Financial Fitness

Rates are low and that has created a lot of refinancing
business with lenders. That means that most lenders are slower than normal to
get the loans closed. I talked to someone recently that had refinanced with a
large bank and it actually took almost 6 months! We are still closing refinance
loans in about 30 days. Earlier this month, we closed a high balance FHA
purchase in Danville in 14 days.

We will make it happen if you need to close quickly, even in this
market.

Legislation gets passed every day that you don't know or care about -- it may never impact your life.  But then there are those times when some law gets passed that smacks you right in the face.

Well, if you're in a high-cost county in California, this might be one of those times.

I spoke with a client this week who wanted preapproval to buy a $750,000 home with $75,000 down (10%).  A year ago I would've said, "Awesome!  Let's do it!"  but this week I said, "You must close by September 30. "

Here's the deal: There have been temporary high limits for jumbo conforming loans for years now, and they are being allowed to expire, going back to the limit of $625,500 (from $729,750) and forcing borrowers to qualify for a regular conforming loan.

In plain English, what that means is folks with a loan value bigger than $625,500 are going to have to jump through more hoops and come up with 20% or more down instead of 10% if they don't close by September 30.

Rates were supposed to go way up with the US losing it’s AAA rating, so did they?

It has surprised many “experts” that the rates have actually gone down with the downgrading of the US credit.

Why?  If you’re an investor, right now you’re looking for safety and US treasuries is still the safest bet even internationally. A second very safe investment is with FNMA or FHLMC loans (conventional loans for real estate) which are backed by the full faith and credit of the US.

As money has poured out of the stock market into treasuries and mortgage backed securities it has brought rates down to the lowest levels of the year.

No one knows how long it will stay here but to get an idea of where mortgage rates are headed keep an eye on the 10 Year T bond.

I once had a man refuse a loan that would have saved him a lot of money every month at absolutely no cost to him whatsoever.

Why would he do this?

He just couldn’t believe that he wouldn’t have to pay a dime. “There is a cost that will have to be paid by someone! This can’t just be free!” And he literally walked away from the loan because he couldn’t believe it.

So, can I really get you a no cost loan? No closing costs, no nothing?

Yes.

Here’s how it works:

• Background information: Nearly every loan gets sold. One company gives you the loan, and then they sell it to another company. Often, Company A will still service your loan, so that you won’t know the difference, but they don’t own your loan anymore. Company B owns it now.
• Company A makes a profit when they sell your loan.
• Having a slightly higher interest rate (usually about .25% higher than a 0 point loan where you pay your own closing costs) gives the loan a little higher value when Company A sells it to Company B.
• When Company A gets a little more profit from selling your loan (due to the interest rate – see the last point.) they pay your closing costs with part of it.
  

Voila. No cost to you at all. Of course you could pay closing costs and get a .25% better interest rate if you’d like (I can run all those numbers for you to help you decide!) but there really is no other “catch” to a zero cost loan.

Do you believe me now?

Of course, one of the best ways to save money is often to refinance your mortgage.

But some folks make serious, costly mistakes when they refinance that can negate the benefit to their bottom line!

Here are a few that I see all the time: 

• Comparing apples to oranges.  Many people simply don't understand the differences between the loans they are comparing.  It's hard to tell which one is the better deal when they aren't both the same type of loan. If you call me I can go over the options with you so you can understand all the jargon and compare the right loans.
• Adding years to their payments without realizing it.  If you refinance, pay attention to the length of the new loan and make sure that you're not adding more time to your loan than you'd like. 
• Taking the first offer they find.  I'm amazed at how many people still just walk into their bank and ask for a loan!  Listen, almost 100% of the time I can beat that rate if you'll take a minute and shop around.  
• Putting it off or not doing it at all.  Many people don't realize that they can refinance at no cost to themselves and without too much hassle, so they just leave money on the table.  I now offer a free rate monitoring service -- I'll make it easy and contact you whenever it makes sense to refinance!  To sign up give me a call at 800-272-6688 or use the contact form on the website to e-mail me.