I just wanted to add my $0.02 about what Mark Barnes wrote in the previous post on my Blog.
Like a Cop would say when they arrest someone: "You have the right to remain silent. Anything you say can and will be used against you in a court of law.". Let me translate this into the Mortgage business: "You have the right to remain silent and you really should. Anything you say WILL be used against you on your next mortgage rate you will get and because you spoke, I will charge you more and you will be happy anyway!".
There you go, you have it!!!
Let me explain what I mean here.
You need to understand what you sign and what you read. You need to educate yourself before you start a refinance or a new purchase.
Some brokers will cut their fees and tell you I cut your fees by $XX amount of dollars! That is great! But they added "Yield Spread" which won't cost you a penny but your rate will go up and the broker will make more money and it will cost you more monthly! But if like many clients you look into a monthly payment only, you might still be happy if you save $250 a month! What you don't know is you could have cut some fees and get a better rate at the same time!
Don't buy everything said to you, not even what I write! Educate yourself!
Search for yield spread on the internet; check how it affects your rate.
Never tell your loan officer you can afford that much dollar a month! Just tell him, show me what you can do and I want to see the GFE! If they don't want to send you a GFE then, change bank or broker!
If you have a question or if you want me to look over your GFE, I'll do it for a small fee that could save you a lot or send me your questions!
Enjoy!
Saturday, June 23, 2007
Mortgage-Refinance Treachery: Avoid Mortgage Bankers and Brokers Biggest Trick - The Sales Pitch
Mortgage-Refinance Treachery: Avoid Mortgage Bankers and Brokers Biggest Trick - The Sales Pitch
By Mark Barnes
What the average homeowner or home buyer fails to realize is that bankers, loan officers, mortgage brokers, or whatever your lenders call themselves, are salesmen. Certainly, if you purchased your home from a realtor and used her lender, you most likely got a feeling of trust in that person, because the realtor referred him. Beware of this potentially dangerous water.
"This guy will help you complete your loan," the realtor will tell a prospective buyer. "He'll help us close quickly, and you'll be in your new home in less than a month."
Suddenly, the banker is a guy who will help you. Now, he's your friend. The intention here is not to scare you into thinking that everyone in the mortgage business is a bad person, looking to rip you off, but don't trust this guy, just because a realtor sends you to him. Remember, they work together.
The realtor needs the sale, and the banker needs to make loans. They are both salesmen, and salesmen are people who make commissions, based on a particular price. This goes for loan officers, just the same as it goes for a realtor or a car salesman. That used car salesman makes more if you pay more, and the mortgage banker makes more, based on how high your interest rate is.
When I worked in the mortgage business as a full-time loan officer and sales manager, the average customer was far more concerned with the costs of completing the loan and the final monthly payment than with the interest rate on the money they were borrowing. This is one of the biggest mistakes home buyers and people refinancing make in completing a home loan.
Unfortunately, most Americans live from one payday to the next, barely paying the bills, so all they're concerned with is what the monthly payment will be and if it will fit their budget. Bankers feed off of this, as it becomes easy to simply fit a loan into a payment schedule, ignoring interest rate, altogether. In fact, most people make it easy on the mortgage broker, asking more questions about payments than about interest rates.
The unsuspecting borrower will say, "I can't pay more than $1,000 per month." The cunning loan officer will feast on this person, like a starving man at a Thanksgiving dinner. Remember, bankers and mortgage brokers keep secrets, advising in ways that appear to save you money but really cost you thousands in the long run.
Let's assume the previously-mentioned person needs $100,000 to purchase a home. An unscrupulous mortgage broker, looking to make as much money as possible on the borrower will find out how much the taxes and insurance will be on the property. Let's assume they are $230, which will be added to the person's monthly mortgage payment. Let's also assume that the market bears an interest rate of 6% for a 30-year fixed rate mortgage (more on terms later). Now, the mortgage broker says to the borrower who can only afford $1,000 monthly, "What if I get you into your house for less than $900, including taxes and insurance? Can we do the loan today?"
This person, dying for his chance at the American Dream, is going to jump at this, thinking the mortgage broker is his new best friend and ignoring the interest rate on the loan, altogether. What the broker, trying to steal every possible cent from this one deal, has done is sold the borrower a $100,000 loan at an interest rate of 7%, which creates a principal and interest payment of $665.30 monthly. Combine this with $230 in tax and insurance escrows for a monthly mortgage payment of $895.30, almost $105 less than what the borrower said he could afford - a pretty nice savings, the borrower will think.
Think about it; if you said you could afford no more than $1,000 per month, and the person, in whom you placed your trust, told you your payment would be $895, you'd probably be pretty excited, huh? What has really happened, though, is the mortgage broker has done the borrower, his valued customer, a great disservice. Why, you may wonder. Because the market for this model bears an interest rate of 6%, and we're assuming the borrower has good credit. The loan officer could have offered the far better 6% rate, which would create a payment of $829.
This is $66 less than the borrower's payment at 7%. Also, the 7% rate will cost the borrower an extra $792 each year ($66 times 12 months). That is nearly $4,000 over five years! All this, just so the mortgage broker could pocket a few hundred dollars more on this one deal. If the loan amount was much higher, you could lose tens of thousands of dollars in just a few years.
So, what is the big secret? Simply put: bankers and mortgage brokers do not always offer the best possible interest rate, because they make money, when you get a higher interest rate than the market bears! So, be careful of this old trick. Tell your mortgage professional that you want the Par rate. This is the best rate the lender is willing to offer on a given day, without charging a premium. In other words, you could get a better rate, but you’d have to pay to get it. Now, if you are caught off guard and sold a rate that is greater than Par, your payment will be bigger and the loan officer will make extra money. Don’t let it happen.
Check out more great loan information now at Direct Lending Solutions
Article Source:
http://EzineArticles.com/?expert=Mark_Barnes
http://EzineArticles.com/?Mortgage-Refinance-Treachery:-Avoid-Mortgage-Bankers-and-Brokers-Biggest-Trick---The-Sales-Pitch&id=13653
By Mark Barnes
What the average homeowner or home buyer fails to realize is that bankers, loan officers, mortgage brokers, or whatever your lenders call themselves, are salesmen. Certainly, if you purchased your home from a realtor and used her lender, you most likely got a feeling of trust in that person, because the realtor referred him. Beware of this potentially dangerous water.
"This guy will help you complete your loan," the realtor will tell a prospective buyer. "He'll help us close quickly, and you'll be in your new home in less than a month."
Suddenly, the banker is a guy who will help you. Now, he's your friend. The intention here is not to scare you into thinking that everyone in the mortgage business is a bad person, looking to rip you off, but don't trust this guy, just because a realtor sends you to him. Remember, they work together.
The realtor needs the sale, and the banker needs to make loans. They are both salesmen, and salesmen are people who make commissions, based on a particular price. This goes for loan officers, just the same as it goes for a realtor or a car salesman. That used car salesman makes more if you pay more, and the mortgage banker makes more, based on how high your interest rate is.
When I worked in the mortgage business as a full-time loan officer and sales manager, the average customer was far more concerned with the costs of completing the loan and the final monthly payment than with the interest rate on the money they were borrowing. This is one of the biggest mistakes home buyers and people refinancing make in completing a home loan.
Unfortunately, most Americans live from one payday to the next, barely paying the bills, so all they're concerned with is what the monthly payment will be and if it will fit their budget. Bankers feed off of this, as it becomes easy to simply fit a loan into a payment schedule, ignoring interest rate, altogether. In fact, most people make it easy on the mortgage broker, asking more questions about payments than about interest rates.
The unsuspecting borrower will say, "I can't pay more than $1,000 per month." The cunning loan officer will feast on this person, like a starving man at a Thanksgiving dinner. Remember, bankers and mortgage brokers keep secrets, advising in ways that appear to save you money but really cost you thousands in the long run.
Let's assume the previously-mentioned person needs $100,000 to purchase a home. An unscrupulous mortgage broker, looking to make as much money as possible on the borrower will find out how much the taxes and insurance will be on the property. Let's assume they are $230, which will be added to the person's monthly mortgage payment. Let's also assume that the market bears an interest rate of 6% for a 30-year fixed rate mortgage (more on terms later). Now, the mortgage broker says to the borrower who can only afford $1,000 monthly, "What if I get you into your house for less than $900, including taxes and insurance? Can we do the loan today?"
This person, dying for his chance at the American Dream, is going to jump at this, thinking the mortgage broker is his new best friend and ignoring the interest rate on the loan, altogether. What the broker, trying to steal every possible cent from this one deal, has done is sold the borrower a $100,000 loan at an interest rate of 7%, which creates a principal and interest payment of $665.30 monthly. Combine this with $230 in tax and insurance escrows for a monthly mortgage payment of $895.30, almost $105 less than what the borrower said he could afford - a pretty nice savings, the borrower will think.
Think about it; if you said you could afford no more than $1,000 per month, and the person, in whom you placed your trust, told you your payment would be $895, you'd probably be pretty excited, huh? What has really happened, though, is the mortgage broker has done the borrower, his valued customer, a great disservice. Why, you may wonder. Because the market for this model bears an interest rate of 6%, and we're assuming the borrower has good credit. The loan officer could have offered the far better 6% rate, which would create a payment of $829.
This is $66 less than the borrower's payment at 7%. Also, the 7% rate will cost the borrower an extra $792 each year ($66 times 12 months). That is nearly $4,000 over five years! All this, just so the mortgage broker could pocket a few hundred dollars more on this one deal. If the loan amount was much higher, you could lose tens of thousands of dollars in just a few years.
So, what is the big secret? Simply put: bankers and mortgage brokers do not always offer the best possible interest rate, because they make money, when you get a higher interest rate than the market bears! So, be careful of this old trick. Tell your mortgage professional that you want the Par rate. This is the best rate the lender is willing to offer on a given day, without charging a premium. In other words, you could get a better rate, but you’d have to pay to get it. Now, if you are caught off guard and sold a rate that is greater than Par, your payment will be bigger and the loan officer will make extra money. Don’t let it happen.
Check out more great loan information now at Direct Lending Solutions
Article Source:
http://EzineArticles.com/?expert=Mark_Barnes
http://EzineArticles.com/?Mortgage-Refinance-Treachery:-Avoid-Mortgage-Bankers-and-Brokers-Biggest-Trick---The-Sales-Pitch&id=13653
Friday, June 22, 2007
What is a Pay Option ARM? Are they for me?
First thing I want to say is... BE CAREFUL about a Pay Option ARM!
How do you know if that mortgage is a Pay Option ARM? Very simple, the rate is extremely low or the payment is extremely low.
If you watch TV or listen to radio, you hear or see ads (too many ads) about mortgages with monthly payment very low on a $150,000 mortgage. Payment like $435 a month and you are told you can save up to 60% or 65% on your monthly payment. Those companies will tell you: “Why pay $1,000 a month on a $150,000 mortgage while you can pay $435 a month?” I know why, I’ll tell you soon!
Or, they will offer you a 1.5% mortgage rate on your next mortgage!
First thing, let me explain what those offers are. They are legitimate offers but they don’t suit everybody.
I will keep it simple and I won’t go into micro details. They will charge you Prime Rate plus a specific percentage. That rate will change every month or every six months depending on your option. A Pay Option ARM offers you 4 ways to pay your mortgage every month:
1- 15 year Fixed: Your mortgage is amortized on 15 years. You pay principle and interest.
2- 30 year Fixed: Your mortgage is amortized on 30 years. You pay principle and interest.
3- Interest Only: You will have the option to pay interest only without principal.
4- Minimum Payment: Your minimum payment is the lowest payment you can do. That would be the $435 a month. You don’t pay any principal but the worse part is you don’t even cover the interest and that creates a problem. Every month, the bank will add the difference to what you owe. Basically, every month you owe more than what you borrow. It is called negative amortization. Some bank will even let you go up to 115% of the value of your house. You will owe more than the value of your house. I smell foreclosure!
Those programs are excellent if you like to flip houses. You buy a house for $150,000, you fix it in 6 months and you sell it back for $225,000. Even if you have to pay a little bit more after 6 months, it doesn’t matter you make good profits since you got the house and fixed it for $435 a month.
Pay Option ARM are not offered in every state. Some states won’t allow it unless you are federally charted.
Many Mortgage companies will use that tactic to get you to call in so they can offer you something else.
Once again, ask questions! Read your papers!
Enjoy!
How do you know if that mortgage is a Pay Option ARM? Very simple, the rate is extremely low or the payment is extremely low.
If you watch TV or listen to radio, you hear or see ads (too many ads) about mortgages with monthly payment very low on a $150,000 mortgage. Payment like $435 a month and you are told you can save up to 60% or 65% on your monthly payment. Those companies will tell you: “Why pay $1,000 a month on a $150,000 mortgage while you can pay $435 a month?” I know why, I’ll tell you soon!
Or, they will offer you a 1.5% mortgage rate on your next mortgage!
First thing, let me explain what those offers are. They are legitimate offers but they don’t suit everybody.
I will keep it simple and I won’t go into micro details. They will charge you Prime Rate plus a specific percentage. That rate will change every month or every six months depending on your option. A Pay Option ARM offers you 4 ways to pay your mortgage every month:
1- 15 year Fixed: Your mortgage is amortized on 15 years. You pay principle and interest.
2- 30 year Fixed: Your mortgage is amortized on 30 years. You pay principle and interest.
3- Interest Only: You will have the option to pay interest only without principal.
4- Minimum Payment: Your minimum payment is the lowest payment you can do. That would be the $435 a month. You don’t pay any principal but the worse part is you don’t even cover the interest and that creates a problem. Every month, the bank will add the difference to what you owe. Basically, every month you owe more than what you borrow. It is called negative amortization. Some bank will even let you go up to 115% of the value of your house. You will owe more than the value of your house. I smell foreclosure!
Those programs are excellent if you like to flip houses. You buy a house for $150,000, you fix it in 6 months and you sell it back for $225,000. Even if you have to pay a little bit more after 6 months, it doesn’t matter you make good profits since you got the house and fixed it for $435 a month.
Pay Option ARM are not offered in every state. Some states won’t allow it unless you are federally charted.
Many Mortgage companies will use that tactic to get you to call in so they can offer you something else.
Once again, ask questions! Read your papers!
Enjoy!
Thursday, June 21, 2007
Good news on Mortgage Rates!!!
I was checking this morning and the mortgage rates went down a little bit! A 30 year fixed mortgage is at 6.29% according to BankRate.com!
Enjoy!
Enjoy!
Monday, June 18, 2007
How many different mortgages are available to me?
Let's say that so many types of mortgages are available right now! What are they? They all start from some basic mortgages and then each bank upgrades them to look more appealing to the customer. Some underwriter will change the mid FICO score to 580 instead of 600 and call it "The American family Mortgage" etc...
Here are the basic mortgages available to purchase a house or to refinance:
1- 30 year fixed: Fixed rate for 30 years and the house if yours. Some banks will let you do 25 and/or 20 year mortgage;
2- 15 year fixed: Fixed 15 year. Some banks will give you a better rate than a 30, sometimes a 0.25% cheaper. Yes it does make a difference on 15 years.
Those might be available Interest Only if your FICO score qualifies. But be careful! As we know it some house markets lost a lot in last year or two and if you were into a Interest Only (I/O) then you might not be able to refinance since the value of your house is now less than what you owe. That means your loan to Value is over 100% and most of the banks don't like it. The I/O is sometimes available for 5 or 10 years, that means you have to start paying principle after that period. The I/O could be good if you owe let's say $100,000 on a $200,000 mortgage (30 year fixed at 6.5%) and you are having a bad year financially, you could save your house! Here's an example:
$200,000 Mortgage 30 year fixed at 6.5%
Monthly Payment: $1264.10
If you refinance $100,000 at 7.5% your monthly payment will be : $625.00 per month. If you have to do this and you do have a few bucks a month, put it on your principal directly!
3- ARM: Adjustable Rate Mortgage, 2-3-5 year fixed and then it goes adjustable. That is a killer if you ask me. If you have a choice, don't do it! Once you go adjustable, your rate can go up 1% to 2% and move every 6 months! That is why the foreclosure rate is so high right now!
4- Pay Option Arm: It is a program many companies uses to get your business. You saw or heard commercials like "1.5% on your next refinance, we can do it!!!". Be careful!
That program offers you 4 ways to pay monthly but the interest rate may change monthly and your payment will change also:
A) Minimum payment, in this case 1.5%. What you need to understand is that the difference in the interest between 1.5% and your current rate will be added to your principal. It is call Negative Amortization! That means every year, you will owe more. Not good!
B) Pay Interest Only
C) 30 Year fixed
D) 15 Year fixed
To me it is primary good for someone buying a house to flip it. You will be fixing that house for 6 months and you will resale it and make a profit. During those 6 months, you will pay the minimum payment and with the profit, you will pay back your mortgage and the negative amortization.
5- The Home Equity Loan: You just borrow some money on your equity to fix the house or pay some debts.
These are the 5 basic mortgages!
Enjoy!
Here are the basic mortgages available to purchase a house or to refinance:
1- 30 year fixed: Fixed rate for 30 years and the house if yours. Some banks will let you do 25 and/or 20 year mortgage;
2- 15 year fixed: Fixed 15 year. Some banks will give you a better rate than a 30, sometimes a 0.25% cheaper. Yes it does make a difference on 15 years.
Those might be available Interest Only if your FICO score qualifies. But be careful! As we know it some house markets lost a lot in last year or two and if you were into a Interest Only (I/O) then you might not be able to refinance since the value of your house is now less than what you owe. That means your loan to Value is over 100% and most of the banks don't like it. The I/O is sometimes available for 5 or 10 years, that means you have to start paying principle after that period. The I/O could be good if you owe let's say $100,000 on a $200,000 mortgage (30 year fixed at 6.5%) and you are having a bad year financially, you could save your house! Here's an example:
$200,000 Mortgage 30 year fixed at 6.5%
Monthly Payment: $1264.10
If you refinance $100,000 at 7.5% your monthly payment will be : $625.00 per month. If you have to do this and you do have a few bucks a month, put it on your principal directly!
3- ARM: Adjustable Rate Mortgage, 2-3-5 year fixed and then it goes adjustable. That is a killer if you ask me. If you have a choice, don't do it! Once you go adjustable, your rate can go up 1% to 2% and move every 6 months! That is why the foreclosure rate is so high right now!
4- Pay Option Arm: It is a program many companies uses to get your business. You saw or heard commercials like "1.5% on your next refinance, we can do it!!!". Be careful!
That program offers you 4 ways to pay monthly but the interest rate may change monthly and your payment will change also:
A) Minimum payment, in this case 1.5%. What you need to understand is that the difference in the interest between 1.5% and your current rate will be added to your principal. It is call Negative Amortization! That means every year, you will owe more. Not good!
B) Pay Interest Only
C) 30 Year fixed
D) 15 Year fixed
To me it is primary good for someone buying a house to flip it. You will be fixing that house for 6 months and you will resale it and make a profit. During those 6 months, you will pay the minimum payment and with the profit, you will pay back your mortgage and the negative amortization.
5- The Home Equity Loan: You just borrow some money on your equity to fix the house or pay some debts.
These are the 5 basic mortgages!
Enjoy!
Thursday, June 14, 2007
Why the Debt to Income ratio (DTI) is important when you refinance your mortgage?
When applying for a home loan (mortgage), there are multiple qualifying factors considered such as the debt to income ratio (DTI).
In other words, the ratio of what comes in and what goes out. What comes in are your incomes and/or revenues. What goes out are all your revolving accounts, mortgages, car loans etc on you credit report.
Basically the calculation is done this way:
Monthly income before taxes: $4250
Credit card minimum payment: $850
Car loan: $375
The new mortgage payment: $1550
Taxes and Insurance: $175
Total out: $2950
Expenses / incomes = $2950/$4250= 0.69
In this case, your expenses are too high and your income is too low.... This is not GOOD! Some banks (mostly subprime banks) will let you go up to 55% or so. Most Prime banks will like it a lot lower than that. Even if you have great FICO score, the DTI might bring you from a Prime Bank to a Sub-prime Bank just because your DTI is too high. Once again, ask questions to your loan officer. If they put you into a sub-prime bank, they might charge you more points.
What you need to do in this case (and TELL your loan officer about this) if you refinance, you get some extra cash out, you pay a few credit cards and automatically it brings your ratio down. But you need to have equity in the house to do it or you will not be able to refinance using the regular channels. There are other options but they are costly!
If we wanted to be more complicated there are the front and the back but we don't need to go there for now.
Enjoy!
In other words, the ratio of what comes in and what goes out. What comes in are your incomes and/or revenues. What goes out are all your revolving accounts, mortgages, car loans etc on you credit report.
Basically the calculation is done this way:
Monthly income before taxes: $4250
Credit card minimum payment: $850
Car loan: $375
The new mortgage payment: $1550
Taxes and Insurance: $175
Total out: $2950
Expenses / incomes = $2950/$4250= 0.69
In this case, your expenses are too high and your income is too low.... This is not GOOD! Some banks (mostly subprime banks) will let you go up to 55% or so. Most Prime banks will like it a lot lower than that. Even if you have great FICO score, the DTI might bring you from a Prime Bank to a Sub-prime Bank just because your DTI is too high. Once again, ask questions to your loan officer. If they put you into a sub-prime bank, they might charge you more points.
What you need to do in this case (and TELL your loan officer about this) if you refinance, you get some extra cash out, you pay a few credit cards and automatically it brings your ratio down. But you need to have equity in the house to do it or you will not be able to refinance using the regular channels. There are other options but they are costly!
If we wanted to be more complicated there are the front and the back but we don't need to go there for now.
Enjoy!
Tuesday, June 12, 2007
What is coming up for you in my Mortgage NEWS?
Here's what I'm preparing for you in the next couple of days...
Why the Debt to Income ratio is important?
What are the different kind of mortgage?
What is Pay Option ARM?
Why do I need an appraisal?
Why do I have to pay for a closing agent?
What should I understand when I look at a Good Faith Estimate?
What should be my last spot checks when I'm closing my mortgage?
The questions your loan officer doesn't want you to ask...
Enjoy!
Why the Debt to Income ratio is important?
What are the different kind of mortgage?
What is Pay Option ARM?
Why do I need an appraisal?
Why do I have to pay for a closing agent?
What should I understand when I look at a Good Faith Estimate?
What should be my last spot checks when I'm closing my mortgage?
The questions your loan officer doesn't want you to ask...
Enjoy!
Friday, June 8, 2007
Piggyback to increase your credit score to get the best Mortgage Rate!
I watched CNN last night and Paula was talking about piggyback to increase your credit score... It looks wrong to me but at the same time it lookls very appealing for some that needs a better FICO score to get a better mortgage rate.
Piggyback is simple, you find a very trusty person to add you on one of their credit card (you don't get the credit card) and every month when that trusty person pays the credit card, your credit score increase.
Some people call it fraud but so far by law it is not! I can give a credit card to anyone I know if I trust them...
Anyway, it is something to know and to follow up!
Don't forget, a better FICO score = a Good Mortgage Rate = Lower monthly payment on your refinance!
Enjoy!
Piggyback is simple, you find a very trusty person to add you on one of their credit card (you don't get the credit card) and every month when that trusty person pays the credit card, your credit score increase.
Some people call it fraud but so far by law it is not! I can give a credit card to anyone I know if I trust them...
Anyway, it is something to know and to follow up!
Don't forget, a better FICO score = a Good Mortgage Rate = Lower monthly payment on your refinance!
Enjoy!
Wednesday, June 6, 2007
Should I buy discount points on my next refinance?
Before you decide if you will buy some discount points on your next refinance, please do the math!
You have to decide how long you are willing to keep the mortgage. It is a very simple calculation. If you use 2 points to buy the rate down on a $200,000 mortgage, it will coast you $4,000 in discount points (REAL discount points, be careful and read your Good Faith Estimate!).
Let me show you if your rate goes from 6.5% to 6% with 2 discount points:
Monthly payment on principal and interest for a $200,000 mortgage loan (30 year Fixed) at 6.5%: $1,264.14
Monthly payment on principal and interest for a $200,000 mortgage loan (30 year Fixed) at 6%: $1,199.10
A difference of about $65 a month. Now take $4,000 and divide it by $65. It will take you 61.54 months (over 5 years) to get your money back and get even (not including the other fees you will pay).
Once again, please take the time to read your Good Faith Estimate (GFE). If your loan officer gives you number over the phone, make sure you ask for your GFE. Make sure you read every line of your GFE and ASK questions. Did I mention to ask questions?
Now it is time for you to get a pen an paper (OK, your computer) and do the math and make sure your numbers fit your goals (You must have some goals if you are looking at a refinance?). By the way, you should not buy the rate down on any Adjustable Rate Mortgage (ARM)! A very simple reason, if your rate goes up 1 to 2% after the fixed period then you will want to refinance and get a fixed rate.
Enjoy!
You have to decide how long you are willing to keep the mortgage. It is a very simple calculation. If you use 2 points to buy the rate down on a $200,000 mortgage, it will coast you $4,000 in discount points (REAL discount points, be careful and read your Good Faith Estimate!).
Let me show you if your rate goes from 6.5% to 6% with 2 discount points:
Monthly payment on principal and interest for a $200,000 mortgage loan (30 year Fixed) at 6.5%: $1,264.14
Monthly payment on principal and interest for a $200,000 mortgage loan (30 year Fixed) at 6%: $1,199.10
A difference of about $65 a month. Now take $4,000 and divide it by $65. It will take you 61.54 months (over 5 years) to get your money back and get even (not including the other fees you will pay).
Once again, please take the time to read your Good Faith Estimate (GFE). If your loan officer gives you number over the phone, make sure you ask for your GFE. Make sure you read every line of your GFE and ASK questions. Did I mention to ask questions?
Now it is time for you to get a pen an paper (OK, your computer) and do the math and make sure your numbers fit your goals (You must have some goals if you are looking at a refinance?). By the way, you should not buy the rate down on any Adjustable Rate Mortgage (ARM)! A very simple reason, if your rate goes up 1 to 2% after the fixed period then you will want to refinance and get a fixed rate.
Enjoy!
Monday, June 4, 2007
Mortgage Glossary...
One of my friend asked me the other day if there was a good site on the Net where he can find a glossary of all words used in the mortgage business.
Here's a great site: US Department of Housing and Urban Development (HUD)
You will find every definition you need! Have look after you spoke with a loan officer or your bank!
Enjoy!
Here's a great site: US Department of Housing and Urban Development (HUD)
You will find every definition you need! Have look after you spoke with a loan officer or your bank!
Enjoy!
Friday, June 1, 2007
The importance of your credit scores?
It might look like I'm repeating myself a lot (might be the age) but you need to understand how important is your credit score for a new Mortgage or a refinance.
You need to stay on top with your credit score.
You have 3 different credit scores:
1- Equifax
P.O. Box 740256
Atlanta, GA 30374
(800)-685-1111
Web site: www.equifax.com
2- Transunion
P.O. Box 2000
Chester, PA 19022
(800) 888-4213
Web site: www.transunion.com
3- Experian
PO Box 2002
Allen, TX 75013
(888) 397-3742
Web site: www.experian.com
Mortgage companies use the middle score, it means not the smaller one and not the bigger one!
Many sites offer you to monitor your credit score or check with your bank.
Here's what each bureau looks into to give you a FICO score:
35% - Your Payment History
30% - Amounts You Owe
15% - Length of Your Credit History
10% - Types of Credit Used
10% - New Credit
They all use a different way to calculate your score, this is why you can have one score at 704 but another one at 621.
Also, not all companies report your information to the 3 credit bureaus!
Enjoy!
You need to stay on top with your credit score.
You have 3 different credit scores:
1- Equifax
P.O. Box 740256
Atlanta, GA 30374
(800)-685-1111
Web site: www.equifax.com
2- Transunion
P.O. Box 2000
Chester, PA 19022
(800) 888-4213
Web site: www.transunion.com
3- Experian
PO Box 2002
Allen, TX 75013
(888) 397-3742
Web site: www.experian.com
Mortgage companies use the middle score, it means not the smaller one and not the bigger one!
Many sites offer you to monitor your credit score or check with your bank.
Here's what each bureau looks into to give you a FICO score:
35% - Your Payment History
30% - Amounts You Owe
15% - Length of Your Credit History
10% - Types of Credit Used
10% - New Credit
They all use a different way to calculate your score, this is why you can have one score at 704 but another one at 621.
Also, not all companies report your information to the 3 credit bureaus!
Enjoy!
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