Tuesday, July 28, 2015

Picking Your Best Mortgage Option

It's been established that current real estate conditions means it's a good time to buy for a lot of people.  However, with so many options out there, it's hard to pick one because with every choice there are pros and cons.  It's easy to be suspicious of lender's advice questioning their motivation to line their own pockets and not knowing where to turn for unbiased information can lead to frustration.  Here's a short guide to the basics of mortgage options to begin your own research.  As a mortgage broker, my job is to find my client the best rates and options for their budget.  Here's some sound advice from Dan Green from The Mortgage Reports on your home loan options.

Picking Your “Best” Mortgage: FHA, VA, Conventional, USDA, & Jumbo


Every mortgage borrower is unique. And, in today's expanding mortgage market, there is a home loan to match nearly everyone's mortgage needs.
There are mortgage loans for borrowers with large downpayments and small downpayments; mortgage loans for borrowers with high credit scores and low credit scores; and loans for borrowers with special circumstances.
There are also loans for borrowers with military experience; loans for borrowers in rural homes; and, loans for investors who paid cash for a home and now want to "cash out".
Furthermore, there are loans for self-employed borrowers; loans for "just-back-to-work" borrowers; and loans for borrowers with sizable assets but no employment.
With so many loan programs available, it can be a challenge for borrowers to know for which loan they should apply, let alone to know whether they'll get approved.
It helps to know the details of each program as it relates to you. Understanding your options is the first step toward making your best choice.


For today's home buyer, there are plenty of way to buy a home with little or no money down.
For example, the Federal Housing Administration (FHA) makes available a loan requiring a downpayment of just 3.5%; and the Department of Veterans Affairs and the U.S. Department of Agriculture offer the VA loan and the USDA, respectively -- both of which require no downpayment whatsoever.
Furthermore, Fannie Mae and Freddie Mac both offer a loan requiring just a 3% downpayment.
Which of these low/no downpayment loans is best for you? That will depend.
Of all the common loan types, VA mortgages are often most attractive because VA mortgage rates have been lower than comparable conventional rates this year by close to 37.5 basis points (0.375%). However, in order to get approved for a VA loan, you must meet specific eligibility standards.
FHA loans would appear to be the next-best loan because FHA mortgage rates also beat comparable conventional rates, but FHA loans can require a stiff mortgage insurance premium which cancels out the savings.
FHA loans are often the best minimum-downpayment mortgage option for borrowers with credit scores between 580 and 660; and borrowers purchasing a multi-unit homes of 2-4 units.
For home buyers in rural areas and suburban neighborhoods which are less-densely populated, the USDA loan can be a terrific fit. Offering 100% financing, USDA mortgage rates rival VA mortgage rates; and USDA loan mortgage insurance premiums are low.
However, USDA financing only allows for 30-year fixed rate loans.
Lastly, there's the Fannie Mae 97% loan. Mortgage rates are low and underwriting standards are simple. The main draw of the Fannie Mae 97% program is that it allows for downpayment monies to be a gift; and that it's the cheapest, widely-available low-downpayment program available. 
Choosing the right mortgage also requires having a strong plan.
Selecting your best loan is about more than finding today's lowest rates -- it's about finding the best possible product at the best possible price.


Just like today's home buyers have a myriad of mortgage options from which to choose, so do households choosing to refinance. 
For example, homeowners with an FHA-backed loan may find it better to cancel FHA MIP via a switch to a conventional mortgage as opposed to using the FHA Streamline Refinance, then passively waiting for FHA MIP to expire.
Same for homeowners with military experience who are not currently using the VA Loan Guaranty program.
VA loans offer low rates, access to the VA Streamline Refinance program, and an assumability clause, which means that a future buyer of your home can "assume" your mortgage at its current rate. VA loans can be especially valuable in a rising mortgage rate environment because of this.
There are three main refinance types.
The first is the rate-and-term refinance. Rate-and-term refinances are characterized by a change in mortgage rate, a change in the loan term (e.g.; 30 year loan refinance to a 15-year loan), or both.
Common rate-and-term refinance types include the aforementioned FHA Streamline Refinance and VA Streamline Refinance, as well as the Home Affordable Refinance Program (HARP) and the Fannie Mae 97% loan, which is billed as a HARP 3-type alternative.
The second type of refinance is the cash-in refinance.
With a cash-in refinance, the homeowner brings cash to closing for purposes of paying down a loan. In general, cash-in refinances are used to bring a loan to 80% loan-to-value (LTV) in order to eliminate private mortgage insurance payments. 
The third type of refinance is the cash-out refinance.
A cash-out refinance is characterized by the homeowner increasing its loan balance by five percent or more. The "extra" balance is paid to the homeowner as cash, or used to pay credit card debts and other obligations.
For loans with high loan-to-value, banks quote cash-out refinances at higher rates than comparable non-cash out refinances. For this reason, some homeowners prefer to use a different way to access home equity -- the home equity line of credit (HELOC).
The home equity line of credit functions much like a credit card. Homeowners are granted a credit line based on their home's equity and can use that credit line at any time, up to the limit. 
For example, a homeowner whose banks grants a $25,000 HELOC can spend up to $25,000 at any time using a bank-issued credit card. So long as there is a balance on the line -- like a credit card -- the homeowner is required to pay interest on it. When the balance is zero, there are no monies due.
Interest rates on a home equity line of credit is based on Prime Rate, which is generally 300 basis points (3.00%) above the Fed Funds Rate and is adjustable. HELOCs offer the flexibility of a credit card but with an uncertain long-term interest rate. 


There are a huge number of mortgage options for today's home buyers and refinancing households. Choosing the best program can help you get great rates. Interest rates vary by product so it's important to choose whats best suited to your needs.
Get a live rate quote now. Mortgage rates are available online at no cost and with no obligation to proceed. Your social security number is not required to get started.

Find the full article here.

Wednesday, July 15, 2015

New Jobs Data Keeps Rates Lower

     A new report by the Bureau of Labor Statistics came out in June and has kept The Fed from increasing rates, for now.  Wage growth in the U.S. has not met it’s predicted increase, therefore, the average rate increase has been postponed into 2016.  Great news for buyers who are still getting their ducks in a row!  There is still have time to take advantage of historically low rates.  Here’s more about the report from Mortgage News Daily:
Mortgage Rates Edge Slightly Lower After Jobs Data
Jul 2 2015, 5:22PM

Mortgage rates made an anti-climactic move lower todayafter the big jobs report proved slightly disappointing to markets.  Stocks and bond yields both fell after the Bureau of Labor Statistics said only 223k jobs were created in June compared to a negatively revised 254k in May.  Perhaps even more of an issue was the drop to 0.0 percent wage growth versus forecasts of 0.2 percent.  The Fed has recently expressed interest in wage growth as one of the signs that economy is ready for a rate hike.  After the data came out, options trading suggested the median Fed rate hike time frame moved into 2016.  It had been September 2015 until today.
Of course the Fed's eventual rate hike doesn't have a direct bearing on 30yr fixed mortgage rates, but it has all the bearing in the world on the short term money that financial markets use to facilitate the trading of long term money.  In all but a very few historical circumstances, when short term rates move up, so do mortgage rates.  Refreshingly though, much of 2015's move higher in rates is, in fact, a preemptive move that attempts to account for the rate hike.  So when the time comes, it's not as if mortgage rates will instantly rise a quarter of a point.
That preemptive move is ongoing, and it's joined by the other big-picture theme of 2015.  That's the gradual unwinding of the great European bond market rally of 2014 (and early 2015) ahead of their quantitative easing program.  (As a reminder, 'bond market rally' = lower rates.)  Now that inflation has begun picking up in Europe, the ultra low rate environment caused investors to panic this spring.  Rates have moved quickly higher since then, leaving us to wonder if the panic has subsided or if it's merely taking a break.  Until and unless we see much more strength than we saw today, it continues to make most sense to assume the move higher in rates will continue and act accordingly in terms of locking and floating.

Loan Originator Perspective

"Well, a "Goldilocks" jobs report today (not too hot, not too cold) has pushed back expectations for an imminent Fed rate hike, and bonds improved. My pricing is better than yesterday's, but Tuesday's was still the best of the week. We are firmly entrenched in the current range, just bouncing up/down within it. Until that range breaks, I'll be locking in the lows. Happy Independence Day, all!" -Ted Rood, Senior Originator
"Rates improved a bit following a NFP report which was a bit worse than expected. The next big market mover will be Greece and the outcome of the referendum. This vote is being perceived as saying yes or no to the Euro. If the vote comes back as a NO we could see rates come down a bit. If it comes back as a YES the market should not really be impacted to much for the market appears to have priced in a YES response. On a side note I just spent a few weeks in Greece and talked to a lot of citizens there and they all shared more or less the same message. They are not happy with the EURO and can care less about the EURO union. By biased opinion leads to me believe the Greek referendum will come back with a NO and for that reason I am recommending floating over the Holiday weekend. Please to take into consideration floating will come with risk. " -Manny Gomes, Branch Manager Norcom Mortgage
"I continue to favor locking at loan application. A mixed employment report has helped bonds recover all of yesterday's losses. Much of today's gains have come after initial rate sheets so look to lock later in the afternoon." -Victor Burek, Open Mortgage

Today's Best-Execution Rates

  • 30YR FIXED - 4.125%-4.25%
  • FHA/VA - 3.75-4.0
  • 15 YEAR FIXED - 3.375%
  • 5 YEAR ARMS -  2.75 - 3.25% depending on the lender

Ongoing Lock/Float Considerations

  • 2015 began with a strong move to the lowest rates seen since May 2013.  The catalyst was Europe and the introduction of European quantitative easing.
  • It's a highly uncertain time for global financial markets.  There is much debate over whether or not the global economy is turning a corner, thus justifying a widespread move to higher rates.  That's made 2015 significantly more volatile than 2014 for markets.  This means lender rate sheets may change appreciably from day to day, and sometimes even several times in the same day. 
  • Bottom line: European Quantitative Easing helped push global rates to all-time lows in April.  Now, the big risk for mortgage rate watchers is that we might have turned a long term corner.  That risk is being compounded by speculation about the Federal Reserve raising rates by the end of 2015.
  • May and June have amounted to the 2nd major move higher bounce so far this year.  Every time this happens, we have to consider the possibility that this will be a big-picture, long-lasting correction.  Until such a thing can be ruled out, Locking makes far more sense. 
  • As always, please keep in mind that the rates discussed generally refer to what we've termed 'best-execution(that is, the most frequently quoted, conforming, conventional 30yr fixed rate for top tier borrowers, based not only on the outright price, but also 'bang-for-the-buck.'  Generally speaking, our best-execution rate tends to connote no origination or discount points--though this can vary--and tends to predict Freddie Mac's weekly survey with high accuracy.  It's safe to assume that our best-ex rate is the more timely and accurate of the two due to Freddie's once-a-week polling method).

The original report by Matthew Graham can be found here

Wednesday, July 8, 2015

What Gay Marriage Ruling Means for Mortgages

   This is a great article on how the historic Supreme Court decision on Gay marriage will affect the mortgage and real estate industries!  When people feel more secure in their civil rights, they feel more secure in their financial investments as well!

What Gay Marriage Ruling Means for Mortgages

The Supreme Court decision making same-sex marriage legal nationwide could boost mortgage demand as it provides gay and lesbian couples with more financing opportunities and stronger joint property rights.

"In the short run, it will increase demand for loans because more couples are going to get married," said Shoshana Grossbard, an economics professor at San Diego State University who has authored research on gay and lesbian couples.

Married couples find mortgage credit more accessible than single people, she said. "It's much easier for a married couple to buy property and get a mortgage than two singles," Grossbard said.
In a survey of lesbian, gay, bisexual and transgender consumers published in May by the National Association of Gay and Lesbian Real Estate Professionals, 81% of respondents said a Supreme Court ruling for marriage equality would make them feel "more fiscally protected and confident,"which the trade group identifies as key real estate market drivers. In addition, 83% of surveyed nonhomeowners consider qualifying for a mortgage a "strong" or "medium" motivator to purchase a new home.

However, 73% of respondents also said they were strongly concerned about some aspect of housing discrimination by real estate agents, home sellers, lenders or other market participants. The survey found that 62% of respondents had a "strong" or "moderate" concern about gender identity or sexual orientation reasons affecting their ability to be approved for a mortgage.

The Supreme Court decision could spur not only more purchase lending, but also more refinancing, according to Holly Hanson, founder and principal of Harmony Financial Strategies, a Los Angeles financial planning and wealth management firm.

"As far as making more loans, I do think that changes," she said. "One of the reasons would be, for instance, if you wanted to refinance a loan into a joint name in order to build credit for one of the spouses that maybe didn't have great credit."

Married same-sex couples also will have more access to the Department of Veterans Affairs mortgage program, said Gary Boyer, a mortgage loan officer at a brokerage in Portland, Ore.

"This has big implications as far as federal agencies. The VA, for example, has honored a same-sex spouse in states where marriage was legal, but did not honor same-sex spouses in states where it was not yet legal. Any veteran will now be able to have their same-sex spouse on the mortgage with them," he said.

There also are national implications for land title, he said.

"Mortgages are interstate commerce and without marriage being recognized throughout the country, it basically means that the laws were inconsistent for borrowers when it came to title issues, which could mean inheritance issues," said Boyer. "It actually clears up a lot of issue with title. One of the biggest issues for couples was ensuring that their significant other would inherit the house and unless title was stated in a very specific way, it was challenging before."

The original article by Bonnie Sinnock appeared on Origination News and can be found here