Rates!

Have you ever felt like you were running around like a chicken with your head cut off? Well, that's pretty much how I felt Wednesday morning when I arrived at work and saw that interest rates on a conventional 30 year loan were at 4.5%. I mean, what do you do when you know that everyone and their dog needs to know about this information and you know that there isn't enough time to tell all of those people. Well, after I calmed down I was able to lock in a couple of borrowers that had done applications with me and I called everyone I knew. Unfortunately, rates did not stay low for long, and within 2 hours rates had risen back to 5.125%. The moral of the story is...when you are thinking of doing a refinance, get your application submitted as soon as possible so that your loan officer has the opportunity to lock your rate in when rates drop significantly.

Testimonials

"I've recommended my buyers to John Neil and Wasatch Mortgage Solutions regularly. John establishes a good raport with my buyers and offers a competitivc good faith estimate. John answers their questions and processes his loans efficiently and avoids delay. John holds the record for my quickest loan processed from offer to funding in 8 business days while still offering the most favorable terms for my buyer. Both my buyer and I were impressed with John's capabilities and expertise. I'm glad I've used John's services in the past and plan to continue calling on him in the future"
- Patience Fisher, Bonneville Realty

"I refinanced my home about 5 months ago, and Wasatch Mortgage hooked me up with John Neil. What a pleasant surprise. I told him what my needs were and what my situation was at the time, and he immediately went to work for me. He sincerely listened to me. He presented me with three options that I could do, with no pressure. He was very informed in the mortgage industry, and also had a very good association with a title company that I ended up using. He thanked me for having good credit, and he even called me up a couple of months after helping me get the loan to see how I was doing. In talking with him at that time, he went way beyong the call of duty, and hooked me up with an individual that would be willing to list my business that we are trying to sell. I would recommend John Neil to anyone that is trying to get financing on a home. I have gone through this process 4 times now, and my experience with John and Wasatch Mortgage Solutions was my best experience"
- Robert Willmore

"John was at all times prompt, courteous and professional. He explained loan options clearly finding us the lowest rate. I recommend him highly!"
- Marsha Ray

When does it make sense to refinance?

I have heard some people say that you have to improve your interest rate by a full percent to make it worth it. Others say a 1/2 percent is enough to make it worth it. The fact of the matter is that there is more to it than just the percentage that you improve your rate. It's really quite simple actually. You just have to find out 2 things: 1. When is my break even point? (which is calculated by dividing the % cost of the refinance by the % improvement in the rate. For example if the closing costs are equal to 2% and you improve your interest rate by 1% than your break even point is 2 years.) and 2. How long do I plan on staying in the home? If your break even point is 2 years and you plan to stay in the home for at least 3 years than it is to your advantage to refinance. I recently refinanced a client who was planning on selling their home in one year. Because of this, it didn't make any sense to do the refinance if they paid closing costs. We were able to structure their new loan so that they still lowered their interest rate without paying any closing costs. The moral of the story is that everybody's situation is different and a good loan officer should be able to help you understand why it does or does not make sense to refinance.

Morgage Rates Coming Down

It's Tuesday, November 25th and mortgage rates have come down dramatically today. A 30 year fixed is at 5.375% and a 15 year is at 5.25% (The spread between the two is smaller than it has been historically). But this is great news for home buyers and those interested in refinancing! Call me at 435-770-2709 if you would like to see if it makes sense for you to refinance.

Program of the Week: FHA

With the underwriting guidelines getting stricter, FHA is a program that is going to help a lot of borrowers that wouldn't otherwise be able to purchase a home. It is a government sponsored program that has no minimum credit score requirements, a minimum 3% downpayment that can be a gift from a family member, and mortgage insurance that is much cheaper than a conventional loan. As long as there is evidence that the borrower can pay back the loan (i.e. a job that provides sufficient income) and there haven't been any grievous credit sins (i.e. bankruptcies, foreclosures, serious judgements) within the past couple of years, than the borrower should qualify for an FHA loan. Give me a call at 435-770-2709 if you have any questions about this loan or others.

First Time Homebuyers Class

I will be teaching a First Time Homebuyers Class for all interested on November 19th, from 7:00 pm to 8:30 pm at the University Inn, conference room 510. I will be teaming up with Karen Stone, a realtor from ERA realty. Karen specializes in first time homebuyers and I am very excited to be teaching with her. We will be discussing changes in the mortgage industry and how they affect first time buyers, loan qualification guidelines and how to prepare, and red flags to be aware of in the home buying process, among other topics. The class is free and I hope that you'll invite family and friends. Hope to see you there!

Program of the Week: Rural Housing

There is really only one bad thing about the Rural Housing loan and it's that you have to live out in the boonies, meaning outside of Logan. In reality I do not consider Hyde Park, Smithfield, and Nibley as the "boonies" and yet those places would qualify for Rural Housing. This is truly a spectacular loan for a variety of reasons. It is 100% financing, the interest rates are typically lower than conventional home loans, and my favorite part: No mortgage insurance!! Yes...that is correct..No mortgage insurance!! This means that a borrower could purchase a home with no money down and have a monthly payment that is cheaper than what any other loan program can offer. So, if you don't have money for a downpayment and want to live outside of Logan, I highly recommend the Rural Housing Loan.

Same Game, Different Rules

At a recent Aggie basketball game I noticed that the three point line is a little bit farther back from where it used to be. The next day, after doing a little bit of research, I found out that it had in fact been moved back one foot to 20 feet 9 inches. Apparently, the NCAA basketball rules committee made the decision based on the rationale that it would "open up the game", force teams to play more defense away from the basket, and assist in the "problem of rough low-post play". I also imagine it will help college players prepare for the next step to professional basketball overseas or even the NBA, where the 3 point line measures 23 feet 9 inches. Whatever the benefits or consequences might be, one thing that is certain is that coaches will have to adjust their strategies to the new rule. They might have to change the way they play zone defense or make a decision on which players are still allowed to shoot the 3-point shot. The teams that will be most successful are the ones that can use the new rule to their advantage.

Just like college basketball, the mortgage industry has had some rule changes as well. The credit score requirements have been moved up a little bit, The down payment requirements have been moved up a bit, up to 3% minimum(except on Rural Housing, VA, and the Utah Housing loan), and the referees of the mortgage business, or underwriters, have become more vigilant of the overall strength of a loan file. It is still the same game but we just have to adapt our strategies a little bit. One strategy is to take advantage of the numerous government sponsored loans, such as the various FHA loans, the Rural Housing loan, the Utah Housing loan, and the VA loan for veterans. Oftentimes, especially with FHA, these loans can help borrowers with shaky credit still qualify for a home loan with a low interest rate, just as long as there is sufficient evidence for their ability to repay the loan. If a home loan applicant has a 720+ credit score and 10% down, than the conventional loan is still an excellent strategy as well. With these government sponsored loans, most home loan applicants that were able to qualify over a year ago would still be able to qualify today.

In 1987 college basketball introduced the 3-point line for the first time ever. It was a huge change that forced teams to adapt or fail. In that same year, Rick Pitino took an undersized and nonathletic group of players from Providence University to the final four by utilizing the 3 point line to their advantage. They made the most 3-pointers of any team that year at over 8 per game (See The 3 Has Changed Strategy, Player Evolution). In that same year, interest rates on a 30 year mortgage averaged over 10%. Just like in 1987, those that can adapt are those that will experience the most success.

Broker vs. Banker

I've taught about half a dozen "First-Time Homebuyer" classes over the last year and a common question I've been asked is, "Is there a difference between getting a home loan through my bank or through a mortgage broker?" Short answer: "Yes" with a "but". Long answer: "No" with a "maybe". Just kidding. There are a couple fundamental differences between the two.

1. Brokerage: Also known as wholesale lending because they can offer rates below retail prices (and higher than retail prices), the mortgage broker works as an independent contractor for various banks and lenders. Most mortgage brokers will have a greater variety of home loan products to choose from than a bank. A home loan originated by a mortgage broker will always be sold to another lender.
2. Bank: The loan officer that works for a bank will only offer home loan products from that bank. Generally speaking a bank will service the majority of the loans that it originates.

I really don't think that these differences should determine whether someone uses a loan officer or not. It should not matter if they work for a bank or a broker. The fact is that there are good and bad loan officers that work at both banks and brokerages. The trick is finding a good loan officer regardless of where they work. Jack Guttentag, the "Mortgage Professor", describes some characteristics of good mortgage brokers that everyone should look for when shopping for a home loan. See What Makes a Good Mortgage Broker, part 1

Term of the day: APR

APR, or annual percentage rate, is a term that is used in the mortgage industry to describe the true cost of credit. Essentially, the APR is the interest rate (e.g 6.0%) plus the closing costs, expressed as an interest rate. The closer the APR to the interest rate the better deal you are getting. For example one loan officer might quote you an interest rate of 6% with an APR of 6.26%. Another loan officer quotes you an interest rate of 6.125% with an APR of 6.18%. The second loan officer is offering you a better deal even though the 1st loan officer has a lower interest rate. The moral of the story is to always compare APR's and not interest rates when you are shopping for a home loan.

Borrow like it's 1975

Things are definitely changing in the mortgage industry and in the credit industry as a whole. Lenders are requiring bigger down payments, better credit scores, and a more stable work history. 100% financing and stated-income loans have, for the most part, "gone the way of the buffalo", as my college basketball coach use to say. With all of the changes that are happening, it's crucial that homebuyers be aware of them and prepare themselves accordingly. Liz Weston, a personal finance columnist for msn.com explores the changes that are happening in the credit industry today and how analyzing the credit industry of 1975 could help us adapt to today. See... Borrow Like it's 1975

Note: USDA Rural Housing, VA, and the Utah Housing loan are all government sponsored programs that allow for 100% home financing.

Once upon a time

I got into the mortgage business about 3 years ago with a company called World Savings. World Savings was the father of the Option ARM loan (practically a swear word today), and was doing quite well before they got bought out by Wachovia at the height of the housing boom. It's no wonder that Wachovia is no longer in business today. They bought World Savings at the absolute worst time when home prices were peaking. About a month ago they were rescued by Wells Fargo, one of the few remaining banks with a strong balance sheet still. World Savings had its issues and there's no question that they did some loans for people that had no business buying a home, but I will always hold a special place in my heart for World Savings because of the people that I worked with and because they gave me my start in the mortgage industry.

Here it goes!

These days it seems like everybody who is anybody has a blog. So I figured because I want to be somebody I should start a blog and what better topic than mortgages. Well, actually I can think of a few better topics, like Utah State basketball or gardening tips, but I can still think of a few very valid reasons for starting a blog about mortgages. I don't think I will list them right now but my hope is that this blog will become a medium through which people can learn more about the mortgage industry, real estate, finances, and yours truly.