Category Archive : Mortgage

Getting a Mortgage Loan in Las Vegas – Some Tips You Should Follow

According to recent reports, the fixed rate mortgage loan rates throughout the nation had hit a 40 year low, making this the perfect moment to refinance home loans for all those struggling homeowners who aren’t able to make their monthly payments on time. If you’re a resident of Las Vegas, you should be aware that the 30 year fixed rate mortgage varies from 3.85% to 4.54% in the beginning of 2012 and therefore any prospective homebuyer in Las Vegas can easily think of taking out a home mortgage loan at the present moment. If you take out a home loan that is beyond your affordability, it is most obvious that you have to go for mortgage modification or a refinance loan in the near future. Are there any tips that you may follow before taking out the right home loan in Las Vegas? Read on to know about them.

Shop around: Taking out a mortgage loan without shopping around among different lenders is a wrong decision that may lead to a chaos in the future. You should get multiple quotes from multiple companies so that you may easily be able to compare and contrast the rates and choose the best loan with the best possible terms and conditions. The interest rate and the closing cost are the two most important factors that need to be taken into consideration before choosing the loan.

Repair your credit score before applying: Whether you’re taking out a home loan in Las Vegas or anywhere, remember that the lender will certainly check your credit score before deciding the loan amount and the interest rate on the loan. Pull out a copy of your credit report so that you may know the various reasons that are dropping down your score and thereby work on it.

Check the amount you can pay down: Most mortgage lenders in Las Vegas ask for at least 20% down payment on the loan by the borrower and if you’re not able to pay down this amount, it is most obvious that the lender will make you pay Private Mortgage Insurance that will unnecessarily increase the monthly mortgage installments. Therefore, you should save enough money so as to be able to pay down the required amount on time.

Determine your debt burden: The total amount of debts that you have to pay in a single month in accordance to the income that you earn is another factor that is taken into consideration by the lender before determining the interest rate of the home loan. You should not only reduce the debt amount but also get help from a professional so as to be able to repay your high interest debts and be able to get back on track.

Organize your documents: Most often it happens that a borrower delays the entire process of taking out a loan due to his ignorance about the kind of documents that are needed by the lender in order to lend the loan. You should assemble your monthly statements, the income tax returns and the other bank statements that are necessary for the lender.

Thus, when you’re in Las Vegas and trying to take out a home mortgage loan, you should follow the tips mentioned above. Manage your finances so that you can take out the best home loan in Las Vegas and avoid opting for mortgage modification in the long run.

I am Alfred Smith from New Jersey and I am associated with several good finance community sites as guest authors and forum members. I do write articles on different genres of finance.

If you’re a first-time homebuyer, or you’re selling your current home but don’t have a lot of equity built up, saving 10 or 20% (or even 5%) of the value of your next home can seem like a tall order.  Fortunately, you may have another option.

Federal Housing Administration (FHA) to the rescue

FHA-backed mortgages still feature a 96.5% loan-to-value option, meaning that you can borrow as much as 96.5% of the value of the home you’re buying.  And, your 3.5% down payment can come from a family member or your employer (“gifted” down payments are typically not allowed by conventional lenders).

They’re called “FHA-backed mortgages” because the FHA doesn’t actually lend the money; instead, the loan is underwritten by an FHA-approved lender and insured by the FHA (so that if the borrower defaults, the FHA pays the lender).  It’s all done through what’s called the 203(b) Mortgage Insurance program.  Some key notes about it:

• You’ll pay a mortgage insurance premium, part of which is required up front and part of which you’ll pay annually.  You can  finance the upfront mortgage insurance premium into the mortgage.
• You have to meet standard FHA credit qualifications, though they’re often more relaxed than conventional mortgage qualifications.  Qualifications include not having a bankruptcy or foreclosure on your record within the last three years.
• The amount of the loan is limited and new changes to loan limits take effect October 1, 2011 (learn how the changes may affect your Las Vegas home purchase).

The upshot

The state of Nevada also has several options that may help you purchase your Las Vegas home.  The bottom line is that you might not need to squirrel away 5, 10, 15, or 20% of your next home’s value in cash.  With an FHA-backed mortgage, you can buy a home with 3.5% down – and with the help from a professional agent, you can be in your new Las Vegas home sooner than you think.

To learn about your Las Vegas down payment options, please give Shelter Realty a call at (702) 376-7379 or to view our many affordable Las Vegas homes for sale, visit www.shelterrealty.com.

Do you really love your Las Vegas home, yet are finding it harder and harder to make your mortgage payments? A home loan modification may help you keep your home by lowering your mortgage payment.

Getting your mortgage payment lowered could mean the difference between staying in your home and having to move. If you can’t make your mortgage payments and don’t get a loan modification, you’ll either have to short sale your home or the lender will foreclose.  If that happens, you’ll probably have to rent for at least a few years (both a short sale and a foreclosure will negatively impact your credit score).

So if your money is getting tight and fear that you may not be able to pay your mortgage (or if you’ve already missed mortgage payments), then you should at least consider a loan modification. Loan modifications are changes made to the terms of your mortgage such that your monthly payments are lower.

Here are three home loan modification options:

Option #1: MHAP (Making Home Affordable Program).  This is a federal program designed to help American homeowners keep their homes, by making changes to qualifying mortgages (the MHAP programs come with restrictions and you must qualify in order to participate). Under MHAP, there are five programs that you may qualify for:

1. HAMP (Home Affordable Modification Program) can lower your payments so that they are no more than 31% percent of your pre-tax income.
2. HARP (Home Affordable Refinance Program) can lower your interest rate (although refinancing fees do apply).
3. 2MP (Second Lien Modification Program) can lower the principal balance on your second mortgage (if you modify your first mortgage through HAMP).
4. HAFA (Home Affordable Foreclosure Alternatives Program) allows you to get out of your mortgage without fear of a deficiency judgment (which is when the lender comes after you for the difference between your mortgage balance and what the market value of your home). Participating lenders only have to consider you for HAFA but are not compelled to approve your short sale under this program. A successful short sale can still be negotiated outside of HAFA.
5. HHF (Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets) can help you avoid foreclosure (especially if you’re under or unemployed).

Option #2: Interest rate reduction.  Even a relatively small change in your interest rate can lower your monthly payments dramatically, often by several hundred dollars a month (depending on your loan balance and interest rate of course). That can really add up over a year, and certainly over the life of your Las Vegas home mortgage.

Option #3: Loan balance reduction.  Unfortunately, loan balance reductions (also called loan forgiveness) – when the lender actually reduces the amount you owe on your mortgage – are rare.  If you can negotiate a loan balance reduction, though, it can have the same effect on your monthly mortgage payments as an interest rate reduction (reduce them) and also help you get back to positive equity.

If you’re having trouble affording your monthly mortgage payments, and a loan modification doesn’t work, another option is a Las Vegas short sale.  At Shelter Realty you can get cost-free advice regarding possible foreclosure alternatives. If you decide to do a short sale, we have the expert help you’ll need. Call us right now at (702)376-7379 or visit www.shelterrealty.com.

What’s in a number? Your chances of getting your new Las Vegas dream home – that’s what! Your credit score can be the one thing that keeps you from owning your next home, so let’s look at how your score is determined and how you can keep (or get) your score up.

The whole point of a credit score is to offer lenders a quick and easy way to estimate the risk associated with lending you money.  If lending you money is riskier (because you’re more likely than someone else to default), the lender will charge you a higher interest rate to compensate for that higher risk (or will simply not lend to you at all).  The most commonly used credit scoring method is the FICO score.

Here are the five factors (and their relative importance) that determine your credit score:

#1: Payment history (35%). The payment history factor is fairly simple to understand: it takes into account how you’ve paid your bills.  After all, your history of debt repayment is an excellent indication of whether or not you’ll pay your future debts on time.  Payment history includes delinquencies, foreclosures, bankruptcies, as well as how many accounts were paid late, the amount(s) that were paid late, and how recent those delinquencies are.

#2: Amounts owed (30%). Almost as important as how you’ve paid your bills is the amount of debt you hold.  That’s because the more debt you hold, the riskier you’ll become – the more debt you have, the more likely it is that you’ll default on one or more of those debts.

#3: Length of credit history (15%). The longer you’ve had accounts open, the more debt repayment history there is for potential lenders to look at.  And the more on-time debt repayment history you have, the more confident your lender can be with your ability to repay your debts on time.  If you’ve just begun to establish your credit history, on the other hand, your lender has less “past behavior” to judge you on.

#4: New credit (10%). Research has shown that people who take out a lot of new credit at one time pose greater credit risks than those who have not taken out new credit lately.  The “new credit” factor incorporates, for example, the number of recently opened accounts you have in proportion to older accounts and the number of times you’ve recently applied for new credit.

#5: Types of credit used (10%). This factor considers the types of debt you have – installment debt (like a mortgage) and revolving debt (like credit cards).

Why does it matter? Your credit score will affect not only whether you’re able to qualify for a Las Vegas home mortgage, but also the rate you can get.  The following table is an example of how much less a person with a higher credit score might pay each month:

Source: MyFICO.com

On a 30-year fixed rate, $150,000 mortgage, a Las Vegas homeowner with the highest credit score would pay $150 less every month – and $54,133 less over 30 years – on their Las Vegas home than a homeowner with a fair (620-639) credit score.

At Shelter Realty, we understand numbers (like your FICO score, the price of your new home or your new zip code) and how important they are.  So call our agents today at (702) 376-7379 or visit us at www.shelterrealty.com and let us show you our numbers.

Important Announcement – If you are considering securing FHA 3.5% down financing for a home in Clark County (Las Vegas, Henderson, North Las Vegas, Boulder City), you have until October 1, 2011 fund on your loan before the loan limits drop from $400,000 to $271,050.

What this basically means is that the alternative to FHA Mortgage Loans is finding a Conventional Mortgage, which may require a much larger down payment (up to 20%), as well as higher credit scores and income requirements.

Quick Background:

When Congress passed the Economic Stimulus Act in 2008, FHA loan limits were temporarily raised to help borrowers in higher cost areas obtain financing through FHA to help offset the reduction in private financing due to the credit crunch. These Loan Limit increases were substantial in many areas of the country and were set to expire in the future. ( I wonder if Congress knew we’d have a housing bubble )

Congress passed additional legislation to extend these loan limits for the past couple of years. However, barring any Congressional action, the FHA Loan Limits are set to revert to the 2008 formula as of October 1, 2011.

Clark County FHA Loan Limits / Proposed Changes:

* Sources: Search FHA Loan Limits | May 26, 2011 – FHA Loan Limit Brief

How Will This Impact Buyers?

A few of the major benefits of an FHA Mortgage Programs:

• Liberal Credit Requirements (580-640 Fico Scores May Work)
• Lower Rates (Not hit with rate increases due to lower FICO scores – LLPA)
• 3.5% Downpayment

While there is mortgage money available… for now, Section 941 of the Dodd-Frank Act pertaining to risk retention and the Act’s definition of qualified residential mortgages (QRMs) could make it very challenging for many First-Time Home Buyers to get a loan. (Video: “Skin In The Game)

However, the difference in downpayment and higher rates may actually force the sellers who have their properties listed in the low $300,000 range to drop their prices just to compete for the FHA borrowers.

Not sure, but this theory makes sense to me, especially if we’re talking about Las Vegas Short Sales and REO’s where the banks will need to price their listings according to accurate market comps.

Buy now, or wait for the FHA loan limits to decrease, along with property values?

Tough question to answer if you’re only concerned with value, equity and other “investment” related topics that probably shouldn’t be mixed with the decision to purchase a primary residence.

And if you’re a cash investor, then this FHA loan limit decision probably won’t impact the homes in your price range of Las Vegas real estate investment deals under $145,000.

Keep in mind that 51% of residential properties purchased in Clark County last month were paid for in cash, and not secured by a mortgage loan.

Either way, the following map and list of homes for sale in Las Vegas and Henderson may give you an idea of what you could miss out on once the FHA Loan Limits in Clark County decrease.

The two main questions to ask yourself area whether you would rather pay 3.5% or 20% down, and if you’re willing to risk getting a higher rate by waiting until after October 1 to see what the market does.

* This list updates every day from the “ACTIVE” listings in the MLS. Once a property goes into contract or “Pending” status, it is automatically removed from this list.

A VA loan is often a better option than a convention mortgage for veteran and active duty military home buyers who are interested in purchasing a Las Vegas home.

With Nellis Air Force Base located near North Las Vegas, we have several VA eligible first-time homebuyers contacting Shelter Realty about taking advantage of the historically low housing prices in the valley.

Unfortunately, the national media has many buyers convinced that the only way they can qualify for a home loan is if they have perfect credit and a huge downpayment.

Over the next several weeks, I’ll be tearing apart the common myths and misunderstandings about mortgage financing in order to help shed some light on the truth about getting approved for Las Vegas mortgage.

Even though each qualifying scenario is unique and requires a full loan approval from a mortgage professional who has experience with VA financing, the following list highlights the main benefits VA loans have over conventional mortgage programs:

1.  100% Financing –

A typical convention mortgage requires an initial down payment that can range from 5% – 20% of the appraised value on a purchase.

I say “appraised value” vs “purchase price” because there are instances when a property does not appraise for the full value of a homeowner’s asking price.  At that point, the borrower would have to pay the difference between the asking price and appraised value, as well as the standard 5% – 20% down payment.

Either way, VA loans generally do not require that initial large down payment based on the standard Loan-to-Value lending guidelines that come with a conventional mortgage program.

2.  Lower Interest Rates –

Another major benefit is that VA loans have comparatively better interest rates.  In some cases, a VA loan mortgage rate can be as much as .50% lower than on a similar conventional program.

Over the course of several years, a $35 – $75 a month payment will definitely add up to a significant savings.

The process of shopping mortgage rates is the same with any program, so it’s a good idea to have a basic understanding of how the markets work if you’re concerned with comparing quotes between a few lenders.

3.  No Mortgage Insurance –

Private mortgage insurance (PMI) is generally required on conventional loans when the loan amount being borrowed is greater than 80% of the value of the property.

The Department of Veterans Affairs does have a funding fee requirement for VA loans. This funding fee can be anywhere between 0.5% to 3.3% of the loan total. However, veterans who were classified as disabled during at least 10% of their time in active duty do not have to pay the fee.

Mortgage insurance is basically in place to protect the lender in the case of payment default or foreclosure.

4.  Qualifying Guidelines –

It is also typically easier to qualify for a VA mortgage loan than a conventional mortgage, especially if you have a recent bankruptcy or foreclosure within the past four years.

There isn’t a hit to the interest rate for lower credit scores, and VA underwriters tend to give special circumstances more consideration if there is a good letter of explanation.

In addition to the benefits mentioned above, VA loans have two payment term options – Fixed or Adjustable Rate.

The difference between the two options is as follows:

• Fixed rate loans have one payment tied to the same interest rate for the entire term, which is typically 15 or 30 years.
• Adjustable rate loans start off with a set interest rate for a predetermined period of time, and then the rate may change based on the specific terms set forth on the note. Know you options, and make sure you understand which program you are choosing.

Refinancing with a VA loan also has many benefits over refinancing with a conventional loan.

Some of refinance benefits include:

• A higher refinance limit (up to 90% and some 100%) than the majority of conventional loans.
• Easier credit requirements, which often make refinancing with a VA loan simpler and less stressful.
• Help from the Department of Veterans Affairs for borrowers currently in default because of financial hardship.
• No requirement of private mortgage insurance.
• The ability to include the VA funding fee with the total amount of the refinance.

Between the tremendous savings and streamlined qualifying guidelines, any veteran who is in the  process of purchasing or refinancing a home should strongly consider using their  VA benefits.

Shelter Realty works with several qualified and experienced mortgage professionals that specialize in helping Las Vegas Veterans qualify for a VA loan.

Please feel free to contact us if you have any questions about VA approved properties or speaking with one of our trusted lenders.

Yes, it is possible to finance a luxury Las Vegas home in the beautiful Queensridge Community with as little as a 3.5% down payment, provided the purchase price is below $400,000 for FHA financing.

There is actually an opportunity to qualify with zero down financing for a slightly higher purchase price if you are eligible for a VA loan.

It’s obviously important to work with a trusted mortgage professional who understands these various local lending guidelines.

However, I find that most of my Las Vegas First-Time Home Buyers looking in the Peccole Ranch area start their real estate search for homes between $60k – $130k, when they can actually afford financing on a property in some of the more prestigious neighborhoods around the 89117 or 89145 zip codes.

While there are certainly several available listings in lower price ranges that may provide a cash flow opportunity for investors, choosing a home and neighborhood to live in involves searching with a slightly different criteria.

Queensridge, for example, is a guard-gated luxury community, which includes a full fitness center, tennis, pools, spa and is woven around the Badlands Golf Course.

With several listings in the million dollar price range, Queensridge does have a select few properties for sale that would qualify for lower down payment financing.

If you’re concerned about the investment quality or potential for future earned equity, it’s generally a wise idea to purchase a home in a neighborhood with stronger comparable values.

So, only if your personal budget and comfort level warrant it, you feel confident in your future employment security and there is a low possibility of moving in the next 5-10 years, it may be worth considering a home in the luxury Las Vegas Queensridge Community.

Since most of these listings require a scheduled appointment to preview, please feel free to contact me at any time about setting up a few viewings at your convenience @ 702-376-7379.

If your Las Vegas property is secured by a VA loan with a mortgage balance that is higher than the appraised value, and you need to sell, then you may be eligible for a special program called a VA Compromise Sale.

Basically, a VA Compromise Sale is a program similar to a short sale transaction, which is designed to help veterans sell a property with an upside down mortgage balance without taking a huge financial loss.

In any case, if you bought a home with a VA loan back when the housing market was healthy, you probably didn’t foresee the need to sell your home in the depressed housing market of today.

The need to move overseas, divorce or or a station change are a few of the reasons that would force a VA homeowner into selling a property.

Obviously, for many veteran borrowers who are facing this scenario, taking a loss on the sale of their home could result in extreme financial difficulty.

How Can A VA Compromise Sale Help Me?

If you are selling your house and receive a purchase offer for less than what you still owe on your VA loan, you can turn in an application with the Veterans Administration for a VA Compromise Sale.

In many ways, a VA Compromise Sale is similar to a short sale with another type of mortgage program.

The good news is that if you receive approval for a VA Compromise Sale, then the VA will redeem you for the difference between what you can sell your house for and what you have left on your VA loan.

To Qualify, You Must Show Proof Of:

• Financial difficulties.
• The realistic market value of your house at time of sale.
• A VA appraisal.
• Standard closing costs.
• No second lien (the VA does makes rare exceptions if the total is not significant).
• The reasons why you are selling your home.

Another important component of getting approved for a VA Compromise Sale is that the total net loss should be less than if the property was taken back by the bank through foreclosure proceedings.

So basically, if it costs more to foreclose vs “short sale” the home, then there is a greater chance of getting a VA Compromise Sale approved.

On another note, if your VA loan originated before December 31, 1989 you might have to sign a promissory note as well as enter a payment plan to redeem the VA a percentage of the compromise claim payment. This sum would end up being less than what you would owe if you did not originally have a VA loan, and the payment plan itself is formulated around what you would reasonably be able to pay.

Our Short Sale team has a proven track record of successfully negotiating with banks to help homeowners sell their properties for less than they owe on their mortgages. However, with a VA Compromise Sale, most of the negotiating process is reduced to simply filling out the proper paperwork and submitting a clean and fully completed package.

Please feel free to contact us to see if your property or unique short sale scenario might be eligible for a VA Compromise Sale.

Financing a property with no down payment is still possible for Las Vegas buyers who are eligible for a VA Mortgage Loan.

And even though we have Nellis Air Force Base located in North Las Vegas, it’s amazing to me how many local real estate agents lead their first-time home buyers to believe that they can only get qualified for a mortgage if they have high credit scores and a 20% down payment.

The truth is that taking out a VA mortgage loan on a new home purchase is fairly straightforward, relatively easier to qualify for than a conventional loan, generally comes with lower interest rates, doesn’t require mortgage insurance and can be financed up to 100% of the purchase price.

The Basic VA Loan Approval Process:

• Meet with a qualified mortgage officer to get a pre-approval letter, discuss closing costs and payment options and get a list of items needed for full loan approval.
• Find the property you would like to buy and arrange the purchase with the seller.  You’ll then sign a purchase contract conditional upon approval of a VA guaranteed loan.
• Choose your lender, present your Certificate of Eligibility, and finish the loan application. Your lender will determine your credit and submit a request to the VA to dispatch a licensed appraiser to evaluate the value of the property.
• If the determined value is acceptable to all involved parties, and the lender determines that your loan application meets the VA loan requirements, your mortgage can be approved.
• You (and co-borrower, if applicable) will then attend the loan closing and sign the related papers. The closing escrow agent or attorney will explain loan terms and requirements and monthly payment details.

Please note that when the VA receives a report of the loan, the Certificate of Eligibility is adjusted to reflect use of entitlement and is then returned to the veteran.

No further actions are required to get your COE back, which just makes the overall process easier for veterans

There are a few unique aspects and conditions to getting approved for a VA Loan, which is why it’s important to make sure your loan officer has experience closing VA Mortgage purchase transaction.

Income, assets, credit scores and appraisal requirements are a few of there areas that can cause a delay or result in a denied loan if your lender is unfamiliar with the recent VA guideline changes.

I’ll actually be writing extensively about the VA mortgage program over the next few months to help educate our Las Vegas veterans and VA eligible home buyers about some of the unique advantages available with VA loans.

How long after a short sale before I can qualify for a new home loan?

This is the main question most of our Las Vegas underwater homeowners have that are weighing their options of loan modification, short sale or foreclosure.

And, not being able to plan for future home-ownership can add more anxiety to the equation.

It’s frustrating when you struggle to do the right thing and make your mortgage payments on time, and then feel penalized by the system by being denied for new mortgage financing due to a recent short sale that was out of your control.

Obviously, if we’re going to turn this slow market around, banks will eventually have to figure out a way of providing special circumstances for qualified borrowers that may have fallen victim to a financial crisis that was largely influenced by mortgage and real estate fraud.

Well, the good news is that according to recent changes in FHA Financing Guidelines as of March, 2011, Las Vegas home buyers who are as little as one day out of a short sale on a previous property may qualify for a new mortgage.

FHA Day Out Of Short Sale Overview:

You can read the official FHA Guidelines, but the following screenshot created by a friend Scott Schang highlights the main points.

So, what this is basically stating is that unless you did a short sale simply for financial gain, there is a chance you could be eligible for a new FHA mortgage right away.

Examples Of Possible Acceptable Reasons For Short Sale:

• Living in previously owned bachelor pad condo – got married, have kids – 1 bed 1 bath doesn’t accomodate 3+ person family
• Kids move out of home – parents no longer need 4 bed 3 bath home for 2 people
• Relocating because of job
• Death in the family
• Forced sale due to a divorce

Before writing this post, I did a considerable amount of research online, as well as speaking with one of our trusted local loan officers, Brian Maier, to ensure there weren’t any hidden challenges our buyers would face if they planned on purchasing a new home immediately after doing a short sale.

Brian said it is important that the borrowers have a clean mortgage payment history for the past 12 months.

This means that there are no 30-day late mortgage payments on your credit report in the past year.

He also stated that each lender has their own qualifying criteria based on standard eligibility guidelines, such as credit, loan-to-value and debt-to-income ratios.

I certainly understand that the words “May Qualify” probably create more uncertainty than hope, but Brian did mention that some lenders were more lenient than others on what they determined “Acceptable” reasons for a short sale.

Either way, the point is that we are moving in the right direction for making mortgage financing available for “make sense” scenarios.

Our Las Vegas Short Sale expert, Paul Rowe, definitely has the knowledge and track record to help answer any of your selling questions.

If you’re interested in digging deeper about how to qualify for a new home loan please contact us for more information.

Many media outlets such as The Wall Street Journal and Bloomberg are reporting that the Obama administration is considering plans to get the government out of the mortgage business and are submitting different plans “to bring a controlled end” to the government sponsored enterprises (GSE’s). In other words, their going to pull the plug on these brain-dead behemoths.

Neither Fannie or Freddie has posted a profit in over three years and the American taxpayers have subsidized them with $150 billion dollars of support to keep them operating. Many opponents of the bailouts felt nothing could save the GSE’s and the any monies spent would be wasted. It seems they were correct.

The government is finally crying “uncle” and this is a good thing. They should stick to oversight and get out of the mortgage business. Private companies are best equipped to provide financing; however, they need to do so in a lucid manner that best serves the long term interests of their shareholders…responsible lending.

Although no final plans have been adopted, the general consensus is to phase out Fannie and Freddie in the next few years. It should be noted that the process of eliminating Fannie/Freddie will have no impact on persons who are currently doing short sales or are in the loan modification or foreclosure process. These are huge institutions and shutting them down will take 3-5 years.

If you have any questions if you are delinquent or about to be on your home, please call Shelter Realty at 702-376-7379.

Simply checking online for today’s posted rate may not lead to your expected outcome due to the many factors that can cause each individual rate and closing cost scenario to fluctuate.

We can preach communication, service and education all day long, but it’s our ultimate goal to earn your trust so that you can be confident in our ability to successfully lead you through this complex mortgage process.

Since mortgage rates can change several times a day, the following questions will help determine whether or not your lender truly knows what to look for so that they can provide you with the best rate once you’re in a position of locking in your loan:

Who determines mortgage rates, and what are they tied to?

Mortgage interest rates are determined by the pricing of Mortgage Backed Securities or Mortgage Bonds. The media often implies mortgage rates are based off the 10-year Treasury Note, which is incorrect.

While the 10-year Treasury Note has been known to trend in the same direction as Mortgage Bonds, it is not unusual to see them move in completely opposite directions.

How often do mortgage rates change?

Mortgage rates may change throughout the day, however they only change on days when the Bond markets are trading securities since mortgage rates are based on Mortgage Bond prices.

Think of a Mortgage Bond’s sales price similar to that of a Stock that trades up and down during the course of a day.

For example – let’s assume the FNMA 30-Year 4.50% coupon is selling for $100.50. The price is 50 basis points lower from the previous day’s closing price of $101.00.

In simple terms, the borrower would have to pay an additional .50% of their loan amount to have the same rate today that they could have locked in the previous day.

What causes mortgage rates to change?

Mortgage Bonds are largely affected by various market forces that influence the changing demand for bonds within the market.  Some of the key economic factors that have the greatest impact are unemployment percentages, inflationary fears, economic strength and the overall movement of money in and out of the markets.

Like stocks, most fluctuation is caused by consumer and investor emotions.

What do you use to monitor mortgage rates?

There are several great subscription based services available to monitor Mortgage Bond pricing.

The key is to make sure the lender is aware they should be monitoring Mortgage Bond pricing, such as the Fannie Mae 30-Year 4.50% coupon… and not the 10-Year Treasury Note or the news media.

When the Fed changes rates, why do mortgage rates move in the opposite direction?

It is a common misconception that when the Federal Reserve implements a rate cut it is immediately correlated to a reduction in mortgage rates.

The Federal Reserve policy influences short term rates known as the Fed Funds Rate (“FFR”). Lowering the FFR helps to stimulate the economy and increasing the FFR helps to slow the economy down. Effectively, cutting interest rates (FFR specifically) will cause the stock market to rally, driving money out of bonds and creating potential for inflation.

Mortgage Bond holders need to obtain a higher rate of return on their money if inflation is increasing, thus driving up mortgage rates. With the Federal Reserve Board meeting every six weeks, this is an important question to ask. If your lender does not have a firm understanding of this relationship, they may leave your rate unprotected costing you thousands of dollars over the life of your mortgage.

Do different programs have different interest rates?

Conventional, FHA and VA loans can all carry different rates on a 30-Year fixed mortgage. FHA and VA loans are insured by the Federal Government in the event of defaults.

Conventional mortgages are insured by private mortgage insurance companies, if insurance is required.

Typically, FHA and VA loans carry a lower rate because the investor views the government backing as less of a risk. While rates are usually different for each program, it may be more important to compare the monthly and overall cost during the life of the loan to determine which program best suits your needs.

Why is an Adjustable Rate Mortgage (ARM) rate lower than a fixed rate mortgage?

An Adjustable Rate Mortgage (ARM) is usually fixed for a specific period of time. The period is typically 6 months, 1 year, 3 years, 5 years or 7 years. The shorter time period the rate is fixed, the lower the interest rate tends to be initially.

This is due to the borrower taking the future risk of increasing interest rates. The only instance where this would not be true is when there is an inverted yield curve where short-term rates are higher than long-term rates.

Why are rates higher for different property residence types?

Mortgage interest rates are based on risk-based pricing. Risk-based pricing allows adjustments to par pricing for risk factors such as; FICO scores, Loan-to-Value percentages, property type (SFR, Condo, 2-4 Units), occupancy (Primary, Vacation or Investment) and mortgage type (Interest Only, Adjustable Rate etc).

This allows the investors who lend their money for mortgages to receive additional compensation for taking additional risk.

If the borrower encounters a financial hardship, are they more likely to make the payment on the home they live in or the one they rent out?

_________________________________

Related Mortgage Rate Articles:

• Mortgage Rate Overview
• Top Five Market Factors That Influence Mortgage Rates
• What’s The Difference Between APR and Note Rate?
• How Are Mortgage Rates Determined?
• How Do Mortgage Rates Move When The Fed Lowers Rates?