Big changes are expected in the mortgage market for 2008. With rates so low, now is a good time to weigh your refinance options…..
Have you been reading the papers or listening to the news lately? (Ok, I guess you have been because you are reading THIS paper. Just call me Master of the Obvious). Rates are low. Actually, rates are really quite low. You may be considering refinancing in the next couple of months. Maybe you need equity from your home but you're hesitant to touch that great rate you got a couple of years ago. Or, maybe you're sure you want to refinance but are waiting for the latest news from the "Fed" before you take the plunge. Well, there are a few reasons why you may want to take action sooner than later.
Fannie Mae and Freddie Mac, the major lending institutions for non-government loans, have recently announced that they will move to risk based pricing in the new year. What is risk based pricing and why do you care? This announcement means that loans with higher risk characteristics will receive a higher rate. In the recent past, risk based pricing was typically reserved for non-conforming loans, or loans that were outside conventional guidelines. In 2008, you can expect to see risk based pricing passed on to conforming loans. What constitutes a higher risk? First and foremost is your credit score. If your loan to value is greater than 70% - your rather healthy credit score of 680 won't get you the same rate that your neighbor's 720 credit score will get him. Same goes for your sister and her 620 credit score. Her mortgage rate will be much higher than yours. Fannie and Freddie will assess tiered "hits" or cost increases to borrowers based upon their credit scores. That could make a huge difference in the rate you will be quoted in December and the rate you would be quoted next year. It may also mean you might not qualify for a loan tomorrow that you would qualify for today. And now lenders will have to pull your credit to actually give you a hard and fast quote. If you have a good idea of what your credit score is, you can compare lender's quotes more effectively. But if you haven't a clue as to what your credit score is, a lender will have to know it in order to be on target with a quote.
And there's more. Although pundits say the rates will stay low (and no, I'm not a pundit), another cost will be passed on to the consumer that will begin to be realized by many lenders very shortly. As a result of recent increases in foreclosure rates, Fannie Mae has decided to increase its margin in order to maintain adequate capital reserves for federal regulators. And Freddie Mac is expected to follow suit, although the announcement is not official as of the date I am writing this column. It may be official by the time you are reading it. Even if rates remain stable through the upcoming period, increased margins mean higher effective rates to consumers. Thus, if you are mildly considering a refinance for whatever reason, you should really decide now if it's right for you. Waiting too long could cost you money.
Of course, refinancing has to make sense. You need to consult with a reputable mortgage lender who can help you analyze your options and choose what's right for you. You need to weigh the savings against the closing costs and also take into consideration how the refinance may or may not benefit you. But, don't drag your feet. Do your homework. Get your ducks in a row. And finally, the risk based pricing and all that other stuff I discussed will also apply to new home purchases (but not select first time homebuyer programs- they remain the same). Whatever type of mortgage you are considering, now is the time to investigate before the changes occur.
Email your home loan financing questions to Kristin Abouelata, Mortgage Specialist, at question@kristinmortgage.com or call (865) 567-0113.
Let my experience work for you!
Kristin Abouelata / Mortgage Specialist with Mortgage Investors Group
Phone: (865) 567-0113
1-800-489-8910
http://www.kristinmortgage.com/
Showing posts with label Loan Knoxville TN. Show all posts
Showing posts with label Loan Knoxville TN. Show all posts
Friday, January 18, 2008
Saturday, November 24, 2007
What are all these fees and why is a mortgage so expensive?
Not only are the expenses associated with a mortgage hard to understand, people often wonder why a loan costs so much. Here's a little background info to explain why home financing isn’t cheap…
Did you ever wonder what a great credit score really gets you in the mortgage market? Many people think it means they get better pricing. Unfortunately, that’s not really the case. It mostly just means your lender won’t have to hassle you for as much documentation to do your loan. In fact, no documentation may be required from you at all if it’s a purchase and you put enough money down. I’ve heard many clients say, “I’ve got great credit, so quote me your best rate.” Good credit can’t directly influence the rate. But it can influence your mortgage loan officer to give you better pricing. If your lender can be assured your loan process is streamlined and smooth, and that they won’t have excessive hours to devote to the process, they may be able to quote you a more competitive rate. Much about a quoted rate depends upon the man hours it will take to make your loan, the loan amount itself and how quickly you can close.
Lenders usually have a minimum percentage of income they are supposed to make on a loan. That percentage is flexible, but only to a certain extent. For instance, the loan amount size is a huge contributing factor. If you’ve got a really large loan amount, your lender doesn’t need to have a feeding frenzy on your loan. The percentages lower because the payback is higher.
However, if you’ve got a really, difficult loan and a modest loan amount, you can expect higher rates or discount points. Or fees. Some lenders may raise your fees to make you think you’re NOT paying as much. But you are. You have to in order for the lender to cover the cost of doing business.
Here’s the secret. Closing a loan is actually a very involved process. Lenders can’t do the loans for free or break even profit because it’s a business and their in it for profit. Plus, there are many people involved in the loan process that you aren’t even aware exist. Processors, closers, post closers, insurers… a staff of thousands! Ok, so maybe not thousands, but your file is probably touched by 5+ different divisions (at minimum) within a mortgage company. Since it is a business, the lenders must make enough money on the loan to cover their costs and actually make money, too. The lender also pays outside parties for services too, like the appraisal, flood cert and automated underwriting system. Paying your originator is just the beginning of the mouths (and families) being fed by your business. It ain’t cheap to close and sell a mortgage.
When you examine all the fees and charges on a good faith estimate, your lender should be able to tell you exactly where that money is going and how it is to be spent. Your lender should have no qualms in telling you what costs are associated with your loan, or which funds cover third party expenses that your lender incurs by doing your loan. And some of that money will be profit. Much of it may be. But remember, you’re not just paying the salary of only one person. However, you shouldn’t pay too much for your loan. After all, the lender will make additional profit on the loan when it is sold on the secondary market.
A good lender will validate any fees and charges for you and should make you feel ok with the fees. If they don’t seem reasonable or fair, always ask questions. If you don’t like the answer, say so. And if you still don’t like the answer, than look for a new lender. Buying a home is such an important purchase and you should feel good about it.
Let my experience work for you! Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist, at question@kristinmortgage.com or call (865) 567-0113. Kristin will try to answer all questions on her website Home Loans Plain Talk.
Kristin Abouelata
Mortgage Specialist
Let my experience work for you!
Knoxville, TN 37919
Phone: 865-567-0113
http://www.kristinmortgage.com/
Did you ever wonder what a great credit score really gets you in the mortgage market? Many people think it means they get better pricing. Unfortunately, that’s not really the case. It mostly just means your lender won’t have to hassle you for as much documentation to do your loan. In fact, no documentation may be required from you at all if it’s a purchase and you put enough money down. I’ve heard many clients say, “I’ve got great credit, so quote me your best rate.” Good credit can’t directly influence the rate. But it can influence your mortgage loan officer to give you better pricing. If your lender can be assured your loan process is streamlined and smooth, and that they won’t have excessive hours to devote to the process, they may be able to quote you a more competitive rate. Much about a quoted rate depends upon the man hours it will take to make your loan, the loan amount itself and how quickly you can close.
Lenders usually have a minimum percentage of income they are supposed to make on a loan. That percentage is flexible, but only to a certain extent. For instance, the loan amount size is a huge contributing factor. If you’ve got a really large loan amount, your lender doesn’t need to have a feeding frenzy on your loan. The percentages lower because the payback is higher.
However, if you’ve got a really, difficult loan and a modest loan amount, you can expect higher rates or discount points. Or fees. Some lenders may raise your fees to make you think you’re NOT paying as much. But you are. You have to in order for the lender to cover the cost of doing business.
Here’s the secret. Closing a loan is actually a very involved process. Lenders can’t do the loans for free or break even profit because it’s a business and their in it for profit. Plus, there are many people involved in the loan process that you aren’t even aware exist. Processors, closers, post closers, insurers… a staff of thousands! Ok, so maybe not thousands, but your file is probably touched by 5+ different divisions (at minimum) within a mortgage company. Since it is a business, the lenders must make enough money on the loan to cover their costs and actually make money, too. The lender also pays outside parties for services too, like the appraisal, flood cert and automated underwriting system. Paying your originator is just the beginning of the mouths (and families) being fed by your business. It ain’t cheap to close and sell a mortgage.
When you examine all the fees and charges on a good faith estimate, your lender should be able to tell you exactly where that money is going and how it is to be spent. Your lender should have no qualms in telling you what costs are associated with your loan, or which funds cover third party expenses that your lender incurs by doing your loan. And some of that money will be profit. Much of it may be. But remember, you’re not just paying the salary of only one person. However, you shouldn’t pay too much for your loan. After all, the lender will make additional profit on the loan when it is sold on the secondary market.
A good lender will validate any fees and charges for you and should make you feel ok with the fees. If they don’t seem reasonable or fair, always ask questions. If you don’t like the answer, say so. And if you still don’t like the answer, than look for a new lender. Buying a home is such an important purchase and you should feel good about it.
Let my experience work for you! Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist, at question@kristinmortgage.com or call (865) 567-0113. Kristin will try to answer all questions on her website Home Loans Plain Talk.
Kristin Abouelata
Mortgage Specialist
Let my experience work for you!
Knoxville, TN 37919
Phone: 865-567-0113
http://www.kristinmortgage.com/
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