Liz Maldonado's MortgageSmart Blog

noreply@blogger.com (Liz Maldonado) — Sat, 09 Jul 2011 01:36:00 +0000

Mortgage Rates Dropping. There's a silver lining in the poor June jobs report. Mortgage rates are sinking.

noreply@blogger.com (Liz Maldonado) — Wed, 08 Jun 2011 01:55:00 +0000

Financial News Icons Say Now Is the Time to BUY! http://ping.fm/BobfZ

noreply@blogger.com (Liz Maldonado) — Tue, 17 May 2011 17:13:00 +0000

Mortgage Rates better, don't miss your chance to refi or purchase. http://bit.ly/mpX6ax

Mortgage Rates are improving - Don't miss the boat this time around!

noreply@blogger.com (Liz Maldonado) — Tue, 17 May 2011 17:07:00 +0000

Mortgage markets have improved through 5 of the last 6 weeks, dropping conforming and FHA mortgage rates to their lowest levels of the year, and re-fanning the flames of last year's Refi Boom.

But refinancing your mortgage is about more than just the rate. It's about the costs, too. Quickly, high costs can negate the benefits of a refi to lower rate.

What Are Mortgage Closing Costs?

Mortgage "closing costs" are fees paid to start a new mortgage; costs that wouldn't be incurred if the mortgage never happened.

Closing costs can be grouped into two categories, labeled as:

1. Origination/lender charges

2. Third-party fees

"Origination Charges" are fees paid to the lender at closing; part of the lender's bottom-line. Origination charges are often broken-down by line item and named things like underwriting fee, application fee and processing fee, for example.

Don't get hung up on the semantics or nomenclature, though. Treat Origination Charges as a lump-sum figure. If it's listed in the Origination Charges section on your Good Faith Estimate, it's paid to the lender and that's all that matters.

Different from Origination Charges are "Third-Party Fees". Third-Party Fees are fees paid to parties other than the lender.

Third-party fees include the costs of appraisals, credit reports, settlement fees and government taxes. In general, they should usually be ignored when comparing mortgage offers to each other. This is because third-party fees tend to be fixed-fee line items; they're 100% identical no matter which lender with which you choose to work.

Also, note that your Good Faith Estimate will include line-items such as Escrow Reserves and Per Diem Interest. These are not closing costs because they're costs that would be incurred whether you gave the new mortgage or not. Escrow and per diem are "prepaid items" and don't figure into a closing cost discussion.

Mortgage Rates Are Falling; Closing Costs Are Not

Bankrate.com's annual closing cost survey shows that typical mortgage closing costs are higher by 37 percent nationwide.

That's a big (and costly) jump -- especially in high-closing cost state like Texas. The good part, though, is that closing costs can be negotiable, in some respects, and when mortgage rates are falling, it's pretty easy to beat the bank.

Instead of paying closing costs yourself, ask your lender to pay them on your behalf. It's called a "zero-cost mortgage".

Here's how a zero-cost mortgage works:

• You're eligible for a certain mortgage rate. Let's say 5.000%.

• Your closing costs are $3,741, the national average.

• You willingly accept a rate of 5.250%, higher than for what you're eligible

• In exchange for you paying more mortgage interest each month, the lender agrees to pay your closing costs for you.

So, a zero-cost mortgage is exactly what it sounds like -- a mortgage for which you pay nothing. Loan sizes don't increase and nothing is "rolled in" to your balance.

The downside to a zero-cost mortgage is that your monthly payment will be higher, but usually it's by a negligible amount relative to the sum of closing costs waived at the time of closing.

Here's a rough guide to how much mortgage rates increase on zero-cost loans (and depending on your state):

• Less than $100,000 : Add 0.75% to the market rate for "zero-cost"

• $100,000-250,000 : Add 0.50% to the market rate for "zero-cost"

• $250,000-400,000 : Add 0.25% to the market rate for "zero-cost"

• More than $400,000 : Add 0.125% to the market rate for "zero-cost"

Zero-cost mortgages can be an excellent strategy in a falling interest rate environment. Zero-cost loans eliminate sunk costs and offer an immediate payback on your investment (of zero).

Apply For A Zero-Cost Mortgage For Instant Savings

When the future of mortgage rates is uncertain, going zero-cost is a sure thing but not every bank offers zero-cost mortgages.

If you'd like to see the math on a zero-cost mortgage, click here to get an online rate quote. I'm happy to show you your options.

noreply@blogger.com (Liz Maldonado) — Fri, 15 Apr 2011 16:04:00 +0000

Is it curtains for the 30-year mortgage?
If the government stops subsidizing mortgages.http://budurl.com/49ee

noreply@blogger.com (Liz Maldonado) — Fri, 15 Apr 2011 01:26:00 +0000

Fannie released HomePath new incentive. 3.5% of buyers closing costs. Must close by 6-30-11. http://www.homepath.com/incentive/index.html

noreply@blogger.com (Liz Maldonado) — Wed, 06 Apr 2011 18:44:00 +0000

Real estate: It's time to buy again? http://budurl.com/4ml2

noreply@blogger.com (Liz Maldonado) — Mon, 14 Mar 2011 17:42:00 +0000

Question of Day!

1. Have you ever owned a stock that went to zero?
2. Have you ever owned a home or piece of land that went to zero?
3. Now that you've thought about it, which do you feel safer owning going forward?

noreply@blogger.com (Liz Maldonado) — Thu, 10 Mar 2011 15:16:00 +0000

For Buyers:The Financial Opportunity of a Lifetime? http://ping.fm/d4RZi

noreply@blogger.com (Liz Maldonado) — Wed, 09 Mar 2011 17:04:00 +0000

FHA Alert: Monthly MI going up to 1.15 after April 18th. UFMIP stays the same at 1. Don't wait to make your offer!

noreply@blogger.com (Liz Maldonado) — Wed, 09 Mar 2011 16:33:00 +0000

The FHA Energy Efficient Mortgage is one of the most under utilized and effective FHA programs. Interested in the details, send me an email.

noreply@blogger.com (Liz Maldonado) — Tue, 08 Mar 2011 15:24:00 +0000

For Buyers:The Financial Opportunity of a Lifetime? http://ping.fm/pskYX

noreply@blogger.com (Liz Maldonado) — Mon, 07 Mar 2011 23:03:00 +0000

Bank of America BLOCKS TBWS Daily Show from Loan Officers http://ping.fm/hMMSI

noreply@blogger.com (Liz Maldonado) — Sat, 12 Feb 2011 21:44:00 +0000

The Cost of Waiting for Prices to Fall http://ping.fm/Edipq

noreply@blogger.com (Liz Maldonado) — Sat, 12 Feb 2011 21:42:00 +0000

The Cost of Waiting for Prices to Fall http://ping.fm/4Eefb

noreply@blogger.com (Liz Maldonado) — Sat, 12 Feb 2011 21:42:00 +0000

The Cost of Waiting for Prices to Fall http://ping.fm/gILD0

Contractors in California ..

noreply@blogger.com (Liz Maldonado) — Thu, 27 Jan 2011 21:32:00 +0000

Did you know the maximum down payment for a contractor in California is either 10% or $1000, which ever one is less? Any contractor who tells you they need 50% upfront for materials is a fraud.

Homeowners Claiming Mortgage Interest Told Not To File!

noreply@blogger.com (Liz Maldonado) — Tue, 18 Jan 2011 18:19:00 +0000

The IRS is open for business, so to speak, but not everyone is permitted to file their taxes just yet. This is because Congress enacted tax law changes during the last two weeks of 2010, and the Internal Revenue Service hasn't had time to update its systems just yet.

As a result, 3 specific taxpayer types are barred from filing tax returns until mid- to late-February, or until such time as the IRS says its systems are ready.

Those 3 groups are:

Taxpayers itemizing deductions via Schedule A. People claiming mortgage interest, charitable donations, and/or state and local taxes on their federal returns can't file yet.
Taxpayers claiming the Higher Education Tuition and Fees deduction. If you plan to submit Form 8917 to the IRS, therefore, you must wait to file.
Taxpayers claiming the Educator Expense Deduction. This applies to school teachers from K-12 with out-of-pocket classroom expenditures.

If you're a homeowner, therefore, it's likely you're on delay. The IRS will let you prepare your tax returns -- you just can't file them. And along with the changes, the IRS is recommend that all taxpayers use the e-File system to ensure accurate tax returns and faster tax refunds. One way to e-File is to prepare your taxes online.

Companies like TurboTax will actually let you file your federal taxes online -- free.

noreply@blogger.com (Liz Maldonado) — Sat, 15 Jan 2011 00:29:00 +0000

Mortgage Rates: Varying Degrees of Opportunity Presented-In the world of mortgage rates there are varying degr..http://tinyurl.com/4cs6lj6

Why Pay Points?

noreply@blogger.com (Liz Maldonado) — Fri, 14 Jan 2011 19:14:00 +0000

When people ask whether to pay up-front "points" on a mortgage loan, it brings to mind an old motor oil ad. A mechanic is holding some worn engine parts and telling us why we should opt for the premium lubricant rather than Brand X.

"You can pay me now," he says, "or you can pay me later."

The same principle applies to the question about points. You can "buy" a lower interest rate today by paying a point or two (one or two percent of the loan amount), also known as an origination fee ("pay me now"). Or you can avoid the points today and accept a higher rate ("pay me later"). Unlike the motor oil question, this one has no obvious answer.

The following enlightened view comes from Jack M. Guttentag ("The Mortgage Professor"):

"Paying points can be viewed as an investment that yields a return that rises the longer you stay in your house. The return consists of the saving in monthly payment resulting from the lower interest rate, plus the lower loan balance in the month the loan is paid in full. This return can be compared to the return on other investments available to you over a similar time horizon."

Consider two offers for a $100,000 loan. Loan A has a lower interest rate of five percent, but you have to pay one point (or $1,000) to get that rate. Loan B has a higher rate of six percent with no points. Calculating your real return on that $1,000 investment depends on additional factors such as your tax bracket, but, assuming you stay in the home for 30 years, the annual rate of return on your $1,000 investment is better than 60 percent even after taxes. In this case the one-point fee is a tremendous investment.

The math is complicated, but the general conclusion is a no-brainer, especially when you use a mortgage payment calculator. With Loan B at six percent interest, the monthly payments come to $599. With Loan A at five percent, they are $536. Think of the $63 monthly savings as the "return" on your $1,000 investment. Now try to think of another way to make $63 every month for 30 years by investing $1,000 up front.

This example is an illustration, and usually the advantages aren't so stark. And, had you needed to relocate and left the house after a year, your $1,000 "investment" would have been a loser. But you get the idea. When considering points, think of them as an investment and then run the numbers.

If you'd like me to run some numbers for you, please do not hesitate to email me or call at 818-378-8669.

noreply@blogger.com (Liz Maldonado) — Thu, 13 Jan 2011 17:55:00 +0000

Buy On The Dip because rates are climbing. Drops in rates like we are seeing today is your signal to lock-not to double-down.
http://ping.fm/2C6AK

Worried about your credit score while shopping for a mortgage?

noreply@blogger.com (Liz Maldonado) — Wed, 12 Jan 2011 18:16:00 +0000

You're shopping for a mortgage and your lender wants to pull your credit. Only, you don't want her to pull your credit because you're worried it will damage your FICO. No need to worry .. The credit bureaus say it plainly -- your credit scores won't drop when your lender pulls your credit.

Credit Inquiries Are A Formal Process

A "credit inquiry" is a formal request to review a person's credit report. Credit inquires are grouped with other traits into a credit-scoring category called "New Credit". New Credit represents a tiny 10 percent a person's complete credit score.

On the scale of 300-850, therefore, credit inquiries represent just a portion of complete category that accounts for a maximum of 85 FICO points. Mathematically, your credit score can't drop more than that.

Credit inquiries come in many flavors, but the bureaus isolate four types as being "a search for new credit".

A credit check for a mortgage loan
A credit check for an auto loan
A credit check for a credit card application
A credit check for a store credit card, or consumer loan

These four types are singled out because, in each case, the initial credit inquiry is requested for the specific purpose of taking on more debt. Extra debt increases the probability of credit default and credit scores drop as a result.

Even then, though, the risk of default varies by credit type.

All things equal, credit card applications harm your credit score much more than an application for a home loan.

A Mortgage Inquiry Lowers Your FICO By 5 Points

As compared to the other credit scoring elements, Credit Inquiries is a relative nothing.

In the official FICO scoring model, Payment History and Credit Utilization account for 65% of a score, combined, and the amount of time during which you've had credit to your name accounts for 15%. These three areas are over-weighted because the bureaus are more concerned with what you've already done with your credit versus what you might do with more of it.

Your credit past is the best clue to your credit future.

It's one of two reasons why it's okay to give your social security number to as many lenders as you want. The impact of a credit inquiry is minuscule as compared to your history as a Model Credit Citizen.

A mortgage credit inquiry is estimated to lower a credit score by just 5 points. Unfortunately, we'll never know for sure because the very act of examining the credit score causes it to move.

Shop Multiple Lenders, Take A Single "Ding" On Credit
The second reason you should shop around with lenders is that -- unlike applying for multiple credit cards -- applying for multiple mortgages won't ding you for multiple, consumer-initiated inquiries.

Talk to as many lenders as you want in a 14-day time frame; have your credit checked as often as you'd like; compare rates and fees. All of the inquiries will be lumped into a single application.

It's good for you and it's good for the bureaus. Your credit scores stay high and TransUnion, Equifax and Experian collect more fees from the banks.

Advice From The Credit Bureaus On Getting Low Rates

To promote rate shopping and to lessen The Fear of Credit Inquiry, the people behind the FICO brand spell out for you the best way to get the best mortgage rates possible:

If you want the best rate, you should "shop around" for it
Limit rate shopping to 14-day time span to keep your credit scores high
Mortgage lenders need your FICO to give accurate rate quotes so give up your social security number

Metaphorically, not letting your lender see your FICO is like not letting your doctor check your blood pressure. You'll get a diagnosis when the appointment is over -- it just might not be the right one.

Start Your Mortgage Rate Shopping With A Free Rate Quote

Your credit scores can mean the difference between a 4.25 percent and a 5.25 percent mortgage rate; a conforming mortgage and an FHA mortgage; an underwriting approval and an underwriting denial.

You can't evaluate your options without a formal credit check. Especially with loan-level pricing adjustments affecting everyone with less than 30% equity, regardless of credit score.

If you are curious and are thinking of starting the process, or have questions please email me or call me at 818-378-8669.

noreply@blogger.com (Liz Maldonado) — Tue, 11 Jan 2011 18:04:00 +0000

Tuesday’s bond market has opened in negative territory .. mortgage rates higher by approximately .125 of a discount point. http://ping.fm/Kjdjc

noreply@blogger.com (Liz Maldonado) — Tue, 04 Jan 2011 23:38:00 +0000

For anyone waiting for mortgage rates to inch lower, the bond market faces a major hurdle on Friday, Jan 7, 2011 when the December Employment Situation Report is released. http://ping.fm/Gc5UX

Liz Maldonado's MortgageSmart Blog: Waiting for Mortgage Rates to go down?

noreply@blogger.com (Liz Maldonado) — Tue, 04 Jan 2011 22:58:00 +0000

Liz Maldonado's MortgageSmart Blog: Waiting for Mortgage Rates to go down?