Mortgage rates lowest in history.

The news is everywhere today that home loan rates have dropped to an all time low – even lower than the historic lows we have been seeing for the last several months. While this may be a reflection on the poor state of the economy it is also an opportunity for those who are ready, qualified and able to refinance or purchase to save a tremendous amount over the lifetime of their home mortgage.

Today I just priced a fifteen year fixed mortgage at 3.25% with an APR of 3.78% on a $180,000 refinance and low closing costs (point in yield). This is an incredibly low rate and most certainly cannot be sustained.

Why are rates so low? The 10 Year Treasury yield is low. That’s the main reason.

Ti qualify for these low rates you need a good credit score, at least 20% equity in your home (or a 20% down payment), steady income and a few minutes to complete an application.

Even though you may have heard and read “mortgage rates can’t stay this low for ever” and they seem to have been hanging pretty low for the last few months the statement is still correct. Here’s what it looks like on a few different loans at low rates:

*This does not constitute and offer to lend. Applicant must qualify by applying for the loan and providing the necessary information and documentation to prove eligibility. These are conventional rates and the APR may vary based on how closing costs are paid: the borrower may pay them in cash, they may be “rolled in” to the loan amount or they may be paid from rate yield.

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Yes. No. Maybe. It depends.

You can guess that in this day and age there are far more bankruptcies we must contend with as lenders than in times past. It used to be that maybe 1 out of 50 applicants had filed bankruptcy but it is now closer to 1 in 10. Some days it is 1 in 1 – like today. Fortunately for you this has inspired a post so if you are in this situation and found this article by searching on the terms “how does bankruptcy affect my ability to borrow” or “can I get a home loan after bankruptcy” this should help. Please keep in mind that lending guidelines change regularly and, unless otherwise noted, this is information for conventional home loans in September of 2011. Call me or contact me for updated information or more specific answers.

Borrowing may be possible depending on a few things:

• How long since the discharge date
• What caused the bankruptcy – financial mismanagement or extenuating circumstances
• No negative credit impact since the discharge date
• Was there a foreclosure/short sale/deed in lieu in the bankruptcy
• What type of loan are you applying for (conventional, government, non-conventional)
• What Loan To Value (LTV) are you seeking

If you are looking for an FHA loan with 3.5% down and it has been three years since your foreclosure and you have not had any negative events on your credit and you otherwise qualify you should be able to achieve financing without further factors. Fannie Mae wants to know what happened to cause the bankruptcy and they want you to have waited 48 months from the discharge date for both 7 and 13.

While FHA will allow 3 years from foreclosure FNMA is stricter and looks for 5 to 7 years and still needs a minimum of 10% down and can be used for primary residence only.

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These days it is almost impossible to get the best home loan without the best credit. During the “sub-prime” boom it was possible to achieve high balance financing with low credit scores if you had the right income and assets. During that time borrowers simply paid a higher interest rate to “offset the risk”. In today’s economy and lending environment, however, the industry has returned to more common sense lending practices. As a result having the best credit score and history possible is key to achieving the best home loans available at the best interest rate.

Key Number One

Have open credit with activity on it. The older the credit line and the better the activity on it the higher your score. New credit lines can temporarily lower your score until the reporting agencies see that you are going to manage your credit well. There are some offers in consumer lending which require the credit line to be at least 15 years old or older to qualify for the offer. This is generally for extremely low rate or high balance/high reward credit cards. So Key Number One is to actually have credit that has always been paid on time and is used regularly.

Tips for great credit for Georgia mortgages

Key Number Two

One of the best ways to tank your credit score and history is to make a late payment. Even a late payment on an auto or credit card can adversely impact your credit score and history enough to eliminate you from qualification for the best home loans. Some loans require there to have not been a late payment on any consumer credit in the last 12 to 24 months and most require no home mortgage late payments in the last 12 to 24 months. So Key Number Two is never pay late. By never I mean never.

Key Number Three

Keep your loan balances low. Paying a loan off, believe it or not, may have less of a positive effect than keeping your loan for the duration but paying it down quickly. With credit cards keeping a very minimal balance is key to increasing scores. For example if you have a credit card with a $5,000 limit and your outstanding balance is $4,900 this can hold your scores down. Conversely if you have a $100 balance on that same card you will notice an up trend in your scores. Likewise with car loans and other types of credit. Paying them off and closing them is not usually as good as paying them down and keeping them open. So Key Number Three is low balance to loan amount or credit line amount.

If You Have Questions

If you have questions about getting the best home loan to purchase or refinance a home loan in Georgia don’t hesitate to contact me. My office is in Marietta near the intersection of Windy Hill and Power’s Ferry so if you want to come by to discuss your situation and opportunities feel free to contact me to schedule an appointment. The coffee or soft drinks are on me! I specialize in Cobb County luxury home financing as well as any home for primary residence or real estate investment purchase or refinance in the north metropolitan Atlanta area of Cobb, Cherokee, Fulton, Paulding and Gwinnett.

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This is not one of those “dangerous” loans made during the sub-prime runup. In fact this loan pre-dates those loans and has performed very well over the years even though it does not require the buyer to have “skin in the game”. We’re talking about the section 502 Guaranteed Rural Home Loan available to homes in designated areas to buyers who demonstrate steady income and a good credit history.

Finding out of the home is in a designated area is simple and takes just a phone call or email. I can help you if your property search is in Georgia and it only takes a few minutes. Listen to this short audio message for more information and call me at the numbers listed all over this page and on the audio segment.

To request more information directly from me (I do not sell leads, ever) simply complete the form below or telephone me during normal business hours:

I am a multi-year veteran of the industry who has served in the highest offices in the industry. I can help you get the best deals and avoid getting ripped off!
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New home sales report March 2011

Is there hope for a recovery cycle to begin in 2011?

Industry insiders and prognosticators alike have been making guesses at exactly when we would hit bottom and when recovery would begin since we entered the market downtrend. While many were well educated guesses and other hunches based on theories created on the barstools of America they have all been simply guesses. Whether or not they are accurate will only be born out in the coming days, weeks, months, and years.

According to the Census Bureau report (see graphic) there were over 300,000 new homes sold in March of this year (2011). The more encouraging number for this southeastern based mortgage marketer is that 162,000 – well over half – were sold in the south. Click the graphic for a larger representation.

March 2011 housing numbers may hold promise

Although modest and somewhat an island of positive in a vast ocean of negative the March 2011 new home sales numbers as tabulated by the US Census Bureau proved an increase.

On the other hand there are variables in the equation

“We’ve gotten spoiled by the idea that

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interest rates will stay in the low single-digits forever,” said Jim Caron, an interest rate strategist with Morgan Stanley. “We’ve also had a generation of consumers and investors get used to low rates.” (NYT)

We are not certain when mortgage interest rates will begin to rise, nor are we sure how high they will trend. The cyclical nature of the economy indicates a strong likelihood rates will rise, possibly sharply, and could easily see double digits in a short time. This, however, is an unknown although it is predicted by some professional economists who have a track record of prediction such changes.

I am a multi-year veteran of the industry who has served in the highest offices in the industry. I can help you get the best deals and avoid getting ripped off!
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FHA MMIP increases - click for larger view

FHA Mortgage Insurance Premiums Increase

We have enjoyed several months of the lowest FHA UFMIP (Upfront Mortgage Insurance Premiums) and MMIP (Monthly Mortgage Insurance Premiums) in recent history. With monthly rates being at .9% payments have been lower resulting in higher debt-to-income ratio for home buyers and owners who have refinanced. With our dollars being stretched because of a damaged and weakened economy this has helped sales and refinances to remain higher than they would have been with higher rates.

Effective with all FHA loans at 95% LTV (Loan To Value) and higher starting with new casefile ID numbers being issued on and after April 18, 2011, the monthly rate is increasing to 1.1% per month. Here is how that stacks up on a $180,000 loan;

On a $180,000 home mortgage loan the increase in the FHA monthly mortgage insurance premium from .9% (of the principal balance) to 1.1% will mean nearly $35 more per month cost added to the mortgage. This multiplies to nearly $420 for the year.

While these numbers may not be astronomical you can see how this may make the difference to a family or single homeowner already working on a stretched budget. If income taxes are increased, deductions decreased, property taxes or home owner’s insurance increases, any of these need to be considered when purchasing a new home or refinancing.

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I am a multi-year veteran of the industry who has served in the highest offices in the industry. I can help you get the best deals and avoid getting ripped off!
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The cause for celebration over Federal Housing Administration lowering the upfront mortgage insurance premium is short lived. Concurrent to lowering the upfront fee is the increase of the monthly insurance premium fee.

Lowering the UFMIP from 2.25% to 1% will certainly decrease the amount of repayment. However, increasing the MIP from .55% to .90% (on loans with a down payment of 5% or less) will increase the cost of repayment significantly. The end result will be the FHA having more operating capital if the result is not a significant decrease in the number of sales due to borrowers not being able to qualify on debt-to-income ratios.

Currently, if you are purchasing a home at $200,000 (for example) with the FHA minimum down payment of 3.5% your base loan amount, prior to the UFMIP add back, is $193,000. Adding back the UFMIP, at the current rate of 2.25%, brings the loan amount to $197,343. The MIP cost per month, at the current rate of .55%, is $90.45 per month.

After October 4th 2010 the UFMIP will be only 1% meaning the loan amount including UFMIP will be $194,930 – a savings of $2413 on the purchase price. However with the new MIP rate of .90% the monthly MIP addition to the payment will be $130 – resulting in a payment approximately $40 per month higher.  At that rate the savings on UFMIP ($1900) will be lost in about 4 years.

One plus is that, at least currently, MIP does have a tax benefit and the buyer should consult their tax preparer for detailed information on the tax benefits of a monthly mortgage insurance premium.

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Soon will come the day in the lives of most readers when purchasing a new home will be a desire realized or a necessity placed on them by the demands of life. Even those who already own a home may be faced with the decision or necessity to refinance a current home loan. Sadly most home buyers and owners plan more for their next vacation or even a family picnic than they do an upcoming mortgage.

Mortgage planning really is a science because it is based on numbers instead of emotions. While the buying process itself may be driven by more than numbers the actual financing of that property, or even the decision to purchase with cash, is primarily a series of numeric calculations. As such there are ways for anyone to plan for their next mortgage in order to receive the best possible rate and terms available.

The four sins

Negative impacts on the applicant’s ability to borrow loans are not always of their own doing yet some are. Clearing one’s history of these three sins, if they exist, will greatly improve their likelihood of not only being approved for a home mortgage but getting the best rate and terms.

1. Foreclosure/pre-foreclosure – this one is the worst. If the applicant has had a foreclosure (outside of bankruptcy) within the last seven years there is a greatly decreased likelihood of being approved for a home loan. Even if the loan approval is granted there may be a higher interest rate due to the risk factor based on historical data. Applicants may be able to challenge with a well written story of financial hardship submitted to the underwriter yet even with the most appreciable of stories the waver may not be granted. In the majority of cases only time can overcome this.

2. Bankruptcy – when completing a standard Uniform Residential Loan Application (URLA) the applicant must also answer the question “Have you been declared bankrupt within the past 7 years?” Although the question gives the impression this would be an automated denial that is not the case. In fact with a good explanation letter from the borrower an underwriter can approve a loan after as little as 12 months from the date of discharge. If you have any doubts find a direct lender who can give you an underwiter’s determination on the bankruptcy history prior to submitting everything.

3. Judgments and liens – in the public records section of all major mortgage credit reports there will be information about any public records including judgments against the borrower or liens against the borrower. At times liens and judgments exist but do not appear on the credit report. Judgments must be satisfied before underwriters will approve the loan an only a few liens may be subordinated to the new mortgage agreement. One such lien is a federal tax lien which is in a repayment period and evidence of the repayment schedule being satisfied can be provided.

4. Late payments – during the last 12 to 24 months any payments that have been made more than 30 days after their due date are referred to as simply “lates”. They can be late payments on any consumer debt which is reported to the credit bureaus including autom loans, school loans, credit cards, revolving store accounts, mortgages, or any other payments. Some loan programs will allow a couple of lates in the last 12 months and others will not. For conventional loans these lates can either prevent the loan from being approved or result in a higher interest rate for the applicant.

Those four items are often “deal killers” and more difficult to overcome than some smaller “sins”. Planning ahead for a mortgage by knowing just these four things which can result in a negative outcome should help you if you are affected by them. As always, with any mortgage advice, the best thing to do is to speak with a trusted mortgage professional who will take responsibility for their answers to you.

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The Annual Percentage Rate (APR) is one of the most misunderstood numbers there is on the mortgage documentation. Additionally it is the most easily abused and even though it is supposed to exist to protect shoppers can be so misconstrued as to actually harm the shopper. Be that as it may here are fees that must be included in the calculations for APR in the state of Georgia.

The APR is the total cost of the loan over the life of the loan averaged with the base interest rate. For example if you have an interest rate or 4.5% and closing costs of $5000 on a $100,000 loan the .5% APR qualified closing costs would result in an APR of 4.923% while $10,000 in APR qualified closing costs on the same loan would result in an APR of 5.333%

The way this can be abused or manipulated is by charging a higher base rate and shifting the rate commission to cover some of the closing costs. Not that this is necessarily a bad thing but it gives a hint as to how this figure can be manipulated.

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I can’t say it any better than my friend Jennifer Fivelsdal “Just a few years ago it was not uncommon to see a house assessed at $200,000 selling for $400,000 and this made home sellers happy.  That was a market called a Seller’s Market, in other words more buyers and fewer properties.  The well known rule of supply and demand dictates that a higher demand with a limited supply will result in higher prices.  Today the scenario is so different.  Very high inventory and few buyers makes this a Buyer’s Market. In this case buyers want to spend less and get much more for their money.”

We are very much, for almost every market, in a buyer’s market. More now than ever before many sellers are having to short sell their home or bring cash to closing to pay the difference between the sales price and the mortgage pay off. To be sure a home seller may want to have their home appraised independently. While that appraisal cannot be used by the buyer’s lender due to all sorts of rules and regulations it should still be a standard, Uniform Appraisal and the result should be within a few percentage points. If you are in the Atlanta area I can give you the names of a few Atlanta area Georgia licensed appraisers.

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