Wednesday, June 04 2014
Homeowners who had been bracing themselves for sharp rises in mortgage interest rates must now be scratching their heads. As the online Mortgage News Daily put it last week, “…rates have been extraordinarily sideways, and right in line with the lowest levels in 11 months.”
Since historical averages are still significantly higher, it’s no wonder that most observers still believe the greater likelihood is for rate increases. But recent Fed happenings show a crack in their avowed determination to let that happen by tapering off purchases of mortgage-backed securities. The hemming and hawing is notable. It’s all pretty much up in the air.
In any case, one thing I can guarantee is that mortgage holders will benefit if they take advantage of savings opportunities when they present themselves. Among current possibilities—
1. Refinance Your Mortgage
Mortgage holders who haven’t already refinanced should at least consider doing so. Refinancing means taking advantage of the still historically low interest rates—often the most meaningful step in reducing your monthly mortgage payments. Before deciding to refinance, make sure that the mortgage costs involved will be less than the resulting savings. If you agree with the prevailing wisdom that it’s unlikely we will see a significant drop in interest rates in the near future, today’s levels still look inviting.
2. Cancel Private Mortgage Insurance (PMI)
According to the National Association of Realtors®, mortgage down payments have fallen over the past decade. Their figures show that the average mortgage down payment in 2013 was 10% – compared with 16% just ten years earlier. Homeowners who put down less than a 20% deposit are typically required to take out Private Mortgage Insurance. But once the Loan-to-value (LTV) ratio falls below 80%, homeowners can ask for the PMI insurance to be removed—and they should, because the lender isn’t responsible for keeping track of that for them. If you are close to the 20% threshold, it may be worthwhile to make a one-time payment that will reduce the principal below 80%.
3. Extend the Length of the Mortgage
Many homeowners have made significant reductions in their principal by opting for shorter-term mortgages. But should rising interest rates make a property you are trying to buy unaffordable, extending the length of the mortgage can reduce monthly payments to a more comfortable level. Although over the long term this will end up costing significantly more in interest, moving from a 15-year mortgage to a 30-year can sometimes be the right move—especially when the property at stake represents one of the terrific values currently out there.
While interest rates in Evansville may rise or fall or, as we’ve seen lately, hold surprisingly steady, sudden leaps or plummets are unlikely…and with a little preparation, unpleasant future surprises in interest rates are avoidable. Thinking of buying a home in Evansville this summer? Call me today to start laying the groundwork! You can reach me on my cell phone 812-499-9234 or email Rolando@RolandoTrentini.com
Tuesday, May 06 2014
Mortgage rates may rise or fall this spring (lately they seem to be falling!)—but that needn’t prevent you from saving even more money when it’s time to structure your own mortgage. The underpublicized fact is that mortgage rates are only one of the factors that affect how much you wind up paying. No matter what happens to mortgage rates in 2014, here are some keys to making mortgage decisions that result in significant savings:
Tailor the term
Evaluate your budget and see whether it is possible to increase the amount of your monthly payment. By increasing monthly repayments, you reduce the term of your mortgage. Over the course of the loan, this can save tens of thousands of dollars.
Refinance for five years instead of two
The interest you pay on a refi loan isn’t the only cost. The origination and other fees can easily end up costing four figures. It’s a numbers game: simply calculate the anticipated savings from refinancing, then subtract the amount of the fees. The difference tells you your net savings…and demonstrates why one of the easiest ways to grow those savings is to refinance less frequently.
Change to biweekly
Changing to biweekly payments instead of monthly payment can save you more than small change. The reason is on the calendar: there are 52 weeks in a year, but only 12 months. If you make 26 1/2 payments every year, that equates to 13 monthly payments. It’s a stealthy way to make an additional month’s payment every year without really noticing it. When choosing a loan, opt for one where the bank allows you to choose biweekly payments (as long as they don’t want to charge an additional fee). Also request that the extra payments be deducted from the principle.
Improve your credit score
On this count, every mortgage guru sounds like a broken record. Although the average quoted mortgage rate may rise or fall, that’s not necessarily the rate that you pay. Your FICO score is the primary determinant of your mortgage rate. The difference between a good FICO score and a bad one can be significant, so get a copy of your credit card record and challenge any damaging inaccuracies. Lenders want to see a long history of paying on time with a mixed use of credit.
Mortgage rates will almost certainly increase in the future because they’re still well under historical averages. But there are plenty of steps you can take to cut thousands of dollars from your ultimate mortgage costs. And if you are ready to buy a house in this spring, contact me today—I’m ready to show you what’s coming up at your price point! You can reach me on my cell phone 812-499-9234 or email Rolando@RolandoTrentini.com
Thursday, March 20 2014
You don’t have to tell anyone who is self-employed that there are extra costs that go with the benefits. In addition to the long hours and weight of responsibility that come with the job description, getting a home loan has always added special challenges. Now that we are into the new Dodd-Frank era of federal oversight, some of the changes warrant an early heads-up.
The 2010 legislation that went into effect on January 10 created the Consumer Financial Protection Bureau, with the function of tightening the rules lenders follow in order to discourage the issuing of mortgages that borrowers can’t be reasonably expected to be able to repay. To deliver on that worthy purpose, more proof and more paperwork will be required to support the income claimed on loan applications (here you might well be hearing an imaginary smacking sound from self-employed persons reading this and whacking their foreheads—paperwork is the bane of the self-employed).
If you are your own boss and getting a loan in Evansville is on your horizon, take heart! Just because it may be more difficult to apply for home loan doesn’t mean it’s impossible.
The new lending rules describe eight specific factors lenders should verify and document before advancing home loans. They includes the borrower’s assets, credit history, employment status and other debt obligations. The penalty for lenders who fail to do so adequately is that they may be legally liable if a borrower proves unable to repay.
For the self-employed, the extra burden can come with the requirement that borrowers be able to show consistent income (hear that forehead-smacking sound again?) The general rule is that borrowers be able to provide at least two years’ worth of personal tax returns. Since self-employed people getting a loan often have perfectly valid reasons for fluctuating annual incomes, it’s vital to talk with a broker and lender as early as possible to establish the taxable income level needed to qualify for a loan.
That talk should cover other areas. For instance, self-employed people have greater flexibility than most when it comes to reporting deductible expenses on their income tax forms. Since those same deductions result in lower net incomes, that can be problematical when it comes to getting a loan. One way to counter that problem is to demonstrate that the expenses incurred were used to buy things that will improve their business in the long term. Another approach is demonstrate that similar expenses are not likely to re-occur (particularly apt when a business is just starting up).
If you are among the self-employed—and plan on getting a loan—planning is key. Get your ducks in a row now so the loan process doesn’t derail you later. It’s never too early to call me as an early resource before we get to move on to the fun stuff—your home search! I can get you in touch with competent loan originators who will walk you through every step of the way.
You can reach me on my cell phone: 812-499-9234 or email Rolando@RolandoTrentini.com
Tuesday, February 11 2014
January presented us with major changes to mortgage lending rules. These new guidelines aim to curb some of the excesses that occurred during the sub-prime years—hopefully resulting in a lower risk of default and foreclosure by borrowers and a healthier real estate climate for everyone.
QM: “Qualified Mortgage”
This all came about as one offshoot of the Dodd-Frank legislation that went into effect in 2014. It creates a new category, “Qualified Mortgage.” Lending institutions are required to document each loan they deem to be a QM; when they do, they benefit by being able to sell them to Freddie Mae and Fannie Mac, and are protected from legal action in the event of a future default.
The reason that these changes won’t keep most borrowers from getting a loan is that loans that don’t qualify (“Non-QM” loans) will still be offered by some banks—they’ll simply keep them on their own books.
The bedrock requirement for a QM is an evaluation of the borrower’s debt-to-income ratio. That’s the projection of debts divided by income on a month-to-month basis — especially important when getting a loan with a variable interest rate. If it seems to you that this calculation makes common sense for any loan—I’m in your camp! The reason a bank might choose to issue a loan that does not meet the letter of this requirement could be their analysis that the percentages dictated by the rules are too strict for a particular borrower.
A Qualified Mortgage can’t have any of the risky factors that were hallmarks of the mortgage meltdown. Included are “no” or “low-doc” loans; loans with terms longer than 30 years, interest-only loans, and those with minimum payments that don’t keep pace with interest rates, causing the loan balance to increase.
So: what’s the bottom line for buyer’s intent on getting a loan this year?
The good news: most loans will go through as before (estimates are about 95% of them). But more paperwork and longer processing times are likely, and since fees and charges for a QM cannot exceed 3% of the mortgage, getting a smaller loan might become more difficult if banks determine they can’t make a profit.
In any case, coming prepared is still the best insurance that your loan goes through as smoothly as possible. If you’re looking to buy a home in Evansville this season, I’ll help make sure your preparation is first-rate! You will be able to take advantage of my extensive network of different mortgage providers in order to make the purchase of your new home as seamless as possible. You can reach me on my cell phone at 812-499-9234 or email Rolando@RolandoTrentini.com
Monday, April 29 2013
When the Wall Street Journal or Forbes run mortgage rate stories as their lead items, those of us who keep an eye on the local real estate market pay close attention. I frequently share what they say here. But when even the non-financial outlets like USA TODAY and the cable TV news channels give top billing to real estate market news, it’s a real attention-grabber.
That’s what happenedlast week. USA TODAY’s online headline focused on the 15-year fixed mortgage rate, “at a record low 2.61%.” The cable news channels talked about record low rates, too (although if you hit the ‘pause’ button long enough to read the TV graphics, you saw that the national average for 30-year loans was still a shade away from the actual record low).
Never mind that; it’s still surprising that mortgage rates continue to linger at such tempting lows.
The reason is hardly a secret: the Federal Reserve is holding rates down to energize the real estate market — a key element of the overall economy. Yet, with existing home sales notching up in the first quarter at the briskest pace in four years, you would have thought that mortgage rates would have been loosened up at least somewhat. And with new home sales doing their best since 2008…
Of course, it doesn’t matter what anyone expects: the results of dipping mortgage rates is just plain good news for everyone in theEvansvillereal estate market: buyers and sellers alike. Those low mortgage rates act to offset the rising U.S. house price index. The result for buyers is a more valuable home without the expected increase in the monthly payment. What more of an inducement to enter the real estate market could there be?
In short, if you’re considering whether it’s time to buy (or to sell your current home and trade up without busting the household budget), last week’s national and local market signs are even clearer than they have been recently. There are definitely opportunities out there! Why not give me a call for an up-to-the-moment real estate market evaluation for your property? You can reach me on my cell phone at 812-499-9234 or by email Rolando@RolandoTrentini.com
Wednesday, April 10 2013
Lenders are more optimistic about the direction of the housing recovery, with 71 percent recently surveyed saying home prices are “rising at a sustainable pace,” according to a quarterly survey of U.S. bank professionals conducted by FICO.
Nearly 60 percent of the bankers surveyed say they expect the supply of credit for residential mortgages to meet demand over the next six months.
What’s more, 39 percent say they expect mortgage delinquencies to fall in the next six months, while 45 percent of those surveyed say they expect delinquencies to remain flat. According to FICO, that represents the most optimistic data on delinquencies in the 12 quarters since the survey began.
"The latest survey results, combined with data that indicates the real estate market is improving in many regions, paint a positive picture for a sector of the economy that has been slow to join the recovery," says Andrew Jennings, chief analytics officer at FICO and head of FICO Labs. "Mortgage lenders have been understandably guarded over the past five years. The improvement in their sentiment should be welcome news, and I wouldn't be surprised to see lenders cautiously expanding their mortgage and home-equity lending businesses."
Wednesday, March 13 2013
Your mortgage: you only think about it once a month (if you’re on autopay, maybe not even that often). Why worry about it? If it ain’t broke, don’t fix it, right?
Like all aspects of your big-picture financial planning, keeping an eye on that mortgage can be an extra wealth-building move. I can point to three reasons why re-evaluating your mortgage could pay dividends:
Down, Down, Down…
Ok, with interest rates continually making headlines, this one might be a no-brainer. But some folks don’t realize just how attainable significant savings may be: a drop of just a single percentage point in themortgage rate can make a gigantic difference. A general rule of thumb is that if you can lower your interest rate by a percent or more, it usually makes sense to refinance. It’s certainly worth looking into.
Pay More Sooner (Build Wealth Quicker)
Nobody wants to part with more hard-earned cash than necessary, but extra money out now can wind up saving a lot of greenbacks later. Making just one extra payment a year will have you owning your home free and clear sooner – whereupon those payment dollars become yours!
Sound too painful? It needn’t. See if you can set up bi-weekly payments of half your monthly mortgage amount. You'll be making 26 payments annually: the equivalent of 13 monthly payments! Confirm with your lender that the extra payments go toward principal.
Eye That Equity
If you’ve got a PMI payment, you know that extra insurance doesn’t come cheap. So why make the extra payment a single month longer than necessary? By law, your lender is required to stop charging you PMI after you accrue 22% equity in your home. But in many cases, once you hit 20% equity, simply writing a letter to your lender will prompt them to allow you to stop paying PMI then and there.
For most of us, our home in Evansville is one of the largest investments we’ll ever make. Got a real estate question? I’m here all the time to supply you with friendly help and advice! You can reach me on my cell phone 812-499-9234 or by email Rolando@RolandoTrentini.com
Tuesday, February 05 2013
Sometimes, even after your mortgage application has been approved, you have to scratch your head at apparent non-sequiturs that attach to the process (for instance, when a loan is made contingent upon your repaying an ultra-low-interest credit account).
Even more so if your perfectly dandy financial situation results in a turndown. How could this happen? The answer usually makes perfect sense…but only if you understand that bankers and mortgage brokers are bound by policies and procedures that apply to everyone currently buying homes in EvansvilleKnowing the rules ahead of time can influence how readily mortgage applications are approved. Some guidelines:
Forget adding "mattress money."
Your bank account gets a thorough going-over, of course. If you have recently deposited a bundle of cash with no apparent source, it looks as if you are artificially hiking up the balance (perhaps with borrowed funds). Too bad about that garage sale: if the cash has not been on deposit for at least 90 days, it can be considered ‘unseasoned’ – likely to raise questions.
Disclose all pertinent info.
Many credit applicants in the process of buying homes assume the credit investigation will be limited to the information disclosed on the application. Not! Underwriters are trained investigators always on the lookout for anything that looks like fraud. Buying homes involves sums that deserve serious investigation; even relatively minor oversights are likely to be discovered. Answer: supply all the information asked for.
Avoid employment hopscotch.
Those who suddenly change jobs while in the process of buying homes in Evansville raise the odds of their application being affected. This is especially true of wholesale shifts in careers or industries. Even for otherwise praiseworthy professional moves, an employment outlook that appears unpredictable isn’t helpful.
Bottom line: those who will be buying homes need to prepare knowledgably for the policies that govern mortgage approval. If you are among those who will be buying homes in the Evansville area this winter, call me today -- I can put you in touch with a mortgage broker to start the pre-approval process! You can reach me on my cell phone at 812-499-9234.
Monday, October 01 2012
Getting a mortgage refinance has seldom looked more attractive than it does this October. Ads for seemingly ridiculously low teaser rates are popping up all over the place -- and even if the closing costs are hefty (many aren’t), the underlying rates make them all but irresistible.
But do you qualify? Some folks don’t realize that a refi can be just as tough as getting a mortgage in the first place. Or tougher. One client has a stunning property, top credit, and a guaranteed income stream that was more than adequate to fund the refi. She put together all the required paperwork, hosted an inspection (the inspector told her, ‘this is the finest property in the area’), and then waited a week before being told she had failed to qualify. Why? Because her place had a guesthouse -- and that particular loan program was for single dwelling properties only!
The lesson here is that it pays to ask all sorts of questions before actually applying for a specific refinance offer; in other words, kick the tires! Nevertheless, when all is said and done, locking in lower monthly payments can still be worth the trouble.
You will want to present a solid picture -- one that shows that you are financially stable with a good credit rating. Getting any kind of a mortgage is twice as hard if there are significant issues in your credit report or instability in your employment history.
Of course, the basic math has to work, too. The more income you have, the more the lender will be willing to lend. If you are married, you can opt to borrow as a couple so that your joint income is considered. Since the lender will factor in your debt load, subtract your monthly from your income number: if the remainder is healthy, the lender will see that, too.
Lastly (and of key importance), your home will need to appraise for the loan you desire. Although a resurgence in property values seems firmly underway, some neighborhoods have had time to show those rising values, and some not. I can help you get an idea of how the ‘comps’ in your part of town have been faring recently – good to know when you are getting a mortgage or refinancing an existing one.
The bottom line? Getting any type of mortgage in Evansville requires all the usual suspects. Reliability and predictability are really the key here. If you are tempted by today’s record rates to try to refinance, contact a reputable mortgage broker to go over your options. As always, please consider me your local real estate resource – call me if you need an introduction!
You can reach me on my cell phone at 812-499-9234.
Friday, September 14 2012
The Federal Reserve announced Thursday that, in an effort to re-ignite economic recovery, it was taking aim at mortgage rates — a move that will likely take rates even lower from their current record lows.
The Federal Reserve announced it will purchase $40 billion of mortgage-backed securities that will help boost the recovery in the housing market. What’s more, the central bank said that it will continue with the purchase program until the economy shows greater improvement, particularly with unemployment.
"These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative," according to the Fed in a public statement.
The Fed says the economy still has a long way to go toward recovery. The Fed predicts the jobless rate will stay above 7 percent well into 2014 and that economic growth will remain slow in the coming months.
At its Thursday meeting, the Fed left its funds rate unchanged at near-zero, but announced the rate — which has a bearing on mortgages — would remain at "exceptionally low levels" until at least mid-2015.
As mortgage rates sink lower, home shoppers have been taking advantage. The Mortgage Bankers Association announced this week that mortgage applications for home purchases were up 8.1 percent for the week ending Sept. 7. Mortgage applications for purchases also were up 7 percent from year-ago levels, MBA said.
"While low interest rates impose some costs, Americans will ultimately benefit most from the healthy and growing economy that low interest rates promote," Fed Chairman Ben Bernanke said Thursday following the Fed committee’s meeting.
Source: “Fed Pulls Trigger, to Buy Mortgages in Effort to Lower Rates,” CNBC (Sept. 13, 2012)
Tuesday, May 01 2012
For credit-worthy Evansville homebuyers, getting a mortgage can be a walk in the park…or a nerve-wracking nightmare. The difference usually has to do with those ubiquitous Credit Reports – the ones TV commercials want to send you for free (at which point they will try to sell you not-so-free monthly services).
Anyone who has ever been stalled just as they reached the final stages of getting a mortgage or refinancing knows that getting mad doesn’t solve anything. But avoiding a last-minute problem is easy to do if you plan ahead. At least six months ahead. We like to assume that outfits as important as the reporting agencies know what they are doing, and in fact, they do. But they must start with the right information, which is where we come in. Nobody ever told us this in school, but it’s ultimately our responsibility to see that our credit reports are accurate.
Whether or not you think you will getting a mortgage or refi soon, here are some plan-ahead, proactive steps everyone can and should take. Monitor for these common stumbling blocks:
1. Inaccurate information on the credit report. The first step is to read your reports. It is very important that you request those free copies of your credit reports and dispute any negative items that seem to have appeared for no reason. All three credit bureaus are required to remove inaccurate information, and they will do so, but only after you tell them to. My experience is that the agencies can be quick to respond…or as slow as molasses in January. In Antarctica. The only sure way to set things right is to allow them time to correct or to ask for more information.
2. Carrying too much revolving debt adds an unnecessary obstacle for getting a mortgage. A large part of a credit score is based on your revolving debt ratios. Revolving debt should be kept at or under 20%. If you are carrying more revolving debt than that, take this lead-time to whittle it down to a more loan-attracting ratio.
3. Taking on new debt less than six months before getting a mortgage: bad idea. If you are planning on getting a mortgage or refinance, avoid taking on other new debt in the six months leading up to your application. This solves any question over whether you will be able to pay the new debt as well as the mortgage amount.
Time spent planning ahead and getting your financing in order will be well worth it once you find the home of your dreams and are ready to write an offer. Questions? Contact me anytime you wish to discuss pre-qualifying for a Evansville home. You can reach me on my cell phone 812-499-9234 or email Rolando@RolandoTrentini.com
Friday, April 20 2012
The 15-year fixed-rate mortgage, often the top choice of home refinancers, reached a new all-time record low of 3.11 percent this week, Freddie Mac reports in this week’s mortgage market survey. The 30-year fixed-rate mortgage also sank lower this week, hovering near it’s all-time low.
"Fixed mortgage rates eased for the third consecutive week following long-term Treasury bond yields lower after a weaker than expected employment report for March,” Freddie Mac’s Chief Economist Frank Nothaft says.
Here’s how rates fared for the week ending April 12:
Source: Freddie Mac
Monday, February 27 2012
We have all been reading about how mortgage rates fell again in January. It seems as if half the time news like that is accompanied by some phrase like, “encouraging new buyers to dip their toes into the housing market."
Checking into it, I found that the average interest rate on conventional 30-year mortgage loans decreased eight basis points (to 4.32%) in December. That came from FHFA in their last full report. And by February 17th 2012, their site showed it was down to 3.87%. It looks like some of that toe-dipping might be about to start in earnest!
Just in case you are one of those ‘new buyers’ who might be feeling some of that ‘encouraging’, sooner or later you will learn that the government’s national rate is not the final word on everyone’s situation. It’s why I would suggest you consider making a call to one of our Evansville mortgage brokers. Here are some reasons why that’s a good idea:
A great mortgage broker can help you unearth the best mortgage; go rate shopping on your behalf. They spend their days keeping track of banks, credit unions and other sources of finance on behalf of their clients, so they are perfectly placed to access a wealth of mortgage data.
Brokers keep mortgage rates competitive by providing multiple points of view and offering alternatives when needed. Were it not for the efforts of diligent mortgage brokers, banks and financial institutions would be able to keep their rates higher. And in this climate of falling mortgage rates, they can save you a lot of the time it would take to go shopping for a great deal.
Good mortgage brokers are there to work to for you. They organize your financial picture, credit rating and future plans to come up with the mortgage that is right for you. They are motivated to work on your behalf because they know that at the end of the day it is by doing a great job for their clients that they are going to earn the reputation and word-of-mouth that keeps them in business.
If you are intrigued by the recent falling mortgage rates and are considering buying a home in the Evansville area, call me for a complimentary, no-obligation buyer’s consultation. I can introduce you to a great mortgage broker -- and we can help you to get prequalified. We can run the numbers that will help you decide if now might indeed be the right time for you to get into this market! You can reach me on my cell phone 812-499-9234 or by email at Rolando@RolandoTrentini.com