is lower than the norm. On the other hand, you can pay discounted fees, reduced fees, or even no fees at all – but understand that this comes at the expense of a higher interest rate. Either of these balances might be right for you, or perhaps somewhere in between. It all depends on what your financial goals are. A professional lender will be able to offer the best advice and options in terms of the balance between interest rate and closing costs that correctly fits your personal goals.
Fifth - UNDERSTAND THAT INTEREST RATES CAN CHANGE DAILY, EVEN HOURLY. This means that if you are comparing lender rates and fees – this is a moving target on an hourly basis. For example, if you have two lenders that you just can’t decide between and want a quote from each – you must get this quote at the exact same time on the exact same day with the exact same terms or it will not be an accurate comparison. You also must know the length of the lock you are looking for, since longer rate locks typically have slightly higher rates.
As you may or may not know, there have been some MAJOR changes made in lending industry. One in particular that we would like to bring to light is the new HERA/TILA (Truth in Lending) regulations pertaining to loan disclosures. Please keep reading, as this is important to all of us!
Here is a summary of what we are referring to:
These new disclosure requirements--which are the result of the Home Ownership and Equity Protection Act (HOEPA) and the Housing and Economic Recovery Act (HERA) passed by Congress in 2008--are intended to protect consumers from deceptive lending.
While lenders are still formalizing their compliance policies, it appears that the slightest change in a loan could trigger re-disclosure requirements that could add days or even weeks to closing dates.
This means that when we send out our initial disclosures to clients to sign at the time of application and we don't have a rate locked in and/or fees settled on, for a number of reasons (property has not been found yet, lender has not been picked, etc.), if there is a change of 1/8th in the APR - Annual Percentage Rate (more OR less), we must re-disclose. Which means that clients will need to resign all documentation and have it re-verified.
Just like the HVCC regulation (new appraisal guidelines), we don't think we will completely grasp the impact of the new HERA/TILA regulation until all the procedures are put in place by lenders. One thing is for certain, there will be an increased number of missed closing dates, expensive lock extensions and frustrated borrowers. We will always do everything in our power to limit this frustration, however, a lot will be in the hands of the lending institution. Our current business practice is to disclose, disclose, disclose, but unfortunately we broke our rate-quoting crystal ball, so there will be times when a re-disclosure, under these new guidelines, is inevitable. Preparation is key.
Based on these changes, there is opportunity for failure in scheduling closing dates that are unmanageable, which can cost buyers money from blown rate locks and extended closing dates with some sellers. In an effort to under promise and over deliver we meet with all of our clients one-on-one at their initial strategy planning session. Communication is key not only with our clients but with their Realtors, Escrow, Title and other parties to the transaction.
We want to make sure you are aware and not caught off guard. These changes affect everyone who is purchasing a home or refinancing their existing mortgage.
If you have any questions meet with our T.E.A.M. ~ Trusted Equity and Asset Management ~ and get them answered.
45% of retirees aged 55-75 surveyed in April 2009 have either not calculated how long their assets are anticipated to last during their retirement years or they have never given the issue any thought.
~source: Society of Actuaries
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Lenders for months have been holding back a high volume of homes in the foreclosure pipeline that could further depress home values if they are released at once into the market, industry experts say. The artificially created shortage of foreclosed homes for sale comes when there is a strong resurgence of home buying, with consumers finding, often to their surprise, that they must make multiple offers to compete for a diminished supply of bargain homes.
Meanwhile, financial institutions have been encouraged by federal and state lawmakers to slow the foreclosure process to provide more time to work with borrowers on mortgage modifications in an effort to reduce foreclosures.
Scott Anderson, vice president and senior economist with Wells Fargo, said by withholding a portion of foreclosed properties from the market, lenders may deliberately be preventing home prices from falling as fast as they otherwise would.
A tally by one company that closely monitors foreclosures showed only about a third of repossessed houses are being actively marketed. If this "phantom supply" of bank-owned houses is put up for sale at once, Anderson said, it would probably prompt another steep plunge in property values.
The median price of an Inland house has dropped 43 percent in San Bernardino County and 39 percent in Riverside County in the past year, but the rate has slowed in recent months.
Statistics confirm that banks are keeping foreclosed houses off the market much longer than usual, said Rick Sharga, senior vice president of RealtyTrac, a company that monitors foreclosure trends nationally. Sharga said RealtyTrac studied the 234,716 bank-owned California homes in its database as of the end of November and discovered that only 34 percent were advertised through the state's dozens of multiple listing services, which is how bank-owned properties are normally marketed. "We were frankly stunned by that," Sharga said. Usually repossessed houses are processed, fixed up and listed for sale within 30 days, he said.
While the gradual release of foreclosed properties helps to prop up prices, it also could prolong the real estate recession.
Also, the foreclosure process has been interrupted repeatedly by federal and state moratoriums designed to encourage lenders to modify loans to help financially stressed homeowners keep their homes. Two large government-controlled lenders, Fannie Mae and Freddie Mac, in November imposed holiday suspensions of foreclosure-related evictions that were repeatedly extended until March 31.
In California, legislation took effect in September that requires lenders to give borrowers 30 days notice before taking the first step toward foreclosure. And starting this summer, loan servicers in the state must delay for 90 days the foreclosure of owner-occupied homes or have a comprehensive loan modification program. As the moratoriums expire, the number of foreclosures is expected to spike. So GET READY...this is definitely the time to buy deeply discounted properties and interest rates are fantastic too!
Meanwhile a surge of first-time home buyers and investors, attracted by low prices and mortgage rates and government tax incentives, are competing for a diminishing number of homes for sale. Buyers are snapping up foreclosed houses, many of which receive multiple offers, faster than they can be replaced by new foreclosures.
"At the rate they are dishing out these repos (repossessed houses) it will be years before they all sell," said Kershaw of Prudential Realty, who claims that the banks are missing out on a great opportunity to clear out their foreclosures. "It is spring and we are in the big buying season. This is probably not the time to choke the market with no inventory. It is like not having iPods at Christmas time," said Kershaw. RISMEDIA, April 22, 2009.
If you are considering buying property or your clients are, not snooze, it may take longer than you think and you will risk missing a GREAT opportunity by not be prepared.
Have a super successful day!
It's Financial Literacy Month. And to long with this, please read this perfect quote to think about as you go through this very changing period of time.
"What is" is always shifting. Be aware of the shift in order to create the life I want.
Please take a moment to watch my SHORT, yes it's true, it's only 1:56 mins, video
CLICK ME TO READ MSNBC ARTICLE
CLICK ME TO WATCH OBAMA'S PRESS CONFERENCE
Please remember, we are able to orchestrate the new programs available and are excited about the programs that are being released in the next few weeks.
Part of being qualified for this new program is that your existing loan must be owned by Fannie Mae or Freddie Mac. Click on each of the links below to find out if you are a candidate.
As a Certified Mortgage Planner client annual reviews & creating a road map are key to mortgage planning and debt management so that our clients goals are achieved and they are successful.
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