Understanding how interest rates work will help relieve a lot of unnecessary anxiety about the home financing process. File photo: Andrey Popov, Shutter Stock, licensed.
Getting The Best Interest Rate
Interest rates are impacted by a borrower’s credit score, loan term, mortgage program and a series of market factors that are outside of our control.
Unfortunately, many advertisers will tease a low interest rate in a marketing campaign for the purpose of creating interest in a specific loan program which may only fit a unique type of qualified borrower.
However, by promoting a lower note rate, with a higher APR, lenders are able to control the flow of the inbound phone call or Internet lead.
Understanding how interest rates work will certainly help relieve a lot of unnecessary anxiety about the home financing process.
While loan programs, credit scores and outside economic factors tend to control mortgage rates, borrowers do have the option of paying more up-front at the time of closing in the form of a discount point or loan origination fee in order to secure a lower interest rate.
Alternatively, borrowers currently have the option of taking a slightly higher rate in exchange for lower closing costs. This particular rate / closing cost scenario is sometimes referred to as a “No Closing Cost Loan” option, or something similar.
Many people believe that interest rates are set by lenders, but the reality is that mortgage rates are largely determined by what is known as the Secondary Market.
The secondary market is comprised of investors who buy the loans made by banks, brokers, lenders, etc. and then either hold them for their earnings, or bundle them and sell them to other investors.
When the secondary market sells the bundles of mortgages, there are end investors who are willing to pay a certain price for those loans.
Timing the market for the best possible opportunity to lock a mortgage rate on a new loan is certainly a challenge, even for the professionals.
While there are several several generic interest rate trend indicators online, the difference between what’s advertised and actually attainable can be influenced at any given moment by at least 50 different variables in the market, and with each individual loan approval scenario.
Outside of the borrower’s control, the mortgage rate marketplace is a dynamic, volatile living and breathing animal.
Lenders set their rates every day based on the market activities of Mortgage Bonds, also know as Mortgage Backed Securities (MBS).
On volatile days, a lender might adjust their pricing anywhere from one to five times, depending on what’s taking place in the market.
Inflation, The Federal Reserve, Unemployment, Gross Domestic Product and Geopolitics are a few of the items you can pay attention to if you’re trying to track rates for 30 day lock.
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.
Since mortgage rates can change several times a day, it’s more important to pre-qualify your lender about his/her competency level with regards to mortgage rates.
If your lender doesn’t know what to look for or how to answer some basic questions, there is a good chance you may not ever see that initial interest rate you were quoted.
Low rates with a high APR may or may not be the best deal.
Comparing apples to apples is the best way to determine which loan closing cost and rate scenario makes sense for your short and long-term financial goals.
The traditional news media generally announces mortgage rate movement a few days too late, or when rates are moving in the opposite direction of where we need them to go.
One of the big misconceptions most people have about mortgage rates is that the Fed, and / or Federal Government control what mortgage rates look like every day.
Mortgage lenders approve borrowers for a loan, which is secured by real estate, based on a standard set of guidelines that are generally determined by the type of loan program. File photo: Fabio Balbi, Shutter Stock, licensed.
Main Components of Mortgage Approvals
Whether you’re a First-Time Home Buyer or seasoned investor, the mortgage approval process can be a slightly overwhelming adventure without a proper road map and good team in your corner.
Updated program guidelines, mortgage rate questions and down payment requirements are a few of the components you’ll need to be aware of when getting mortgage financing for a purchase or refinance.
While this site is full of useful information, industry terms and calculators that will help you research the mortgage approval process in detail, this particular page was designed to give you a thorough outline of the important components involved in getting qualified for a new mortgage loan.
Mortgage Approval Components:
Mortgage lenders approve borrowers for a loan, which is secured by real estate, based on a standard set of guidelines that are generally determined by the type of loan program.
The following bullets are the main components of a mortgage approval:
Debt-To-Income (DTI) Ratio –
A borrower’s DTI Ratio is a measurement of their income to monthly credit and housing liabilities.
The lower the DTI ratio a borrower has (more income in relation to monthly credit payments), the more confident the lender is about getting paid on time in the future based on the loan terms.
Loan-to-Value (LTV) –
Loan-to-Value, or LTV, is a term lenders use when comparing the difference between the outstanding loan amount and a property’s value.
Certain loan programs require a borrower to invest a larger down payment to avoid mortgage insurance, while some government loan programs were created to help buyers secure financing on a home with 96.5% to 100% LTV Ratios.
EX: A Conventional Loan requires the borrower to purchase mortgage insurance when the LTV is greater than 80%. To avoid having to pay mortgage insurance, the borrower would have to put 20% down on the purchase of a new property. On a $100,000 purchase price, 20% down would equal $20,000.
Credit –
Credit scores and history are used by lenders as a tool to determine the estimated risk associated with a borrower.
The type of property, and how you plan on occupying the residence, plays a major role in securing mortgage financing.
Due to some HOA restrictions, government lending mortgage insurance requirements and appraisal policies, it is important that your real estate agent understands the exact details and restrictions of your pre-approval letter before placing any offers on properties.
There are government insured loan programs, such as FHA, USDA and VA home loans, as well as conventional and jumbo financing.
A mortgage professional will take into consideration your individual LTV, DTI, Credit and Property Type scenario to determine which loan program best fits your needs and goals.
Pre-Qualification Letter Basics:
Getting a mortgage qualification letter prior to looking for a new home with an agent is an essential first step in the home buying process.
Besides providing the home buyer with an idea of their monthly payments, down payment requirements and loan program terms to budget for, a Pre-Approval Letter gives the seller and agents involved a better sense of security and confidence that the purchase contract will be able to close on time.
There is a big difference between a Pre-Approval Letter and a Mortgage Approval Conditions List.
The Pre-Approval Letter is generally issued by a loan officer after credit has been pulled, income and assets questions have been addressed and some of the other initial borrower documents have been previewed. The Pre-Approval Letter is basically a loan officer’s written communication that the borrower fits within a particular loan program’s guidelines.
The Mortgage Approval Conditions List is a bit more detailed, especially since it is usually issued by the underwriter after an entire loan package has been submitted.
Even though questions about gaps in employment, discrepancies on tax returns, bank statement red flags, and other qualifying related details should be addressed before a loan officer issues a Pre-Approval Letter, the final Mortgage Approval Conditions List is where all of those conditions will pop up.
In addition to borrower related conditions, there are inspection clarifications, purchase contract updates and appraised value debates that may show up on this list.
This will also list prior to doc and funding conditions so that all parties involved can have an idea of the timeline of when things are due.
Let’s start with the most commonly asked question about mortgage loans. Getting a Pre-Approval Letter for a new home purchase is mainly to let everyone involved in the transaction know what type of mortgage money the buyer is approved to borrower from the lender.
The Pre-Approval Letter is based on loan program guidelines pertaining to a borrower’s DTI, LTV, Credit, Property Type and Residence Status.
A complete Pre-Approval Letter should let the borrower know the exact terms of the loan amount, down payment requirements and monthly payment, including principal, interest, taxes, insurance and any additional mortgage insurance premiums.
Keep in mind, one of the most important items to remember when looking into financing is that there is sometimes a difference in the amount a borrower can qualify for vs what’s in their budget for a comfortable and responsible monthly payment.
7 Items to Look For On a Pre-Approval Letter
Loan Amount – Base loan amount and possibly gross loan amount (FHA, VA, USDA)
Status Date and Expiration Date – Most Pre-Approval Letters are good 90 days from when your credit report was run
Mortgage Type – FHA, VA, USDA, Conventional, Jumbo
Term – 40, 30, 20 or 15 year fixed, ARM (Adjustable Rate Mortgage); if ARM, 1, 3, 5, 7 or 10 year initial fixed period; Interest Only
Why do I have to obtain another Pre-Approval Letter from a different lender when I make an offer on a particular home?
Cross-qualification is imminent in certain markets, especially with bank-owned or short sale properties. Some of the large banks that own homes require any potential home buyer to be qualified with their preferred lender – who is typically a representative of the bank that owns the home. This is one way for the bank to recoup a small portion of their loss on the home from the previous foreclosure or short sale.
In other scenarios, the listing agent/seller prefers to feel safe in knowing the home buyer they’ve selected has a back up plan should their current one fall apart.
I was pre-approved, but after I found a home and signed a contract, my lender denied my loan. Why is this a common trend that I hear about?
There are literally hundreds of moving parts with a real estate purchase transaction that can impact a final approval up until the last minute, and then after the fact in some unfortunate instances.
With the borrower – credit scores, income, employment and residence status can change.
With the mortgage program – Interest rates can change affecting the DTI ratio, mortgage insurance companies change guidelines or go out of business, new FICO score requirements…. the list can go on.
It’s important to make sure your initial paperwork is reviewed and approved by an underwriter as soon as possible. Stay in close contact with your mortgage approval team throughout the entire process so that they’re aware of any delays or changes in your status that could impact the final approval.
What happens if I can’t find a home before my pre-approval letter expires?
Depending on your mortgage program and final underwritten conditions, you may have to re-submit the most recent 30 days of income and asset documents, as well as have a new credit report pulled.
Worst case scenario, the lender may even require a new appraisal that reflects comparables within a 90 day period.
It’s important to know critical approval / condition expiration dates if your real estate agent is showing you available short sales, foreclosures or other distressed property purchase types that have a potential of dragging a transaction out several months.
If you are in a financial position where you are qualified to afford both your current residence and the proposed payment on your new house, then the simple answer is Yes!
Qualifying based on your Debt-to-Income ratio is one thing, but remember to budget for the additional expenses of maintaining multiple properties. Everything from mortgages payments, increased property taxes and hazard insurance to unexpected repairs should be factored into your final decision.
Qualifying for a mortgage requires meeting a pre-determined set of guidelines established by a lender, which may include credit history, income, employment and assets. File photo: Fizkes, Shutter Stock, licensed.
What Is A Mortgage?
Simply put, a mortgage is a loan secured by real property and paid in installments over a set period of time. The mortgage secures your promise that the money borrowed for your home will be repaid.
1. Mortgage Approval:
Qualifying for a mortgage requires meeting a pre-determined set of guidelines established by a lender, which may include credit history, income, employment and assets.
In addition to personal qualifying factors, a property must also meet certain standards set by lenders before a borrower can obtain a mortgage loan secured by real estate.
2. Mortgage Payments
On a traditional 30 or 15 years fixed rate mortgage program that involves principal and interest, each payment made divided into two parts:
The first part of the mortgage payment, which is commonly referred to as principal, goes to paying down the initial amount borrowed.
The second part is the “interest” paid for the money borrowed to purchase the property.
The amount paid in interest decreases each month, as the amount paid towards the principal balance increases. This apportioning is referred to as amortization.
Other types of mortgage payments available can include options for paying interest only or a teaser rate.
Either way, it is extremely important to have a solid understanding of the full payment and terms before moving forward with a particular option.
3. Mortgage Programs
Mortgage Programs come in many different types of flavors and colors depending on the down payment and/or monthly budget a borrower has been approved for.
There are also federally insured mortgages, such as FHA or VA loans, whch have more flexible qualifying guidelines.
4. Closing Costs / Fees
The actual cost of obtaining a mortgage mainly depends on whether or not the borrower is paying points for a lower mortgage rate. In some cases, there are also other loan processing and underwriting fees associated with the the work involved in the transaction.
Either way, a true mortgage professional to be able to fully articulate the long and short-term financial benefits of choosing one loan scenario over another.
Fortunately, there are several consumer protection policies implemented by the government to help borrowers understand their options during the initial mortgage pre-qualification process.
However, please keep in mind that there may be other closing costs not associated with a mortgage or real estate transaction to be aware of.
While mortgage interest rates may change several times a day, there are a few market factors you can pay attention to which may impact your final payment.
Whether you’re shopping for the best rate, or trying to determine the difference between the Note Rate and APR, it definitely helps to understand what questions to ask a mortgage lender about your specific loan scenario.
Whether you’re new to the home buying process, or a seasoned investor, I bet you didn’t realize that there are at least 20 top mortgage related terms that you may want to understand prior to speaking with a real estate agent or loan officer. File photo: REDPIXEL.PL, Shutter Stock, licensed.
Mortgage Highlights & Resources
We realize that the information contained in this site could literally take you weeks to research and digest, so please feel free to contact any of our local mortgage experts at any time for a personal consultation where we can address your specific needs and questions.
The following outline highlights the important links and resources that are contained in this comprehensive home-ownership education website:
What is a mortgage, and who owns my home if I have secured financing to purchase it?
Whether you’re new to the home buying process, or a seasoned investor, I bet you didn’t realize that there are at least 20 top mortgage related terms that you may want to understand prior to speaking with a real estate agent or loan officer.
This section highlights some of the basic math and topics of interest that will help you get started on your home buying and financing journey.
Required down payment, income / employment information and credit standing are a few of the important factors banks look at when considering a borrower for a mortgage loan approval.
There are actually several questions that a loan officer needs to ask before a simple pre-approval letter can be issued.
But more importantly, there are at least 8 top questions that you should be asking your lender before taking any steps to fill out an application.
Being prepared with the proper documents and personal information will allow you to spend more quality time with your loan officer addressing the important points of your pre-approval, property residence type and mortgage program options.
Your credit picture plays a key role in the mortgage approval process, and it is essential to understand how scores are measured and calculated.
Should you close all cards or keep them open? What if you don’t have any credit history that shows up on a report, is there a way to use cell phone and utility bills?
In this section, you’ll learn the basic rules about preparing your credit standing prior to speaking with a lender for a qualification.
In addition to mortgage rates, there are many other monthly obligations that factor into your overall mortgage payment.
HOA Dues, Hazard Insurance, Home Warranties, Property Taxes…. to name a few.
It helps to be aware of the expenses involved in owning real estate in order to set a monthly budget that is true to your financial goals and expectations.
Mortgage rates can fluctuate several times a day, and are influenced by many factors that are out of the loan officer’s control.
Determining if you’re getting the best deal at any given moment boils down to whether or not you trust that your preferred loan officer is truly looking out for your best interests.
Fortunately, there are economic indicators that impact the typical movement of interest rate markets which you can be aware on a daily basis.
When the media reports that the Fed is moving rates down, it always seems that home loan rates go up. What about the points vs no points, and APR?
Basically, there is a correct way to shop for the best rate, and it starts by asking your loan officer eight simple questions that they should be able to answer.
It’s amazing how many mortgage programs have been designed to help First-Time Borrowers get financing on new homes.
Before you start shopping for a listing that fits your living needs, it would be extremely beneficial to know what type of lending scenario best fits the type of property or neighborhood you’re looking to buy in.
With regards to a refinance, you may actually qualify for a new government sponsored program that has been designed with current market conditions in mind.
What comes first – the approval or the purchase contract?
Once you have weighed the basic pros and cons of owning a home vs renting, tax benefits and timely market influences, assembling a winning team of real estate and mortgage professionals will help you cover all of your bases.
There are also some very important time lines that you’ll need to be aware of, such as appraisal, home inspection and loan approval dates.
Can the type of Home Owners Association affect your loan approval? Absolutely.
If you’re feeling a little anxious at this point, then that just means you’re actually taking this home buying thing serious.
Don’t worry, we’ll make sure you are kept in the loop throughout the entire home buying process.
If this were cub scouts, you would have already received several badges and awards by this point.
With the right home buying team on your side, the closing process should be a smooth transition from signed documents to closing.
The excitement has been building throughout the entire home shopping to mortgage approval, so it’s easy to overlook some important details at the end.
Understanding the industry lingo will certainly help you avoid feeling like you’re on a roller-coaster while all the team players come together at the end to perform docs, signings, pre-closing conditions….
However, it also helps to know about all of the fees associated with a new home purchase or refinance. Understanding the difference between the fixed and variable fees will help you set a more accurate budget, which could impact whether or not you get your earnest money back at closing.
Properly estimating neighborhood property values and your closing costs will help determine the net benefit of a refinance transaction.
Some homeowners just want to know the best approach of finding money to make home improvements, while other borrowers are in a situation where their rate is adjusting.
Either way, it’s easy to get caught off guard if you don’t have the essential knowledge about your mortgage refinance options.
In a brilliantly unique desert setting, Lake Las Vegas spreads out as an ultimate dome of luxury and privacy.
The landscape is fairly inspiring and the desert stretch calls for mute obedience. On the largely untouched side of Henderson Mountain, Lake Las Vegas Real Estate is spread over a colossal 2245 acres of private canyon, some 40 minutes away from the Las Vegas Strip.
Lake Las Vegas is a place one can’t keep boasting about, it is the home to two of the most renowned global chain of hotels; the prestigious Ritz-Carlton and the Hyatt regency. Apart from the unflappable grandness of these hotels, Lake Las Vegas puts on the platter few of the most challenging golf courses; the public one’s for the “mainstreeters” and the private one for the elite. The courses are built in a fashion that it takes the mountain and the lake within its compass.
Jack Nicklaus, the undisputed great of the golfing arena has used his insight to construct Reflection Bay Golf club. Tom Weiskopf’s Falls Golf Club is a piece of sheer delight running through lush tans, erratic mountain slopes and hindering lake. So you have got to work your way up the birdie.
Lake Las Vegas homes area tribute to the Mediterranean concept of house-making. Owing to the reflective natural neighborhoods and the artistic desert settings, the place offers a touch of nomadic with the urban theme. The houses are built with a classical mindset and offers variable patterns.
Many Lake Las Vegas neighborhoods offer the peace of an enclave even while being replete with almost all the amenities modern day has to present. Bella Fiore is highly rated and this reflects in its shooting prices. Manicured greens and green lush fields run alongside the desert setting creating a wide repertoire of nature-based emotions. The homes and ranches are readily available at different altitudes.
Now for the modern side of the neighborhoods; the houses are replete with private Casitas, Master suites, internal courtyards and outdoor fireplaces. Floor plans are distinctive. The carpet area setting enhances from 2822 to 4376 square feet. At $ 700000, the prices are still reasonable, considering the flats mostly have five bedrooms and nearly four and a half baths. The houses have oil-rubbed bronze rubbed hardware and fiberglass doors. The homes include volume ceilings and are effected with fire sprinkler systems. They also have the out-of-convention setting of gourmet kitchens with raised panels and stern countertops. Home networks are complete with ultra speed digital 5 wiring.
If you are interested in a private showing in the Lake Las Vegas area, please contact us 702.376.0088
According to FBI Special Agent, Scott Hunter Las Vegas is called mortgage fraud ground zero.
This problem is becoming so wide spread that special task forces have been created to combat the problem. Every week you read in the paper or view the news about another real estate industry professional being arrested for some type of real estate or mortgage fraud. Just this month, Cindy Birkland was arrested for alleged mortgage fraud.
According to the FBI, mortgage fraud is becoming one of the fastest growing white collar crimes in the United States.
Mortgage Fraud is usually committed by several individuals who all have a certain role within the scheme. Usually a loan officer, borrower, real estate agent and/or an appraiser. The most common type of mortgage fraud is a “straw buyer”. This is where the bank lends hundreds of thousands on a home that is way over inflated due to an appraiser setting an unrealistic value. The group splits the money and never has any intention on making any payments on the home.
For the 4th straight month, Las Vegas Home Sales are up. We have seen an increase in home sales over the same month from the previous year for the first time since September 2005.
Are these signs that the Las Vegas real estate market might be turning around?
Let’s not get to excited just yet; we still need to see how the rest of spring and summer goes before we can really access indications that the market might be rebounding.
We should continue to see a rise in Las Vegas Foreclosures as the adjustable rate mortgages continue to – well – adjust. As more foreclosures enter the market, home prices will continue to fall as banks drop the prices to move inventory off their books. So there is a good chance Las Vegas Home prices will continue to fall.
However, the Las Vegas Strip is expected to create over 113,000 jobs over the next 5 years starting with the opening of Project City Center in 2010. With the creation of these jobs, we will begin to see an influx of people moving to Las Vegas filling these new job opportunities. This will help the Las Vegas Housing Market as the influx of people relocating here will need housing. It will be interesting to watch how the Las Vegas real estate market evolves over the next 9 – 12 months.
