interest rates « Home Loan Information

7Jan/090

Mortgage rates headed to double digits

Ken Cook

When you have spent enough time in your own industry you learn to read or sense change by subtle changes and scuttle from insiders. If you are a musician, for example, you know of a subtle change in beat patterns or melodic phrasing long before the general populace. Likewise if you are in the medical profession you will hear something at a seminar or read it in a published research paper long before the rest of the world knows about it. If you expect anything different from the finance and mortgage industry you are stopping short.

Long before, literally years before in some cases, the remainder of the open world knew there was trouble on the horizon for the real estate and finance industry there was scuttle in the mortgage industry. Then months before it started the scuttle got louder. Finally just weeks before the fallout started happening it was being shouted in the industry and starting to leak to the remainder of the world.

Today there is scuttle and it is not quiet scuttle. It is also backed by sound research and trend patterns that indicate we are headed for another impacting change in the real estate finance industry. Lately, as you may already know, the federal government of the United States has started purchasing Mortgage Backed Securities. Their purpose behind this is to instill confidence in other investors that it is “okay to get back into the pool”. Since this was supposedly the main focus of the initial bail-out plan the activity should not come as a surprise. Unfortunately, and already predicted by some seasoned economists, the impact on the market is more like dropping a pebble in the ocean. The result could be further recession strengthened by inflation.

In the end, according to many insiders, the result will be higher rates -even into the double digits- by the end of 2009 if not sooner. If I were in need of purchasing or refinancing I would not wait. Some insiders believe mortgage interest rates could go as high as double digits and sooner than we all may think.

At the time of publishing this article there are interest rates on 15 year mortgages as low as 4.625% at 4.737APR and 30 year mortgages just .25% higher. People, it just doesn’t get any better than this. Mortgage rates, without government subsidies to the banks, will never get much lower. In fact, it is impossible. As long as investors and depositors want a return there must be profit. So until you, Mr. and Mrs. General Q. Public, will in invest in lenders for zero return the interest rates cannot go below 4.5%.

Tagged as: 15 year, 30 year, fixed rates, interest rates, mortgage rates, purchase, refinance No Comments

2Jan/090

Will interest rates go lower?

As buyers and lenders we have become somewhat spoiled. During the last few years we were spoiled to have sustained low interest rates in the mid 5s which was historically low. Of course the uneducated media got a line on that and began suggesting rates could go lower. Well, could interest rates go lower? How low can interest rates go?

First let us understand how interest rates are the source of most of the profit for lenders. Origination fees, contrary to popular belief, rarely generate any profit at all. In fact it usually costs more to originate a loan than the origination fees. Therefore the lender depends on the interest to earn a profit.

Lending money also has a cost. Money which is “on loan” carries a cost every month it is loaned and also prevents the lender from investing in other, more profitable, investments. How much it costs every month for money to be on loan varies from lender to lender and loan to loan but those costs include: office space, technology costs, payrolls, employee benefits plans, legal fees, fraud detection and ongoing monitoring, servicing fees, collection costs, and more.

Furthermore there is the cost of paying dividends to investors. Now every one of you can understand this: as an investor you must make a return on your dollars invested or you are not going to invest. So let’s say you have an IRA with $100,000 in it. You can either lend it directly through a company like Novation or you can buy a single note or you can invest into a real estate investment trust.

Investing directly into a loan through a company like Novation may earn you 10% or more annual return because you alone are taking the risk. Investing into mortgage notes you may be sharing the risk with other investors. Investing in an REIT you do not actually have ownership in any one single note and therefore most likely receive the lowest return on your investment. What is the minimum return on your investment you would like to have? Would you go as low as 2%? Probably not. 3%? Not likely. chances are to even tick your interest you are looking for a minimum of 4% APY.

Now let’s look at that question again. Will interest rates go lower and how much lower will interest rates go? Mortgages are not funded by lenders they are funded by investors. Now that you know who funds mortgages (and not it is NOT the Federal government and that’s a very long story but FNMA and FHLMC depend on investors) and you know they are people just like you do you really see them going lower than 4.5%?

Chances are rates will hover around 5% for some time with small, quick dips, into the 4% range.

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30Dec/080

First Time Home Buyer

To the seasoned home buyer today’s economy and real estate industry condition are a little frightening to say the least. One would assume, then, that this is not a good time to be a first time home buyer. The truth, however, is quite the opposite.

The existing home owner is more likely to have existing “baggage” to bring to their next purchase where the first time home buyer is not encumbered with such burdens. The first time home buyer will certainly not be in a negative equity position on their existing home. This is a great position to be in when the market is so full of opportunities to buy properties at well below the price they would have been just a few short months ago.

Financing is available for first time home buyers up to 100% of the purchase price – though 96.5% financing plus a gift or loan from a family member or employer is much more likely. Honestly I would not mind at all being in the position to buy my first home today instead of being in the position I am! There are thousands of deals in the Atlanta area and literally tens of thousands throughout Georgia, Florida and the southeast.

If you are conisdering buying your first home give me a call. I have helped hundreds of people buy their first home or first investment property over the last few years. Your real estate agent knows about real estate regulations and my staff and I are all seasoned experts in the mortgage and finance business. We know things your agent doesn’t even want or need to know.

Call today while home loan mortgage interest rates are still very VERY low and there are plenty of opportunities on the market. In the Atlanta area and north Georgia call 678-946-0100 and in south Georgia and Florida call 866-946-0120

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16Dec/080

Should I Refinance Today?

By the time you read this article everything will have changed. One thing is certain about the mortgage banking industry and that is change. Do not take this as a smack on the face because it certainly is not intended to be but it should be somewhat of a wake-up. The truth is the far above average home owner and real estate investor are not capable of properly answering this question. We, and I include myself, make the terrible mistake of thinking if we know a few terms about something that we understand it well enough to make important decisions. Most people are not capable of making wise or even correct mortgage decisions. The frightening part is most loan officers also do not have any idea how to really determine if a certain mortgage is the best for you.

Be not dismayed: Even financial planners are often wrong with their advice.

So, am I the genius to answer the question? No. But I will give you a little more information than you probably already had to help you make the best possible decision you can make for yourself, your family or your investment strategy. More than that this may help you avoid “tricks” used by the so-called “no closing costs” providers. By the way, “no closing cost home loans” do not exist. There is no such thing as no closing costs. There are always closing costs and one way or another you always pay them. Repeat that to yourself: there is no such thing as a loan with no closing costs. If you refuse to believe that you are beyond help and get everything you deserve. (I write that with a sideways smile.)

There is a long standing argument among many people as to which is more important between interest rates and monthly payments. The bottom line is: nobody can answer for you. They can pontificate for weeks but ultimately it is your decision. So let me direct this to you about the difference between interest rates and monthly payments and how this could become an issue.

Most people automatically assume that if you have a lower interest rate you will have a lower monthly payment. They also often assume, and to their detriment, that a lower payment or lower interest rate may be the best loan. Neither is true and both are true but the paradox is simple to decode. FOr example a fifteen year mortgage has a lower interest rate but a higher monthly payment. A forty year mortgage has a higher interest rate but a lower monthly payment. So which best fits your goal?

For today I can actually offer a loan to the right buyer for 4.75% with no discount points. This loan has an APR of 4.893 which is still phenomenal. What you, Mr. or Ms. Borrower, need to understand about numbers like this is this is not *your* number. In fact it is the best case scenario number. Your rate may in fact be much higher from any and every lender -not just us. There are “hits” to rate and adjustments to pricing which are, in part, dictated by Fannie Mae or Freddie Mac. Those are called Loan Level Pricing Adjustments and they are based on the risk presented to FNMA or FHLMC by the borrower, the property and the type of loan.

If you and I were on the golf course and you asked, “Ken, is this a good time for me to refinance?” If I did not start my answer with, “What are you trying to acheive?” I would be a fool to answer. This may be a great time for you to refinance you loan with interest rates as low as they are today but this may be a horrible time for you to refinance if you are living in a home with an upside down mortgage, you have had a change in careers or an income drop, your debt-to-income ratio is off the charts or any other number of reason. Now, if you are one of the few who qualifies for the advertised rate and you have equity in your home (which you would to qualify for that rate) then yes, this is probably one of the best times in recent history to refinance in to a long term fixed rate mortgage.

Call me and let me be honest with you. We can refinance your Fannie Mae loan in Georgia or Florida and your FHA loan anywhere in the southeast. 866-946-0120

Tagged as: closing costs, interest rates, mortgage, refinance No Comments

7Dec/080

What is Most Important: Closing Costs or Interest Rate?

I recently wrote an article telling how the “no cost loan” works and in it I demonstrated there are always costs and the borrower always pays them. Of course only 132 people in the entire world have read that article and millions have seen the big bank’s nationwide advertisements showing how they can purchase a home or refinance a home without writing a check for the closing costs. Pretty silly considering most refinances do not require the buyer to write a check for the closing costs. But when we start talking about closing costs on a purchase that’s a different story.

So let’s quickly revisit: there are closing costs and the buyer always pays them. No matter what any big Bank in America tells you. For example, if you pay the closing costs the big Bank in America puts you into a 30 year loan (on that day) for 5.375 interest rate and about $3700 in fees on a $200,000 loan or a 6.875 interest rate and no fees on a $200,000 loan. Now when ARM loans were cheap and attainable they could have compared with no fees on an interest rate even lower than the rate for a fixed 30 year loan.

$1,313.86 would be the monthly P&I at 6.875

$1,119.94 would be the monthly P&I at 5.375

So if you are going to keep the loan for less than 35 months this could make sense but if you keep the home longer than 35 months you will now be paying an additional $94 per month in closing costs for the remaining life of the loan.

If you must assume then assume there is no free lunch and ask for a comparison chart from a trustworthy mortgage advisor.

Tagged as: closing costs, home loans, interest rates, no cost loans, no cost mortgage No Comments

1Dec/080

What They Don't Tell You About Their "No Fee Mortgage"

They are big. They have millions to spend on advertising. In fact, they don’t pay for that advertising at all -their customers do. Since we started back in 2001 we have fought giants and we have always beaten them and we will continue to do so. Currently there is a very large bank offering what they call the “No Fee Mortgage Plus”. Now if you visit the website you will see rates advertised in the mid 5% range. If you click on the link to take you to their super special you will not see any rate changes when they show you how you can have a loan with all these thousands of dollars in closing costs or this loan with no closing costs shown.

They recently bought another huge defaulting lender who claimed “No Closing Costs” but were ordered to cease and desist on those advertisements because they were misleading. The truth is they were no more misleading than what you see today from the huge American bank who purchased them. I will write it again for probably the 100th time in the last two years, “There are closings costs and the borrower pays them.”

One way or another you are going to pay the closing costs. You either pay them in cash at the closing table for no payments and no interest on them … ever (because you paid them in cash). Or your interest rate is going to be jacked up so high that the lender (notice I’m not writing about a broker here but one of the largest lenders in the world) will earn enough “back end fees” from the interest to offset the costs. Oh it’s just horrible when a broker does it but completely acceptable when a big name bank does it?

Here’s how it works. As of this writing if a borrower has a 700 middle credit score, fully documented income and assets, is getting a $200k home loan in the state of Georgia the interest rate with 20% down on a fixed 30 fully amortizing loan should be about 5.5% -what the big bank advertises. Now, they are only making about $2500 immediate profit on that loan at that price (of course they’ll make interest over the life of the loan) and this is not enough to pay the costs of closing a loan. Stay with me, I know you aren’t aware of all the costs associated with closing a loan on the back end but at that price we would all go out of business because it costs more to close.

So the big bank, per their own web page, at 5.5% interest would also want $5974 in closing costs (higher than ours by the way). So how can they recover those costs on their “No Fee Mortgage”? You know they have to or they would not be in business.

It’s simple: they raise the interest rate which pays them higher SRP (Service Release Premium) or interest over the life of the loan. How much higher? When I was in their local branch 3 days ago the interest rate on the “No Fee Mortgage” was 6.875% or a full 1.375% higher than the rate with fees not included. How does that affect you? Hugely. However, the truth is not only can we do the same thing but on that same loan we can do it cheaper! Here is the difference.

At 5.5% on a 200,000 loan for 30 years the monthly payment would be $1130.39
At 6.875% on the same loan for the same borrower the monthly would be $1306.37

This represents a difference of $175.98 per month (keep the loan for 30 years and that $5974 you saved costs you $63,352.80

Now, as I tell all of my clients, doing this makes great sense if you plan on keeping that loan for just a few years and, in fact, I encourage it. What my writing is concerned with today is the big bank hides this fee jump until it is too late. You’ve already applied and you’re in the system so now why bother switching to the company that was honest with you from the beginning?

If the difference in closing costs is $5974 at closing you need to get out of that loan within 34 months to break even. That’s less than 3 years. After the 34th month you start losing money -now we give you the choice and, unlike the big guys, we give you the information up front and personal. Call me personally and I will be more than happy to be honest with you. I can help you on your primary residence in Georgia and Florida. 866-946-0120 extension 101

(This is an opinion post and not an advertisement to lend or an advertisement of interest rates.)

Tagged as: closing costs, interest rates, No Fee Mortgage No Comments

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Daily Rates for Qualified Buyers

	Today	Last Week
30 Year Fixed	3.59%	3.65%
15 Year Fixed	2.91%	2.89%
5/1 ARM	2.81%	2.57%
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(Note: These are the lowest rates possible offered through advertisers and lead buyers at the company providing the data. They may require discount points.)