Provided By Trulia.com
Humans have a natural tendency to portray themselves in the best possible light. When the neighborhood kid who mows the lawn wants more money, he says his rate is lower than what the other kids are charging. When he gets together with the other kids, he brags about getting paid 20 percent more for the same amount of work.
Consumer credit companies, including mortgage lenders, are no different. When they're lending you money, they like to talk about their low APR, which stands for Annual Percentage Rate. When they're "borrowing" your money (by selling you a CD at the bank, for instance) they advertise their generous APY, which stands for Average Percentage Yield.
APR is the term relevant to mortgage borrowers. But it's useful to understand both, as well as a third concept—compounding.
When you're paying a simple interest loan at a rate of, say, 12 percent per year, it's easy to calculate its effect per month. It's 1 percent. At that rate, a $10,000 debt balance increases by $100 each month or $1,200 each year.
Enter the "magic" of compounding. Einstein called it "the most powerful force in the universe."
For the lender, the magic works this way. After one month, your new balance is $10,100. At that point, the lender starts charging interest not on $10,000 but on the new balance of $10,100. After a year (if you've made no payments) your balance is $12,268. Your simple interest rate was 12 percent but your APR worked out to 12.68 percent.
In fact, for the borrower, it's worse than that. Lenders don't compound monthly—most do it daily. That's the significance of the "daily periodic rate" you see listed at the bottom of your statement. The above 12.68 percent APR becomes something like 12.74 percent. (In a periodic rate, more "periods" means more interest.)
There is more you should know about APR. InvestorWords.com defines it as "the yearly cost of a mortgage, including interest, mortgage insurance, and the origination fee (points), expressed as a percentage."
The add-ons are man-made, not mathematical constructs. But clearly, they're of interest to borrowers when cross-shopping loan rates between banks. Just be sure the same number of points is factored into both figures, or you're comparing an apple to an orange.
Hey, what about APY? Again, that's more relevant when you're the lender. Buy a 12-month CD and the bank will advertise its great Annual Percentage Yield of 1.4 percent - which sounds a little better to you than the APR, which is 1.3-something. Hence, the magic works in your favor for once.
A related note comes from the Lessons for Life Department. Given a choice, be a lender, not a borrower. Better yet, be a bank.
If you would like to learn more about borrowing, give us a call at 972-772-7000 or email us at frontdesk552@kw.com.
Showing posts with label lenders. Show all posts
Showing posts with label lenders. Show all posts
Monday, June 20, 2011
Friday, May 13, 2011
Four questions to ask before choosing a mortgage broker
Provided By Trulia
Mortgage brokers are engaged in the business of finding you the best home loan. Their true clients are the lenders, and their real "job" is to deliver good, creditworthy borrowers like you.
Mortgage brokers have encountered a formidable competitor in the past decade or so, called the Internet. Borrowers can compare loans through sites like Trulia Mortgage, eloan.com and LendingTree.com. Fill out a credit application and receive several offers. When banks compete, as the slogan says, you win.
That's a good way not only to pit lender against lender (a subject for another chapter), it's also useful keep your broker honest as well. Your job is to monitor the market. Why? Because loan rates change daily. A broker acting in sheer self-interest could bait you with one rate (possibly lower than reality), knowing you can't "lock" that rate until you complete the full application process. It's always a good practice to be skeptical and do you homework.
Why haven't I seen a rate like this elsewhere?
Ask this question only after having done some homework. A similar scenario would be a broker who advertises rates below market to get you in the door, and then lists all the fees necessary to make that rate possible — even including lofty origination fees.
What are the fees and costs associated with the interest rate you've quoted?
(Above-the-board brokers welcome questions like this.)
Fees take many forms. There are charges for your credit report, appraisal, title insurance, deed-recording, overnight deliveries, etc. For a rate quote to meaningful, it should be accompanied by a list of all related fees and costs.
Your broker must supply a Good Faith Estimate of all charges before the closing. The estimated figures aren't set in stone because "third party" costs such as title insurance premiums can change. But it's possible to know the total tab, or a figure pretty close to it, several days in advance.
Ads and other promises aside, you don't really know what you'll be paying until your rate is "locked". Brokers have been known to game this process. For example, a broker might say your rate is locked when it's not, and if rates go down before closing, he could sell you the higher rate you agreed to and pocket the difference. A broker who plays this game and loses (because rates go up) could tell you that your rate wasn't really locked — it was a misunderstanding.
If your rate truly is locked, your broker will have proof of it. Hence this line of inquiry:
May I see the lenders commitment letter that shows my rate is locked in?
Many states have started licensing brokers. This is a positive development, with potential to weed out the few bad apples remaining in the business. In the past, going into business took nothing more than a web site and a shingle. Licensing requirements will prevent scams. Still, one very basic question is always in order:
How long have you been in business?
Longevity is important--time and nature have a way of separating the wheat from the chaff. With the array of available mortgage products more complex than ever, experience is important too. Look for at least five years in the business. With that as a minimum, your broker will have seen good times as well as bad.
Are you ready to buy but need a great mortgage lender? Give us a call at 972.772.7000 or email us at frontdesk552@kw.com.
Mortgage brokers are engaged in the business of finding you the best home loan. Their true clients are the lenders, and their real "job" is to deliver good, creditworthy borrowers like you.
Mortgage brokers have encountered a formidable competitor in the past decade or so, called the Internet. Borrowers can compare loans through sites like Trulia Mortgage, eloan.com and LendingTree.com. Fill out a credit application and receive several offers. When banks compete, as the slogan says, you win.
That's a good way not only to pit lender against lender (a subject for another chapter), it's also useful keep your broker honest as well. Your job is to monitor the market. Why? Because loan rates change daily. A broker acting in sheer self-interest could bait you with one rate (possibly lower than reality), knowing you can't "lock" that rate until you complete the full application process. It's always a good practice to be skeptical and do you homework.
Why haven't I seen a rate like this elsewhere?
Ask this question only after having done some homework. A similar scenario would be a broker who advertises rates below market to get you in the door, and then lists all the fees necessary to make that rate possible — even including lofty origination fees.
What are the fees and costs associated with the interest rate you've quoted?
(Above-the-board brokers welcome questions like this.)
Fees take many forms. There are charges for your credit report, appraisal, title insurance, deed-recording, overnight deliveries, etc. For a rate quote to meaningful, it should be accompanied by a list of all related fees and costs.
Your broker must supply a Good Faith Estimate of all charges before the closing. The estimated figures aren't set in stone because "third party" costs such as title insurance premiums can change. But it's possible to know the total tab, or a figure pretty close to it, several days in advance.
Ads and other promises aside, you don't really know what you'll be paying until your rate is "locked". Brokers have been known to game this process. For example, a broker might say your rate is locked when it's not, and if rates go down before closing, he could sell you the higher rate you agreed to and pocket the difference. A broker who plays this game and loses (because rates go up) could tell you that your rate wasn't really locked — it was a misunderstanding.
If your rate truly is locked, your broker will have proof of it. Hence this line of inquiry:
May I see the lenders commitment letter that shows my rate is locked in?
Many states have started licensing brokers. This is a positive development, with potential to weed out the few bad apples remaining in the business. In the past, going into business took nothing more than a web site and a shingle. Licensing requirements will prevent scams. Still, one very basic question is always in order:
How long have you been in business?
Longevity is important--time and nature have a way of separating the wheat from the chaff. With the array of available mortgage products more complex than ever, experience is important too. Look for at least five years in the business. With that as a minimum, your broker will have seen good times as well as bad.
Are you ready to buy but need a great mortgage lender? Give us a call at 972.772.7000 or email us at frontdesk552@kw.com.
Wednesday, January 26, 2011
Types of Lenders
Provided By Yahoo! Real Estate
Today's choices include banks, mortgage brokers, home builders, and Internet lenders. Each has its advantages and disadvantages, and rates vary from lender to lender.
Typically, most lenders do not keep money on hand but instantly sell conforming loans to third parties like the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac). The most common source of home lending is a retail financial institution or credit union. They offer specific loan products and handle their own direct financing by taking consumer deposits and lending them to home buyers.
Mortgage brokers, on the other hand, act as the middleman and don't fund the loans themselves, but handle the mortgage financing for the borrower. Most earn their fees directly as a percentage from the lender and some from the borrower, or a combination of both. Since mortgage brokers have access to a wide variety of lenders they are usually on top of the latest rates, fees and lending practices.
Home builder financing is common in new developments where there is a single builder. The builder carries the construction costs until the homes are built. The builder works with a lender to set-up financing for the buyer and finances the construction costs. The buyer doesn't make mortgage payments until the property is finished.
The popularity of finding a mortgage on the Internet mortgage has grown in recent years. Many lenders offer competitive rates and the convenience of tracking your application through the approval process. Some can save you a significant amount in closing costs, since everything is automated and the time to get approved can be shortened.
Do you have questions about a new home loan? Give us a call at 972-772-7000 or email us at rockwall@kw.com.
Today's choices include banks, mortgage brokers, home builders, and Internet lenders. Each has its advantages and disadvantages, and rates vary from lender to lender.
Typically, most lenders do not keep money on hand but instantly sell conforming loans to third parties like the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac). The most common source of home lending is a retail financial institution or credit union. They offer specific loan products and handle their own direct financing by taking consumer deposits and lending them to home buyers.
Mortgage brokers, on the other hand, act as the middleman and don't fund the loans themselves, but handle the mortgage financing for the borrower. Most earn their fees directly as a percentage from the lender and some from the borrower, or a combination of both. Since mortgage brokers have access to a wide variety of lenders they are usually on top of the latest rates, fees and lending practices.
Home builder financing is common in new developments where there is a single builder. The builder carries the construction costs until the homes are built. The builder works with a lender to set-up financing for the buyer and finances the construction costs. The buyer doesn't make mortgage payments until the property is finished.
The popularity of finding a mortgage on the Internet mortgage has grown in recent years. Many lenders offer competitive rates and the convenience of tracking your application through the approval process. Some can save you a significant amount in closing costs, since everything is automated and the time to get approved can be shortened.
Do you have questions about a new home loan? Give us a call at 972-772-7000 or email us at rockwall@kw.com.
Friday, January 21, 2011
Mortgage Rates Down for Second Week
Provided By Realty Times
McLean, VA – Freddie Mac (OTC: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®). The survey results showed lower mortgage rates for both long- and short-term rates, with the 30-year reaching a four-week low.
30-year fixed-rate mortgage (FRM) averaged 4.71 percent with an average 0.8 point for the week ending January 13, 2011, down from last week when it averaged 4.77 percent. Last year at this time, the 30-year FRM averaged 5.06 percent.
15-year FRM this week averaged 4.08 percent with an average 0.7 point, down from last week when it averaged 4.13 percent. A year ago at this time, the 15-year FRM averaged 4.45 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.72 percent this week, with an average 0.7 point, down from last week when it averaged 3.75 percent. A year ago, the 5-year ARM averaged 4.32 percent.
1-year Treasury-indexed ARM averaged 3.23 percent this week with an average 0.6 point, down from last week when it averaged 3.24 percent. At this time last year, the 1-year ARM averaged 4.39 percent.
Frank Nothaft, vice president and chief economist of Freddie Mac, reports, "Bond yields drifted lower following the release of the December employment report , which was weaker than the market consensus forecast and implied that the labor market is still in a sluggish recovery. Fixed mortgage rates followed bond yields lower for a second consecutive week, bringing them to a four-week low."
"In its January 12th regional economic review, the Federal Reserve noted that activity in residential real estate and new home construction remained slow across all Districts over the last two months of 2010 due to concerns about the pace of economic recovery, especially in employment. In addition, the outlooks for residential real estate were mixed, with contacts in most Districts described as expecting continued weak conditions."
Do you have questions about mortgage rates? Give us a call at 972-772-7000 or email us at rockwall@kw.com.
McLean, VA – Freddie Mac (OTC: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®). The survey results showed lower mortgage rates for both long- and short-term rates, with the 30-year reaching a four-week low.
30-year fixed-rate mortgage (FRM) averaged 4.71 percent with an average 0.8 point for the week ending January 13, 2011, down from last week when it averaged 4.77 percent. Last year at this time, the 30-year FRM averaged 5.06 percent.
15-year FRM this week averaged 4.08 percent with an average 0.7 point, down from last week when it averaged 4.13 percent. A year ago at this time, the 15-year FRM averaged 4.45 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.72 percent this week, with an average 0.7 point, down from last week when it averaged 3.75 percent. A year ago, the 5-year ARM averaged 4.32 percent.
1-year Treasury-indexed ARM averaged 3.23 percent this week with an average 0.6 point, down from last week when it averaged 3.24 percent. At this time last year, the 1-year ARM averaged 4.39 percent.
Frank Nothaft, vice president and chief economist of Freddie Mac, reports, "Bond yields drifted lower following the release of the December employment report , which was weaker than the market consensus forecast and implied that the labor market is still in a sluggish recovery. Fixed mortgage rates followed bond yields lower for a second consecutive week, bringing them to a four-week low."
"In its January 12th regional economic review, the Federal Reserve noted that activity in residential real estate and new home construction remained slow across all Districts over the last two months of 2010 due to concerns about the pace of economic recovery, especially in employment. In addition, the outlooks for residential real estate were mixed, with contacts in most Districts described as expecting continued weak conditions."
Do you have questions about mortgage rates? Give us a call at 972-772-7000 or email us at rockwall@kw.com.
Wednesday, January 19, 2011
Tips for Appraisals
Provided By Realty Times
Appraisals allow for homeowners and buyers to establish what is fair market value of a property. In addition, an appraisal allows a lender to know how much they can safely lend.
According to The Appraisal Institute, a global membership association of professional real estate appraisers, "Appraisals are especially important because they are an objective and unbiased source of information. Unlike others involved in real estate transactions, the appraiser is an independent professional who performs a service for a fee rather than for a commission."
This process, however, can be trying and even frustrating. Recent declines in the housing markets have spawned scapegoats across the industry, including appraisers. And increased caution from lenders has slowed the buying process.
"Too many consumers in this struggling real estate market face problems with appraisals when attempting to buy or sell a home," said Appraisal Institute President Joseph C. Magdziarz, MAI, SRA. "But rather than passively endure delays in closing a sale, homeowners and buyers can take proactive steps to avoid pitfalls."
To reduce your stress during this time, consider these simple tips from the AI®.
•Understand the role of appraisals. It is neither in your interest nor the interest of your lender for you to purchase a property that is over-priced for its value.
•Make sure the lender hires a qualified appraiser (such as a designated SRA, SRPA or MAI member of the Appraisal Institute). The lowest priced appraiser does not necessarily equate with the most qualified. This is a time to get the numbers right.
•Accompany the appraiser during the inspection of the property if possible. The more active of a participant you are in the process, the more you will understand it, and be able to catch any errors.
•Request a copy of the appraisal report from the lender. Federal law requires that you receive a copy of the appraisal within 30 days.
•Examine the appraisal report and ask questions. Be sure to examine the report for errors. According to "Appraising the Appraisal: The Art of Appraisal Review," 2nd edition, common errors in appraisals include: misuse of adjustments to comparables, disregarding special financing and concessions, or miscalculation of gross living area.
•Appeal the appraisal if appropriate. Market conditions do change, especially in these economic times. If you feel that new information may change the appraisal, be sure to contact them!
•Ask the lender to order a second appraisal by a qualified and designated appraiser.
•File legitimate complaints with appropriate state board or professional appraisal organizations.
If you are selling your home and need advice call the experts at 972-772-7000 or email us at rockwall@kw.com.
Appraisals allow for homeowners and buyers to establish what is fair market value of a property. In addition, an appraisal allows a lender to know how much they can safely lend.
According to The Appraisal Institute, a global membership association of professional real estate appraisers, "Appraisals are especially important because they are an objective and unbiased source of information. Unlike others involved in real estate transactions, the appraiser is an independent professional who performs a service for a fee rather than for a commission."
This process, however, can be trying and even frustrating. Recent declines in the housing markets have spawned scapegoats across the industry, including appraisers. And increased caution from lenders has slowed the buying process.
"Too many consumers in this struggling real estate market face problems with appraisals when attempting to buy or sell a home," said Appraisal Institute President Joseph C. Magdziarz, MAI, SRA. "But rather than passively endure delays in closing a sale, homeowners and buyers can take proactive steps to avoid pitfalls."
To reduce your stress during this time, consider these simple tips from the AI®.
•Understand the role of appraisals. It is neither in your interest nor the interest of your lender for you to purchase a property that is over-priced for its value.
•Make sure the lender hires a qualified appraiser (such as a designated SRA, SRPA or MAI member of the Appraisal Institute). The lowest priced appraiser does not necessarily equate with the most qualified. This is a time to get the numbers right.
•Accompany the appraiser during the inspection of the property if possible. The more active of a participant you are in the process, the more you will understand it, and be able to catch any errors.
•Request a copy of the appraisal report from the lender. Federal law requires that you receive a copy of the appraisal within 30 days.
•Examine the appraisal report and ask questions. Be sure to examine the report for errors. According to "Appraising the Appraisal: The Art of Appraisal Review," 2nd edition, common errors in appraisals include: misuse of adjustments to comparables, disregarding special financing and concessions, or miscalculation of gross living area.
•Appeal the appraisal if appropriate. Market conditions do change, especially in these economic times. If you feel that new information may change the appraisal, be sure to contact them!
•Ask the lender to order a second appraisal by a qualified and designated appraiser.
•File legitimate complaints with appropriate state board or professional appraisal organizations.
If you are selling your home and need advice call the experts at 972-772-7000 or email us at rockwall@kw.com.
Friday, July 23, 2010
Choosing The Best Lender
Published By Yahoo! Real Estate
You're shopping for a mortgage and you've received four offers from four lenders. How do you choose? The first factor most people consider is the interest rate and other costs, but that's only the beginning. You'll also want to think about the lenders themselves, not simply the numbers they're tossing your way.
Here are five steps to follow when determining which lender is right for you:
1. Compare fees as well as interest rates
Comparing loans based on their annual percentage rate (APR) is a good place to start, but it's not enough. In the case of a mortgage, to get a more accurate breakdown of costs, ask the various lenders for a formal "good faith estimate" of all the fees you'll incur with your loan -- this is a standard form lenders must provide you that is more detailed than the overview you'll get with an offer. Also, ask about potential charges that may not appear on that list, such as prepayment penalties. You're not just comparing numbers here: determine how honest and upfront you feel the lender is being, and don't use a lender that you feel is evading your questions.
2. Consider your individual circumstances
Bigger lenders aren't necessarily better than smaller ones, especially if you have unusual circumstances. For example, some lenders specialize in loans for people with poor credit, while others may have more options for those with small down payments. If you have special borrowing needs, look for a lender with experience working with people in similar situations.
3. Look at the range of loan types available
There are more loan options available than ever before, so take advantage of all that choice. Look for a lender who offers a wide variety of loan types, from conventional fixed-rate and adjustable-rate to newer ones such as hybrid ARMs and option ARMs. Your lender should be able to match you with a mortgage that's right for your financial situation and risk tolerance.
4. Evaluate the level of customer service
When you're comparing offers, ask each lender about their policy regarding locking in their quoted rates and see whether there is a fee. Also, ask them to amend one of the terms (such as a payment cap) and see how willingly they agree. You're looking for flexibility and responsiveness. And also note how well they listen to you. If you ask for a 30-year fixed-rate mortgage, they ought to present that as an option, not push you toward something different, such as an interest-only loan. If you're not getting good service from a lender who is competing for your business, you're not likely to get it after you've agreed to work with them.
5. Check out the lender's reputation
Word of mouth is important in every business, including the loan market. If you've never worked with a particular lender, you'll want to find out the opinion of people who have.
Do you need help with your home mortgage? Give us a call at 972-772-7000 or email us at rockwall@kw.com.
You're shopping for a mortgage and you've received four offers from four lenders. How do you choose? The first factor most people consider is the interest rate and other costs, but that's only the beginning. You'll also want to think about the lenders themselves, not simply the numbers they're tossing your way.
Here are five steps to follow when determining which lender is right for you:
1. Compare fees as well as interest rates
Comparing loans based on their annual percentage rate (APR) is a good place to start, but it's not enough. In the case of a mortgage, to get a more accurate breakdown of costs, ask the various lenders for a formal "good faith estimate" of all the fees you'll incur with your loan -- this is a standard form lenders must provide you that is more detailed than the overview you'll get with an offer. Also, ask about potential charges that may not appear on that list, such as prepayment penalties. You're not just comparing numbers here: determine how honest and upfront you feel the lender is being, and don't use a lender that you feel is evading your questions.
2. Consider your individual circumstances
Bigger lenders aren't necessarily better than smaller ones, especially if you have unusual circumstances. For example, some lenders specialize in loans for people with poor credit, while others may have more options for those with small down payments. If you have special borrowing needs, look for a lender with experience working with people in similar situations.
3. Look at the range of loan types available
There are more loan options available than ever before, so take advantage of all that choice. Look for a lender who offers a wide variety of loan types, from conventional fixed-rate and adjustable-rate to newer ones such as hybrid ARMs and option ARMs. Your lender should be able to match you with a mortgage that's right for your financial situation and risk tolerance.
4. Evaluate the level of customer service
When you're comparing offers, ask each lender about their policy regarding locking in their quoted rates and see whether there is a fee. Also, ask them to amend one of the terms (such as a payment cap) and see how willingly they agree. You're looking for flexibility and responsiveness. And also note how well they listen to you. If you ask for a 30-year fixed-rate mortgage, they ought to present that as an option, not push you toward something different, such as an interest-only loan. If you're not getting good service from a lender who is competing for your business, you're not likely to get it after you've agreed to work with them.
5. Check out the lender's reputation
Word of mouth is important in every business, including the loan market. If you've never worked with a particular lender, you'll want to find out the opinion of people who have.
Do you need help with your home mortgage? Give us a call at 972-772-7000 or email us at rockwall@kw.com.
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