The Big MAC……and Just As Delicious!
The SanMateoMortgageBlog is proud to announce the launch of the Mortgage Adoption Center or the MAC for short. The Mortgage Adoption Center is for anybody that feels they have been abandoned by their lender, loan originator, Mortgage Broker or the endless amount of names that you may classify as simply, your loan person.
You would be considered abandoned if:
- You have not heard from your loan person since your closing
- You can’t even recall your loan person’s name (which is the reason you refer to them as your loan person)
- Your loan person does not call you every time there is an opportunity for you to save money on your mortgage
- Your loan person does not contact you every time there is a change in the market that may affect you as a homeowner
So is adoption in order?…Sign up at the Mortgage Adoption Center and start receiving the top notch attention that you deserve!
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Part II: The 5 Secrets of Being a Skilled Home Mortgage Shopper
If you read Monday’s post about The 5 Secrets of Being a Skilled Home Home Mortgage Shopper, you already know my first two tips. Now, here are the final 3 secrets of being a skilled San Mateo County Home Home mortgage Shopper.
3. You Get What You Pay For
In the consumer world, deals do exist and finding them can be a gem, but when you are shopping for a home mortgage, the cheapest is not always the best. Call or look around on the internet and you can find numerous sources that say they are they cheapest deal out there, but do you really want to place an important and complex process into the hands of the lowest bidder? If you do decide to go the discount route; expect very little advice, little experience and zero personal service. On top of this, expect the real possibility of not closing at all. Losing the home of your dreams and then realizing that the cheapest isn’t the best can be a hard pill to swallow.
4. The Correlation Between Interest Rates and Closing Costs
You can have any rate that you want! Yes you heard me right. You name the rate you want, I can give it to you. Any home mortgage professional can, but you may pay more in costs if the rate is lower than the norm. As you are learning, when it comes to your loan, you have multiple options. You can pay fees to lower the rate, reduced fees or you can pay no fees at all. Paying zero fees will cost you with a higher interest rate. One of these options may be a better fit for your financial needs and a true home mortgage professional will find the balance between interest rates and closing costs that best compliment your financial goals.
5. Interest Rates are in Constant Flux
Interest rates change daily and sometimes hourly. This means, that trying to compare lenders rates and fees isn’t feasible. You would have to receive these quotes at the exact same time on the exact same day with the exact same terms and ready to lock the rate in or you are just wasting your time. You must also know the length of time for the lock because this also affects the rate and fees you receive. While this seems frustrating, remember that the professional you pick is worth more the any rate you are quoted.
I hope you have enjoyed my home mortgage shopping posts over the last few weeks. Now that you have the skills and the knowledge to shop effectively, go out there find a bargain (AKA a true home mortgage professional). If you want a complete version of the Home Mortgage Shoppers Guide, feel free to drop me a line. So until then… Be Smart, Ask Questions and Wait for the Right Answers!
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Part I: The 5 Secrets of Being a Skilled Mortgage Shopper
In prior mortgage shopping posts, I have explained why you should go beyond shopping for the rate, given you a series of questions to gauge a mortgage professional’s financial expertise, and explained the real bargain, which is a mortgage professional who has earned your trust and confidence. Now it’s time to unveil the five secrets of shopping effectively:
1. If It Seems to Good to Be True, It Probably Is.
Deep down, you know this! If the interest rate is discounted much lower than the competition, there is a reason. Mortgage money and interest rates all come from the same place. If it seems like you are getting an unbelievable deal, you are right, it is not believable. Ask a lot of questions and discover the hook. Is there a prepayment penalty? Are you being charged two or three points upfront (1 point equals 1% of the loan amount) to obtain said rate? What is the length the quoted rate is locked? An incredibly low rate means you need to ask a lot of questions!
2. Make the Correct Comparisons
We all know the biggest concern when it comes to mortgage shopping is “What’s the rate?” Comparing interest rate to interest rate is not necessarily an accurate comparison. Again, most mortgage rates are a commodity, meaning the rates are set by the market, not the lender. What makes the difference is what a mortgage professional will charge you upfront and their fees.
Comparing fees is a must, as these are the only costs that a mortgage professional controls. But beware, sometimes fees are under-quoted upfront to make the bottom line appear lower. Even comparing APR (Annual Percentage Rate, which is your effective interest rate that includes your quoted rate plus all of the costs involved in the loan) is not a cut and dry comparison. APR can also be manipulated as some lenders calculate APR differently.
The best way to make a true comparison is to obtain and compare good faith estimates from your mortgage professional with all of their costs on the same program at the same rate. Subtract all of the fees independent of the loan, such as homeowner’s insurance, title fees, escrow fees, etc. Now add up all of the loan fees. The mortgage professional that has the lower fees has the cheapest loan.
These are the first two secrets for shopping effectively. Next time, I will round out the top five and arm you with the tools to be a knowledgeable and effective shopper. So until then… Be effective!
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The $250,000/$500,000 Capital Gains Exclusion, Excluded?
Monday I discussed some of the highlights of the Housing and Economic Recovery Act of 2008 (HR-3221). Hidden among the many pages of the bill, are some interesting changes to the Capital Gains Exclusion Rule.
Based on the new Capital Gains Exclusion Rule, the profits from the sale of your home (capital gains) may have to be shared with your favorite Uncle. Yes Uncle Sam has decided he wants his portion as well. Currently, homeowners enjoy tax free profits from the sale of their primary residence up to $250,000 (if filing single) or $500,000 (if filing jointly). As of January 1, 2009 this simple math will now will be replaced with the ratio mentioned in my last post:
What exactly does this mean to the San Mateo County homeowner? If you have owned your home for more than two years and have declared this home as your primary residence every year, you will still receive your full Capital Gains Exclusion ($250,000 if filing single, $500,000 if filing jointly) when you sell. But, if you are one of those savvy investor types that lived in a home two years for tax purposes and then converted it into a rental, you may have a problem.
Suppose you declared this property as your primary residence for two of the last five years. Under the current Capital Gains law, you would receive 100% of profits up to the exclusion tax free. Under the new law, you would only receive 40% of the exclusion tax free.
How will this affect the San Mateo County Housing Market and your home’s value? Will we see an increase in homes for sale as investors unload their inventory in the last half of this year? Will we be forced deeper into a buyer’s market? Only time will tell as we only have about four months to reap the benefits of the 2008 Exclusions.
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The New Housing Law: More Changes for San Mateo County Borrowers
Last Week President Bush signed the (HR-3221) Housing and Economic Recovery Act of 2008 into law. It will take me some time to dredge through the 694 pages, but in the meantime, here are some of the highlights and how it impacts San Mateo County borrowers and the soon-to-be borrowers.
- Conforming loan limits will now be permanent, but decreased from the current $729,750 down to $625,000.
- If you are a first time home buyer that purchased a home between April 9th 2008 and June 30th 2009, you can receive a tax credit up to $7,500.
- Earmarked funds for local governments to purchase and restore blighted homes and neighborhoods have not yet been designated.
- Adjustments to FHA
- Expansion of the program to help delinquent homeowners
- Termination of Down Payment Assistance Programs
- Increased down payment from 3% to3.5%
- Upfront Mortgage Insurance increase from 1.25% to 3%
- The Capital Gains Exclusion of $250,000 if you’re single and $500,000 if you are married will now be calculated as a ratio and not an all-or-nothing exclusion. The formula to calculate your Capital Gains Exclusion will be based on your home’s actual usage as a primary residence:
This is only a quick overview of this very important Housing Law. Watch for future posts that will address more of the issues that will impact you a homeowner or a soon to be homeowner in San Mateo County.
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Part II: Four Questions to Ask Your Bay Area Mortgage Professional
Last time, I gave you the first two questions to ask your Bay Area Mortgage Professional. Here are the final two questions to help gauge your Mortgage Professional’s financial understanding and the affect the current financial market will have on your financial situation.
- When the Fed changes rates, what does this mean for mortgage interest rates?
You may be surprised, but when the Fed changes the Fed Funds Rate, mortgage interest rates often move in the opposite direction due to the dynamics within the financial markets. However the Fed Funds Rates will have an affect on short term rates such as credit lines, credit cards, auto loans etc.
- What is happening in the market today and how do you see rates in the near future?
This question has the biggest impact on the borrower. Having the ability to explain how mortgage bonds and interest rates are performing at the present time as well as any foreseeable market events that could affect interest rates will determine if locking in your rate today is advisable. Again, we cannot predict the future, but we can help you make logical decisions based on where the market is today and where we see it going.
In this rapidly changing real estate market, it is more important than ever to choose a Mortgage Professional who has a solid understanding of the financial markets. The person you choose will make a considerable impact not only on how successful your transaction will be, but also on your financial future.
My next post will continue to explore the art of mortgage shopping. Until then………….Keep asking questions!
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Part I: Four Questions to Ask Your Bay Area Mortgage Professional
A true Mortgage Professional will reveal their value from your very first interaction. By taking the time to understand your short and long term financial objectives, Mortgage Professionals will structure a loan program tailored to your specific financial goals. Mortgage Professionals will also have a true understanding of financial markets and what affects the markets will have on your overall financial. Here are two of the four simple questions that your Mortgage Professional must be able to answer:
- What are Mortgage Interest Rates based on?
The only correct answer is Mortgage Backed Securities or Mortgage Bonds. You may also hear the 10-year Treasury note. The 10 year Treasury note can move in the same direction as Mortgage Bonds, but it is not uncommon to see them move in the complete opposite direction either. In helping judge where rates are headed, you do not want to work with a mortgage person who is keeping watch on the wrong market indictors.
- What is the next Economic Report or event that could cause interest rate movement?
A true Mortgage Professional should have this answer for you without hesitation. Mortgage Professionals are not fortune tellers, but having the market knowledge to know where rates are expected to move is one of the most important job requirements of being a Mortgage Professional.
Next time, I will give you the last two questions to ask your Bay Area Mortgage Professional. Until then….keep asking questions!
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Mortgage Shopping Part III: How to Find a San Mateo Mortgage Professional
It’s not hard to find a Mortgage Consultant, Loan Originator, Mortgage Advisor or whatever we call ourselves these days. In San Mateo County, you can find one of these mortgage people on every corner, and, if you take a quick glance around, probably right behind you.
With so many Mortgage Consultants and/or Loan Originators and/or Mortgage Advisors vying for your business, how do you know who you can turn over one of your largest financial decisions? First of all, you are not shopping for a Mortgage Consultant, Loan Originator or Mortgage Advisor. You are shopping for a Mortgage Professional, which begs the question, what is a Mortgage Professional and how do I find one?
A Mortgage Professional is somebody that will take the time to understand your financial needs and goals. They will not just quote rates over the phone because they sound pretty or get into a bidding war after you tell them the last mortgage person they talked to said they could get a 0.25% lower rate. A Mortgage Professional stays on top of the market so they can advise you properly. A Mortgage Professional should be just that, Professional!
How do you find one? You find one by taking the time to properly interview your Mortgage Professional. I know once you pick up the phone, you’re going to have a burning desire to ask, what are your rates? Don’t! Even though the mortgage person at the other end is already reaching for the rate sheet because they know the question is coming, don’t ask the question. Instead start the interview process.
The first step of the interview process is to see how the Mortgage Professional interviews you. See if they ask you more questions than, how much do you want to borrow, how is your credit and how much do you make? Although these financial and credit related questions are important, there should also be additional questions that explore your goals and what you are trying to accomplish with your new loan. Even if you do not get these questions in the f