Thursday, September 29, 2011

PV Brokers Residential | Palos Verdes Real Estate Mortgage Update

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Palos Verdes Real Estate
Good News: Interest Rates Will Remain Low
3.5 % Down Payments and Jumbo Loans Available
 

This is a great time to be looking for a new home. Historically low mortgage interest rates will remain low for the near future. Those low interest rates keep home purchases affordable, which is good news for buyers and sellers. With the August United States' debt ceiling crisis behind us, many people are starting to become more confident about buying or selling their homes.

Interest Rates
In early August, the Federal Reserve pledged to maintain historical low interest rates for another one to two years. Most likely, when the Fed's pledge ends, interest rates will have to increase. However, we don't anticipate a significant increase in interest rates until 2013 or later.

Down Payments
Even though underwriting for home loans has tightened up over the past several years and buyers are now required to put down larger down payments and have higher credit scores, the Federal Housing Administration, or FHA, still offers mortgages with a 3.5 percent down payment.

Expiring High Mortgage Balance Loan Limits
As a result of the 2008 mortgage crisis, loan limits were increased to allow more borrowers to secure conforming loans. On the first of October 2011, these temporary limits expired, and more buyers in higher-priced markets will need jumbo loans that will carry tighter qualifying requirements (i.e. credit scores) and slightly higher interest rates.

Although many banks stopped or significantly tightened lending underwriting for jumbo loan products when the housing crisis hit, they are now back in the market and filling the void created by the expiration of the higher loans balance. That's good news for buyers needing jumbo loans and sellers of higher-priced properties.

Conclusion
The days of reckless lending and then the market's pendulum swing to overly conservative lending practices are gone. The good news is that we are now back to sensible underwriting. Even though we have tougher qualifying requirements - larger down payments and higher credit scores - banks still want to provide mortgages, even at historically low interest rates. Call your broker for more information when planning to buy, sell or refinance your home.

 

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PV Brokers Palos Verdes Real Estate provides residential real estate services for the Los Angeles County South Bay communities of Palos Verdes Estates, Palos Verdes Peninsula, Rancho Palos Verdes, Rolling Hills Estates, Rolling Hills, Redondo Beach, Hermosa Beach, Manhattan Beach, Torrance and San Pedro. As a boutique Realty, our agents and brokers are committed to giving our clients specialized service and attention.

 

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Thursday, September 15, 2011

Is it Time to Lock In Your Mortgage? | PV Brokers Residential Real Estate

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Is the timing right to lock in your mortgage rate?

In a rate lock, lenders are typically obligated to offer a home loan at an agreed-upon rate regardless of whether mortgage rates have changed between the time of the loan approval and the closing date.

When consumers find a great mortgage rate, they typically choose to lock it in for a specified period of time. Todd Dal Porto, a national sales executive with Bank of America Home Loans, says most lenders offer a loan lock period of 30, 45, 60 or 90 days.

If you’re shopping for a home loan, when is the best time to lock your mortgage rate?

“The time to lock in a loan depends completely on individual circumstances, so borrowers should work closely with their loan officer to make the decision,” Dal Porto says.

When to lock?

The earliest point at which a borrower can lock in a loan is after the initial loan approval. However, many borrowers wait until they have found a home to purchase.

“The vast majority of homebuyers wait until they have a ratified contract to lock in their loan,” says Brent Mendelson, a senior loan officer with Monarch Mortgage in Rockville, Md.

Borrowers typically wait because they don’t know how many days it will take to find a home and have an offer accepted. They worry that by locking in too early, they may miss the opporunity for a better rate before they complete a purchase or get stuck




paying extra to extend the lock once it expires.

In addition, a longer rate lock is more costly. For example, a borrower who chooses a 30-day lock on a loan may pay a 4.875 percent rate and zero points, while a 60-day lock might cost 1 point (equal to 1 percent of the loan) or a slightly higher rate with a half-point, Dal Porto says.

Brad Blackwell, executive vice president and national retail sales manager of Wells Fargo Home Mortgage, generally urges clients to wait for an accepted offer before locking a loan.

“If you don’t have a ratified contract, you don’t want to lock in your rate and have the clock ticking while you start searching for a home,” says Blackwell.

However, Mendelson emphasizes that each borrower’s individual circumstances dictate the best time to lock.

“There’s no perfect time to lock a loan, but a lender or mortgage broker can check with the loan processor to get a feel for how long it will take to have the loan go through underwriting,” Mendelson says.

Dal Porto agrees that individual borrower circumstances influence the best time to lock.

For example, Dal Porto says borrowers concerned that even a small increase in the interest rate could cause a budget problem should “lean toward locking in the rate as early as possible, especially in a market with increasing mortgage rates.”

Choosing when to lock the loan for refinance is easier. The settlement date for a refinance loan is driven only by the lender, while a purchase loan typically has a settlement date that depends on the seller as well as the buyer.

“Refinancing right now typically takes a little longer than a purchase mortgage, so we recommend a lock of 60 or even 90 days,” Dal Porto says. “We have a lot of refinancing applications and the loan process is more complex. Now, every loan requires full documentation.”

Dal Porto says the industry average for a purchase loan is 45 days from application to closing, while a refinance averages 60 to 90 days.

Working with borrowers

Although the term “rate lock” sounds unyielding, many lenders are willing to be flexible with borrowers when circumstances change.

For example, many lenders will negotiate with the borrower if rates fall to prevent the borrower from opting to go to another lender.

Blackwell says lenders sometimes charge a small fee to float down the rate.

What if the lock expires before closing? Lenders may offer an extension on the lock.

Mendelson says lender charges for a lock extension vary. Normally, the fee is 0.25 of a point for every 15-day extension. Another option is to relock at the current mortgage rate.

Dal Porto says many lenders will negotiate the fee for extending the lock, particularly if the settlement is delayed due to a distressed property needing additional repairs.

Borrowers should also remember that a rate lock is not guaranteed in all circumstances. Borrowers can lose a rate lock if their circumstances change – such as a shift in their credit score or in their debt-to-income ratio – before settlement.

If you have any question with regards to Mortgage rates programs, please don't hesitate to contact us.  We can answer most general questions regarding mortgages or can refer you to a specialist in mortgage brokerage.

PV Brokers provides residential real estate services for the Los Angeles County South Bay communities of Palos Verdes Estates, Palos Verdes Peninsula, Rancho Palos Verdes, Rolling Hills Estates, Rolling Hills, Redondo Beach, Hermosa Beach, Manhattan Beach, Torrance and San Pedro. As a boutique Realty, our Palos Verdes Real Estate agents and brokers are committed to giving our clients specialized service and attention.