Truth is, you are NOT going to refinance that loan anyway!

But WHY are the rates so low, and how long will they stay down???

They are low because for the first time the Feds are actually MANIPULATING the FIXED RATE HOME LOAN MARKET.  In my 23 years as a loan originator, I have never seen the Feds do what they are doing.

BACKGROUND: The Federal Reserve raises and lowers the Federal Funds Rate and the Discount Rate. This affects the cost for banks to borrow  from the Feds.  That then impacts the cost of short term borrowing for consumers (ARM’s for the most part).  Fixed rates are affected by the price of long term bonds.  Bonds are considered a safe place to put money.  You don’t get the same return as stocks, but you are at least sure of your return. In fact, BONDS AND STOCKS COMPETE FOR AVAILABLE MONEY.

This is what affects mortgage rates, because bonds and mortgage back securities are similar in nature, they are similar in this respect.

The Feds do not control the price of bonds, which means they do not control mortgage backed securities, which means they do not control fixed rates. Got it?

Now stay with me because…

IT IS A COMMON MISCONCEPTION THAT THE FEDS  CAN CONTROL, OR COULD EFFECT, LONG TERM FIXED RATES, BUT THEY DON’T, THEY HAVE NOT, THEY CANNOT…..THAT IS, UNTIL NOW!!!!!!!!!!!!!!!!!! 

From now until the end of the year, the Feds are actively buying existing mortgage backed securities. Because there is this huge buyer of BONDS, IT MEANS THE YIELD IS LOW.  Normally the yields must be high, to attract a buyer, but the Feds are buying so much ($1,250,000,000,000) it keeps the yields, and the rates low. That is 1.25 TRILLION dollars. 

NOW FOR THE GREATEST PART!!!

THIS IS WHY YOU READ THIS POST….

You might think, “GREAT!” more bailouts! But that is not true, the money will come back to us, because they are buying securities yielding 5.5%.  So, by buying these securities they drive rates down (big buyer remember?) AND THAT WILL CAUSE THESE 5.5% RATES TO REFINANCE TO 4.5%, AND THE FEDS WILL GET THEIR MONEY BACK!!!

BRILLIANT!!!!

So, in a nutshell that is why Danville mortgage rates are low.

UNTIL THE END OF THE YEAR….

So now is the time to apply for your 4% rate loan,  as next year will be too late!

Click on the “apply” or call me to discuss your specific scenario!!!

Related posts:

1. Existing Home Sales Drop Again In January But Stay On The Trendline
2. The January 2010 Jobs Report May Lead Mortgage Rates And Home Prices Higher

Getting approved for a home loan isn’t getting easier, but it doesn’t appear to be getting much more difficult, either.

In its quarterly survey to member banks, the Federal Reserve asked senior bank loan officers whether “prime” residential mortgage guidelines had tightened in the last 3 months.

Nearly 50 percent of banks said guidelines tightened last quarter, a much lower figure than during all of 2008 and a signal that mortgage lending may be turning a corner.

Guidelines remain restrictive, however. 

Versus 18 months ago, lenders subject would-be borrowers to all of the following:

• Higher minimum credit score thresholds
• Larger minimum downpayments
• Lower debt-to-income requirements
• Mandatory fees based on certain loan traits

In addition, the availability of subordinate financing has all but disappeared when a home’s loan-to-value exceeds 80 percent.

Combined, these changes preclude a lot of Americans from getting access to today’s low rates but that could change in the coming months if the Fed’s reported trend continues.

Some experts believe that credit tightening started the recession.  Credit loosening, therefore, could help lead us out.

Related posts:

1. Mortgage Approvals Are Getting More And More Scarce
2. 1 In 8 Banks Tightened Prime Mortgage Standards Last Quarter
3. Single-Family Housing Starts Hold Steady For The 8th Straight Month

WOW!!!!
 
As you may have heard, FannieMae and FreddieMac have been implementing new guidelines regarding non-owner occupied transactions. There was a time when an investor could own as many investment properties as they wanted with no limitation.   Fannie stepped in and limited it to 4 investment properties max and Freddie is limiting investment buyers to 10.  Most lenders will only allow 4 financed properties, which includes the clients primary residence as well. 
 
As you know there are tremendous investment property opportunities out there right now.  But what are we to do as Real Estate professionals when we come across a qualified investment property buyer who exceeds these limits?  Most are turning them away, unless they are paying all cash.  Others are going through with an offer and getting into escrow, only to find that their client cannot get a loan because of these limitations.  
 
DO NOT TURN THESE CLIENTS AWAY!!!    

Here at Capital Market Funding we have a large National Bank that has a solution for your investment property buyers.  Our clients can own and finance as many properties as they would like, with very few restrictions.
 
Great Credit / Employed / 25% down / Loan Amount below $417,000
 
As an added bonus this product is available on a “Stated Income” basis for self-employed borrowers which translates into an easier process for you and your client.
 
You would certainly expect the rates to be real high, but I have seen some investors actually take out hard money loans with interest rates over 10% because of the restriction, but check this out, today we are at 7% with one point for a 30 year fixed with no prepayment penalty.    

That’s better than some small local banks owner occupied rates!!!!!
 
I urge you to notify all of your investment property clients of this tremendous loan opportunity, it will NOT last forever.
 
HINT: if you have a client who paid cash for an investment property, have them call me, we will pull out 50% of their equity and you get to sell them ANOTHER property, EVERYBODY WINS!!

No related posts.

The most important thing to know is that you cannot let your client do whatever you USED to let them do about getting a mortgage.  Gone are the days when you let your client go to their bank for a mortgage loan.  Gone are the days when you let them go online for a loan.  WHY??? Because 3 out of 5 motivated buyers get discouraged when they go to their bank for financing.  Most will stop looking at homes.  I see it happen time and time again.

After getting turned down by the bank, or told that Jumbo loans are not available, or that Quick Qualifier loans are not available, people get unmotivated, and many times I cannot get them re-motivated, even if I have the product available.  You simply MUST have your client talk to an experienced independent BROKER if you want to close their transaction smoothly.

A good broker has virtually all money available from every bank you can think of, so no need to let them go all over town and get discouraged.  Have them call me first, and THEN let them call whoever they want to!  It will keep them in the game.

And don’t let them go to a small bank either, look at IndyMac for example, do you want your client to go to a small regional bank? If they close down won’t you look bad?  So again, I say an independent broker working with big banks is a win/win/win!

EXAMPLES:

Quick Qualifier loans are not dead.  But they are harder to obtain. Credit scores need to be over 700, the client needs to have decent job history, and a little money left in the bank.  Self employed borrowers, including real estate professionals can get good loans, with no verification of income.  Yes, you need a down payment for that, but isn’t that the way it used to be?

Jumbo Loans are still available.  I can easily to go $2,000,000 and even higher if needed.  Rates are OK too, around 6% interest only for a 5 year fixed. Not bad when people are being told by the bank tellers that Jumbo loans are not available is it?

Last month I closed a Danville purchase loan for $1,7000,000 stated income, with 30% down.

This month I am closing a Danville purchase loan for $1,600,000 stated income, with 25 % down.

Of course loans under a million are even easier, and if you are under the $729,750 limit it is even easier.

Now, not every loan is available for every single scenario, but don’t let your clients do what they want, encourage them to do what they NEED to do, give me a call for a fast and free analysis.  I work every day, helping people just like your clients get into local homes, so let me help you as well.

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Although diverse products have evolved to help many individuals,  the problem of achieving a 20% down payment eludes nearly 1/2 of all homebuyers.  Without a 20% down payment, purchasers are required to pay Private Mortgage Insurance (MI).  Lately there has been a lot of focus on 80-10-10 loans as an alternative to paying MI.  An 80-10-10 avoids MI by using an 80% first mortgage, a 10% second mortgage and a 10% down payment from the borrower.  Buyers have been programmed to avoid MI but are the alternatives really better?

I have found that when we compare the differences between paying MI or choosing the 80-10-10, the monthly payment usually ranks as the borrowers highest priority.  Since MI is an extra fee, most buyers assume it will result in a higher monthly payment.  That is not necessarily the case since the second mortgage portion of the 80-10-10 is usually at a higher rate.  Additionally, the rate may be variable on that 2^nd mortgage loan and may have a shorter amortization period.  The result is that total payments between MI and the 80-10-10 are very close with the possibility of either program being slightly less expensive on a monthly basis.  However, there are a few hidden factors that most borrowers do not consider:

¨ One major benefit of paying MI is that you may be able to have it removed from your loan if your home appreciates in value. While lenders are not required to drop the MI coverage even if you can demonstrate greater than 20% equity in your home (based upon appreciation), you do stand a reasonable chance of having the MI removed.

¨ The biggest benefit from MI for some borrowers could be the fact that the lender will be more accommodating when it comes to approving your loan. With the extra insurance on the loan that MI offers, lenders can overlook some borrower shortcomings or make more exceptions since the loan is safer to approve. This is a critical benefit for borderline borrowers.

• ¨ The payment for MI is now tax deductible, and there are new creative ways to finance MI for a tax deduction. While it looks like the 80-10-10 is a better choice from a tax benefit perspective, there is a possible future tax woe for users of the 80-10-10 option. Current tax laws allow the deduction of a second mortgage up to $100,000. This also applies to future refinances when cash is taken out of the new 1^st mortgage that exceeds the original 1^st mortgage amount. That means that you are eating up that tax deduction. If you think that you will never use the $100,000 amount in the future, think again. This equity can be used for college costs, purchases, cars and debt consolidation. You may max out your deduction if you use that equity in the future.
• ¨ There will be more choices with MI since some lenders will not offer a 2^nd Mortgage, causing the borrower to find and coordinate a separate source to fund the 2^nd mortgage. The result could be a higher interest rate first mortgage if you avoid MI.
• ¨ The 80-10-10 is really 2 different loans so there are 2 separate sets of papers, closings and payments resulting in more hassles.
• ¨ The current Jumbo limit is $729,750 in Danville and loans above this amount are charged a higher interest rate. The increase is as much as 1.0-1.5%. If you can use the 80-10-10 to avoid both the Jumbo limit on the first mortgage and MI, then it would really benefit you to select the 80-10-10.

While the debate may continue, it is my opinion that tax deductible MI is the better choice for most borrowers unless the 80-10-10 helps the individual avoid paying the Jumbo premium.

Some borrowers are so intent on making a 20% down payment in order to avoid either option that they liquidate their retirement funds to do so.  Cashing in your IRA or 401K is a terrible mistake.  Tax deferred retirement plans are one of the best tools individuals have for a secure future.

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