Mortgage Updates

Accurate Quick rate quotes a thing of the past…

We all remember when getting a mortgage loan was as easy as, - rolling out of bed or as simple as getting a couple of interest rate quotes and going with the lowest one. That has all changed in today’s volatile market.

Sub-prime loans have virtually disappeared, guidelines for ALL loans have tightened and mortgage products have diminished. Additionally, both Fannie Mae and Freddie Mac have instituted Loan Level Price Adjustments (LLPA). This Fee will range from .25 point to 2.75 point additional cost for your loan depending on your FICO score and Loan To Value (LTV). In the current market, it is increasingly difficult to find mortgage insurance with credit scores under the 680 bench mark for conventional financing. Assuming your lender could find mortgage insurance … let’s look at the difference in rate the additional points will cost you.

Today, in California, a standard 30 year conventional mortgage rate is 6.125 with 1.00 point for Origination. If your LTV is over 80% and your credit scores are 680 or better, your rate would be 6.125 PLUS the .25 cost total points 1.25 OR the .25 can be financed by increasing the rate... in this case to 6.25%

If your credit scores are below 680 and your LTV is 80%-90% your best options for mortgage insurance (required for loan approval) will be through the specific 1st Home Buyer Investors - in California that would be CalHFA or NHF (National Homebuyer Fund). Both of these programs have income limitations and may provide the best interest rates with lower points.

Non 1^st time buyers have the option to purchase through the My Community Mortgage program with credit scores of 620 or better up to a 95% LTV. PMI is one of the few MI companies still underwriting this Fannie Mae product. (PMI Mortgage Insurance)

There are several pricing adjustments for this combination; the LLPA 2.75 cost and then Fannies additional risk assessment cost for MCM of 2.75 total costs 5.25 PLUS 1.00 for the lenders Origination fee. The adjusted rate for this transaction using the same base as above would be 7.00% rate with a total of remaining points including Origination Fee 2.75. On a $150,000 loan that would be $4,125.00.

Other areas that affect interest rates or the cost of your loan include charges for the waiving of lender’s escrowing for taxes and insurance (which can be done with LTV’s under 90%).25; Choosing an interest only option on a 30 yr. fixed 1.75 pts.; Investment property over 80% LTV 2.50 pts.

This is one of the reasons that FHA loans have become the #1 lending instrument for the average home buyer.  Since so very few lenders have worked with FHA over the last 10 years (FHA has always required full income documentation,  and a tracking of the assets used for closing.) It is important that a buyer choose a lender that is experienced and is knowledgeable about the "ins & outs" of this excellent source of funding which not only provides guaranteed mortgage insurance backed by the Federal government, but also incorporates competitive interest rates and lower points.

If you are looking to make a purchase, interview a couple of recommended lenders. Choose the one you trust and who will answer all your questions explaining your options and the reasons behind those choices.

Hopping from lender to lender - based on a rate quote will not necessarily serve your best interest. Many lenders still quote "low" to reel in the unwary customer.  Knowing full well that they are under quoting and giving the customer the "vanilla" version. -Consensus... you cannot blame them for not presenting the whole picture... when they don't have it yet... When it sounds too good to be true... it usually is. Even if it is what you want to hear.