Blog Post

UNDERSTANDING RATES - BUCKLE UP!

Deana M. Devereaux • December 17, 2020
Now is a GREAT time to refinance. You have been hearing all over the news, the internet and TV that rates are as low as 2% and you should refinance yesterday.

This is true…but NOT FOR ALL BORROWERS!!! That advertised 2% rate exists, but it MAY NOT BE FOR YOU!!! I think I need to state this again in a different way.

A merchant’s/advertiser’s job is to market the lowest possible rate to you, in order to draw you in, lock you in and benefit off of your situation. OF COURSE, you will see an ad for 2%, but did you bother to check the FINE PRINT? Those are the itty-bitty little words at the BOTTOM of that ad that states this rate may or may NOT be for you.

It is no different than those countless real estate seminars that present you free tablets, with the storage availability of 2010, cookies, muffins and bland coffee and show you all of the millionaires that went through the program (mainly the owners you are paying the sign-up fees to – “You can do this, too, for $1,997 down!”) and they promise the WORLD…but when you read the fine print, it states that these results are not guaranteed and VARY.

Ladies and gents, I must break this down right now. We are getting a TON of Borrowers with their boxing gloves already on, ready to go a few rounds to defend the fact that THEY HEARD rates were 2% and they need that rate STAT.

This is how we feel about that:

The lowest advertised rate for a loan is usually for your LOWEST-RISK Borrowers. They are the types of borrowers that do full documentation, are living in the property (owner-occupied, no investment properties) have 780+ credit, need a LOW LTV (loan-to-value) of less than 40%, request a rate and term refinance (no cash out). Their loan amount, property, mortgage history, tradelines, clean title report, appraisal and everything else is SQUEAKY CLEAN. Even then, there may be an overall cost to get that 2% rate, and depending on the deal, there may be a credit.


When the file returns from Underwriting, the rate may be up to a 2.25% - 2.5%. There are SO many factors in determining rates for a Borrower that vary from day to day, loan to loan and borrower to borrower.


Rates change DAILY, several times per day, every few days, or some other random pattern. What we submit a rate in as, is different from when the rate is actually LOCKED. Heaven help us if pricing is higher when it is time to lock, because we then, must wait and ride the wave, until the rate (or rate costs) lower again.


Currently, appraisal turnaround times have been an ISSUE. Did I say that appraisals have been an issue? OMG! Appraisal Management Companies (AMC’s) have been slammed and backlogged, causing delays in appraisal turnaround times.


If your rate lock expires on 12/18, but the appraiser is not returning your appraisal until the 27th, we must either extend the rate lock (at a cost to YOU at closing) or let it expire and work to re-lock the rate again at its new pricing (still at a cost to YOU at closing). Pricing could be better, the same, or worse. This dance is always about as fun as banging your shinbone into a coffee table at night, on the way to the kitchen.


So, there’s THAT.


 Loan program guidelines change, as well. When the ill-fated COVID hit, lenders and investors were like:

And we were like:


Programs stopped completely (even in the middle of deals ready to close, rendering them DEAD) and guidelines changed almost WEEKLY.


Now, they may change monthly, or bi-monthly. It all depends.


A Borrower could have a great credit score if they paid current for the last 12 months on their mortgage…but what about BEFORE THAT? If a Borrower has had mortgage lates in the last 24 months, but had been on time for the past 12, then they can no longer qualify for the premiere program with the lowest rates. These premiere programs examine the last TWO YEARS of mortgage history.


There are some programs that will only look at the last 12 months, but those are specialty programs…these are NOT the ones that offer 2%-2.5%.


Can you get an extremely low rate right now? YES.


Will that rate allow you to refinance, build equity and pay off your mortgage much sooner? YES.


How good will your rate be? We need to examine that. Depends on what you have going on with your situation!


Rates are at historic lows now, but they will inevitably rise at some point in the future.


Whether or not you are purchasing, or refinancing, now IS a great time to attempt to renegotiate and lock in an available, low fixed-rate loan! If you owe less than 15 years left on a 30-year mortgage, then 15-year loan rates are also historically low.


If you have great credit, or even not-so perfect credit, we have programs that can go as low as sub-600 credit scores…just do NOT expect a 2% rate with low scores!!! (#nopenopenope).


If you own a property with equity, then maybe you can also take advantage of a lower rate. Bring in 2021 like a champ!


Purchasing? We have programs that can cover you from 96.5% up to 100% for that purchase (of course, each borrower’s situation is different. Loans, pricing, and availability can vary by state).


We are your CREATIVE funders, bringing a combined 30+ years of experience to the table. We know how to satisfy the underwriters…to creatively get your loan approved and approved the RIGHT way. Call us today if you want to take advantage of the historically low rates available!


CHECK OUT SOME OF OUR RECENT BLOG POSTS

AFFECTING THE MORTGAGE INDUSTRY? NEW LAWS 2022

By DEANA M. DEVEREAUX • June 21, 2022
It’s important to stay up to date on the ever-changing landscape that is the mortgage industry. It’s possible that the newest laws passed by congress, Fannie Mae, and Freddie Mac could affect those looking to get a mortgage, or refinance in the coming months. We’ve put together all the latest on the newest and upcoming mortgage laws affecting the industry. Additional due diligence for condo buyers If you’re looking at buying a condo that is 20 years or older, you may have to jump through a few extra hoops before signing the final loan docs. Conventional loan buyers will have to go through an additional due diligence process that includes obtaining answers on safety, soundness, structural integrity, and habitability of condos from the condo association before the loan can be processed. If you’re looking at a condo this spring, it’s best to get prepared now. While this extra due diligence step is a pain, it’s in your and your lenders best interest. This extra due diligence step was born out of the devastation of recent condo building collapses in the U.S. New fees for vacation home financing and high-balance loans If you thought 2022 was the year for. A second home, vacation home or jumbo upgrade, it may still be but you’re going to be looking at additional fees. Upfront fees for these types of loans are expected to increase between 1.125 percent to 3.875 percent. Fannie Mae and Freddie Mac explain that these increases in the second home market are to keep first-time homeownership rates low and facilitate equitable and affordable housing. You can still buy down these increases with points just like you can buy down an interest rate. This rate increase comes as we saw the housing market skyrocket and borrowers take on additional debt to compete in this hot market. Self-employed borrowers rejoice – loosened regulations Thanks to the pandemic, the number of freelanced workers has increased. The good news keeps on coming because lending criteria has relaxed for self-employed borrowers. The COVID-19 pandemic saw an increase in requirements for self-employed borrowers. If you’re a freelancer, you no longer need to provide year-to-date profit and loss statements and three months of bank statements. We’re back to the good old days of using tax returns to show income! If you’ve been waiting to buy a home because you’re a self-employed borrower, now is the time! In the past, borrowers had to show creditworthiness through any number of on time loan payments including credit cards, first mortgage loans, car loans and more. The strict creditworthiness requirement affected many buyers that did not have credit cards, mortgage loans, or car loans. Now your mortgage loan provider can use a verification tool to check bank deposits for on-time rental payments, and other creditworthiness information. Say goodbye to mounds and mounds of paperwork proving you pay your loans on time!

DO YOU REALLY NEED A REAL ESTATE AGENT?

By Deana M. Devereaux • June 14, 2022
 The real estate agent that you’re working with to buy your home should be your advocate. You want to ensure that they are aware of all risks and benefits associated with the property you’re looking to buy. There is a major benefit in having a good real estate agent because they can ultimately help you make money on the purchase of your home in the long run. If your agent shows you homes where you could add an additional bedroom or bathroom or they show a property where you could finish the basement, they’re helping you gain equity in the property. On the flip side of that, if they don't understand your search area and they show you a home that is overpriced and they suggest that you go in over the true value of that home, you’re losing money on the transaction. It’s important to work with someone that you trust to guide you through the process and help you make decisions that will help your bottom line, not hurt it.

THE INS AND OUTS OF FINANCING A 2ND HOME

By DEANA M. DEVEREAUX • May 23, 2022
Step 1 – Decide How You’re Going to Use the Second Home Your down payment requirements and loan types will differ depending on what you plan to use your second property for. For example, do you plan to use it as a vacation home, secondary residence, or full-time rental property? A vacation home or secondary residence may qualify for a conventional home loan. When qualifying for a second conventional loan, the process is much like your first mortgage except you will be required to put down 10 percent. If you are purchasing the home to use as an investment property or full-time rental, you won’t qualify for certain loan types such as FHA or VA loans. You will also be required to put down a larger down payment than a vacation home or secondary residence. In addition, you may have to meet stricter debt to income ration requirements. All hope is not lost though! You can still qualify for a vacation home or secondary residence if you plan to rent the home out on apps like Airbnb. Typically, you must occupy the home for some portion of the year, and the home must be a one-unit home that can be used year-round. We can help you figure out what loan type you qualify for. Step 2 – Save For Your Down Payment There are multiple ways to complete this step. You can save the traditional way and put away a portion of your paycheck every month. You can also use the equity in your primary home to fund the down payment of your second home. There are multiple programs available such as: · Cash out refinance: A cash out refinance allows borrowers to borrow up to 80% of their home’s current value. The only caveat with this option is that your primary home’s monthly payment will increase. · HELOC: A HELOC, otherwise known as a Home Equity Li ne of Credit. This avenue differs from a cash out refinance because you are not refinancing your primary home’s mortgage. This is a good option if current interest rates are higher than your primary home mortgage interest rate. The last thing you want to do is refinance to a higher interest rate!
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