Dennis' Mortgage Blog

Question of the week:  What should I look for in a mortgage broker?

Answer:  This is a question that I am asked four to five times a year, usually from friends in other parts of the country who are buying a home.  This is also a question I try to answer for every client I meet.  As we have seen in the past few years too many borrowers did not ask this question, instead they asked “who is showing me the lowest rate or monthly payment?”  Or “who, with the lowest rate or lowest monthly payment, will help me buy that home?”  Too many of these questions were answered by individuals who are no longer in the mortgage business, and too many of those who asked these questions are no longer home owners.

Trust:  How do you know you can trust your mortgage professional?  The best way to find someone you can work with that you trust is to ask friends, family, co-workers, your real estate agent (who I trust you trust) for referrals.  Then interview the individual(s), see what their experience is, check out their website, ask for references.  When asked “why should I work with you?” is there answer only about having the “best” rates?  Do you get the sense that the individual is concerned about your becoming a homeowner or you getting “a great deal?” 

Homework:  Do some homework on someone before you begin working with them.  Are they licensed by the California Department of Real Estate (check here for DRE license—anyone licensed should have number readily available)?  If you Google them do any complaints or negative information show?  Can they explain those complaints in a way you feel comfortable?  Do they have a website that is informative and shows they are transparent in their business, rates, fees, etc?  How long have they been in the industry?

Knowledge:  This is a hard area to research, however remember that every situation is different and while most people fit into only a few mortgage programs, your mortgage professional should know the ins and outs of conventional, FHA, VA, programs, costs and risks of different types of mortgages such as fixed rates and yes even some adjustable programs.  How up to date is s/he on new government and Fannie/Freddie policies such as MDIA and HVCC? 

Technical Skill:  Is the mortgage advisor only concerned about your current income, your current debt, your current assets?  Or are you being asked about your future plans?  Children? Will one spouse be leaving the work force to care for kids? Bonus and overtime? Continuing? Guaranteed? Are you secure in depending on it for future payments? Car payment in the future? Are you looking at two bedroom homes but plan on 3 children in the next 5-6 years?  All these factors and more matter when discussing options today for a home that you will own for several years or longer.  It is easy to train someone to punch numbers into a software program and have it spit out a mortgage amount and sales price.  But beyond the technical skill of entering the numbers, how do they relate to your current and long term financial and family situations?  What options do you need to explore and think about?

Rate/Price: Clichés are clichés for a reason, they generally have a lot of truth, “if it looks too good to be true it probably is.”  If someone has a rate that is significantly lower than anything else being quoted or published something is up.  In the past I have had clients I was quoting 6% for a 30 year fixed tell me that some other guy is telling them 5% at the same 1 point fee; turns out the loan was for 30 years but the rate was fixed for only 3 or 5 years, or the cost was 1 point in fee but had about 2 more points in origination, discount and other fees, or it was just flat out not true.  I often tell clients when discussing rates that they are very easy to lie to at the early stages of the process because they want to believe they are getting a great deal.  Usually those who end up with a disaster at closing because the program was not what they thought it was, or fees are higher than they were told, or the rate is different, usually those people were looking for the best deal and fell for the person telling them they had it.  Look for a mortgage professional who is transparent about their rates and fees, always quoting the same time frames for locks, has past clients who can testify to his/her closing what was quoted, is very much in the market with other mortgage companies.  It is no deal if you can’t close your loan, and it is no deal if your loan is not what you thought you applied for.

Service:  Perhaps the most important factor separating mortgage professionals.  While the top mortgage professionals are all very close in rates and fees, service is a huge separator.  Dig around a bit and see if your mortgage advisor has a reputation for closing loans on time, that while there is always some additional information required through underwriting, is the process fairly easy and efficient for the borrowers, agents and escrow company?  Is the process from application to closing made clear to you and also what is expected of you, your agent, the escrow company and the mortgage company known and discussed?

Communication:  Nothing is more critical to the process than timely communication.  If you get a referral that says, “He had a really good rate but we had a really hard time getting in touch with him.”  Or, “he got us our loan but once we started we only heard from his assistant.”  If you are okay with not knowing what is happening during a transaction which if successful will put you several hundred thousand dollars in debt and obligate you to thousands of dollars a year in monthly payments then that person is for you.  If however you would like to know that your mortgage is proceeding as expected, or even more important if something is amiss like a low appraisal or underwriting question income or funds for closing, you better find someone who communicates clearly and often.   

My Pitch: I think if my past clients and agents I work with currently and in the past were to chime in on this subject they would say that I was open and honest with them from the beginning to the end of the process.  When I quote rates I close the rates I quote, when I say we are locked at a certain rate, price and term that lock is valid.  My communication is constant and pertinent keeping borrowers, agents and escrow teams informed of progress and what is needed for closing.  When it comes to rates I know I am not the lowest in town when it comes to quotes, but our rates are always very competitive and when priced out for all fees, costs and rates we are as good as anyone reputable.  As evidence of my openness I offer this weekly update where I publish our rates for every Friday, I post it on the internet and all week long I Tweet what is happening in the mortgage market advising on locking or floating and letting clients and agents know where rates are headed—I can’t tell you on Thursday when we go to lock that rates have suddenly gone up when the previous three days and that morning I have been Tweeting on how rates have improved.

My pitch is over, it is my hope to be your mortgage professional of choice, for many receiving this I already am and I thank you.  However should you choose to use the services of another mortgage professional it my hope that they meet the criteria I have described, the outcomes of the wrong choice are very harmful to all involved not only for financial costs involved but lost opportunities and the emotional stress.

Finding the right mortgage broker to assist you with the planning of your mortgage and home purchase is no guarantee you will have your home forever, life happens as do pink slips, accidents and other emergencies that are unplanned.  However, with the right mortgage plan and a realistic meeting of expectations and capability, chances are you will be able to enjoy your home based on your financial circumstances.  Ask the questions, do the research…and call me to help you with your mortgage needs!

I will keep this link on my “Question of the Week” section to assist new homeowners:

IRS Form 5405 for First Time Buyer Tax Credit for those eligible for the up to $8000 credit. Note credit only for those who close escrow before November 30, 2009 under current legislation.

Have a question for me?  Ask me!   

Foreclosures and Delinquencies headline the Los Angeles Times and other papers across the country today as the numbers continue to climb.  Much of the reporting I have read is fairly good with a glaring omission.  Due to rising unemployment across the country is it not unexpected that mortgage delinquencies will rise as people with little to no income are unable to make monthly payments.  What is missing from the reporting however is a factor in delinquencies that many of us in the mortgage industry have seen are the purposeful missed payments.  Many homeowners looking for loan modifications to lower their interest rates and payments are being told by lenders that no modifications will even be discussed while the mortgage is current.  So the borrowers miss two or three months of payments and then the lender will discuss, and possibly (not probably but possibly) modify the terms of the loan. 

It is very difficult to gauge the number of mortgage delinquencies are the result of the intentionally missed payments to get lenders to negotiate, but from my experience the number is not insignificant.  I caution anyone going this route to make sure they put any payments missed into an account and do not touch the funds in case the lender rejects their modification application.

ATTENTION! BIG NEWS! One of our premier lending partners has come back into the market with very decent Jumbo financing.  Current pricing is right around 6 – 6.25% depending on loan amount, ltv, credit score and other factors.  Need a loan to $1.5 million with 30% down?  Call me!

Unemployment higher, so are home sales economy continues to push and pull, grow and shrink, sending positive reports in one sector and negative in another within moments of each other.  Stocks reach high levels and then sell off the next day.  Up down, down up.  As I mentioned when the economy was making the transition from growth to recession that contradicting information is the sign of a changing economy—that is where we are today and will be for another quarter before the positive news is greater than the negative news.

Looking ahead on what impacts rates the Treasury is auctioning another $100 billion or so in notes and bills next week—the last auction was very well received, meaning high prices and low yields.  Basic economics says increase supply should lower prices, and increase yields/rates, but the last few auctions defied the basic premise.  Also impacting rates will be when the Fed stops buying mortgage backed securities.  Currently ending later this year after spending almost $1 trillion purchasing the bonds, that is a lot of support that will be missing.

As we start the school year and near the end of the third quarter in 40 days, keep in mind that demand for first time homes will increase as November 30^th approaches and the end of the first time buyer credits—we could see pipelines stressed with an influx of buyers.  With prices in many areas stabilizing, rates continuing to float between just below and just above 5% for conventional mortgages, we should see continued strength in the housing markets….provided employment roles can sustain enough workers to purchase homes. 

Through the news this week as I write this mortgage backed securities are at the same prices as they were Monday when the markets opened.  Prices dived mid-morning today leading many lenders to re-price for the worse mid-morning so the rates below are after such a reprice.

Rates for Friday August 21st:

FIXED RATE MORTGAGES AT COST OF 1 POINT*

30 year conventional  4.875%                           Unchanged

30 year conforming-jumbo 5.375%                   Unchanged

30 year FHA    5.00%                                      Unchanged

30 year FHA jumbo 5.625%                            Unchanged

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, and period rate is locked (i.e 45 days instead of 30 days).

Please note that rates quoted are based on average of several lenders for a purchase transaction with 20% down payment and a minimum FICO score of 740; APR is not quoted as it is dependent upon specific loan amounts, lenders and services selected.  Numbers provided are for comparative purposes only.

Looking forward to meeting new friends at a barbecue this weekend.  I am reminded of one of the songs that played seemingly every car ride with the kids when they were teeny-tiny, “Make new friends and keep the old, one is silver and the other gold.”  Truly the richness of our lives, the silver and gold of friends new and old.

Speaking of songs, “What A Wonderful World” by Louis Armstrong was one of my Mom’s favorite songs.  By now everyone has received numerous Power Point presentations with beautiful and heart warming pictures with Satchmo’s song playing accompaniment; the link above is Louis live singing the song with his wonder voice and facial expressions—take 2:19 and give it a watch, you will be glad you did.

Happy Birthday Mom.   

Have a great weekend,

Dennis

Remember this update is posted weekly on My Blog at www.DennisCSmith.com ; feel free to forward the link to family and friends who may be interested in past commentaries.

Follow me on Twitter for market updates throughout the day.