I have always responded to mortgage question from readers, part time editors, not so much. Any case I have created the “Mortgage Answers” tab above to provide links to several short videos that address the most common questions I receive. As always if you should have a mortgage question please feel free to ask.
One of the negatives of an approving economy is inflation. As more people return to work there is more demand for……everything. The improving economy is a good thing as people returning to work instills self-pride as they can finally get that new car, take a vacation or purchase a home. Purchasing a home gets hit with a double whammy as inflation drives up values and mortgage rates. Both have a negative impact on the affordability index for purchasing a home. I am already beginning to hear from people “why did you not tell me” home prices, rates and affordability index are all going up. Truth be told I said it many times verbally and in this blog. So here is the next thing, click on the link to see a short video that breaks down in more detail “It is not always about the rate.”
Over the past few years we has experienced artificially low mortgage rates so people will not want to sell or refinance as they will lose their 3% rate. Simply put those days are gone and will most likely not return in my lifetime. As we move forward with real estate and mortgages we should understand that rates are moving up. Debt reduction to improve monthly cash flow is, for the most part, the only refinance option for most home owners. This is due to increased property values for debt consolidation or to remove mortgage insurance.
Home Owners with FHA loans should consider refinancing to remove the mortgage insurance. FHA mortgages offer many advantages to borrowers but the mortgage insurance in many cases never goes away. If you should have a FHA loan that will allow for the mortgage insurance to be removed then you should know that earned equity does not factor into the loan to value equation for removing the mortgage insurance. It will drop off when the original principle balance is reduced to 78% or in most cases roughly 11 years of on time payments.
It is anyone’s guess as to what the future holds for mortgage rates but 5.5% for a 30 year fixed should be expected. For those of you that are holding out for a 3.0% rate I think it is safe to say that ship has sailed. It is sad to said but rate reduction refinancing is not going to happen for most people.
Today I think it is fair to say we live in a technology world. When it comes to the Mortgage Industry your mortgage is not something you really want to rocket into. Technology is a great thing but it will not replace the benefit of a qualified Loan Officer. Until we have actual thinking technology it will be difficult for borrower’s to actually pick the best mortgage option for them without human interaction. For example, if you are only emailing with someone in any business you are leaving your emails open to the receiving parties interpretation. So your message could be completely misunderstood. So now ask yourself, can a computer that only speaks in text, actually communicate as well as a qualified Loan Officer?
Technology is best used as support to the Loan Officer and not as the only means of communication between a borrower and the Lender. MN Capital Home Mortgage has a very good example of technology supporting both the borrower and the Loan Officer. If you go to MN Capital Home Mortgage Facebook page you will see they are currently posting educational information for borrowers. Here is an example of what MNC is doing MNC Video Link. The video link addresses PMI or mortgage insurance.
Do not get me wrong, I do like technology. I just have not seen Mortgage Industry technology that works for all loan types over multiple Lender platforms. I am sure the day will come but until then the current technology is helpful but in my opinion there is still more development work to be done before it will equal the benefit of a qualified Loan Officer.
When looking for a new home mortgage it is difficult to know where to go. Do you use your bank, a broker or maybe a mortgage lender? We all think that our bank is the safest place for us as they know all about you so they would not need much paperwork. Well that is not correct as they need all of the same paperwork as any other Lender. So a Mortgage Broker? Well this one is could cost you less but it will most likely take more time. As for the Mortgage Lender these companies have many advantages in terms of cost and speed but the current larger companies are working more like banks and talk more about awards from the past or glory days. There is one other option and that is a Direct Lender. Direct Lenders will fund your new mortgage in house, with their own funds, and have multiple outlets is they choose to Broker a loan as well.
Banks use depository money to fund loans. Brokers use Wholesale Mortgage Lenders to fund loans. Retail Mortgage Lenders use their own money to fund loans but offer limited loan programs, in most cases. A Direct Lender, simply put, offers nearly all of the above options and will go with the program that is best for the borrower. So it is my opinion that a Direct Lender is your best option when looking for a new mortgage. A Direct Lender will look for the best mortgage program fit for you and not try to put you into one of the programs a particular company offers or aka “box.”
If anyone should have any questions in regards to a mortgage program please send me your questions. I will be happy to respond back to you with my thoughts and, if possible, how to get your Lender to improve their mortgage offer to simply let you know yo have a good offer.
When looking for a new or refinance mortgage is it common for us to go to our banks as this is where we feel safe. We keep our money there and often have auto and/or credit cards form these same institutions. Truth be told the banks sell of the majority of their home mortgages so they function much like a Mortgage Broker from the borrowers prospective.
When you sit down with any loan officer they we talk with you about your goals or why you are looking for a new mortgage. This is so they can select the proper program they have to offer to meet your needs. This is important, not every Bank or Lender will offer a mortgage program that truly fits your needs but rather best fits the loan officers needs. Just as Chevy is beating up Ford on the aluminum truck beds. The question is, will you be throwing heavy rocks, bricks or other such items into your mortgage? So it is important you know what you are looking for when it comes to a purchase, rate reduction, term reduction or cash out mortgage.
I am going to use the company I work for as an example, and there are many companies that work similar to my company, to address many of the common questions I get on a daily bases. Just a little background on my company, We are both a Direct Lender and a Mortgage Broker originating in seven states. We can fund a on one of our programs or broker a loan through a Wholesale Mortgage Partner if they are offering a better options for the Borrower. We will use a Wholesale Mortgage Partner if it is in the borrower’s best interest, not every Company, Bank, Direct Lender or Mortgage Broker offers this service. Common questions by mortgage type below, I hope this helps.
Purchase Mortgages We offer forward mortgage programs for FHA, VA, USDA, Conventional and HEMC for those over 62 years of age. Fees are where the cost go up on purchase loans so pay close attention and do not get lost in the excitement of the new home. A.P.R. is somewhat misleading so where do you look. The actual cost/money to close and the monthly payment is the answer. Real Estate Agent referrals are often a good option. In House Lenders are sometimes questionable. Always get a second offer as you will often get a better rate with the same credits, up grades or incentives. There are many In House Lender companies that bank on home buyers not doing their diligence.
Cash -Out Mortgages This is an area of the business where companies are all over the map. My Company offers a cash-out mortgage options to 95% of your homes value with no mortgage insurance. This is not a hidden mortgage insurance where the Lender pays it I mean truly no mortgage insurance. Best of all this program has a max loan limit of $1,250,000 for a single family residence. There are restrictions but they are not too bad.
Term Reduction This is a loan type that most Loan Officers do not seem to offer to people. The deal is simple, keep your payment the same and reduce the number of years left to pay. This will often add up to 100’s of thousands of dollars over time. And if you sell early the ratio of cash to principle more times than not will reduce your remaining principle balance faster than your current mortgage so it is a win/win for the home owner.
Payment Savings The term payment savings is used with a home owners want to refinance to reduce their monthly payment. This can offer the home owner monthly payment savings that can be significant. When it not enough of a monthly saving to act this is when the Term Reduction option should be looked at.
There are many other programs available to current home owners and future buyers but these are the most common. When obtaining a new home mortgage for any reason we can all move fast but fast is not always your best option. I am not saying to delay your purchase but rather take 20 minutes to confirm you are getting a fair deal. We have all rushed into things and then later were upset we impulse purchased. These are answers to common questions I get daily so I hope they help. When it comes to a home mortgage there are no silly questions so please ask any questions that you may have.
Automation does make some things very convent – Microwave Ovens, Fax Machines, Digital Cameras, Email, K-Cups, etc. I guess I am an old school person as when it comes to automated mortgage application to approval in seconds is more of a mortgage lead generator than a industry changer in its current fashion. In the coming years I can see huge improvements coming but with small business being the backbone of the American economy it is difficult to see automation taking over.
Now with that said the mortgage company I work at is currently beta testing its own automated mortgage approval program. It will greatly speed up the mortgage process as many of the supporting documents needed will be gathered by automation and not by the borrower. So the process will be much easier for the borrower. It is almost an unfair advantage when compared to mortgage companies that do not offer the automation technology.
Loan Officers, like it or not automation is coming and millennials like automation. I can assure those that know me that we will be offering our clients automation, online, email or phone application options. Watch the younger generations with their cell phones and reality is right in front of you.