Tag Archives: mortgage

Credit Score Impact


Most people do not relies that your credit score impacts your rate when obtaining a new home mortgage greatly.  When you have a lower credit score you are considered a higher risk than a person with a higher credit score.  So it is reasonable to expect a higher cost to obtain the same rate as a higher credit score borrower.

The average borrower thinks rates change but truth be told rates never change.  For example, a gallon of gas is always a gallon of gas.  Much like a 4.0% rate is always a 4.0% rate.  It is the cost to obtain the rate that changes much like the price of a gallon of gas.  Supply and demand along with the futures market effect the price of gas and the Mortgage Backed Securities market effects the cost of rates.  It is important to keep your credit score as high as possible.  Click here to view the video.

Stay Tuned…

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Where Are Rates Headed?

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.


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Best Mortgage Options

  The Real Estate market continues to improve with homes values increasing roughly 8% on average in most of the coastal areas.  This increased value as allow many people to refinance their homes and obtain much lower mortgage rates.  With that said I have noticed an increase of questions addressing their mortgage rate on a loan they are about to get and recently closed loans.  Nearly 50% of the inquires, that I have address, have mortgage rates that are much higher than the wholesale mortgage at the time the loan was structured.  So what does that mean?

  Lenders all make money on every loan that they do, we all know that.  The question is how much money you are paying for your loan.  Yes the A.R.P. can show you the amount that you are paying for your loan but this figure is often manipulated.  You should be able to get a rate quote from any lender without them running your credit report providing you know what your fico score is.  Also your rate will be subject to your personal information once reviewed.  Once you have a few rate quotes then you will have an idea if you are dealing with a reasonable priced mortgage company.

  The larger mortgage companies are the Banks themselves.  Do not fool yourself, Banks today function much like a Broker.  If your Bank Loan Officer says that they have DU approval on your file, most will not tell you, then they plan to sell the note once created.  They will service the loan once created but servicing and owning a note are two different things.  For those that do not know, service is much like a property manager when you rent a place to live.  You deal with the property manager and not the owner.  A servicer and a property manager are similar in terms of function to their client, client as in property owner or note owner.  You can also look closely as your paperwork and loan docs and see if there is anything that states the Lender can sale your loan after you sign your loan docs.  This is that same thing a Mortgage Broker will do. 

  This is why I always say to get a mortgage quote from a Bank, Direct Lender and a Mortgage Broker as the cost will vary widely.  Look closely at your note rate, loan fees to close and your monthly payment.  Keep in mind that Brokers are required to show how much they will make on a loan.  Direct Lenders and Banks are not required to show how much they will make on a loan.  This is because Lenders both depository and non depository that fund loans using their own funds do not have to show their fees, imagine that!  Personally I find it shocking that a Bank, the place most people trust, does not have to show their fees but it is what it is.                   

The Feds have made many changes to the Mortgage Industry over the past four years but clearly, as indicated above, the industry favors the larger mortgage operations.   Today roughly 70% of the small mortgage brokerage companies have closed down just as many of the Banks over the past 10 years.  When looking for mortgage companies, look for a local mortgage company in your area, check them out with the Better Business Bureau and request a mortgage rate quote.  Mortgage rate quotes should always be free of charge.  Frankly all consumers obtaining a new loan should never pay any upfront fees.   

MN Capital of Huntington Beach offer free online rate quotes. 

MN Capital –


Stay Tuned…         

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Does The HARP Program Work?

  The H.A.R.P., Home Affordability Refinance Program, program offered to Fannie Mae or Freddie Mac mortgage note owners to refinance at today’s lower rates.  So simply yes the program works.  The program allows for home owners to refinance regardless to your loan to value.  The catch is your mortgage most be owned by Fannie Mae or Freddie Mac before May 31, 2009.  So who owns your mortgage note? 

  Most people do not relies that the bank they are paying their current monthly mortgage bill to does not own their mortgage note.  Most of the time the bank you make your monthly payment to is acting as a “Servicer” for that actual mortgage note holder.  You can do a web search for does Fannie Mae or does Freddie Mac own my loan and follow the steps.  If you have a loan match before May 31, 2009 then you are eligible for the program. 

  Here is the tricky part, you have to find the right Lender to meet your needs.  May people get discouraged because they get told their bank cannot do their loan.  Well this is correct more times than not.  The reason is because not all mortgage lenders offer the program as it is intended.  Banks, Brokers or Mortgage Bankers offer programs with what they feel is safe to them.  This is very complex but if you think of banks as car deals this makes more sense.  For example you would not take your Chevy to the Toyota dealer to get fixed.  Yes the people at the Toyota Dealer could get the job done in most cases but not efficiently.  So your cost would be much higher than if you just took your car to the Chevy dealer to begin with.  The average person simplifies the mortgage process and yes the banks take advantage of this lack of knowledge.  Was anyone surprised that Wells Fargo posted huge profits as few months ago?  All of the big banks are doing very well in a down economy, imagine that. 

  So what is the HARP program?  The HARP program is a refinance opportunity that allow you to refinance your current loan to a new 30 year fixed mortgage.  HARP is not a loan modification.  The program does not require you to be late on your mortgage payment and it does not damage your credit score.  Frankly if rewards those people that are keeping up with their mortgage payments.   

  There is only one company that I am aware of that offer the HARP program regardless to your loan to value.  It is MN Capital and you can visit them on line at www.mn-capital.com 

The HARP program is currently scheduled in terminate on Dec. of 2013.  If you are still considering taking advantage of the HARP program then you might want to get moving before the program is over.  With the rising real estate values there is little reason for Congress to extend the current HARP program or roll out the rumored HARP 3 program.    


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What is the HARP 2.0 Program?

I sat down with the Broker of MN Capital, Michael TenEyck, and we discussed the HARP program in detail.  We both came to the same conclusion that the media does not explain the program correctly so how is the average homeowner to even know it is an available option.  Most people seem to think that the HARP program is a loan modification program or it will damage their credit.  That could not be any further from the truth!  I will list several points to the program that are the most common misunderstood.

What is the HARP 2.0 Program?  The program allows mortgage note holders of Fannie Mae or Freddie Mac the option to refinance their existing mortgage regardless of your current loan to value.

I make my payments to Bank “X” so don’t they own my loan? – Well in many cases the Bank you make your payment to does not own your mortgage note.  Many mortgages are owned my Hedge Funds, Fannie Mae and Freddie Mac.

My Bank says I do not qualify do to my LTV – This is very common as many banks have self-imposed restrictions that they have placed on the HARP 2.0 program.  As stated above the program does not have loan to value restrictions.  Banks provide a service to the actual mortgage note holder as a “Servicer” much like a property manager does if you have every rented a place to live.

So how can MN Capital refinance my mortgage with the HARP 2.0 Program and my bank cannot? – If you are not in the finance business you most likely would not be in a position to understand that banks do not like all loan programs.  If you were to think of the banks as Car Dealerships then this makes more sense.  For example you would not take your Ford to the Chevy Dealer for repairs.  So for my auto metaphor your loan program is your type of vehicle.  The difficult part is to fully understanding the proper Lender or Broker that you need to use to max your benefit as there is no sticker price to start from.

Do I need an appraisal? – In most cases no.  The loan to value is not a factor for approval but with that said there are some restrictions in terms of rate if your LTV is over 125%.  The impact is generally within .125% in terms of rate.

The HARP 2.0 program is only available to property owners with mortgage notes that are owned by either Fannie Mae or Freddie Mac.  Currently Congress is working out the details for HARP 3.0 which should open up the program for all property owners.  The one unknown is will the current note holders participate in the program.  This would require the current note holders to take a reduced return on their investment.  As a property owner this sounds great as you benefit from a reduce payment but there is one serious issue.  Most of the additional mortgage notes are funded with 401K money.  So that right we will experience a reduced return on our 401K investments.  So at this time is it unclear how Congress will entice the Hedge Fund Managers to exercise the HARP 3.0 option.  Time will tell.

Stay Tuned…

MN Capital has answers to many questions on thier website at – www.mn-capital.com.  You can also ask property specific questions at info@mn-capital.com.

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Home Buyer Beware

In The Beginning


   I recently received a very spirited response to a posting that I did in regards to what a Loan Officer should never do.  All thou I do very much share this persons frustration in regards to the mortgage meltdown I am not sure if we see it in the same way.  One of the points raised in the response was that there is a large part on the public that are ignorant to the pitfalls of a home mortgage.  Well this got me to thinking so I am going to do a several part series about the pitfalls that the consumer should be aware of. 

   So let’s look at this without emotion and from a neutral view point.  People that are happy or excited are buyers.  People that are generally not happy will not spend their money.  For example, if you do not enjoying yourself at a public outing you are most likely looking for a way out.  So way does the average person part with their money?  It is for self satisfaction, from a candy bar to a home as long as we feel good about the transaction.  So that is a salesperson’s job and you as the consumer need to understand this. 

  I would have to say that the best sales people are movie stars.  Think about it, people are paying as much as $40 for two tickets to the movies at prime time.  Brad Pitt has got to be one of the best salesmen of all time in some ways.  You are paying for a big name movie and sometimes disappointed later.  Much like a big bank or broker mortgage that let’s down because you did not understand something in your loans structure.

   My point is that you have to leave emotion out of these types of transactions.  Everyone including myself has made an impulse purchase only to be disappointed later.  This is a fundamental flaw in the way we respond to things that we like or want.  Sometimes our desires can over power our needs.  This can become a very serious issue when our own survival is at risk because we bit off more than we can handle.

  The Media and Public option will often help us to make misguided steps as the information we used to make our decisions was flawed from the beginning.  For example, the Arizona law that has everyone in an uproar mirrors the Federal Law that has been ignored for years.  Personally I do not see a problem with the law and yes some of my own personal family does not have permanente citizenship status.  Everyone 18 and over is required by law to carry identification.  So why is it a problem to ask anyone here legal or illegal to show ID?  Those that say the Arizona law is unconstitutional are clearly ignorant themselves to what the constitution says and the Media runs with.  So ask yourself why?  The answer is because they, the Media, makes money from telling the story true or not.  Yes they would prefer to tell the truth with their stories but “if it bleeds, it leads.”  Then something that is questionable at best can suddenly seem as fact.        

   Here is an example of the Media at work.  The guy that tried to set off the bomb in Times Square was arrested and is Pakistani.  The Media and even the NY Mayor thought that this guy was most likely a tea party or home grown person that was unhappy with Obama or Heath Care.  This type of thinking is absurd yet many people will run with it because they heard it on the news or the Mayor said it.  Where is the common sense?  People are not that civilized.  It is these types of emotional responses that get us off base and not thinking about what we are really doing.  Hey, so as long as I have you thinking the same way as me go ahead and sign here.  So who should get the academy award?

   Over the next several postings I will break down the entire mortgage process step by step with what the brokers, bankers and HMC’s are doing so that anyone should be able to make an informed decision on a home mortgage. 

Stay Tuned….

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Do The Feds Understand The Mortgage Industry?

  I really hate it when the Mortgage Industry has the Feds hands all over it and they look to blame anyone other than themselves.  You have to go back a bit to when Clinton was in office and you will find stuff about making it easier for all Americans to buy a home.  “It is the American Dream” and we should help everyone to achieve the dream.  I am really disappointed in Congress!  Both sides have then finger prints on this and yet they have no clue what I am even talking about. 

  My industry continues to take a beating by the Feds from Obama to Frank to Waters and none of them even understand what they are talking about.  Republicans seem to be quite or at least none of them are making it on our TV’s which sadly most people get their information and take this information as fact.  At least the Democrats are talking but they are only making it worse so maybe not talking would be better?  In any case if either side talks it would be nice if they understood what they are talking about, don’t you think? 

  Below is a link of Maxine Waters asking questions of Ben Bernanke.  Ms. Waters’s questions are so unfounded that she does not even understand what she is asking.  She clearly does not understand the difference between the Fed Prime Rate and the Fed Discount Rate and how they impact Home Mortgage Rates.  If you are going to take on this issue don’t you think Ms. Waters, of all people, should have done some research on the subject?  This is a person of power that is demonstrating that she does not want to do her job.  Is this the kind of representation that we need at this time?  I think not!           


  Not to be out done Obama himself has waded into the mortgage waters and without a paddle yet again, imagine that.  Obama wants to freeze all foreclosures for twelve months or until everyone has had a chance to be evaluated for the HAMP program.  Is this good for the economy?  The answer is clear, no, no way, no how, no way possible!  The bailouts to the Banks, Insurance Companies, Fannie Mae, Freddie Mac, Car Companies and now the American People have to stop.  The country is broke!  Obama now wants to change the constitution to force his health plan upon us.  I understand what Obama is saying and he has no clue what he is talking about in terms of the Mortgage Industry.  I can only hope he know more about Health Care bit that is for another time. 

  Look the extending of unemployment funds is a problem.  For example, I know someone that receives $500 per week on unemployment and stays on unemployment because this person can only find a job that pays $450 per week.  Well this becomes a business decision that hurts the Country as a whole.  Why work when if I sit at home I make more?  This is Jimmy Carter all over again.  People are not motivated to work if they will make less. 

  If people do not work then there is less gasoline sold as people are not commuting to work.  So this means that service stations make less money so they have to cut their staffs or hand out pay cuts.  I think we all understand this.  Now less go further, this also means that less gas is needed so there is a reduced need to deliver gas to stations.  This means that the gas truck drivers begin to have their jobs cut.  With less deliveries mean there is a back log of stored gas so production is cut and refinery people begin to have their jobs cut.  There is less demand for gas so there is less demand for oil so the harbor workers begin to loss their jobs because there are no ships to off load. 

  Gas is only one item but it goes deeper.  Think about all of the support companies that go along with the gas.  The stations need electricity, water, phones, office supplies and repeated general maintenance.  The delivery truck companies all have or need DMV fees, tires, fuel, office supplies and repeated general maintenance.  The refineries need electricity, water, phones, office supplies and repeated general maintenance.  The harbor needs electricity, water, phones, office supplies and repeated general maintenance.  This is only the retail side of the gasoline industry and you can see how the impact of the reduced work commute has on the oil industry.  And all of the lost sales tax, payroll tax, social security tax and company income tax, both Fed & State, has simly evaporated.  This is real money that we are talking about and it is now gone with people are not working.  So ask yourself, why are the Feds not trying to help creat new jobs within our own county?  To say we saved or created “X” amount of jobs is disingenuous.  Without a strong economy there is no money.   

  There real issue here is at some point the bail out will stop and the job you could have had at $450 per week will be reduced to $375 per week because there is such a demand for the job that someone will work for less.  This is simple supply and demand.  So look yourself in the mirror and ask yourself, is the current Obama administration course of action good for the long term?  Be honest and you can see where we are headed.    

Stay Tuned….

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