Archive for the 'Interest Rates' Category
Shopping for a Home Loan – Be Sure to Compare Apples to Apples
Posted by Paul Gonzales | Leave A Comment »
You’re a smart cookie, so you called five different lenders and “shopped” for your home loan. If you are like most folks, you asked “what’s your rate?” and each lender tossed you a quote. What’s your next move – do you go with the guy that quoted you the lowest rate? You probably shouldn’t and here’s why – you didn’t ask enough questions, and probably didn’t speak to all of them on the same day.
Interest rate quotes by themselves literally mean nothing. This is because, all other things being equal, you can get a lower rate by paying ‘points’ or other closing costs. On the other hand you may reduce or even avoid those extra expenses by accepting a higher interest rate. The problem you have when you ’shop’ is that each lender may be simply tossing you an interest rate without explaining what it will cost you to get it. They simply want to take you off the market with whatever you want to hear – they’ll clue you into the full picture later.
Your job is to get the full picture right up front! Here’s how:
- be very specific about the kind of loan you want (30 year fixed, interest-only payments etc.. Rates very depending on the type of loan you are seeking)
- When they quote you an interest rate, ask them if that particular rate requires your payment of any discount points, an origination fee or application fee.
- Also ask what the Annual Percentage Rate (APR) is for that particular quote (see below for more information on the APR)
- finally, ask them to give you an estimate of your final and total closing costs including an appraisal and credit report
The Annual Percentage Rate (APR)
In addition to the interest rate being offered, the APR takes into account the costs necessary to actually get that rate. It does this by mathematically spreading those costs over the life of the loan (say 30 years) and treating that cost as an added interest burden. For example, if you are quoted a rate of 5.50% for a 30-year fixed loan of $300,000 and the total costs incurred to get that loan are $2,700, the APR might be 5.58%. This device is intended to help you better compare quotes from different lenders. If you talk to two different lenders about the same loan and each one quotes you the same interest rate but different APRs, you might conclude that the lender quoting the lower APR is estimating a lower closing cost figure. On the other hand, if one lender quotes a lower interest rate than another lender, but both APRs are about the same, the lower rate may involve paying discounts points that the second quote doesn’t incur.
A final word about interest rates
Mortgage rates for all lenders are subject to the frequent and rapid changes in the financial markets. They can (and commonly do these days) change literally hour-by-hour, much as the stock market does. In recent months we have actually seen interest rates on mortgages rise and fall as much as a half of a percent in the same day. The point is that if you are leisurely “shopping” for the best deal over a period of several days or weeks, your information has already gone out of date and you have no basis for a sound comparison.
The key is to recognize that rates alone are only half the picture. You also need to know the costs involved in getting those rates and talk with lenders preferably on the same business day, so you can compare “apples to apples”, instead of “soup to nuts”. The bottom line, however, is still choosing to work with a lender whom you can trust and who will work hard to get you the best interest rate-and-cost package you can qualify for. And that may definitely not be the the person tossing out the lowest rate of the day!
Paul Gonzales, Countywide Mortgage Lending, (760) 746-7388 or email at paulforloans@aol.com
Related Posts: Buyers, CW Mortgage, Home Loans, Interest Rates, Mortgage News, Real Estate News
Sizzling Summer To Coincide With Sizzling Selling Season
Posted by Dee Marie Fisher | Leave A Comment »
San Diego’s Real Estate Market is Heating Up!
With warm weather upon us, the season for buying and selling a home approaches quickly. Although the Federal Reserve is ending policies that have helped keep mortgage rates around 5 percent they are still at a historical low. The industry expects mortgage rates to rise, but not for some time.
One point that I found interesting in the North County Times article “HOUSING: As peak selling season begins, parts of market red-hot“, is that the federal and state governments installed policies that induced buyers into the market while cutting down on the number of homes available, thereby created the same problem that they were trying to resolve….. a mini housing bubble!
Do you think San Diego home prices will go up or down this summer? Let me know…. write comments, email me at DeeMarie@SellingProperties.com or give me a call at 619 742-0046. I’m real curious about your opinions….. Dee Marie Fisher
Related Posts: Area Information, Buyers, Interest Rates, Market Trends, San Diego
Affordable Loans for California Public Schools Emplyoees – Get the Facts
Posted by Diane White | Currently 2 Comments »
Do you work for, or have worked in the past, the California Public School System? If so you are most likely eligible for the CalSTRS 80/17 Loan.
Some of the highlights of this program are:
- 3% down payment
- It is a 30 year fixed interest loan broken into two loans:
- 1st is for 80%
- 2nd is for 17%
- 2nd loan is at same interest rate as first – with no payments for 5 years
- No PMI (Private Mortgage Insurance)
- Conforming 1st loan amount up to $417,000
- Non-conforming 1st loan amount up to $536,082
Eligible Properties are:
- Owner-occupied single family homes
- Approved condos
- Approved attached and detached PUD’s
Eligible Borrowers are:
- Member of the California State Teacher’ Retirement System
- Employees of a California public school district
- Employees of a California Community College
- CalSTRS employees
It is a wonderful program which gives back to those employees that make our schools systems one of the best around! Ask your lender if this loan program is for you, or let me know if you would like any recommendations.
On another and seperate note…the Federal 1st time homebuyer IRS tax credit is running out. Escrow must be opened by April 30th and closed by June 30th. Call me if you want to take advantage of a possible $8,000 tax credit.
![sunset-banner-v2[1]](http://pictureperfectsandiego.com/files/2010/04/sunset-banner-v21.jpg)
Related Posts: Buyers, Financial news, Home Loans, Interest Rates, Real Estate News, San Diego, Uncategorized, tax credit
FHA Home Loans – Credit Requirements
Posted by Paul Gonzales | Leave A Comment »
This is the second in a series of four posts that deal with important aspects of FHA financing. The first post provided an overview of the program. This post will detail the credit requirements necessary to obtain an FHA home loan.
Traditional Credit History
This describes the typical credit history that most people tend to establish over time. As consumers utilize credit in its many forms (credit cards, car loans, student loans, mortgages etc.) detailed histories of how they have managed their credit responsibilities are collected by at least three credit bureaus. In addition, each bureau also computes a composite credit score commonly known as your FICO score (stands for Fair Isaac Corporation, the company that created the current credit-scoring models).
The FHA lender will review the FICO scores as well as the details of the individual’s credit history to determine how well a Borrower has managed credit in the past. NOTE: You may obtain a free credit report once each year, from each of the three major bureaus (Equifax, Experian and Transunion) by going to www.annualcreditreport.com. There are many websites where you can obtain your FICO scores, usually for a fee. One popular site is www.myfico.com.
Derogatory Credit
You knew we would get there eventually. Derogatory, or negative, credit are the dents and dings that people can incur in their financial lives. Here is a breakdown of how FHA lenders consider such items:
- all derogatory items within the last 24 months require a written and signed letter of explanation
- “minor” derogatory remarks older that 24 months do not require explanation
- all “major” derogs require written explanation, regardless of age (the FHA lender determines what is minor vs. major)
- collections are considered major derogs and must be explained; most FHA lenders will require them to be paid off
- judgments must likewise be paid off unless a verifiable repayment plan is in force and all payments have been made to-date
- a foreclosure must be at least 3 years old, but may be less than that for certain documented extenuating circumstances beyond the Borrower’s control (I.e. serious illness, death of a wage-earner). Divorce will not normally be considered.
- Chapter 7 bankruptcy discharge must be at least 2 years old with no new derogatory credit issues after the discharge; may be less than 2 years with acceptable extenuating circumstances. Less than 12 months not allowed
- Chapter 13 and/or Consumer Credit Counseling allowed with at least a 12-month history of on-time payments; permission of the bankruptcy court or counseling agency is required
Non-Traditional or Alternative Credit
The FHA allows for Borrowers without traditional credit histories to document their bill-paying behavior by showing on-time payment of other types of consumer bills such as rents, utility bills and car insurance. Such documentation cannot be used to enhance an existing traditional credit report or offset other derogatory credit
A Final Word On Credit
As you can see, the FHA has certain minimum standards and requirements, yet also allows FHA-approved lenders a certain degree of discretion in some areas. It is up to the lender’s underwriter to render a final decision on the creditworthiness of a particular Borrower. Some lenders may add additional requirements as well, but can never ignore or toss out FHA guidelines. Click here to go to the FHA’s consumer website.
The next post in this series, to post here shortly, will discuss income and employment requirements for obtaining FHA financing.
For more information contact Paul Gonzales, Manager, Countywide Mortgage Inc (760) 746-7388 or paulforloans@aol.com
Related Posts: CW Mortgage, Financial news, Home Loans, Homeowners, Interest Rates, Mortgage News
FHA Loans – The Basic 203(b) Home Loan
Posted by Paul Gonzales | Leave A Comment »
This post will be the first of four brief articles covering the most important aspects of what has become the darling of the real estate market – the venerable FHA home loan.
Established in 1934, the Federal Housing Administration, as stated on its website “…. has served as an economic backstop working hand-in-hand with lenders to provide consumers with access to safe and affordable loans, even during times of tremendous market volatility as with the current subprime situation“.
This post will describe some highlights of the most common type of FHA financing, known as the Section 203(b) loan.
Subsequent posts will detail credit requirements; income and employment; and finally, assets, down payment and cash required to close.
Maximum Loan Amount
The current limit is the same as it was in 2009, varies county-by-county and is the lesser of 125% of the median house price in a given area, or the following amounts:
- Single family unit – $729,750
- Two family unit – $934,200
- Three family unit – $1,129,250
- Four family unit – $1,403,400
Property Types Allowed
As noted above, FHA financing is available for single-family homes, condos and PUDs as well as 2 to 4 family properties provided that they are owner-occupied. Second homes and investment properties are not allowed. Condominiums must be FHA approved and HUD recently made it somewhat easier for a lender to initiate the approval process if necessary.
Other Notable Features
- Can be used to purchase or refinance a primary residence
- Minimum allowable down payment is 3.5% of the purchase price (for homebuyers with FICO scores below 580 the minimum down payment will be 10%)
- Down payment can be gifted
- For now the “Upfront Mortgage Insurance Premium” (UFMIP) is 1.75% of the purchase price; however this will be increased to 2.25% April 5, 2010. FHA still allows this premium to be rolled (financed) into the loan
- Seller can credit up to 6% of the purchase price to closing costs (HUD plans to lower the maximum amount of Seller credit to 3% later this year, the date to be announced)
- No financial reserves required for 1 or 2 units, 3 months reserves for 3 to 4 unit properties
- Allows non-occupant co-borrowers (for example, Mom and Dad can be on the loan to help qualify, even though they will live elsewhere)
- Allows cashout refinancing to 95% of value ($417,000 maximum; 85% over $417,000)
- No prepayment penalties
- A borrower can have only one FHA loan at a time (fairly obvious since these are strictly owner-occupied loans and a person cannot have two “primary” residences. Exceptions: you are relocating, selling your home to purchase a new home, or a divorce situation.
- U.S. citizenship is not required: the borrower must have a valid Social Security Number, hold Permanent Resident Alien status or be eligible to work in the United States and hold the appropriate work visas.
Watch for the next article in this series to be posted very shortly which will detail the credit requirements for obtaining an FHA home loan.
For more information contact Paul Gonzales, Manager, Countywide Mortgage Inc (760) 746-7388 or paulforloans@aol.com
Related Posts: Buyers, CW Mortgage, Condos & Townhomes, Financial news, Home Loans, Homeowners, Interest Rates, Mortgage News, Real Estate News, San Diego
