What You Need To Know About Mortgage Interest Rates

by Justin Miller on February 13, 2012 in Interest Rates with No comments

Did you ever see an ad on TV for a car and couldn’t believe how low the monthly payment was so you rushed to the dealership to find out it was too good to be true?  The same thing happens with mortgage interest rates.

The purpose of an advertisement is to get you to call and there is an asterisk for just about everything.  If it is too good to be true it normally is and if you don’t read the fine print you could end up hurting yourself.

In the world of mortgage interest rates lots of times the quoted rate includes paying discount points to buy the rate down, requires a large down payment, has an unrealistic timeframe for the interest rate lock period (the shorter the lock period the better the interest rate), etc.  And sometimes someone advertises an interest rate that doesn’t yet exist hedging the market hoping rates improve and even worse they are purposely quoting a rate below what they can offer knowing you most likely won’t be getting a loan that day.

You have to be so careful especially in the Fort Lauderdale and South Florida area where mortgage fraud runs rampant.  The most important thing to understand is that a mortgage is much more than an interest rate and no matter what product or service you are buying if it’s cheaper you are giving something up.  With a mortgage you won’t know if that is service, advice, expertise, or honesty until it’s too late.

What To Know About The $25 billion Foreclosure Settlement

by Justin Miller on February 10, 2012 in Foreclosure, Short Sales with No comments

The details are in the Wall Street Journal article from today’s paper titled “Q&A: What Homeowners Need to Know on the Deal.”

Who does the settlement cover?
The settlement covers borrowers who have loans that are serviced by one of the five big banks: Ally Financial Inc./GMAC Mortgage, Bank of America Corp., Citigroup Inc.,J.P. Morgan Chase & Co. and Wells Fargo & Co. These banks handle payments on 55% of U.S. mortgages, according to Inside Mortgage Finance………

Appraisals & Distressed Sales

by Justin Miller on February 7, 2012 in Appraised Values with No comments

It’s quite often that a borrower reviews an appraisal that I send to them and they can’t understand why there are short sales and foreclosures included in it.  If there is a recent sales close (same neighborhood or within .5 miles) to the property and within the last 3 months it needs to be included.  A lot of times the appraiser will comment that it was a distressed sale and due to the condition little weight has been giving to it but it has to be included.

Here in Fort Lauderdale and all of South Florida we see this all of the time because there are so many distressed sales.  The article below, “Do Appraisers Use Distressed Sales As Comparables,” give very good examples to answer this question:

Last month, the Appraisal Instituteissued a paper on the subject. In the paper,  the Institute explained that:

“Foreclosures and short sales can provide important information for appraisers, who develop valuations based on market data and market forces.”

On whether an appraiser should use distressed properties as comparables, the Institute was very direct (all items in bold were shown as bold in the original paper):

“An appraiser should not ignore foreclosure sales and short sales if consideration of such sales is necessary to develop a credible value opinion.”

And they explained the possible differences between short sales and foreclosures:

“A short sale … might have involved atypical seller motivations and so might not be an ideal comp…

A sale of a bank-owned property might have involved typical motivations, so the fact that it was a foreclosed property would not render it ineligible as a comp.”

FHA Mortgage: 30 Year Versus A 15 Year Fixed

by Justin Miller on February 6, 2012 in FHA Loans with No comments

I have mentioned my thoughts on carrying a big, long mortgage for years now and I still stand by that however with an FHA loan it can be a little different due to the costs of the monthly mortgage insurance on a 30 year fixed versus a 15 year fixed.

On a 30 year fixed, if you put less than 5% down the monthly mortgage insurance factor is 1.15% and if you put 5% or more down it’s 1.10%.

On a 15 year fixed, if you put less 10% down the monthly mortgage insurance factor is .5%,  if you 10 – 21.99% down it’s .25%, and if you put 22% or more down there isn’t any.

Here is an example: On a $10ok purchase price, with 3.5% down on a 30 year fixed, the monthly mortgage insurance is $91.67 per month but on a 15 year fixed it’s $39.30 per month.  The interest rate is normally about .5% lower on a 15 year fixed.  If market rate is 3.5% on a 15 year that would make your Principle & Interest payment at $696.76 per month plus the $39.30 per month of MI for a total payment of $736.06 per month.  On a 30 year fixed at 4% the Principle & Interest payment would be $437.66 per month plus the $97.67 per month of MI for a total monthly payment of $529.33.

Both the 30 year and 15 year fixed require the one time Upfront Mortgage Insurance Premium (UFMIP) of 1% of the loan amount.  You have to keep the monthly mortgage insurance on until you have 22% equity AND a minimum of 5 years other than if you have a 15 year fixed putting 22% or more down then you have no monthly mortgage insurance from the start.

Every borrower’s circumstances are different so make sure to consult a Mortgage Consultant and/or Financial Planner.  I use Mortgage Coaching software to help my clients determine the best loan for them.

Mortgage Interest Rates Update: February 6, 2012

by Justin Miller on February 6, 2012 in Interest Rates with No comments

Mortgage-backed securities, which move interest rates, are trading higher right now which is good for interest rates.  Interest rates paying NO Points in Fort Lauderdale and South Florida are as follows today on a $400,000 purchase price, 740 credit score, 25 day lock period, primary residence, single family detached home, with escrows are:

  • 3.875% on a 30 year Conforming fixed rate mortgage with 20% down (APR 4.096%)
  • 3.5% on a 15 Year Conforming Fixed rate mortgage with 20% down (APR 3.658%)
  • 3.875% on a  30 year FHA fixed rate mortgage with 3.5% down (APR 4.765%)

Contact me for interest rates on Jumbo Mortgages and Adjustable Rate Mortgages (ARMs) in Fort Lauderdale and South Florida.  Rates are subject to change without notice.

The Top 10 Turnaround Towns

by Justin Miller on February 1, 2012 in General News with No comments

8 of the 10 towns were in Florida and 2 of which are our very own Fort Lauderdale and Miami.  Click here to see all 10.

Have We Hit A Bottom In The Housing Market?

by Justin Miller on January 30, 2012 in Mortgage Education 101 with No comments

There is no way to tell and I am not in the business of calling a bottom.  What I do know is that in Fort Lauderdale and South Florida home prices are extremely attractive, rates are low, and rents are rising.  If you feel secure with your job, have money saved, and will hold onto the house for at least 10 years now might be the best time to buy.  Remember, every 1% increase in an interest rate it reduces your buying power by 11%.

In an interview with Robert Shiller when asked about whether we have hit bottom he said “When people phrase is that way, they say ‘we’ve reached the bottom.’ That suggests that we have the expectation of a major turning point right now. But I don’t see that. I don’t see any reason to think that prices are going to start heading up dramatically now. We do have some good news. Permits are up. Notably, the National Association of Homebuilders Housing Market Index is up and that’s a forward-looking index. But it’s not up very much. If you look at the rate of change it looks dramatic but it’s still at a low level.”

I feel he hit it right on the nose.  It’s a really good interview and I highly recommend reading it.

To Mortgage or Not To Mortgage: That Is The Question

by Justin Miller on January 28, 2012 in Mortgage Education 101 with No comments

I have heard so many people talk about getting a 15 year fixed mortgage versus a 30 year fixed mortgage or buying cash.  I am sure you have heard me quote Ric Edelman in the past about the reasons to carry a big, long mortgage and he’s correct.

In this article, “Don’t rush to pay off your mortgage,” I think they describe it best by saying “When it comes to home loans, we’ve become a nation of debt-a-phobes.”  It is easy to think that leverage is bad after experiencing the worst downturn since the Great Depression but it’s not when used correctly.

“You could save a lot of interest by choosing a 15-year loan over a 30-year — about $63,000 after taxes on a $200,000 loan for someone in the 28 percent tax bracket. But ask yourself whether you can really afford the higher monthly payment — in this case, $1,420 versus $955. Have you maxed out your 401(k) and built up an emergency fund? Paid off credit cards? Funded insurance policies and, if you desire, college savings? If you haven’t, choose the 30-year loan. And if you have, choose the 30-year loan anyway and put the difference between the two payments in a savings or investment account. You’ll build up a nest egg that might keep you afloat (and in your house) if you lose your job or get sick. The strategy requires discipline; setting up automatic payments helps.”

A mortgage is a financial tool when used correctly and you can build a larger net worth by taking out a bigger and longer mortgage when putting your leftover monies to work elsewhere.

What’s the Maximum Purchase Price For The Florida Bond?

by Justin Miller on January 26, 2012 in Florida Bond Program with No comments

Many at first glance would think that this down payment assistance program was only for the lower end but that couldn’t be further from the truth.   If you are buying a property in Broward, Palm Beach, and Miami-Dade Counties Florida the home you want to purchase cannot exceed $386,202.60.  

If you want to find out the limits for any other counties through Florida click on the link below, click on the First Time Homebuyer Program image in green, choose your County, and the Number of People Living in the Household:  http://www.floridahousing.org/

Why Mortgage Deals Die?

by Justin Miller on January 26, 2012 in Interest Rates, Mortgage Education 101 with No comments

I hate to keep copying and pasting content but KeepingCurrentMatters.com does such a great job. As I have mentioned so many times before the interest rate is not the most important part of your mortgage.

I have seen estimates stating that 29% of deals that go to contract and require a mortgage, don’t close. That number boggles my mind. It means that even after a buyer and seller come to terms on a sale (not an easy feat these days), 3 out of 10 transactions fall apart. What are some of the more common reasons?

  • Appraisal issues – In many markets, we are still seeing declining values. Appraisers are in a difficult position, and with so many transactions (including seller’s concessions to assist buyers with closing costs) values aren’t always coming in at sales prices.
  • Short Sales not being approved by the current lender – With so many sellers owing more than their home is worth, buyers’ proposals need to be sanctioned by the lender (who will be receiving less than they are owed). Some of the offers are too low, but often, the lender isn’t local and they really don’t know what the property is worth today.
  • Bad pre-approvals from the loan officer – Today, loan officers who are not reviewing tax returns, analyzing bank statements, and asking for detailed explanations and documentation on credit blemishes, are truly hurting the customers. Issuing pre-approvals based on the representations of the customer is reckless and a cause for dismay later.
  • A lack of transparency – Whether it’s a seller or agent not disclosing property issues, or a buyer trying to sneak things by an underwriter, too many people think they can cut corners. That is not the world we live in anymore. Everything is uncovered. Being honest in the beginning, gives you the best chance to overcome obstacles.

It is clear by the numbers that closing loans can be more difficult today. However, with proper planning and integrity, many of the challenges can be dealt with early and successfully. Agents documenting values of the homes, loan officers doing complete reviews of the loan profile up-front, and everyone telling the truth helps get deals to a successful conclusion and avoids horror stories.

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