Archive for February, 2010

More on the new good faith estimate

February 17, 2010

Since blogging about the new good faith estimate in January, I’ve had the chance to listen to clients and other loan professionals’ feedback on the new three-page form… and the feedback has been consistent.

As the recent post states, there are some great benefits to the new good faith estimate:

  • the terms, interest rate, and loan amount are clearly stated on the first page leaving no room for confusion
  • lender fees quoted must match at closing
  • other fees (attorney, credit, etc.) are also clearly identified leaving no room for ambiguity

The areas needing improvement are still there:

  • there is no signature line/page on the new good faith estimate for borrowers to acknowledge they received the form
  • total closing costs are not shown. Instead, prepaids and closing costs are mixed together.
  • total cash required to close is nowhere to be found
  • monthly mortgage payment is also nowhere to be found

Solving the first problem is easy – all mortgage professionals must create a form for borrowers to sign acknowledging they received the good faith estimate.

In order to help our clients with the rest, we created another form. This additional page shows the itemization of closing costs and prepaid items along with the cash required for closing and the monthly mortgage payment – problems solved!

The one item out of our control is how other mortgage professionals quote estimates for property taxes and homeowners insurance. This is one area that the burden is on the borrower to ensure the good faith estimates they review use the same amounts for property taxes and insurance. Only then will a borrower have a true apples-to-apples comparison.

As with all things in life, there are pros and cons, and the new good faith estimate is no different. As a colleague of mine said in one of his recent posts, the keys to helping our clients through the pros and cons haven’t changed – be simple, honest, and professional:

  • quote closing costs honestly and don’t try hiding or under quoting fees
  • quote real interest rates and not something abnormally low to get the phone to ring
  • keep your word!

Mortgage professionals able to do that will help to keep themselves, their realtor partners, and clients happy as we all navigate the new (and sometimes confusing) three-page good faith estimate (oh, and don’t forget the extra page showing the itemization of closing costs, and one more page to confirm receipt of the new good faith estimate).


is the (low mortgage rate) party over?

February 9, 2010

The party is just getting started in New Orleans (Super Bowl win + Mardi Gras = month long celebration), but it may soon be coming to an end for historically low rates.

Enjoy it while you can!

Mortgage rates hit historic lows in 2009 thanks to the extraordinary efforts of the Federal Reserve.  Back in November 2008, the Feds announced a program to buy mortgage backed security (MBS) bonds.  The reasons were two fold:

  • to help push mortgage rates lower to stimulate the real estate market
  • to create a market (or in other words, increase the value) of MBS bonds for others to buy

When the plan was announced by the Feds in November 2008, interest rates dropped roughly a half point in one day!  As the Feds began buying bonds, rates dropped down to their historic lows. The initial plan was to buy bonds through the first six months of 2009. It was extended through 2009, and extended again through end of the first quarter 2010.

At their recent meeting, the Feds reiterated their intentions to “seamlessly exit” the MBS bond market with no hint at another extension to the MBS bond buying program.  The question now is “what happens to mortgage rates?”  Take a look at the chart below.

Since mortgage rates dropped significantly on the announcement of the plan, and then continued to improve to historic lows as the Feds purchased MBS bonds, one would logically expect the opposite reaction once the bond buying program comes to an end.  In this case, and at least to some degree, interest rates should rise.

How should you proceed? Anyone who hasn’t refinanced OR is waiting until the deadline to take advantage of one of the home buyer tax credits, go ahead and get prequalified today.  Move forward with the loan now while rates are still ridiculously low.

There is not guarantee rates will dramatically increase, but also no guarantee they will stay the same.  Take advantage of the market and low rates while they are still available.

to buy or not to buy

February 3, 2010

That is most certainly the question these days. The answer is an easy one if you look at the market as a whole – home values are down, homes are more affordable than they have been in years, financing is available, and there are incentives (federal and some state tax credits). With all of that in mind, it is a good time to buy!

Specifically, if you are in one of the two categories below, there has never been a better time to buy a home.

  • First time home buyers – Conventional loans available with as little as 5% down and FHA loans only require 3.5% down.  The seller can pay for most (if not all) of the closing costs.  The down payment can be a gift from a family member. The $8,000 tax credit still applies to first time home buyers (or anyone who has not owned a home in the last thee years).
  • Buyers looking to move up into a larger home – Buyers may lose money selling their current residence, but save substantially more on their next purchase. For instance, I’ve had clients lose a few thousand dollars on the homes they sold only to buy new homes (that were originally listed over $400,000) in the $300,000 price range. Also, don’t forget about the $6,500 tax incentive available to move-up or repeat home buyers.

Now is indeed a great time to buy, and if anyone is looking to take advantage of one of the tax credits, what are you waiting for?  Remember in order to claim one of the tax credits, the home must be under contract by the end of April and purchased by the end of June.

If you haven’t spoken with someone about qualifying to buy your first home OR seeing how much home you could afford prior to selling your current residence, now is the time! I would enjoy the opportunity to speak with anyone looking to take advantage of the current market and/or government tax programs.