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How much money do I need to buy a home? What are the advantages home ownership over renting? What Are Credit Cards Costing Me? What is a Good Faith Estimate (GFE)? Do I have a choice of points or no points? How do I determine whether or not to pay points? What are the pros and cons of getting an adjustable rate mortgage? When is an adjustable rate mortgage right for me? What is credit scoring and how can I improve my score? What constitutes a loan approval? Should I pre-qualify or get pre-approval before I begin searching for a home? When should I lock in my interest rate? Once I apply, how long will it take before I receive an approval? How much money will I need at closing? What is the maximum monthly payment for which I qualify? What is PMI and how do I get around paying it? What causes mortgage rates to change? Is a direct lender better than a mortgage broker?
How much money do I need to buy a home? You can now afford a home even if you do not have money for the down payment. Closing costs in most instances can be financed. You should have money for an appraisal, prepaid taxes and insurance, and incidentals. You can get into a $300,000 home with $2,000. If you go straight conventional and your down payment is less than 20%, you will have to pay PMI. However, you can also choose a 80% first and a 20% second, thus eliminating PMI. FHA mortgages require a 3% down payment. VA mortgages require no down payment for up to 105% financing. Investor and commercial mortgages usually require a 10% down payment. No money down and low down payment options are subject to credit score restrictions. Contact your loan officer for a more detailed explanation. What are the advantages of home ownership over renting? Where else can you get significant tax advantages, appreciation, freedom of ownership, and cash flow on investment properties - other than real estate? A home is usually your best investment - better than stocks, mutual funds, annuities. In real estate you can use tremendous leverage through a mortgage to own and control the real estate while making a monthly payment. Every month that you pay your mortgage you gain appreciation and pay down your debt, thereby increasing your equity and net worth. Mortgage interest along with property taxes are usually tax deductible giving you an after tax APR significantly below you note interest rate. You will not get any rent increases or be under any of the the landlord's "rules". Your mortgage payment goes to benefit you - not your landlord. Should I refinance? Your individual set of circumstances will determine if it is time to refinance. You can save a lot of money by getting a better rate. You may want to switch from an adjustable into a fixed rate mortgage or from a fixed rate into an adjustable. If you have credit card or installment debt which is almost always not tax deductible interest, you can easily save thousand of dollars by refinancing your home and paying off debt. Since the interest on your mortgage is usually tax deductible, your after tax APR will be significantly less than your note APR and much less than the interest on your credit cards. Contact your loan officer for a free debt analysis.
What Are Credit Cards Costing Me? Credit card interest rates are around 17-19% on the average. Interest paid on credit card debt is usually not tax deductible while interest on a mortgage is usually deductible, creating an even greater difference in the interest rate on a mortgage vs. the rate on a credit card. Based on an interest rate of 17% (not 19%) and a minimum payment of 2 percent of the balance this is what you will be paying:
These numbers will change if your interest rate is different, or if you make more than the minimum payment. If you make new credit card purchases or incur fees such as late fees, over-limit fees, or cash advance fees, it could take even longer and cost even more to repay a credit card balance. A better alternative is to refinance and pay off your credit card debt, thereby lowing your interest rate and payments dramatically. You can even invest the savings in a tax free retirement account, further increasing your wealth while reducing your taxes. Contact your loan officer for a more detailed analysis. My Credit Isn't So Good And I Don't Have A Lot of Money for A Down Payment. Can I still Get A Mortgage? Yes, in most instances you can. We can get someone 100% financing with one day out of bankruptcy with a 600 credit score. We can also show you ways to increase your credit score. Call us to see if we can help. What is a Good Faith Estimate (GFE)? A Good Faith Estimate (GFE) is an estimate of the rate and terms of the mortgage and the costs that you will incur. It also states prepaid items like insurance and prepaid taxes. It is an estimate and is based upon the information that you provide and the programs that your lender has available. It is important that you are as accurate as possible in presenting information to your loan officer. Do I have a choice of points or no points? How do I determine whether or not to pay points? Yes, you do have a choice. The primary idea of points is to pay a fee at closing in order to lower your interest rate. Depending upon how long you keep your loan, you may save initially more money over the life of the loan. Check the APR of a loan with points and without. What are the pros and cons of getting an adjustable rate mortgage? When interest rates are high, many borrowers choose an adjustable rate mortgage. This option will keep your monthly payment lower as you start out in your new home. When interest rates are low, fixed rate mortgages will lock in that low rate over the life of the loan. Other pros and cons:
This decision should be thought out carefully. If interest rates rise you may have higher monthly payments for a significant period with an adjustable loan. When is an adjustable rate mortgage right for me? Generally, if you plan to keep your loan for a short period of time (1-10 years) or if fixed rates are high, an adjustable rate mortgage may be right for you. Westminster Mortgage offers a variety of ARMs including 1-year Treasury ARM, 3-year Treasury ARM, 3/1 Treasury ARM, 5/1 Treasury ARM, 7/1 Treasure ARM and 10/1 Treasury ARM. Other advantages of an ARM include: An ARM will usually offer a lower starting interest rate than a fixed rate loan. An ARM can be less expensive than a fixed rate loan if interest rates remain steady or decline. Most people keep a mortgage for from 6 to 7 years. This makes ARMs attractive to many people. What is credit scoring and how can I improve my score? A credit score is derived by analyzing a number of variables to determine the likelihood that a person will repay the loan on time. The scoring system was developed from a statistical analysis of variables that predict loan repayment patterns. Variables include late payments, delinquencies and credit history. A higher score is better. There are ways to improve your credit score little known to the general public. Call now to request this free report or contact us by clicking here and request Report - "Credit - How to Play The Game".
What constitutes a loan approval? Most lenders base their decision on three factors: credit, collateral and capacity. Credit refers to the quality of your current credit rating. Capacity is your ability to repay the loan based on job stability and/or income. Collateral is the amount of equity in your home, and the likelihood of appreciation. Your application not only has to be approved by a mortgage broker, it has to be approved by a lender for a specific program to be really approved. Too many mortgage companies tell people that they are approved for this loan or than when in reality they are not. A credit report must be ordered and an application must be taken and approved by a lender. You may have gotten letters in the mail or emails or played with some online calculator that all say "You are approved." This is simply not true. Our approval process is detailed and thorough. When we write an approval letter it has substance to it and real work behind it.
Should I pre-qualify or get pre-approval before I begin searching for a home? You should get preapproved. Many real estate agents will not show you a home unless you are preapproved and can show a letter from a reputable mortgage company. They are unwilling to waste their time on an unqualified buyer and for good reason. The seller does not have to even consider your offer unless you can prove that you are able to actually go through with the purchase. Unless you have all cash, you will need a mortgage. We can get you truly approved for a mortgage so that you, the real estate agent, and the seller will all know that you are an able buyer. Without preapproval, you are wasting everyone's time - yours, the real estate agent's, and the seller's. When should I lock in my interest rate? To be an informed buyer, you’ll want to be aware of recent interest rate movements. Have they been falling or rising? Depending on the market, you may want to wait before locking in an interest rate, or may want to lock in as soon as possible. We offer lots of flexibility but the decision to lock or float can only be made by you. A rule of thumb is - "When in doubt, lock the rate."
Once I apply, how long will it take before I receive an approval? Approvals can take as little as 48 hours, or less in some instances. It will generally take about 5 business days from the time we receive you completed application and supporting documents to obtain a loan decision. Some programs may require additional documentation and time to place the loan, so approval may take a little longer. Whatever you do, remember to be truthful and accurate on your application. An inaccurate application will slow down the process tremendously.
How much money will I need at closing? Your out of pocket closing costs will be revealed on your good faith estimate and also by us via email, phone, fax, or mail. You will know what you need to bring to the closing. If you have financed your closing costs, like most people do, you will not need to bring any money. Keep in touch with your loan officer for up to date details.
What is the maximum monthly mortgage payment for which I qualify? This depends on your monthly income and monthly debt payments. We can generally go to a maximum ratio of 55%. This means that 55% of your monthly income is available for mortgage payments, tax payments, insurance payments, all reoccurring debt payments. Different programs have different ratio requirements. Ratios of 38% - 50% are more common. Government programs usually have a maximum ratio of 42%. Contact your loan officer for details.
What are discount points? A discount point is a fee that you can pay to reduce your interest rate. One "point" equals 1% of the loan amount. For example, one point on a $100,000 loan would equal $1000. If you’re going to be in your home for a relatively short period, it may not be worth it to you to pay discount points. If you would like to lower your monthly payments by lowering your interest rate, then paying points up front may be the best way to accomplish this.
What is PMI and how do I get around paying it? PMI is primary mortgage insurance. It is insurance taken out by the lender and paid for by the borrower to insure the lender against loss in case that the borrower defaults on the loan. It is required by most lenders when the LTV exceeds 80%. You can avoid paying PMI by combining a first mortgage with a second "piggy back" mortgage to lower your LTV ratio below 80%. Your payments will also usually be lower with a first and second mortgage. Your payments then go to pay down the two mortgages and building equity instead of paying PMI. PMI payments are not tax deductible while interest on a second mortgage is. |
How Do I Get The Best Rate?
It is NEVER about the best rate. It is about the best MATH, period. There is NO other answer than that. So why isn't the lowest rate the best deal? First, lower rates come with more points and fees. That's not the real issue either. There is a break even point to contend with when paying points and fees, tax deductions to figure out and your available cash. In the case of a purchase loan, points are tax deductible in the year that you pay them. That is good, but then again, so is the interest you think you are saving. With refinances, the points are usually only deductible over the full term of the loan. That could be 30 years, making the benefits and the break even point years down the road. So why do so many lenders advertise really low rates with all of those points and fees? Because they know most consumers look at the rate, not the math. That advertising strategy works really well. How about the lowest APR? Often, the more points you pay, the lower the rate and APR. True, but not the answer. Get your loan officer to take apart each rate and fee quote to find out what the best MATH is for you, period. It only takes a few seconds for a professional to do it. After that, it's your decision.
What
Causes Mortgage Rates To Change?
Did you know that one or more rate changes per day is normal? Actually, it is unusual not to have at least one rate change in a day. Most people do not know that. Rate quotes can change when you call back later that same day. In the lending business, a rate change can also include a change in the point cost for the same rate. In other words, a rate can be no points in the morning, then later that day cost ¼ point. That is a rate change to lenders. Did you also know that mortgage rates are not directly affected by what Alan Greenspan does? Many times a fed rate cut can cause mortgage rates to go up. Mortgage rates change primarily based on: 1) the perception of inflation, 2) times of uncertainty and 3) the movement of money in and out of the stock market--that's it. When a piece of economic data shows weakness or uncertainty in the economy, rates tend to fall. The opposite is also true. A drop in the unemployment rate, a rise in durable goods orders, a rise in the consumer confidence index--rates go up. These influencing factors can present themselves at any time, many without warning, affecting mortgage rates instantly. There is no "delay". It doesn't take time to "filter down" like some people think. Reading the paper for quotes doesn't really work because the information is old by the time you read it. Radio, TV and billboards are not the answer because the details are always missing. They just want to get you on the phone. Competitive lenders can deliver nearly identical rates to each other. Most borrowers don't ask the right questions and focus only on the interest rate. Try to think MATH and as it pertains to you. That's all that matters.
Is A Direct Lender
Better Than A Mortgage Broker?
No. First, if a couple of lenders were always the cheapest, everyone would
eventually know about them, right? Over the last several years, we have seen
amazing advances in home mortgages. Today’s homebuyer has the widest variety
and the most unusual types of loans ever available. Mortgage brokers have
dozens more of these loan programs for customers than any single lender. And
most of the time, they can provide better deals. This is because they represent
the WHOLESALE rates of these lenders. These are rates and fees not available to
the public. For example, ABC Bank might be quoting you 5.5% and 1 point for a
loan. A broker representing the very same bank can also quote the same rate and
fee. The broker is probably paying NO points for that loan. They add the point
back and keep it for themselves. They can also quote ¾ of a point and beat the
retail quote of that bank. This is the essence of broker competitiveness. The
“best deal” is always changing from lender to lender. A broker has so many
sources and receives so much up to date pricing, you are more likely to save
money than not. Next time a big national lender tells you that the broker is
only a middle man and therefore cannot beat their deal, get it in writing.
The bottom line is that there is no one source that is the cheapest. The only other way most lenders can compete with one another is to somehow convince the public that they have some "secret way" of providing lower than market rates. The market is the market and you pay for it one way or another. Work with a mortgage professional that can explain it all in make sense terms.
Call 860-225-5731/712-5553
