Tag: mortgage

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7 Mortgage Rate Tips for Homebuyers

If you’ve been considering buying a house — or if you’re actually in the process — you’ve probably heard two things quite a bit lately:

  1. Rates are going up.
  2. They’re still historically cheap.

Yes, interest rates remain historically low, but that doesn’t negate the fact that they’re higher than if you had only recently purchased a home. Don’t grind your teeth…

Likely, rates and house values will drop in the near future, so wait just a little longer and you’ll see how well it pays off. Unfortunately, it appears that rates may rise even more in the near future, and home prices don’t appear to be on track to come down by much.

So, let’s look at some methods for managing increasing interest rates in order to make your payments as manageable as possible, and maybe even save money.

Credit. Clean it up. The better your credit is, the lower your interest rate will be. Check out your credit report to see if anything obviously wrong can be fixed. If anything looks strange to you, get advice from your mortgage rep or a credit repair professional on any issues they discover that you could fix, pay down, or reduce in order to raise that credit score.

Shop around. Check with a few lenders to find out who offers the lowest rate. Alternatively, go through a mortgage broker that has access to several lenders and can do the shopping for you. If one appears too good to be true, be mindful of the rates and charges. If you happen to know anyone that works at a credit union or is connected with one, ask them – they frequently have better rates since they lend their own cash and/or have a closer connection with their customers.

Buy discount points. Buying down your mortgage rate by paying “discount points” is a good idea. These are fees paid in advance to secure a lower mortgage interest rate. Buying a point will cost you 1% of your home loan and will typically reduce your interest rate by 0.25 percentage points, although this varies from lender to lender. Most offer a maximum number of points you can purchase, and they sometimes provide the choice of purchasing smaller than full point increments. If you want to stay in your home for an extended period, this is a great alternative.

Lock in that rate. Despite the fact that rates have already been on the rise, there’s a good chance they’ll rise even more. Rate locks are generally only given for 60 days, so if you want to buy soon, now is the time to lock in at current rates. Make sure to ask your lender how much a rate lock will cost you. Check to see whether they provide a “float down” option, which would allow you to take advantage of a lower rate than the one you locked in if rates drop before you close on your property.

Get an adjustable mortgage rate. Rates have been so low for so long that adjustable rate loans haven’t really appealed to consumers, since the 30-year fixed-rate mortgage was so cheap. However, as individuals strive to save money wherever they can, adjustable rate mortgages are making a comeback. Variable rate bonds give you the greatest chance of securing higher rates compared to fixed rate bonds. Variable term mortgages are normally more favorable with a greater interest rate at a predetermined period, but only for a limited time before they raise (as the name implies). Depending on what rates are when the opportunity arises, they might change up or down. To be safe, anticipate that the rate will be higher on that day. The period before the rate rises is usually 5, 7, 10, or 15 years. If you’re not thinking about living in your house for a complete 30 years, these are ideal. Consider how long you’ll stay in your house and pick one that won’t change rates before you move so you aren’t penalized. If you’re sure you’ll be moving in the next decade, a 10-year ARM may be the best option for you.

Make bi-monthly payments. If you pay half of your monthly mortgage payment every two weeks, you end up making an extra payment each year. This cuts years off your loan and saves you a lot of money in interest charges.

Re-fi when the rates move down. Keep an eye on interest rates. When mortgage rates fall significantly, refinance your mortgage at a lower rate.

You don’t necessarily have to accept whatever interest rates are offered. As a result, even if rates aren’t as low as they’ve been in the recent past, you still have choices and control over how much interest you’ll pay. You’re certain to save money if you utilize one or a combination of the techniques above!

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What Do You Need To Budget To Buy A Home?

When it comes to purchasing a property, it might be difficult to know how much money you’ll need and where to get that information. You should understand, however, that you are not required to have all of the answers on your own. There are several reputable professionals who can assist you in understanding your finances and what you’ll require to budget for throughout the process. Here are some things experts recommend when it comes to planning ahead.

people holding miniature wooden house
  1. Down Payment

When it comes to saving for a home, you’re likely already thinking about your down payment. You may believe you must set aside 20% of the purchase price for your down payment, but that isn’t always the case. The National Association of Realtors (NAR) advises: “One of the most widespread misconceptions among housing purchasers is what the average down payment is and what amount is required to go into homeownership. Having this information helps you know where to save.”

The good news is that in some cases, you may be able to put as little as 3.5 percent (or even 0%) down. To learn more about your choices, speak with a qualified expert who can explain the many loan kinds, down payment assistance programs, and what they entail.

2. Earnest Money Deposits

Another item to consider is a down payment in earnest money. While it isn’t necessary, it is becoming increasingly popular as a way for your offer to stand out in a competition.

What is it, exactly? It’s money you pay as a sign of good faith when making an offer on a property. This deposit functions like a credit. You’re demonstrating your commitment and seriousness to the seller by using some of the money you saved for your purchase. It’s not an extra cost; it’s paying part of the down payment up front. First American describes what it is and how it works:

“The money paid by the buyer to the seller as part of an offer. This deposit is usually kept in trust by a third party and shows the seller that you are serious about buying their property. The money will generally be used to pay for your down payment or closing costs after closing.

In other words, the first check you’ll write towards your purchase may be an earnest money deposit. The amount varies by jurisdiction and situation. According to Realtor.com,

“The amount you deposit as earnest money will be determined by a variety of things, including your state’s regulations and limitations, the current market, what your real estate agent suggests, and whatever the seller requires. On average, you can anticipate to put down 1% to 2% of the total house price. ”

When it comes to selling your property, you want someone who can guide you through the process and get the most out of it. A real estate advisor will assist you in determining whether or not something may be a viable alternative for you.

3. Closing Costs

The next item to consider is your closing expenditures. Closing costs are defined by the Federal Trade Commission (FTC) as:

“The upfront expenses incurred when purchasing a mortgage loan. These may include, but are not limited to, a loan origination fee, title examination and insurance, survey, attorney’s charge, and prepayments for taxes and insurance.”

Closing costs, in a nutshell, cover the expenditures for various people and services connected with your deal. According to NAR, you should budget about:

“A home costs more than simply the sale price,” says the article. Closing expenses, for example, which represent between 2 and 5 percent of the purchase price, are a significant added cost… A mortgage lenders gives buyers with a Closing Disclosure at least three business days before closing to allow them to plan ahead of time for these additional fees.

The most important point to remember is that savvy purchasers budget for these fees ahead of time so they can enter the process prepared. As Freddie Mac puts it,

“If you’re looking to buy a house, your down payment is almost certainly at the top of your list. And rightfully so – it’s usually the most expensive element of house buying. However, it isn’t the only cost and you must know all of your expenditures before diving in. The more prepared you are for your down payment, closing fees, and other expenses, the better off you’ll be as a home buyer.”

Bottom Line

It’s critical to know how much you should budget for throughout the home buying process. To guarantee that you understand these and any other costs that may arise, give me a call. You’re not in this alone.

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6 Tips to Find the Best Mortgage Rates in 2022

Home buyers who do mortgage loan shopping can avoid leaving money on the table.

man in black suit jacket sitting beside a couple

Whether you’re shopping for new bed sheets or a new car, the drill is usually the same. Hit the reviews, check with friends, and scope out the best deal. After all, who wants to buy a car that racks up repair bills right away? Yet when picking a mortgage loan, borrowers don’t always think about comparison shopping.

In a Bankrate survey of recent home buyers, 12% of millennials said they believe their mortgage rates were too high. Some buyers may think that when mortgage rates are low, they don’t need to shop for the best offer. But even a few basis points can make a difference of thousands of dollars over the life of a loan, according to Bankrate, the Consumer Financial Protection Bureau, and the Federal Trade Commission.

You may think mortgage shopping is about as much fun as prepping for a tax audit. It’s true that comparing home mortgages can get complicated. But you don’t need a finance degree to make an informed decision. Here are some steps to get there.

Find a Few Lenders

When looking for lenders to consider, loan officers recommend going to a few sources:

  • Locals you know and trust: “Make sure the lenders you’re comparing come from referrals from local people you know who’ve worked with them — like your friends or relatives,” advises Jeff Koch, vice president of residential lending at Draper & Kramer Mortgage Corp in Schaumburg, Ill. “Wherever you have trust established would be a good source.”
  • Your real estate agent: “If you’re working with a real estate agent, find out if they have any feedback or advice on a lender or a loan officer,” recommends Jim DeMarco, branch manager and senior loan advisor at Flagstar Bank in Seattle.
  • Online reviews: These can be a good starting point, DeMarco says. “If you see a lot of really good reviews, that means people are taking the time to provide them.”

Have an Intro Mortgage Loan Meeting

During a meet and greet, you and the loan officer will usually ask each other questions, and the loan officer will use that information to assess your qualifications. That may sound cut and dried, but the meeting should be fluid based on what you’re ready to do.

Typically, the loan officer would schedule a meeting focused on comparison shopping separately. If that sounds painful to borrowers who want to (literally) get moving. No worries, Koch says. “The borrower may be well versed and want to get right to what’s most relevant for them, which are the financial and comparison details. But a lot of people need to go over their own questions or cover key topics first.”

Want to meet virtually? “Some folks are just more comfortable virtually, and that’s OK,” DeMarco says. “I’ve closed loans with people I’ve never talked to on the phone. It’s all via text.”

Interview the Mortgage Loan Officer

Whichever way you choose, this meeting is prime time to interview the loan officer. Borrowers need to find someone who will be in there with them and can problem solve. “We call unanticipated problems ‘icebergs,’” DeMarco says. “You think there’s smooth sailing. And then, suddenly, you smack into an iceberg.” 

Check out the lender’s communication strategy and their process for delivering on time. “The process is highly complex, and you’d think professional lenders all would have mastered it. That’s not the case,” says Koch. “When a loan isn’t delivered on time, people’s finances and lives are basically balanced on the head of a pin, which is the closing date.”

To avoid problems, ask questions like these: 

Fact finding about the process:

  • Would you take me through the process?
  • What should I expect? 
  • What will I need to supply?

Compatibility with the loan officer or mortgage banker or broker:

  • What’s your communication style? Are you willing to communicate virtually?
  • When would I work with you? Are you available in the evenings?
  • Will I be working with you or a member of your team?
  • What do you think of my time frame to get to closing?
  • What if any problems do you foresee?

Track record of loan officer and lender:

  • How long do loans you process typically take to close?
  • How would you expedite the process if there’s a tight time frame?
  • About what percentage of loans you work on close on time?
  • How many loans have you worked on that haven’t closed or haven’t met deadlines? 
  • What’s the biggest problem you’ve had with a loan and how did you fix it?

Use the Meeting to Learn

You can also use the meeting to clarify general info you’ve picked up online and talk about your concerns. DeMarco gives a couple of examples. “You may have switched careers or industries in the last year or started having bonus or commission income. Your research may have shown you can just divide your salary by 12 to figure monthly income. But it may not be as simple as that.”

You’ll also want to bring up concerns like the impact on your credit score. Thirty-eight percent of buyers think comparing multiple mortgage offers in a short time will hurt their credit rating, according to a 2020 LendingTree survey. “As long as the lenders all pull the borrower’s credit within a couple of weeks, it’s counted as a single credit inquiry. So, it’s not a problem if they do it within a narrow band of time,” Koch explains.

Get and Compare Financial Information

Whether you’re looking at a federal form called a loan estimate or a precursor form called the fees worksheet, you’ll see a breakout of closing costs, explains Koch. “To compare the lender financials, you’ll want to drill down to origination charges in the lender section. Make sure you’re comparing apples to apples. If one lender is offering a 30-year fixed rate at 2.875% with no lender fees and another is offering 2. 75% with $1,500 in lender fees, those are unlike products. Get the fees at the same rate to find out which is less expensive.”

6 Tips to Get Mortgage Loan Information

Comparison shopping can get complicated. Here are six ways to keep it simple:

1. Keep Your Pool Manageable

Mortgage shopping “depends on the borrower and the personality type and how they’re wired,” Koch says. “The process can seem overwhelming. That’s why it makes sense to have a select few options to compare so borrowers can process and assimilate them.”

2. Get a Fees Worksheet

The best way to compare effectively is to zero in on the fees worksheet, which the loan officer should provide. “You’ll be able to figure out just what the lender’s direct fees are, and you can make a nice, simple comparison.”

3. Understand a Fees Worksheet Versus a Loan Estimate

The numbers on the worksheet are estimates and not locked in. Interest rates are fluid and change daily or even more often, DeMarco says. On the other hand, after you have a contract with a seller, “the loan estimate and loan application are where the information is binding, barring structural changes to the loan,” Koch says. Make sure the information reflects previous discussions with and disclosures by the loan officer.

4. Be Careful Interpreting Third-Party Fees

Third-party fee estimates are included on the worksheet. Two lenders could each come up with different estimates for title, escrow, or appraisal fees, Koch explains. But not all are negotiable. For instance, the seller chooses the title company, so the lender doesn’t control the choice or the fees. The lender could be choosing the high or low end of a range, but it’s only an estimate.

5. Think About Timing

Make sure lenders are using the same time frame for locking in pricing and that it will extend through the closing, Koch notes. “A lender might offer a rate that’s a lock for three weeks, but if you anticipate or know your closing date will be five or six weeks out, that’s a problem.”

6. Consider Applying for Loan Approval Before Finding a Property

“Many lenders will not do this,” Koch says. “But some will allow borrowers to go through the formal underwriting process — not just pre-approval — without having a property. The borrowers can get a bona fide mortgage commitment with all of the major buyer financials truly underwritten at that point. Then when borrowers make an offer, they can close more quickly.”

You’ll have to invest some time and effort into comparison shopping for a mortgage loan and selecting a lender and a loan officer. But your return on investment can pay off over the long haul.