What’s Happening With Interest Rates?

rising-interest-rates-291x500With the American economy still sluggish and a disappointing employment report, why have interest rates been rising?

Good question. The answer has to do with the European bond market. After a year and a half of all time lows, it has reversed its course; consequently, investors are quickly selling their bond market holdings, which forces prices lower and interest rates higher. The U.S. rates are inter-connected with European rates, so this has pushed mortgage rates back up to the 4% to 4.25% range for the 30-year fixed rate. The 15-year fix rates are in the 3.25% to 3.375% range, so don’t look for anything that starts with a two.

Is this movement temporary and will rates drop by to record lows? Friday we got a brief reprieve, but rates were back up Monday morning. No one can predict the future. Right now, rates are volatile and one day can make a difference of an eighth of a percent (.125%).

If you are risk adverse, the safest move is to lock in your rate. If you are refinancing and not under time pressure, then you have the luxury of floating rather than locking to see what happens. Last Friday, for example, we saw a dip in rates, but it lasted only the day. It could happen again–no one knows.

Please note that interest rates quoted are for top tier credit and at least 20 percent down on a single family residence. Factors such as your credit score, down payment, property type (condo, co-op, manufactured home), and region of the U.S. all affect the credit score.

5 Things To Know About Locking In Your Interest Rate

Rate lockWhen purchasing a home or refinancing your mortgage,  locking in your interest rate is an important step. This is your security against rates going up while your loan is in process. A rate lock is a three-way agreement between the borrower, lender, and the investor that says the loan will be done at a specific interest rate, for a specific cost (or credit), on a specific property.

Here are five important things to know about locking in your rate:

1) You, the borrower, are in charge of choosing when to lock in your rate, and you must instruct your loan officer when to do that. Neither the loan officer nor the lending institution chooses the day for your lock.

2) You need to call your loan officer to request the rate lock. Do not leave something of this importance to the uncertainty of email or text, because you have no way of knowing if your loan officer will see your message before the rate you want changes. Interest rates can change midday when the market is volatile.

3) Within 48 hours of locking in your rate, you will receive a confirmation of the rate lock. If you do not receive confirmation in writing  (email is fine), then do not assume your rate is locked. Call your loan officer again to verify and ask for a written statement.

4) If interest rates go down after your rate is locked, your rate is still locked. This is not a one-way contract where you are protected if rates go up (and the lender takes the loss), but the reverse is not true. That said, if rates drop by at least half a percent (0.5%), then lenders will often compromise with a decrease of .25%.

5) Your rate lock includes an expiration date. If your loan does not close and fund by that date, then you have two choices.

First, you can buy a rate lock extension. It is a per day fee, and you need to ask your loan officer what their company’s policy is. This option makes sense if rates are higher.

Second, you can take the new, higher rate. If rates are the same or lower than when you locked, the lender will extend your current rate at no charge.

Note: You cannot get a lower rate by letting your lock run out and then grabbing the new, lower rate.

Another note: If the rate lock expires due to the fault of the lender, you do not get to demand a free extension. You have no recourse. That is just the way it works. This is one reason why I offer my clients a Peace of Mind Guarantee that includes closing on time (or the lender pays)*, best pricing, and timely updates.

If you have any additional questions about locking in an interest rate, let me know. The comment button is at the top of this post.

* This is for my mortgage clients. I am licensed in CA and WA states. For details on the Peace of Mind Guarantee, simply ask and I will email you the official flyer.

equal housing logoMLO License # 1284134

Available at most fine booksellers.

Available at most fine booksellers.

 

Buying a Home or Refinancing in WA State?

Are you (or someone you know) planning to buy a home in WA state? Would you like to refinance your existing loan?

If so, I have good news for you. After looking at local banks, credit unions, and other lenders, I have joined VITEK Mortgage Group, a lender with a stellar reputation. As a mortgage loan officer, I can shop the wholesale divisions of lenders such as Wells Fargo, Chase, Ditech, Caliber, and more — as well as VITEK’s own line of loan products.

It is important to me to get the very best loan at the very best pricing available for my clients. Having the ability to shop without being limited to only one lender’s loan products gives me the ability to do that. If I worked for a bank or credit union, I would be limited to their loan products only — and when it comes to a mortgage, it is NOT a “one size fits all” situation.

If you want a seasoned professional who wrote the book on mortgage rip-offs and money savers to do your loan shopping for you, then I am your gal. Not only that, but I go another step in helping you get a good title and escrow company, because now in 2015, too many title and escrow companies are piling on the junk fees and over-charges.

As a loan originator for VITEK Mortgage Group, I can extend their Peace of Mind Guarantee:

* Guaranteed On-Time Closing
* Guaranteed Real-Time Status Updates
* Guaranteed Best Value

VITEK stands for Value, Integrity, Teamwork, Excellence, Knowledge.

That is pretty much everything you and I want in a company.

I am licensed in WA state and will soon be licensed in CA as well. (I have met all the requirements for California and am awaiting on the Dept. of Business Oversight for their acknowledgement.)

Please let me know how I can help you with your home purchase or refinance.

NMLS License # 1284134

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Is a Low Credit Score Locking You Out?

Locked out“Can I buy a house with bad credit on my report?” She felt like she was being unfairly profiled and locked out of buying a house. She knew she could afford the mortgage payment; after all, the rent she was paying was higher than that.

Maybe her credit was inaccurately placing her in a category in which she did not belong. Maybe it is happening to you or someone you know. Here is what landlords say about people with low or no credit score.

“It is a fact that lower credit score individuals engage in riskier behaviors… Lighting off fireworks in a high-density environment, fighting, speeding, being drunk in public, DWI, driving without insurance, dealing and using drugs, etc. would be examples of risky behaviors that we would want to avoid.”
~No Nonsense Landlord

Does that describe you or the person you know who has a lower score than average? Maybe not, but that is what “they” are thinking about you when they see your credit score or see that you have no score.

A gentleman, a construction worker, wrote to me after his credit score took a dive and he wanted to restore his good name. It all started when a truck ran over his foot. He couldn’t work and medical bills piled up and slipped into collections faster than his insurance company took care of business. He was neither irresponsible nor a deadbeat. He didn’t light fireworks off in crowds nor did he drive drunk or deal drugs.

FicoScoresYou don’t need perfect credit to buy a house. A score of 580 will qualify you for an FHA loan with some lenders, and a score of 620 will qualify you for a conventional, VA, or USDA loan. However, you will have to take a higher interest rate and make a higher payment with those scores. I think it is worth taking a few months to raise your score first.

You will save yourself a lot of money if your score is at least 620 rather than 580 for the FHA loan.
Similarly, if your score is at least 740 rather than 620 for the conventional loan.

Your credit score is something you control. It is a number, and when you understand what it takes to get that number, you can make it happen. There is no need to be a victim of the credit system.

“No one can get bad credit off of their report” is a false statement. People — lawyers, credit repair specialists, and individual citizens — do get bad credit off of their reports every day of the year that the credit bureaus are open.

If you’d like to know how this is done, if you’d like to boost your credit score and qualify for a GOOD home loan, then take a look at Repair Your Credit Like the Pros: How credit attorneys and certified consultants legally delete your bad credit and restore your good name. It contains insider information from some of the top credit specialists on the planet. Loan officers and journalists tell you it’s impossible… and all the while, these people are quietly raising their scores.

If you have questions, I am happy to help the best I can. Your comments are welcome. Thanks for stopping by.

Amerisave Fined $19.3 Million For False Advertising and More

Bait-and-Switch is a serious crime.

Bait-and-Switch is a serious crime.

It was bad enough seeing the impossibly low interest rates posted by Amerisave, but when they showed up on reputable websites like Bankrate and Mortgage Professor, it was downright disturbing. Why would they let a liar post on their websites? Didn’t they value their reputations? I sent an email asking and received a very unsatisfactory reply. It seemed like the god of greed was ruling over decency.

I heard from several good folks who had read Mortgage Rip-Offs and Money Savers that they were promised a low interest rate and then locked in at a higher rate. And the fees! The huge, ridiculous fees! It was like old fashioned highway robbery.

But justice finally caught up with the scheme that took advantage of borrowers in all 50 states. The Consumer amerisave logoFinance Protection Bureau, the watchdog organization set up by the White House, busted Amerisave, its affiliate Noro Appraisal Management Company, and the owner, Patrick Markert.

The Result:

* $14.8 million must be paid back to consumers who were sucked in and taken advantage of.

* $6 million in fines and penalties for the companies and Mr. Markert.

* An order to stop advertising rates that are not actually available.

* An order to follow the disclosure law by revealing the relationship between the lender and the appraisal company.

* An order to stop collecting money from borrowers before providing a Good Faith Estimate (which is illegal).

The Lesson for Everyone

Listen to your gut instinct and common sense. When someone claims to have an interest rate that is so much lower than every other lender in America, you know something is amiss. Choose the honest, ethical loan officer over the smooth-talker who refuses to answer your questions directly. Never give your credit card to pay for a lender fee or appraisal before you have received a Good Faith Estimate.

To read more about this news story, see the CFPB post here.

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Are You Aware of Your Rights (under the new Mortgage Law)?

Dodd Frank ActAs a home buyer or home owner refinancing, you have new rights that did not exist before the Mortgage Disclosure Improvement Act.

Here are five facts you have the right to know (and that might surprise you):

1) The lender is required to provide you with the Good Faith Estimate and other disclosures within three business days of receiving your full and complete application.

You sign the disclosures to verify that you have received them and to indicate your intention to proceed with the loan. The disclosures are not a contract; therefore, they do not obligate either you nor the lender to close the loan.

2) The lender cannot allow you to sign final loan documents before you have had at least seven days to review the initial disclosures.

This means no more super fast three-day or five-day closings as sometimes happened when a home buyer’s first lender let them down and the closing date was upon them. The new law puts a speed limit on closing your loan.

3) The lender cannot ask you to pay for the appraisal nor can they require you to pay an application fee or any other lender fee before they give you the Good Faith Estimate. The only fee a lender may collect prior to disclosure is the cost of the credit report (which is usually about $25 to $35).

If a loan officer asks for your credit card information or for a check at the time of taking an application, this is a violation of the law and punishable by a fine of $5,000 and/or one year in prison (for each instance).

4) The lender must provide you with the appraisal report as soon as possible/feasible after it comes in from the appraiser — but it must be at least three days before closing.

This three-day rule could further delay a closing and might cause hardship to the home buyer; therefore, the home buyer has the right to waive the three-day requirement in the “case of an emergency.”

5) If the Annual Percentage Rate changes by a miniscule 0.125% or more between the initial disclosure (or an updated disclosure) and the final APR, the lender must give you a new disclosure and wait another three long days before you can sign final loan documents. This applies even if the change is in your favor!

(This is a change to the APR, not to the interest rate on your Loan Note. The APR is your Note rate plus some of the closing costs rolled in and amortized over the life of the loan. Therefore, a change to the APR is less significant than a change would be to your actual interest rate on the Note.)

So if the loan officer over-estimated one of the closing costs that are calculated into the APR — or if the loan officer was able to do you a favor and get a lower interest rate than expected — then you are penalized by three days as a result of this good news.

If your closing date is fast approaching, this is a problem. Let’s say you need to move out of your rental by the last Friday of the month and that is your closing date. It is the day before signing, and you cannot tolerate any delay. What happens if the fees come in lower so that you get an APR that is 0.125% less than the original disclosure?

You have the choice of not taking advantage of the savings or not closings on time, thanks to this new law passed by politicians who have never actually worked in the mortgage industry.

There is more to the new lending laws, of course, but I think that is enough frustration for one blog post.

I don’t like to end with bad news, so now for some wonderful news: Very soon I will make an announcement that says I am accepting clients for loans again. Watch for that news, coming soon!

 

Junk Fees From Title, Escrow, and Attorneys

Junk-FeeLast two posts, I wrote about lender junk fees. Now as promised, today is about the unnecessary, bogus, and redundant fees that some settlement agents are tacking on. (The settlement agent is the neutral third party that handles the closing of the loan: signing and notarizing final documents, getting the Deed to the county to record, handling the disbursement of funds.)

The settlement agent can be a title company rep., an escrow agent (common in the West), or an attorney (common in the East). It is your choice, as a buyer or as a home owner refinancing.

Over the past seven years or so, more and more settlement agents are adding junk fees to their closing costs. It seems like they’ve said, “Hey, look at all these lender junk fees! Let’s see how I can pad my own profits by adding a few of my own.”

Then once one well-known company adds bogus fees, their competition sees it as a green light to jump on the bandwagon. It’s disgusting the way greed grows like a toxic black fungus.

Fortunately, there are good, ethical closing agents who do not charge extra for their services. I encourage you to choose these agents and help clean up the business by starving out the greedy ones. It is YOUR choice which settlement closing agent you use. (Per the Real Estate Settlement Procedures Act, Section 9)

To help you, here is my personal list of fee pet peeves.

 Unnecessary or Bogus Fees I Don’t Want to See From a Closing Agent (alphabetical order)

* Archive or filing fee (You shouldn’t pay extra for their filing system. That is part of being in business.)

* Courier or messenger fee (Getting the signed documents back to the lender is part of what the closing agent’s large fee should cover. Moreover, FedEx and UPS, the services most agents use now, charges about $40 to overnight documents, so they shouldn’t show a padded fee of $60 – $100, as they often do.)

* Document preparation fee (Preparing the closing Settlement Statement and a handful of other boiler plate forms is what their main big fee covers. Adding this is redundant and borders on dishonest, in my opinion.)

* Email or edoc fee (They don’t need to charge you $50 to $150 to receive the documents from the lender by email. That is part of their normal job.)

* Wire fee (While banks do charge a nominal fee to wire funds, none of the good settlement agents tack on this fee for their clients. They figure it is part of what their big fee covers.)

Fees that are not junk are title insurance, title search, endorsements, loan tie-in, or other reasonable and customary title fees.

Here is a copy from an actual closing statement from a loan in California, $625,000 loan:

Closing/Escrow Fee ESTIMATED $ 1,300.00
Notary Fee  $ 125.00
Lender’s Title Insurance ESTIMATED  $ 799.00
Endorsements $ 75.00
Courier / Messenger  $ 65.00
E-Doc Fee  $ 75.00
Loan Tie In Fee  $ 150.00

My Comments: Evidently, this escrow settlement agent doesn’t think $1,300 is enough to make for their services. They are adding a $65 courier/messenger fee and a $75 email fee. If I were that borrower, I would either insist that the extra $140 be waived or I would choose a different closing agent. In addition, if I did not require a notary to come out to me, because I would sign in the agent’s office during normal business hours, I would ask for the notary fee to be waived.

If you see another garbage fee, please send me a message via my Ask a Question page or comment on this post at the top right. If you would like to recommend or warn about a good or bad closing agent, please let me know, because I am keeping a list.

Let’s all do our part to clean up the mortgage industry — including the closing side — by giving our business to the good, ethical agents.

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Mortgage Fees: What are the Junk Fees?

Take out the garbage! Rotten fees are stinking up the place.

Take out the garbage! Rotten fees are stinking up the place.

Junk fees and garbage fees are the unnecessary fees that some banks and mortgage lenders charge to pad their profits. These fees are either nonsense, redundant, or padded costs. You want to avoid wasting your hard-earned cash and say NO to those fees. As promised, here is updated information on lender fees for 2015.

Current Law About Mortgage Fees

The Dodd-Frank Act (passed after the release of Mortgage Rip-Offs and Money Savers) says two things you should know:

1) Lenders cannot increase their fees from the time of the Good Faith Estimate to the closing HUD Settlement Statement.

2) All of the lender fees in the upfront Cost Estimate or Fees Worksheet must be added together and posted on one line in the Good Faith Estimate: “Our origination charge” (page 2, #1).

What This Means to You

1) You no longer have to worry about a lender adding a big junk fee at closing, as used to happen. This also means you don’t need to ask the loan officer for a written guarantee on the lender fees, because that is now built into the law.

2) Your main concern when it comes to lender fees is the total cost of those fees. Are they fair? Are they reasonable? Are they too high? To help you answer those questions, you can dig deeper into what those fees are.

Common Lender Fees

Lenders might call their fee an administration fee, commitment fee, processing fee, underwriting fee, or simply, origination fee. As long as it is a fair and competitive amount for your region of the country, it doesn’t matter which of those fee names they use. (East and West Coast states are higher priced than the South and Midwest.)

Another common fee–one that I do not like–is the application fee. Some lenders used to charge an upfront app. fee of $150 to $400 for taking the loan application. Thankfully, it is now illegal to collect that money before your loan has been pre-approved. However, I still do not like the idea of lenders taking an application fee before closing, because if the loan does not go through for some reason, the application fee is the one they do not have to refund to you. One of the biggest national banks charges an application fee for this very reason. Sneaky, right?

Pure Junk!

In my professional opinion, a lender should not charge the following fees: (To my way of thinking, these services should already be covered by the administrative, processing, or underwriting fees.)

* Ancillary Fee
* Courier
* Document Preparation Fee
* Doc Fulfillment Fee
* Document Review Fee
* Email or e-doc Fee
* Funding Fee
* Misc. Fee
* Photo Review Fee
* Satisfaction Fee
* Storage Fee
* Warehouse Fee

There is a lot more to say about lender fees, which is why there is an entire chapter on this topic in Mortgage Rip-Offs and Money Savers and in Homebuyers Beware.

Next blog post, I will discuss junk fees that title companies, escrow companies, and even attorneys who provide settlement/closing services are charging nowadays. I invite you to subscribe to this blog so you don’t miss out on any important information.

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Mortgage Lender Fees

Money in hand  “What are your lender fees?” I asked. A simple enough question, one every loan officer should know the answer to. Then to clarify, I added, “I am interested in the fees that go to your company only, not third party costs such as appraisal, credit report, flood certification, and such.”

“Is this for a purchase loan or a refinance?” the loan officer replied. Clearly, he was skirting my question, because lender fees do not change based on the loan type.

Nevertheless, I thought I’d humor him. “The fees for a purchase loan,” I replied.

“And what loan amount are you interested in?”

I could see where he was going. He was trying to segue into taking a loan application. I wanted to be honest, so I said, “I am not looking for a loan at this time; I just want to know what your company’s lender fees are.”

“I don’t do surveys,” he said.

“So you won’t tell me what your lender fees are?” I asked.

“If you know anything about mortgages, you would know that there is a lot more to it than rates and fees.”

“I think it’s odd that you won’t tell me your lender fees, but that’s okay. I will call someone in your other office and find out,” I said. Then I bid him a good day and hung up.

My husband had been listening in. He said, “They must have very high fees if he won’t tell you what they are.”

True.

I called another lender and asked the same question. This time the loan officer did a verbal dance. Three minutes later, he still hadn’t told me what his lender fees were.

I called another lender and the lady hung up on me. I called right back in case it was an accidental drop, but she let my call go to voice mail.

Twenty minutes of phone dialing later, I came upon a loan officer who said simply, “Our lender fees are $995.”

How refreshing! An upfront, honest loan officer. That is one I would do business with.

Even now with the huge stack of new lending laws that are supposed to protect the borrower and make everything transparent, it’s not so easy finding a loan officer you can trust, who will answer your questions in a forthright manner.

As I explain in Mortgage Rip-Offs and Money Savers, the best way to compare loan offers is to ask for a written estimate. We used to ask for a Good Faith Estimate, but now, thanks to the Dodd-Frank Act, we have to ask for a Cost Estimate or Fees Estimate. That worksheet is what used to be called the Good Faith Estimate, and it is more specific and clearer than the new GFE designed by the feds.

Don’t worry about getting a GFE when you’re shopping for a loan, because Dodd-Frank states that their (convoluted) GFE is to be given after the loan officer has received six pieces of information:

1) Property address

2) Property value

3) Loan amount

4) Borrower’s name

5) Social security number (for pulling credit)

6) Borrower’s income documentation

How can you determine whether or not you like the lender’s pricing if you cannot see what their pricing is? Especially since the majority of them won’t give you a verbal quote over the phone? You do not know the property address when you are starting your house search.

The answer is, skip the GFE and ask for a Cost Estimate. Some lenders call it an Initial Fees Worksheet, a Loan Worksheet, or whatever. We don’t care what title they put at the top of the page. All we care about are the numbers on the estimate.

Here is an actual example from a lender in Texas, in the same order as listed on their Itemized Fee Worksheet:

Document Preparation Fee $200
Administration Fee $1,340
Origination Points .5% $1,599.60

Adjusted Origination Charges (Total) $3,139.60

The junk fee is quite obvious. It is the $200 doc prep fee. The lender is charging $1,340 to process and underwrite the loan, so why do they need to add another $200? And, why are they listing it separately? Is it because they don’t want to scare away borrowers with a $1,530 fee?

The .5% origination point is for the interest rate that is slightly below par rate. The borrower can choose to eliminate the half point by taking an interest rate that is an eighth (.125%) higher if desired. So that is not a junk fee.

My next blog post will be more about junk fees. There are still plenty of nonsense fees out there — and they are being charged by both lenders and closing agents. I cordially invite you to subscribe to this blog if you’d like more  information on this topic. As always, thanks for stopping by.

What is Prepaid Interest?

home owner 2On your cost estimate worksheet or Good Faith Estimate, you see “Prepaid Interest” for several hundred dollars.

What is this? Is it a junk fee? Do I really have to pay that? These are questions people have been asking me.

Prepaid interest is not a fee. It is actually a partial mortgage payment. I will explain.

If you close your loan on June 15, then you will own your home from June 16 to June 30. For those 15 days of ownership, the lender does not send you a bill for a partial mortgage payment; instead, it is included in your closing costs.

If you close on June 30, you will have only one day of prepaid interest, because you will own your home for only one day in June.

If you close June 5, you will have 25 days of prepaid interest.

Prepaid interest is calculated to be exactly fair. You pay for the days you own your new home from the date of funding to the end of the month.

Before you have a contract on a house, the loan officer doesn’t know which day of the month you might close; therefore, most lenders will select 15 days of prepaid interest. The most conservative lenders will select 30 days of interest, ensuring that the cost will not go up. Some lenders, in an effort to make their estimate appear cheaper than their competitors, select one or two days of prepaid interest. In this case, you will most likely see a higher charge at closing, unless you truly close at the end of the month.

Which is the Best Day to Close?

The best day to close your loan is the day you want to take ownership of the new property. For many people who are renting, the best day for them to move out of their apartment or rental house is at the end of the month. However, some people want two weeks’ lead time so they can paint and clean. In that case, taking ownership in the middle of the month works better.

Be aware that the seller might put in a clause that says closing is June 15, but occupancy is June 20. This means you will own the house on June 15 and pay the prepaid interest from that day, but you cannot move in until June 20. You are giving the sellers five days to move out and you are paying for those days for them. If you don’t like that arrangement, speak with your Realtor about the closing date matching the occupancy date.

If you know someone who could use this information, please feel free to hit the share button or pass along the website address.

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