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JUMBO RELIEF
It looks as though Fannie and Freddie have decided to lower the rates on those “jumbo” conforming loans.
Remember that Fannie and Freddie increased conforming loan limits–in certain geographic areas–so that borrowers with larger loans could benefit from lower, conforming interest rates and, to some extent, conforming loan underwriting qualifications.
However when these jumbos came out the interest rates weren’t so favorable. Lower than most “true” jumbo loans, but still relatively higher than conforming loans.
The key is to make sure that your property is located in an area where these jumbo conforming loans are allowed.
MORTGAGE APPLICATION: A CHICKEN AND EGG THING
Many borrowers, especially first time homebuyers, ask about the mortgage process. Basically: “So what do I do?”
First, to make an offer to purchase a property, the listing agent (or homeowner if it’s a FSBO) will likely want a pre-approval letter. In order for the loan officer to write the letter, he or she must have all of the borrower’s information. And believe it or not, the information needs to be correct. What?
So really the first step is for the borrower to give the loan officer all of the relevant personal information (name, address, employment, income, credit history, etc.) and then for the loan officer to verify this information by reviewing the actual documents (paystubs, W-2s, asset statements, etc.). Then, and most importantly, the borrower and loan officer should review all of this information as it now appears on the application.
The industry has moved away from personal consultations and reviews. And this has caused borrowers to unintentionally misrepresent information that is critical for loan program availability and which could, down the road, cause an issue for underwriting. The information has to be correct before a loan officer can confirm mortgage program availability, and the program availability will determine the kind of preapproval that the loan officer can write.
In the end: without accurate application and credit information, that preapproval really doesn’t mean that much now, does it?
ANGRY ABOUT YOUR MORTGAGE OPTIONS?
I read this recent blog post and got angry myself. For a different reason than the writer.
He seems to be upset because banks/lenders are using systems to offer higher rates to current, valued clients. Hmmm….. At first glance I would agree and be upset. Yes, you want to give your best customers your best products and rates.
He then goes on to suggest that people who are going to need a mortgage should assume that the lender is trying to “screw” them and shop “hard.”
I am not clear what he means by shopping hard, but I think I have a sense. Talk to as many people as you can, use one lender’s rate against the others, and have them negotiate. Hmmm….
I have always felt that it is perfectly fine to talk with a few lenders. Only if you feel completely comfortable and confident that they are professional, ethical loan officers. If the answer is yes, then you should be getting the “best offer” upfront. And let’s remember how tight the mortgage programs have become, and interest rate is really one of the last items to worry about.
WILL THE MORTGAGE PROGRAMS BE THERE?
Here in Chicago we hit 60 degrees this weekend. I noticed everyone out and about, walking dogs, walking kids, wearing shorts, etc. So I guess spring is here.
Then I noticed the trees. Still all bare. Not any sign of buds yet. It was as if the buds were still afraid to pop out for fear that we’d get another blustery snowstorm. I don’t blame them. I am nervous about that too.
But that got me thinking about my industry. Though it seems that more people are out looking at properties, my sense is everyone is still nervous. From talking to new clients as well as real estate agents, most people have heard about the mortgage industry situation, and even after having been fully pre-approved, they still don’t feel anxiety-free. They know about the month-to-month (or, even more accurate, day-to-day) program changes, and so they have to be wondering, “I am fully pre-approved today. But what about in 30 days when I find a property?” Good question.
My suggestions:
- Be sure to work with a reputable and knowledgeable loan officer.
- If you call a loan officer, and he/she doesn’t call back, you can be sure that you won’t get a call back when programs change.
- Be proactive and ask your loan officer a lot of questions. Like: “How will I know if the program for which you are preapproving me will be around?” and see how they respond.
- Does your loan officer explain the state of the industry or just say everything is great, please sign here?
It’s important to feel safe and secure. Though no one can guarantee every loan, the conventional programs should be solid. If you are going to do any out-of-the-box loan, be careful. It could be very very cold out there still.
SHOPPING FOR THE BEST INTEREST RATE? HOW ABOUT 11.5
As you may know, I published a book called It’s Not About Rate…OK, let’s stop right there. It’s not about the interest rate? Then what can it be about? You don’t have to read my book to have a good idea what are the critical factors in being approved for a mortgage. Still….there are companies that want you to believe that shopping for the lowest interest rate is the way to go in finding a lender.
Zillow.com has a new mortgage page. The information is, for the most part, pretty informative and practical. A good place to educate yourself about both the mortgage and real estate process.
However…their “find a lender” (or, I guess, the lender finds you) search is not unlike many of the internet-based companies that are trying to lure people into believing that finding a lender is like buying a bottle of ketchup: all are the same and you just want the cheapest (and we all know that all ketchup is not the same.)
I could go on and on about the many dangers of using this site for finding a lender, but instead I would go to Lenderama’s site and read this post. It’s great and explains the objections in a sensible and thoughtful manner.
GETTING A MORTGAGE? HOW ABOUT A PAUSE?
The other week I was talking with a real estate agent who is very smart. Smart and intelligent.
We were discussing the hot topic of the day, month, and year: the state of the mortgage industry. We eventually got around to the various ways to fix the problems. We all know that the government would get involved, for better or worse. Here in Illinois, for example, the state government passed Public Act 095-0691, and the federal government has passed the Stimulus bill which includes sections about mortgage reform as well as mortgage “fixes.”
The Illinois law would effectively either slow the mortgage process (for someone buying a home) or even possibly stop loans. Those (in the government) who would be reviewing a loan application would not be consciously or intentionally stop the loan, but the review and time to get the review done might (and this is the key word: might) cause 1. sellers to find another buyer, or 2. discourage good buyers from moving forward. And thus everyone loses: buyer and seller, seller and buyer realtors, attorneys, loan officers, the city, the state…..
So…what is the point of these laws? There are many, and it’s complicated. So the realtor and I came to this point and he said, “Well, isn’t it (the law) for us to pause?”
Hmm…let me take a second to think about this………..
The one positive outcome of all the reforms, bills, and laws, for now and just before the borrower signs the application documents, is to take a moment, pause, and think. Is this the right loan program? Will this leave me financially stable and in a position to pay my bills? If something happens for the worse, am I ok?
Hmm…some things to think about? Thanks Zeke.