How to shop for a mortgage

Well this should be my last post for 2009. It's been alot of fun writing this blog and I plan on doing more of it in 2010. I wanted to take a few minutes and give some insight into how to shop for a mortgage in 2010. Many rules are changing starting in Jan and you need to know about them. A new GFE is being used and it's very confusing at least at this point. Here's what I think you need to know.

First off, I recommend shopping local. States and counties have little rules and quirks that a national lender may not know and understand. I have done loans in other states in the past such as CA, KS, KY and NE. I also did loans in NC, SC, GA and Florida. All the loans closed and because of the amount of time that I spent making sure everything went smoothly they did just that. Many loan officers don't take that extra time to make the loan as perfect as can be though. My comfort level was where I did the most business and still is.Maryland, Virgina, DC, Delaware and Florida are what I know best and that's the best place for me. So shop local to start.

The Internet is a great place for information but there are so many silly loan quotes posted these days it's very frustrating when you are actually quoting a rate backed up by facts. To quote a rate you need to know, credit, income, assets, what type of home, how much equity and if there is a 2nd mortgage. I get the "but I found a better deal" or my neighbor got x rate" No two loans are the same which is both good and bad. So I ask them if the other loan officer got all the above information and the client says no. Just remember that, there is a reason I ask so many questions, it's to give you accurate rates and know whether the loan can be done at all. It's MUCH harder to get a loan these days and takes much longer than ever before. There is little to no common sense underwriting left these days and everyone is running scared, especially the banks. My co-worker Alex Echeandia wrote about this topic also.

Bottom line, talk to a few local lenders, both banks and brokers and see how the compare on rate. Remember that YSP drives rates so if you want to see how much the loan officer is making DO NOT go to a bank. You will never know how much the bank is making on your loan and if you are getting a fair deal. Shop the rates but remember to check the total fees. I had a client recently that said to lock him at 5.25% with no points. I did and then he wouldn't close with me. He said he found a better deal. He got 5.0% with one point. He didn't get a better deal, he got a different deal. I could have done the same deal at 4.875% He cost him self thousands of dollars over the life of the loan by not talking to me again. Do some homework on the company and the individual loan officer. Google their name and see if any complaints or kudos come up thru the search.

I'll say this, if you shop rates and lenders, feel comfortable and start working with one person you do owe them the benefit of the doubt. If you find a better deal, tell them, just don't go off in another direction. We spend weeks and months sometimes working on a loan and deserve to know when you are in shopping mode and when you are committed. Shop all you like but make a decision and stick with it unless suddenly the answers start to change. Loans take 45 days to close on average but dishonest loan officers will still quote a lock good for only 15 days. Or they will be floating the rate hoping that what you want becomes available before you close. If the loan officer says you are locked then ask for a copy of the rate sheet which shows how long you have to close and the rate.

Most important note- LISTEN TO YOUR LOAN OFFICER. If I tell you I need something ASAP it's not for fun, I really need it. When we send you a package to sign with income and assets, don't take a week to get it back and pay attention to the instructions. We know what banks require and how silly much of what they want truly is. It's their money though and they are entitled to set the rules. If I say all pages of the bank statement, send them all in. If I ask for two most recent paystubs don't send the ones from 6 months ago. Tell us the problems, we know how to fix them and save you time. Remember the loan officer will save you more or cost you more than anyone else in your life. If you don't follow the rules, you lock will expire and you could end up losing the low rate you locked. Some banks will cancel your lock if you don't have the package back to them in 10 days. That doesn't mean send it to me on the 10th day, I need time to get it ready and ship it out.

I hope this helps and clears up some of the mystery of how to get the best deal possible out there. If I can in anyway help with the purchase or refinance to save you money please contact me right away. I will owrk very hard and always give you honest advice and do the best job I possibly can. Before I was a loan officer I was taken advantage in my first mortgage. It's why I became a loan officer and why I have remained one. I don't want you to feel like I did at settlement and not have any surprises. It's also why I go to as many local closings as I possibly can.

Happy New Year and good luck in 2010.

Thanks,
Brent Mendelson
Senior Loan Officer

Trends for 10

First the good news. It won't take long because there isn't much of it. The HVCC style appraisal system for FHA loans will not take place at least until Feb 15th.
Any delay from the disaster that has become normal for HVCC conventional loans is welcome.

A few items that were just announced and what they mean for home buyers and sellers.
The Treasury department announced that the mortgage backed security purchase program ends 12/31/2009
The Federal reserve program ends in March. When it ends they will have purchased 1.2 TRILLION in mortgage backed securities. If the Fed hadn't acted mortgage rates would have been dramatically higher. When the program ends rates will do what they would have done without the gov't program. I think in March if not in the month prior we will see rates in the 6.5% range. The real problem lies in that other than the federal gov't the demand for the MBS should be almost zero.

Since investors lost the ability to call the notes for lack of payment along with a myriad of other issues the demand has plummeted. Think about it; if the demand was strong the government would not have begun to buy them in the first place. It's not the actual owners of the mortgage but rather the servicers that have become empowered to make decisions on the loans. Should the rate be lowered, should principal be forgiven etc. Hedge funds and private venture capital firms will not jump back in unless the current market changes drastically in their favor. Basically the "security" has been removed from the term "mortgage backed security"
Plus with the free fall in equity even if a home is foreclosed there is likely to be no equity for the bank to recover.

If this happens expect a further decline in home prices that will rival what we have already seen. Add in the fact that ARMS are still going to come due in 2010-2011 which means the supply will rise again in markets around the country and we simply have not seen the worse that is to come. A happy new year indeed.

15 year versus a 30 year

I receive many calls these days about refinancing into a 15 year loan. They aren't for everybody but it's always something that a smart loan officer will recommend, mainly because the rates are so incredibly low. One of the complaints I hear also is "I don't want to start over on another 30 year fixed mortgage because I already paid 5 year". Completely understandable. There are also 20 and 25 year loans for people that don't want to start over. Take someone that owes 417k on a 30 year at 5.5% That is a P&I payment of $2367 per month. Today you can replace that mortgage with a 15 year at 4.25%
Now that means you pay $770 more per month and it must be considered how you pay that higher amount. It also means you should be able to pay it and still save for retirement, college plans etc. Shaving 10 years off the mortgage though is a huge savings in interest payments. You would still owe $289k 15 years in the 30 year mortgage. With a 15 you owe zero. My feeling is that our homes are the primary method we retire and not worry about money. Previous generations paid their mortgage, lived there until they retired and moved to Florida and paid cash. Our generation has moved away from that and will lead to further problems for all us down the road. My feeling is get debt free including your home as fast as possible. Think of it as a forced retirement account. Over the 15 years of the new loan you will spend $138,600 but save $289,000 over the same time period. Does that make sense and sound good? It does to me but again only if the overall payment plan works in your overall financial strategy. As I said a good loan officer asks those types of questions and makes sure this is the best fit for you. Is it a cash flow problem monthly or are savings down the road? Let me know how I can help you.

Thanks,
Brent

Update on VA loans

No I don't mean loans in Virginia, I am talking about Veteran loans. If you are eligible for a VA loan this is the best route to take in today's mortgage market. The first VA loan I did was almost seven years ago and we had to basically switch to a VA loan under the radar. It was hard to get sellers to accept a VA contract because some of the fees are paid by the seller and the appraisal process is more stringent.

That is no longer the case because VA loans are the only option in urban areas to get a low rate 100% loan with no mortgage insurance. If you already have the loan with VA you can still do a streamline called an IRRL that allows you to refinance to 100% of the value of the property with no appraisal, income or assets. You can also do a cashout to the same 100% under 417k and purchases up to the county loan limits at 100%. Around the DC area the county limits are currently $812,500 but that is going down slightly for 2010. The new maximum limit will still be $768,750
in the surrounding areas. Please check with me for the county information if you are unsure.

There are so many other great features for the veteran and possibly the people who purchase the home from the veteran someday.

The loans are assumable when you sell the home.Closing costs are limited by VA
For example we don't charge a processing fee and either waive or pay the bank administration fee on your behalf. Additional assistance is available thru VA if you have difficulty paying the mortgage in the future. There is no prepayment on any VA loans. You can get a loan with a credit score of 640. You also don't have to be a first time homebuyer, the benefits can be reused multiple times.
If you receive disability benefits you can have the funding fee waived.

You are allowed up to 4% in seller financed help. Only certain parts can be considered part of the concession though. For example discount points are not an allowable closing cost to be financed.

As you can see there are so many advantages to having or using your VA benefits whether to refinance or purchase. I love doing VA loans and working with veterans. I decided years ago to become a VA expert and help as many people as I possibly can. That's why I offer a discount to every veteran who closes their loan with me and also reduce other rates and fees. Upon request I can provide you dozens of veterans who can tell you that I routinely beat all the specialized VA lenders you will find on the Internet. Contact me today and find out what I can do to help you. Thank you for your service to our nation.

Sincerely,
Brent Mendelson
VA Loan Oficer

How to buy a home

I know the title sounds silly, everyone knows how to do that right? Maybe they do but not the way it should be done.

First off don't go talk to a realtor first. Not until you have been pre-approved for a loan from a mortgage professional. I highly recommend using one that is local to your transaction also. There are many reasons, someone local has ties to the community and hopefully a sense of responsibility. A local lender also knows the quirks of each county and state in as well as the ability to pull together information quickly for your review. Take a look at other lenders and you will see they almost always recommend someone local to you.

Once you have been approved for the loan or rather pre approved then it's time to out and find the house of your dreams. That's the fun and easy part. Once you have done that it's time to write the contract and settle the loan. It doesn't matter where you settle right? Just let the agent pick the title company right? WRONG.

Once the agent orders title they will have little contact with the attorney. The loan officer will have contact at numerous points with the title company. Think of it this way, who does the title comapny send the title work to when it's ready? Who does the lender and the title company work with to clear up all the last minute snags that know one knows about? Not the realtor but the loan officer. It also makes a huge difference in dollars to you sometimes, realtors by design don't really know about the fees that are charged. Same thing goes for letting your realtor pick the lending agent. It may work out it may be an extremely bad idea. Take a look at my co-worker Josh Burley's on Localism.com for another view.

Fannie and Freddie Changes

Starting Jan 1, 2010 Fannie and Freddie will no longer purchase loans with a DTI over 45%. This means that even with a huge downpayment, excellent credit and any other positive factors will no longer be considered. So once again the lending window will close for millions of qualified borrowers. Where this really will impact is on someone that wants to purchase a home and hasn't sold their current home but has it on the market for sale. I have many people that are doing just that and FNMA understands what they are trying to do. No longer. Also if people want to turn the primary into a rental property because the market is down and don't want to sell that will become much harder. Lenders because of the GSE'S are not allowed to count and rental income unless you have 25% equity. This means if you have a 50 DTI on paper because you don't have enough equity you will not be buying that new home. Lenders were expected to begin the new rules in mid Jan but BOA announced today their cutoff is December 11th 2009. Please contact me NOW if you are planning a purchase so we can help provide you all the information before it's too late.

Thanks,
Brent

Maximum DTI
• Maximum DTI lowered to 45%, with flexibilities offered up to 50% (as approved by DU)

Minimum credit score requirement
• Minimum credit score increased from 580 to 620