What do you mean I can't refinance?

Wow, look at these great mortgage rates! It is a great time to refinance!
With this being the case, it brings up an un-settling fact for many people! Either it may not make sense to refinance or they simply can't!
This all comes down to your homes value and what it will appraise for. Gone are the days of buying a home and the appreciation begins. If you just purchased your home at market value and did a 100% loan, refinancing won't be so easy. Your need to have 5% equity in your home to refinance and this equity is simply not there for many homeowners. With people unloading their homes at reduced prices, comparable sales are hurting you. You may have purchased your home for $140,000 and then identical homes have sold in your neighborhood since for $130,000! These are comparables they use to appraise your home and the lender will not be able to refinance based on these current sales. Many are finding this out and are frustrated! It is frustrating for lenders like us as well. We see great rates and an opportunity to save our client some money and then we must tell them they are out of luck. They want the 5.625% rate when they are paying 6.625% or 7%. Instant savings would be there, but they can't grab it!
If you put money down on your home, received a great deal, or have been in your home for awhile; you are more than likely ok.
Just bear with us when it comes to applying for a refinance. It isn't because we don't want to help. The market is just out of our control at this point. We want to make sure the savings justifies the closing costs you must pay, add in how long you plan on staying in the home, and take a solid look at the homes current value. After evaluating these factors, we can give you a solid recommendation on what to do! If you are unsure, just consult a lender you trust will evaluate your situation properly. Don't go with someone that will try to squeeze the numbers to make it work and then find out later that it won't! All this does is waste your time, money,and get your hopes up! Who wants to pay for an appraisal that says, sorry you are out of luck! I sure wouldn't!

Brought to you by:
Professional Mortgage Group, Inc.
"Your Columbia, MO Mortgage Broker"

A Big Week of Economic Data

The Fed will be meeting Tuesday and Wednesday of this week and to go along with this we have a plethora of data coming out as well. I believe we will find this week to be much like last week, extremely volatile with large swings going both ways based on the data at hand and the market's perception of this data. I have outlined some of the key data to be released this week and the forecasts for this data.

1/28 10:00am EST: New December Home Sales Previous: $647K Forecast: $635K

1/29 10:00am EST: Jan Consumer Confidence Previous: 88.6 Forecast: 88.0

1/30 8:30am EST: GDP 4th Qtr: Previous: 4.9% Forecast: 1.1%

1/30 2:15am EST: FOMC rate decision: Previous: 3.5% Forecast: 3.0%

1/31 8:30am EST: Dec Consumer Spending: Previous: 1.1% Forecast: .3%

1/31 8:30am EST: Weekly Jobless Claims: Previous: 301K Forecast: 315K

2/1 8:30am EST: Jan Unemployment Rate: Previous: 5.0% Forecast: 5.0%


There is other economic data scheduled to be released this week but I simply pointed out what I think are the "key" indicators! Is your mortgage professional on top of this data and how it could affect the market and in particular your mortgage rate, should you lock or float, do they know how analyze this?

Brought to you by Professional Mortgage Group, Inc.
Your Columbia Missouri Mortgage Broker

Market Volatility

Wow, what a crazy day in the market yesterday! We had 5 "re-price" notices (a re-price is when a lender is changing mortgage rates based on market conditions) 4 of which were for the worst. At one point in time 30 year fixed rates were at 5.25% and within 2.5 hours the market made a 600 point swing and we were back to 5.75%! I say this because I have never seen a day in the market like what we witnessed yesterday. It made our job extremely difficult because the lenders were so busy taking rate locks that I was not able to lock everyone of my clients. I literally was on hold 25 minutes to lock the last of my clients loans and during my "holding" the lender re-priced and my clients were left hanging the baggage.

Now with that being said it is predicted that mortgage rates will reach that low again but only time and market conditions will tell. What does all of this mean? It means you BETTER be doing business with someone who has the knowledge, ethics, and tools available to them to best serve YOUR interest in regards to your home financing needs! Be prepared for more of the same going forward especially next week when the Fed meets again to further discuss economic planning and stimulus issues.

Brought to you by Professional Mortgage Group, Inc.

Your Columbia Missouri Mortgage Broker

Quoting Mortgage Rates

With record low mortgage rates upon us I thought it would be wise to discuss what goes into quoting mortgage rates. More specifically some of the assumptions that lenders, banks and brokers use in quoting these rates. Do not take anything for granted when market rates are at 5.5% and you overheard a lender quoting 4.875% then something is wrong and you should read the fine print.

#1) Locking Term: Typically when quoting rates most lenders use 7-15 day locks! This means that if you want a 30, 45 or 60 day lock your rate will be higher. Why? Because you are locking in today's rates for a future period in time and lenders must hedge their money to cover your lock. Longer locks are available (i.e. 180 day locks) however out-of-pocket expenses typically accompany such a lock. Why? Again because banks what you to close your loan with them and to ensure this they charge a locking discount which is refunded once your loan is closed.

#2) Escrow Account: Lenders assume that you will want your taxes and insurance included in your payment when they are quoting rates. If you would like an "escrow waiver" then a higher rate may apply. Why? Because when you don't escrow the lender loses money and in turn charges the broker or banker .25% to waive escrow. Why does the bank lose money? When you make escrow payments the lender takes this extra money and invests it. In turn they earn income on "your" money while they wait to pay your taxes and insurance. Therefore when they don't have this extra money to invest they do not have the income it produces.

#3) Loan Amount: Most lenders assume a loan amount of at least $130,000 when quoting rates. Why? Because the larger the loan amount the more interest the lender can collect and this translates to a better rate. For instance a person borrowing $55,000 will not get the "advertised" rates because the banks will take a .50%-1.25% rate hit for this loan size. Why? Again banks will not earn very much interest on a loan size of $55K and therefore will charge a higher rate to make up the difference.

#4) Credit Score: Effective November of 2007' lenders now hit borrowers with sub 700 credit scores. Meaning someone with a 660 score will get a slightly higher rate than someone with a 720 score, regardless of the fact that it is a Fannie Mae loan.

#5) Loan-to-Value: Lenders assume that the client will have at least 5% equity in a refinance transaction or 5% down payment on a purchase transaction. What does this mean? If you need 100% financing the rates being quoted will not apply to your particular situation!

#6) Documentation: Most rates being quoted are assuming that the client can document income via taxes, W2's, pay stubs and asset statements. Therefore if "other" documentation is being provided a slightly higher rate may apply.

#7) Collateral: Most rates advertised are assuming the property is a single family "stick built" primary residence. Therefore if you have a client purchasing an investor 2 or 4 unit property their rate will differ from the advertised rate.

Brought to you by Professional Mortgage Group, inc.

Your Columbia Missouri Mortgage Broker

The FED Acts Again!

The FED acted again this morning, slashing the Federal Funds rate by .75%! This is the largest cut since 1984! This comes during a time of great turmoil in our economy. It seems ironic that the mortgage industry is benefiting from a mess that they greatly contributed to! However, this is much needed. Rates have come out today and are 5.50% and ARMs are in the 4's! Keep in mind the Federal Funds rate is the interest rate at which private depository institutions (mostly banks) lend funds at the Federal Reserve to other depository institutions. This isn't a direct cut in prime or mortgage rates, but it factors into the equation!

We have seen some activity pick up here in the Columbia area and hopefully this just adds fuel to the fire. Refinances are way up and buyers are even starting to come out of the woodwork. This is no doubt a sign they want to take advantage of the extra buying power they will have! A buyer's market and low rates are quite the combination!

As always we will keep a close eye on rates and the market. Be sure to check back to our blog or http://www.pmg-inc.net/ for updates!

Brought to you by:
Professional Mortgage Group, Inc.
"Your Columbia, MO Mortgage Broker"

What Determines My Mortgage Rate?

I have found the above subject to be quite relevant considering the fact that mortgage rates have dipped back down to near record lows. I have been asked time and again as to what influences the rate they (clients) receive on a mortgage. You simply cannot go off "advertised" rates anymore because there are so many "assumptions" in qualifying for that rate. I have taken the liberty of outlining some of the factors that help determine your rate and a brief outline as to why. Keep in mind that mortgage rates like many others are tied to risk, so the riskier the loan is for the bank the higher the rate of return they want on their investment.

#1: Credit Score: This is the MOST important factor in determining your rate on a mortgage. The higher the score; the lower the risk and hence the lower the rate. Vice versa for a lower score; more risk and hence a higher rate.

#2: Loan-to-Value: Is the bank lending a 100% of the properties value? Are they lending 95%, 80% or 90%? The lower the (ltv) typically the lower the rate you will qualify for (to a certain point)!

#3: Income & Asset Documentation: Can you document your income and asset via W2's, pay stubs, bank statements and 401K? Or are you a 1099' self-employed contractor? Again, the more documentation that you can provide to justify your financial position the better the rate will be.

#4: Credit Report: Do you have a great score but have filed for Chapter 7 bankruptcy within the last 2 years? Do you have judgements, collections or charge offs. Do you have a reposession or "spotty" lates within the last year. What kind of debt are you carrying (i.e. credit cards, unsecured loans, pay day loans, etc.)? Your overall credit portfolio will impact the banks decision on rate.

#5: Collateral: Is the home you are purchasing a double wide on piers on 12 acres? Or is it a "stick built" home in a subdivision? Are you purchasing a "working farm" or a modular home? Is the home "unique" in any way? The home in which you decide to purchase could have an impact on the type of loan you qualify for and in turn the rate associated with that product.

Hope this information helps shed some light on the determining factors associated with mortgage rates. When you here 5.0% on a 30 year fixed be careful; do you fall within that box? More times than not the answer is NO but the lender got you to call and that is their goal.

Brought to you by Professional Mortgage Group, Inc.
Your Columbia Missouri Mortgage Broker

Closing Costs

With the current mortgage rate drop, applications have really picked up. With this many refinance applications come numerous closing cost questions.
This is the subject of today's post.
A big misconception is that your lender is charging you all of these fees. This is not the case. All you need to do is look at your Good Faith Estimate and more importantly your HUD to see where these fees are going.

Typical fees are as follows:

Appraisal
Title Charges (Title insurance, closing fee, and misc charges)
Recording Fees
UW fees
Processing Fee
Credit & Courier
Daily Interest
Taxes
Insurance
Escrow Account Pre-paids


The processing fee, credit, and courier are the only fees going to your broker. All the others go to appraisers, title companies, insurance agents, etc..

Some brokers charge broker fees or origination fees. You just have to look for those.

Many people also overlook a huge part of these costs. These are pre-paids. Most people want to setup an escrow account to pay their taxes and insurance. Depending on the time you close, it can be $1000 + to set this up. This is money you are paying either way, it just must be setup at the closing for your new loan.

This is just a brief overview of closing costs. Don't be shy in asking your broker or lender about them. A good broker will explain everything listed in detail. There should be absolutely no surprises when in comes to these fees.

Brought to you by:
Professional Mortgage Group, Inc.
"Your Columbia, MO Mortgage Broker"

Don't Be Fooled By Ridiculous Interest Rates!

I over heard an ad on the radio yesterday advertising an interest rate of 4.875% with an APR of 5.6% fixed for 30 years! I know this lender (don't worry no one local) and you would think in light of what has happened in the mortgage business that this practice would be completely "off limits" as I consider this completely unethical and goes against what I believe, practice and teach! So how can they offer 4.875% (5.6% APR) when rates as of yesterday were 5.75% on a 30 year fixed? Well I'm about to show you.

I looked at Boone County statistics yesterday and YTD (ending September 2007') the median purchase price of a home was $152,500. In order to get 4.875% with an APR of 5.6% the client would have to pay 2.875% in discount points (or $4,384.38) to the lender plus an additional $7,550.00 in closing costs!!!!!! That's $11,934.38 in total fees (excluding escrow) that your client would have to pay to get this rate. The funny thing about this is that people will actually pay these types of fees in order to say they have 4.875%!!! This is not financially responsible nor should you fall into this trap. Imagine what the fees would look like on a $320,000 home? Well why don't I show you. At 2.875% to the lender that's $9,200.00 in discount points plus an additional $15,900 in closing costs (excluding escrows) for a grand total of $25,100 in closing costs! And guess what people will do it.

Imagine if you had someone attempting to do this on a purchase? First the home would have to appraise an average of $18,500 above the purchase price or the buyer would have to invest on average $18,500 of his own money into the transaction before a single drip of equity is achieved. I would imagine that this lender does not do much purchase business but mostly refinances for people who are fixated on rate.

Brought to you by Professional Mortgage Group, Inc.
Your Columbia Missouri Mortgage Broker

New Title Law For Missouri

I am writing to discuss the changes that will be implemented on January 1, 2008, as a result of the new title insurance law in the State of Missouri. In an attempt to protect the interest of the consumer, the Missouri Legislature has revised Chapter 381 of the Missouri Revised Statutes dealing with the issuance of title insurance. These revisions will result in dramatic changes to what we are all accustomed to seeing on the settlement statement for real estate closings.

In the past, an all inclusive “Title Insurance Premium” fee for the owner’s policy and the lender’s policy have been included on the Settlement Statement. Included in these fees were the remittance, title search, document clearing and document preparation fees charged by the title insurance agent for issuing the policy. Under the new law, this is no longer allowable. Instead, what will now show as the title insurance premium fee will be the rate posted with the Department of Insurance for each underwriter in the state of Missouri. Essentially, this rate is the amount the settlement agent must remit to the underwriter in order to issue the policy on that underwriter. Additional fees for the title search, document clearing fee and document preparation will now have to be individually itemized on the Settlement Statement.

In addition, the new law mandates that a closing protection letter be issued for each closing. When conducting a refinance, there will be an additional fee for this service itemized on the borrower’s Settlement Statement. When conducting sale transactions, a closing protection letter must be issued for both the buyer and seller. The additional fee will be included on both the buyers and sellers side of the Settlement Statement. It is anticipated that the fee for the closing protection letter on each side of the transaction will be $25.00. There are within the law limited provisions for opting out of this fee, however the Missouri Department of Insurance has yet to approve and distribute the forms to do so.

Many lenders and brokers have in the past used blanket Closing Protection Letters to satisfy the requirements of their underwriters. However, as of January 1, 2008, this practice will not be allowable in the State of Missouri. So, please let us know as soon as possible the name and address of the lender associated with each transaction so that we can issue the required closing protection letter(s) in a timely manner.

I am aware that change does not come easily within the real estate community. However, we will be doing everything we can to make this transition as smooth as possible. I know that there will be concerns that the fees being charged for services provided will increase as a result of this itemization. However, that will not be the case. Our fees for providing the services we have provided in the past will not increase. They will however, out of necessity, be itemized on the Settlement Statement.

It is my feeling that these changes have been put in place in response to the numerous problems in the St. Louis market. In the past two years a large number of title insurance companies in that market have either gone bankrupt or been shut down by their underwriters. In an attempt to provide the consumer with full disclosure of the fees incurred, these changes were implemented. I believe that over the first few months of this year the new procedure will cause a great deal of confusion and require a lot of explanation. The main concern will be the perception that the fees charged will increase. I cannot speak for the other title insurance companies in the market, however the fees charged by Archer Title Company will remain the same. They will be itemized in a different manner but will total the same as in the past. If you have questions or concerns, please let me know.

Courtesy of Eric Blume President of Archer Title Company

Economic News

OK, we have been preaching the last week and half about how low interest rates are and their predicted assessment of going even lower. With that being said it's going to be a somewhat slower week for economic data. This is the time of year where earnings reports start rolling out from the holiday season, I personally find it very hard to believe that these reports will ad strength to the economy.

It appears that the market will be watching for these reports and forming their own opinion based on them and other "key" factors like oil prices, jobless claims (last Friday 1/4/08), and other miscellaneous data. This could be an extremely volatile period for the markets in the coming weeks. If earnings reports are positive then market should swing in a big way, if they are negative we will continue to see a slumping Dow, an increased amount of money going into Treasuries and therefore a reduction in mortgage rates!

As usual we will keep you posted on necessary information

Brought to you by Professional Mortgage Group
Your Mid-Missouri Mortgage Broker

Interest Rates Fall!

That's right everybody, interest rates have dropped again! At the moment you could possibly qualify for 5.625-5.75% on a 30 year fixed. If you want a 15 yr. term, your rate could be even better! We haven't seen rates this low for quite some times and people are starting to take advantage. We took several refinance applications yesterday and expect more today. Just take a quick look at your current loan and see where you are at. If you think you can benefit from these great rates, just call. If you aren't sure and want a free evaluation, we can do that too.
Remember if you have a rate that is very close to these already, it may not make sense to refinance. We run a "Net Tangible Benefit" on every loan to make sure the customer is improving their situation. If they aren't, we don't loan to them! There is no sense in paying closing costs if you cannot justify them!

I know this sounds corny and you probably think all lenders say this to get people to do business sooner rather than later, but I am going to say it anyway!

"You need to Act Fast" because these rates may not last long!

The reason I say this is because this market has been absolutely crazy. All of last year it was up and down. Just look at a month ago for a prime example. Rates dropped like this for 2 days and then they shot back up again! I don't think it will be quite as abrupt as that, but it could happen! We use a paid service that monitors the market very closely. This service tells us when to float and when to lock. This will be a key tool to assure our customers get the rate they deserve!

If you have any questions, don't hesitate to contact us!

Brought to you by:
Professional Mortgage Group, Inc.
"Your Columbia, MO Mortgage Broker"

Mortgage Mess!

Monday afternoon around 1:30 CST another lender (National City Mortgage a division of National City Bank) closed its wholesale lending division effective immediately! In a late afternoon e-mail they advised they would honor their current pipeline but were not accepting any new submissions. This comes after 209 other lenders have closed their doors since late 2006'.

Most if not all of these companies credit their exit to CDO's / Mortgage backed securities "pull-out", rising foreclosure rates, and lack of capital to operate through these troubled times. Most of these lenders sold their mortgages to investors on Wall Street. These investors have taken HUGE losses and therefore have stopped purchasing mortgage backed securities, which were the "life line" of many of these wholesale lenders.

National City Mortgage did state it would continue to produce mortgages through either its banking locations or its retail mortgage centers. However, this is another blow to the already battered industry that finds itself among the targeted areas surrounding new legislation, a scape goat to many investors, political figures, and lenders and a large if not significant factor surrounding the housing slump and credit crunch.

In my eyes the negative media publicity, political outrage and these closings are a direct result of the housing downturn. The market has really over corrected itself and in a big way. Not so much with these lenders closing their doors but more in line with the pull back in lending parameters. The majority of these "bad loans" are either sub prime or "hybrid" ARM loans the Fannie Mae / Freddie Mac products for the most part have been performing well in light of this crisis. However, I have seen wholesale changes to key product lines across the board in most lenders. Why? My opinion is simply overreacting to the mortgage meltdown.

Brought to you by Professional Mortgage Group, Inc.
Your Columbia Missouri Mortgage Broker