Michael Creed's Blog

NOTICE: For those of you that had this emailed to you again on 2/20/2010 (it's a post from 2/10/2010), I apologize.  I have opened an IT Helpdesk ticket to find out why the system sent out the email a second time.

April 30th is 79 days from today!  The clock is surely ticking for getting your hands on the First Time Buyer and Move-Up Buyer tax credits. To be eligible, you must have a signed contract by April 30^th 2010 and be closed on your home by June 30^th 2010. Checkout the resources, including a video, below.

So that you know what to expect, here is the timeline for a typical home buyer in our market:

1.    Pre-Approval Process: 24 to 48 hours from application

2.    Shopping for a home and having your contract accepted: 30-60 days

3.    Loan Underwriting and Closing: 21-35 days

As you can tell by our timeline, the total process can take well over three months.

If you want to buy a house, and need financing to do so, the time to start the home buying process is now. This gives you enough time to get the home you want and also close your loan on time.

With the whole country trying to take advantage of this amazing tax credit before the June 30^th deadline for closing (must be under contract by April 30^th), it would be wise to start YOUR process now so that you don't get stuck in the middle of the frenzy that will undoubtedly take place!

Start the pre-approval process by using our free online application today! It only takes a few minutes!

There are now two different tax credits available for home buyers:

1.    The original tax credit is the First Time Home Buyer Tax Credit and you can receive a tax credit up to 10% of the sales price or $8,000 whichever is less.

2.    The newest Tax Credit is for Move Up/ Repeat Home Buyers. You can receive up to 10% of the sales price or $6,500, whichever is less.

To learn more about this, visit this great website by the National Home Builders Association and watch the video below:

I hope this helps you make an informed decision! 

Please be sure to pass this along to those that you think may benefit the most!

My contact information can be found here if you have further questions.

Clearly, buying a home should be an uplifting experience, but all too often, the closing process has left borrowers confused, angry and paying more than originally anticipated. The same goes for refinances; sure it may not be “uplifting,” but it surely shouldn’t be surprising either.

The reason? Oftentimes, lenders/brokers would exploit the old disclosure rules and borrowers would find that their closing costs and fees are significantly higher than the lender’s/broker’s original estimates. In these situations, borrowers are faced with two not-so-great choices: pay-up or throw in the towel and start searching for another house.

Now, after many years of wrestling with different ideas, the Department of Housing and Urban Development has adopted rules designed to prevent these last-minute closing situations. The rules, which took effect 1/1/2010, will reduce closing shocks and, in theory, save home buyers money.

The biggest change involves the good faith estimate – or GFE – the form lenders give borrowers after they apply for a mortgage. The GFE isn't new, but in the past, the document didn’t seem to be particularly helpful to borrowers. Here’s what has changed:

Uniformity

Lenders are now required to use a standard three-page document when they give prospective borrowers a GFE.

Lenders also are required to provide the document within 72 hours after prospective borrowers apply for a loan against a specific property.

Transparency

Many borrowers who bought homes during the housing boom later discovered that their loans contained hidden clauses that made their mortgages unaffordable. The new GFE requires lenders to disclose features that could drive up costs. i.e. the document requires lenders to disclose whether your interest can change — as would be the case with an adjustable-rate mortgage — and if so, by how much. Other items include balloon payments and pre-payment penalties.

Options

Some lenders offer borrowers a lower rate in exchange for higher costs — or vice versa. A new section in the GFE helps borrowers compare how different interest rates and closing charges will affect monthly payments.

Trustworthiness

Lenders are required by law to give applicants a copy of their settlement costs, known as a HUD-1, at least one day before closing – this isn’t new. In the past, however, many borrowers discovered that the costs shown on the HUD-1 bore little connection to those provided in the GFE.

The new rules make it much more difficult for lenders to depart from their GFEs. The new HUD-1 includes a line-by-line comparison to the GFE, making it easy to identify any cost changes.

Furthermore, lenders are prohibited from increasing the costs they control, such as origination and underwriting fees. Fees for third-party services, such as appraisals and title insurance, can increase no more than 10% from those provided in the GFE, as long as the borrowers use providers selected by the lender. The limit doesn't apply if borrowers select their own third-party providers.

Other costs that aren't subject to the 10% limit include the initial deposit for the borrower's escrow account, daily interest charges and homeowner's insurance.

If you want to explore your options relative to a home loan, please contact me today!

As you probably know, historically speaking, the mortgage rates are still very low.   What you may not know is that they are this low due to government subsidies that are about to stop.  This means that you need to get into the right mortgage now, before your purchasing power is decreased by higher rates. 

Here’s the Situation

At the end of 2008, the Fed started purchasing mortgage backed securities (MBS) from Fannie Mae & Freddie Mac.  To date, they have spent about $1.25 Trillion doing so.  In other words, the Fed has created an artificial demand (which drives up the price of anything – higher demand = higher prices) to subsidize the mortgage rates.

This graph shows the big spike in prices of the MBS back in late 2008:

The Fed has said on several occasions that the MBS purchase program will stop in the first quarter of 2010. 

Just like we saw in the graph above, with the added demand, we will have an immediate and opposite change in prices for the MBS when that artificial demand goes away. This will, in turn, create an immediate and opposite change in mortgage rates as well.

Some would even argue that it could be an even worse swing in the opposite direction because, just like they have created artificial demand, they will eventually have to sell those securities, creating an artificial supply.

Why Lower Prices = Higher Rates

The reason that the mortgage rates go down when the MBS price goes up is because these are fixed-coupon securities.  Meaning that no matter what price one pays for the investment, when it matures, it’s face value will be the same. 

Naturally, if one pays a lower price for the $1,000-face-value-investment (say $900), they would have a better return on their investment at maturity (i.e. a higher rate of return) than they would if they paid $950 for the same $1,000-at-maturity investment at the same time.

Therefore, as an investor, they want to get the MBS at the lowest price, yielding the highest rate.   

Keep in mind that, unless you are the investor in the MBS, you don’t like to see lower prices and higher rates.  When you are the borrower, you like to see the investments sold at higher prices so as to yield lower rates for your specific home loan. 

This is complicated stuff; if you have more questions, please contact me.

From time to time, I get asked the following question by those inquiring about a new home loan:

"Why are you the only lender asking me to send over my income documentation prior to issuing me a good faith estimate (GFE)?"

First off, in today’s market, where many lenders/brokers are willing to loosely fire-off half-guessed estimates, I think that is a great question! I also think I have an answer that will make sense to you; read on.

Before I get into that, however, I need to re-explain what a GFE is.  The GFE, by definition, is an estimate – one that you are able to confidently rely on in ‘good faith’ – that contains all of the details surrounding the home loan being offered to you by a lender/broker. Oftentimes, people think the opposite; that it’s an estimate based on the lender’s ‘good faith’ reliance in the few details given over the phone to make the estimate. That’s simply not true.  If it was true, the federal government would require it to be provided prior to application [the government defines ‘application’ as the date the credit is pulled] instead of within three days after the application.

Secondly, would you really want an estimate where the lender didn’t exercise due diligence prior to providing the estimate?  If you follow that road, you are making a decision – one that pertains to one of the largest transactions of your lifetime – based on half-truths and laziness. That might sound like a bold statement, but the reality is that the law allows a lender/broker to change any aspect of the GFE as long as they tell you the ‘real’ numbers no less than three days before the closing. 

Being in writing, doesn’t necessarily mean a thing!

If you went into an auto service station complaining of a sputtering engine, would you really believe any quote that the shop offered-up, off the cuff, without them first looking under the hood and listening to the troubled engine? I don’t presume to know what you would do in this situation, but I sure know that I would want them to look at it, listen to it, and maybe even drive it before I would seriously consider their estimate to be accurate.

…and that’s just for a car repair quote!

Wouldn’t it be wise to want the same done for one of the largest transactions of your life?

Consider This

We are not asking that you pay any sort of fee to have us do the work that is needed to get you a solid, reliable, honest and personalized quote. Not a cent!

Isn’t that what you want? A mortgage company that isn’t just about telling you one thing to get you buried in the process, only to show you their true colors (i.e. real numbers) later on?  Because of this honesty-policy, we have an A+ rating with the Better Business Bureau.

We think honesty rocks!

If you agree, contact me today to get your free-quote started.

The holidays can put a dent in your savings, especially if you're planning to buy a home in the coming year. There are, however, several ways to cut costs so your finances aren't in the red by New Year's Day. Consider the following money saving tips:

• In lieu of buying presents for every family member, suggest a gift exchange and draw names out of a hat.
• Agree on a spending limit for gifts for friends and family and stick to it.
• Make your holiday meals a potluck and assign each guest an item to bring.
• To prevent the urge to overspend when shopping, use cash and leave your credit cards at home.
• Consider buying a joint gift rather than individual gifts for a family such as a zoo membership or movie tickets.
• Instead of holiday wrap, buy monochromatic wrap in holiday colors such as green, red, or gold that can be used all year.
• For young children, half the fun of holidays is often opening the gifts. Wrap small, inexpensive items separately - coloring books, crayons and picture books or novels, even stocking stuffers work well. Or recycle hand-me-down toys by wrapping them up and putting them under the tree.
• Instead of spending a lot of money on gifts from the mall, give homemade treats like fudge, truffles, cookies or jams and jellies.
• To cut down on postage and holiday card costs, send mail only to out-of-town friends and family you're not likely to see throughout the year. Or send e-cards, which are usually free.
• To keep your electricity bill down, use a timer to turn outdoor lights on and off at designated hours.
• If you know you won't be able to pay your credit card off right away, make sure you use a single low-interest card to make purchases - that way you can easily track them.
• When traveling during the holidays, try to fly on the day of the actual holiday (Thanksgiving Day, Christmas Day, etc.). It's usually cheaper and there are plenty of seats.
• Subscribe to receive e-newsletters from your favorite online merchants. They will often e-mail coupons to use for savings on purchases and shipping costs. Or subscribers may receive private sale information.
• Sometimes buying an item online is cheaper than going to the store since many sites don't charge sales tax and offer free shipping. Use the savings to have the gift mailed directly to the recipient instead of standing in line at the post office.
• Instead of buying an expensive gift, make a donation to a worthy cause in a friend or family member's name.

If you would like to talk about savings strategies - or anything else mortgage related - please contact me for a no hassle, no pressure conversation.