My New Blog

The fed cut their rate by .25% , however they (bond traders) were looking for a .5% cut. This is a breather for bond traders, and not pushing hard on the inflation button. This has so far been good for the mortgage market that has had higher rates in the last week. We will see if this is a knee jerk reaction or if the mortgage rates can sustain from the news of the Fed's decision to cut rates.

What this means , is if you have a Home Equity Line of Credit it will go down .25% from where it is. This might only be in tact for a portion of your current billing cycle (as HELOC's bill like credit cards). Look for it on your next statement~

Ray

Recently I was on the phone with a client who had called about refinancing their home. The client had bought their house a few years back and were in an adjustable rate mortgage that was set to go up about 3% at the end of January. The loan had a prepayment penalty that was expiring, but they couldn't refinance until it did without facing a $5K addition to their payoff. The typical increase in payment on those first adjustments is about $300 per month. They had called in after finding us online to check in and see how we operated, and our philosophies. We were talking about the current state of their home loan and where they had gotten into trouble.

Turns out that when they bought their home a few years back they were just told "Ok, sign here, this is going to be your mortgage" Unfortunately, they weren't educated about the different mortgage programs and what benefits or weaknesses each of those programs had tied to them. As it turned out this is the second client in a month that was strung along by a family member or friend of the family in the past. Individuals who aren't licensed to offer F.H.A or V.A mortgages can't offer these programs, and will be reluctant to mention them to you. When you are researching your home loan, whether to purchase your house or refinance you should be educated on all of the options. If the individual is not licensed to offer certain mortgages (FHA, VA, CHFA) then you won't be educated about that mortgage.

I explained how when they came in we would go over the available programs for their much needed refinance. They were surprised to hear that I would present them with options and different mortgage programs based off their abilities to qualify and their needs. Not only will they leave as an educated client, but understand the positive and negative aspects of each of these options. Usually we find one option that is the clear answer, as we get to understand the client's needs and abilities.

Our team has always believed in action through education for our family of clients. Make sure when you are looking for your next home loan, that you are working with someone who is going to offer you more then one choice for a mortgage and also educate you on the positive and negative aspects of those options.

Give a call if you have questions while looking for your next home loan. We are here to give you honest answers to your mortgage questions.

Ray (303) 779-0591 x2

Theresa x4

Aurelia x3 (se habla espanol)

The Division of Real Estate in Colorado has been doing quite a bit of work on legislative changes and requirements for the State of Colorado's mortgage professionals.

The addition of 2 more restrictions have been put in place for when you are applying for a mortgage with a professional who is licensed in the state of Colorado. The one added on 12/04/2007 was the net tangible benefit and reasonable inquiry requirement.

What this means is that we are required to only offer a mortgage to you that has a net tangible benefit to you. Meaning that there has to be a requisite benefit to you the borrower. This can include things like: Lower payments, Condensed Ammortization, Debt Consolidation, Lower Rates, Fixing your mortgage rate, Avoiding foreclsoure, Negative Ammortization, and Purchasing a home to name a few. The state requires that you fill out a Net Tangible benefit when you are applying for a mortgage, and also at the closing table when you are signing at the title company. There are specific questions that you will answer by initialing next to the statement.

You can also expect that if you are doing a low (no income verification) document loan that the mortgage professional is going to inquire about your ability to repay the loan. They have the requirement to at least inquire about your current income, and the probability of your continued income potential. What this means is you are seeing the evolution of the mortgage market wanting to require everyone to verify as much as possible about your ability to pay for the mortgage you take out. Although it doesn't require the mortgage professional to verify your actual documentation.

Also, there is a new Colorado Lock Disclosure to ensure you are going to receive the rate and terms you are agreeing to when you sign the loan application. The Banker/Broker you are working with should be able to show you a lock confirmation from their particular investor on your home loan. The lock confirmation will include your name, address, type of mortgage program, loan amount, RATE, rate lock date, and lock expiration date. This will allow you to know when your loan rate was locked and when it will expire. Typically as a mortgage banker, we need to lock your rate up to 10 days after your loan will fund. This will allow your mortgage servicing to be transferred to the end lender and ensure they have all the proper documentation for your loan.

The newest requirement (from 12/17) is to eliminate the ability for there to be a prepayment penalty that is longer then the initial teaser rate you would have on a sub-prime mortgage. However, there are very few lenders even lending in this arena these days. A few of them are popping back up but there are few soluable sub-prime mortgage companies in business.

The most up to date information on the requirements for the mortgage professionals you interact with in Colorado can be found at http://www.dora.state.co.us/real-estate/index.htm.

If you have questions about who you are working with, make sure they are listed as a licensed mortgage professional in Colorado and not listed as a denied mortgage broker. If you don't see the individual on either of those lists you may want to see if they are exempt before taking action.

Of course, if you are uncertain of who you are working with and don't feel like they are servicing your needs first, let us know! We will make sure you are getting options and an education during your home buying or refinancing process.

Ray

Hey All,

I wanted you to read something I found online this morning while waiting to hear what the Fed will do today when they meet. What you want to do is read through the following article, as it may be the first time I have found article where a journalist actually educates the consumer on what to expect from a Fed Rate Cut.

There are a few points I would like to make to clarify some of the article:

1) The market has already priced in the change~ She is somewhat on track here but offbase. Truly the last week has been extremely volatile for mortgage rates, and actually they have gone up over the last week, from where they reached 3-year lows. Be wary when reading 30 year average rates, as by the time they are posted they are already a week outdated!

2) Gerri talks about ARM resets not being as severe~ What you need to understand is that your ARM is made up of an Index (variable) and a Margin (fixed). You add those together and you get the fully indexed rate. (Ex. Index = 6 month Libor = 5.38, Margin = 5.0, Fully Indexed Rate = 10.38) You also have what is called a CAP on your adjustment. If your current rate hasn't adjusted yet, you are facing the initial adjustment. If it has already once (even if it didn't but could have), you are facing the periodic adjustment. The initial adjustments range from 1-6%, and periodic adjustments range from 1-2% on average. Meaning if you are sitting at 6.375% and your loan is set to adjust for the first time and your initial adjustment cap is 5%, here is what you look at. If we use the earlier example of Index being 5.38% and Margin being 5%, then you could have a cap of 10.38 (which is rounded up to the next highest .125% or 10.5%) for the initial adjustment. So you would be looking at 10.5% for your new rate and payment based off of that example on a $250,000 loan would be principal & interest $2,286 from $1,559 at 6.375% where it started. This is the real deal on a rate adjusting on an adjustable mortgage the first time.

3) Truly she is right when she says to keep it in perspective~ Right now and for the most recent months mortgage rates have been driven by inflation and job growth. The reason inflation has a role requires an understanding of bonds (mortgages). Meaning if there is a worry on inflation then what you can buy today with a dollar may not buy you as much in the future, if inflation is higher.If you buy a note (mortgage bond) at 6% and inflation is a worry. That would mean that in the future your dollar wouldn't necessarily be worth as much. If you have a note payable (due) in the future and your dollar isn't going to be worth as much, you are going to want a higher rate when you buy it. So instead of wanting to buy it at 6% you may want 6.375% (to earn the rate of return you would like) to take into consideration the future value of that dollar with inflation.

Enjoy the article, and let me know if you have any questions about your adjustable rate mortgage. rwilliams@summit-mortgage.com

~Ray

What a rate cut means to homeowners

How to keep ahead of rates and lower them when your card issuer hikes them up.

NEW YORK (CNNMoney.com) -- Most analysts see the Fed cutting rates for the third consecutive time tomorrow. What investors don't know is just how deep the Fed will cut. What will this mean for your mortgage? Here's what you need to know.

1: Long-term mortgages won't move much

Right now investors are split on whether the Fed will lower the funds rate by another quarter point to 4.25% or cut it by a half-point, to 4%. But the fact is, there's not much doubt that the Fed will cut rates. And because of that, the market has already priced that in, says Mike Larson with moneyandmarkets.com. 30-year fixed rates have been falling for some time.

In July, the average rate on a 30-year fixed mortgage was 6.66%. Last week, it was 5.82%. So, a rate cut won't really do very much to lower long-term rates. They're already low. So if you want to refinance, it's a good time to start shopping.

2: ARM resets not as severe

The Fed move tomorrow may be more significant to borrowers with adjustable-rate mortgages than what the government is doing in freezing subprime interest rates. That's according to Greg McBride at bankrate.com. Most resets on adjustable rate mortgages will reset in the middle of next year. And the fact that the Fed is cutting rates, will make these resets more manageable for prime borrowers, which aren't covered by the foreclosure-prevention plan announced last week.

So, if you had an adjustable rate mortgage that started at 4.5% and your rate was going to reset at 7.5%, you may only face a rate reset of 5.7%.

3: HELOCS will be cheaper

Home equity lines of credit will be cheaper if the Fed does cut rates. It may take up to three billing cycles to see the actual decrease in your bill. If you need to consolidate debts or you need money for medical bills or college expenses, you may consider shopping around for a HELOC since lenders are likely to price in the Fed's cut immediately.

4: Keep it in perspective

The take away here is that the Fed is on your side. This rate cut won't be the silver bullet that fixes the housing market. But it's apparent that Fed is in a rate cutting mode, and the cumulative effect on that will help consumers. There are a number of things the Federal Reserve can't control, like the impact of the credit crunch.

You need to look at inflation, job growth and the overall health of the economy as indicators of when this housing crisis may subside. When we get down to it, there are two issues here, according to McBride. That's inventory of houses on the market and the affordability of houses. Interest rate cuts won't do much to make that go away. Sometimes, it's just a matter of time.