When looking for a mortgage many people are in search of the "best rate". While getting a low rate is certainly important, buyers must look at all aspects of a loan before deciding if the loan really is best for them. Brokers and banks can offer a variety of rates, but with each different rate there is an associated set of closing costs.
For instance Broker 1 might advertise 6.0% interest and Broker 2 might advertise 6.25%. The first question you'd want to ask is how much are each of their closing costs. If they are equal or close Broker 1 has the better option. However it's more likely that Broker 1 has higher costs. You'd then have to decide whether it's better for you to pay more now to get a better rate, or to save your cash although paying a higher rate over time.
To make it a little easier to compare both offers, it's usually wise to pick which option would work best for you and then ask the other Broker what set of closing costs he'd offer at that selected rate. This way you'll have the structure you want and can compare apples to apples.
This short post was meant to explain the relation that rate and closing costs have, not to fully explain how to pick your mortgage broker. When looking for and choosing your broker there are many more characteristics that you'll want to evaluate such as: having the right loan program for you, disclosing fees upfront, trustworthyness and ability to close your loan among others.
Feel free to email me with questions. I really enjoy helping people understand the loan process.
Wednesday, August 27, 2008
Tuesday, July 29, 2008
Coming up with down payment money
Most loan guidelines will not allow an third party, even a family member, to loan you the money for the loan down payment. In some instances a gift is allowed from a family member though. To set it up properly you'll need to go about it a certain way depending on your situation.
If you have the money for the down payment and closing costs but are still getting a gift from family it's easiest to not even bring up the amount of the gift at all. Many times though buyers don't have enough for the down payment and closing costs so will need the gift to use for closing. In this case as long as the buyer has the required down payment in their own funds then the family member will write a gift letter and it is allowed. The gift letter states who is giving the money, who is receiving the money and that it is truly a gift and doesn't need to be repaid.
The last case would be where a buyer does not have enough for the required down payment. Here the buyer needs to receive the gift well ahead of closing and put it into their bank account. When the lender verifies the buyer's assets they will look back 60 days. If the gift has been in there the whole time, it's considered 'seasoned' and is viewed as the buyers own money.
Every loan situation is different so I'd suggest talking with your lender before making any final decisions.
If you have the money for the down payment and closing costs but are still getting a gift from family it's easiest to not even bring up the amount of the gift at all. Many times though buyers don't have enough for the down payment and closing costs so will need the gift to use for closing. In this case as long as the buyer has the required down payment in their own funds then the family member will write a gift letter and it is allowed. The gift letter states who is giving the money, who is receiving the money and that it is truly a gift and doesn't need to be repaid.
The last case would be where a buyer does not have enough for the required down payment. Here the buyer needs to receive the gift well ahead of closing and put it into their bank account. When the lender verifies the buyer's assets they will look back 60 days. If the gift has been in there the whole time, it's considered 'seasoned' and is viewed as the buyers own money.
Every loan situation is different so I'd suggest talking with your lender before making any final decisions.
Monday, June 2, 2008
jumbo rates increase
We've had some decent economic news coming in, so as the stock market has done better it's pushed up mortgage rates. The upward rise has not been dramaticthough and made most of the movement the last two weeks of the month.
Of special concern is the Jumbo mortgage rates. While they've been hovering the the low to mid 7% range since last August, Jumbo mortgage rates increased to the high 8%. That is with no points, but now many lenders' Jumbo rates are 9% and requiring 3 discount points! This is a huge jump, and is going to put serious pressure on those homes that require Jumbo loans.
*Please remember that the conforming limit is $417,000 but that is for the first loan amount only. It is not the purchase price, nor the first and second loans combined.
So when buying a home over $440,000 it's definately worth it to make the first loan amount less than $417,000 through a combination of down payment and a second lien.
Of special concern is the Jumbo mortgage rates. While they've been hovering the the low to mid 7% range since last August, Jumbo mortgage rates increased to the high 8%. That is with no points, but now many lenders' Jumbo rates are 9% and requiring 3 discount points! This is a huge jump, and is going to put serious pressure on those homes that require Jumbo loans.
*Please remember that the conforming limit is $417,000 but that is for the first loan amount only. It is not the purchase price, nor the first and second loans combined.
So when buying a home over $440,000 it's definately worth it to make the first loan amount less than $417,000 through a combination of down payment and a second lien.
Monday, May 19, 2008
how much should you put down?
Here are some other questions I get a lot, "How much should I put down? Do I get a better rate if I put down x, what about y?". There are a couple different downpayment levels that will improve your rate.
If you have 20% to put down, that'll take care of having to get mortgage insurance or a second loan. This savings can equal hundreds of dollars a month and depends on your loan amount. If you have the 20% and are comfortable putting it down, this is a great option to take. If you don't have 20%, or have it but just don't want to put it down, 5 or 10 percent would be other good options.
5% will get you a better rate than 0% down, so I'd recommend that as a minimum downpayment. If you put down 10%, the rate will be the same on the first loan but your rate on the second (or mortgage insurance amount depending on which one you have) will be less.
Those are the main downpayment levels that will result in lower rates and/or payments when buying a home. There are different levels for investment properties and cash out refinances. Feel free to email me with any questions on those billconover@america-lending.com.
Have a great week!
If you have 20% to put down, that'll take care of having to get mortgage insurance or a second loan. This savings can equal hundreds of dollars a month and depends on your loan amount. If you have the 20% and are comfortable putting it down, this is a great option to take. If you don't have 20%, or have it but just don't want to put it down, 5 or 10 percent would be other good options.
5% will get you a better rate than 0% down, so I'd recommend that as a minimum downpayment. If you put down 10%, the rate will be the same on the first loan but your rate on the second (or mortgage insurance amount depending on which one you have) will be less.
Those are the main downpayment levels that will result in lower rates and/or payments when buying a home. There are different levels for investment properties and cash out refinances. Feel free to email me with any questions on those billconover@america-lending.com.
Have a great week!
Wednesday, May 14, 2008
rates moved up today
Rates rose up about an eighth yesterday and another eighth today. They're right about 6.125%.
Tuesday, May 13, 2008
alternatives to mortgage insurance
I always get asked the question "Do I have to pay mortgage insurance?". It's a good question, why would you want to pay for insurance that only benefits the lender not yourself? If you're not putting down at least 20% to get your loan amount less than 80% of the sales price, conventional underwriting will require you to obtain and keep mortgage insurance with your loan.
However there are two exceptions though that I use quite often. The first is to obtain a first lien loan at 80% of the sales price and then use downpayment and a second loan to cover the other 20%. In a common scenario a buyer will put down 5%, get a second loan for 15% and get a first loan for 80%. As second loans don't require mortgage insurance they do charge a higher interest rate. In most cases though the total payments still work out to being less than one loan with mortgage insurance.
The second exception is to get a loan with Lender Paid Mortgage Insurance, or LPMI. In this case a buyer can put down less than 20% but instead of paying for mortgage insurance themselves the lender obtains and pays for a policy. To cover this extra cost, the lender will charge a slightly higher interest rate, typically 1/4 to 1/2 % higher. Again in most cases this will be a less expensive route than to get a loan with buyer paid mortgage insurance.
There are a number of other details to think about when deciding which route to take. I'd be happy to answer any questions you have. You can email me at billconover@america-lending.com.
However there are two exceptions though that I use quite often. The first is to obtain a first lien loan at 80% of the sales price and then use downpayment and a second loan to cover the other 20%. In a common scenario a buyer will put down 5%, get a second loan for 15% and get a first loan for 80%. As second loans don't require mortgage insurance they do charge a higher interest rate. In most cases though the total payments still work out to being less than one loan with mortgage insurance.
The second exception is to get a loan with Lender Paid Mortgage Insurance, or LPMI. In this case a buyer can put down less than 20% but instead of paying for mortgage insurance themselves the lender obtains and pays for a policy. To cover this extra cost, the lender will charge a slightly higher interest rate, typically 1/4 to 1/2 % higher. Again in most cases this will be a less expensive route than to get a loan with buyer paid mortgage insurance.
There are a number of other details to think about when deciding which route to take. I'd be happy to answer any questions you have. You can email me at billconover@america-lending.com.
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