Ed's Blog

Again, as a reminder, over the next few weeks, I’ll be posting questions for you to ask your broker before to help you decide if they are the best professional to help you with your home financing. Here’s the latest installment:

1. Do You Have A Degree in a Business Related Field?

Mortgage brokers are not required to hold a degree. Of course, in order to earn the title of “Broker” you do have to pass a pretty rigorous test here in California, and you’re then given a broker license number. While plenty of mortgage brokers do not hold a college degree, and are quite good at their jobs, it can’t hurt to work with a broker who has a substantial finance or business background.

Again though, as long as you are working with an actual broker, you can rest assured they’ve met the requirements mandated by the Department of Real Estate. Moreover, mortgage brokers belonging to associations like the California Association of Mortgage Brokers willingly agree to abide by a code of ethics, including fiduciary duty to protect the best interests of their clients at all times.

2. What kind of Success Ratio Do You Have?

When you settle on a loan with a broker, they will “lock in your rate.” This means that they’ll let the bank know that your application will be submitted, and therefore will lock in your interest rate (so that it doesn’t increase.) An experienced, ethical mortgage broker will only lock in your loan if he is certain that you will be approved for that loan; meaning that he’s seen your application, he knows what the bank will require and has determined that you will be approved. This type of broker will have a high lock to loan-closed ratio.

Unfortunately, less experienced or unsavory loan agents will lock in borrowers without doing their diligence in confirming that you will be approved. Thus their lock to loan-closed ratio will be low. Look for a broker who has a lock to loan-closed ratio of at least 90%.

3. Can You Offer Loans From Multiple Lenders?

Independent mortgage brokers have the advantage of shopping for the perfect loan for you from dozens (if not hundreds) of lenders. Unlike working with a loan agent who works at a bank (and can therefore only offer loans products from their employer) a mortgage broker is able to provide you with options from multiple lenders, so that you can select the loan that is best for you.

That’s all for today. More tips to come in just a few days. In the meantime if you have any other questions, feel free to leave a comment, or call 415-406-2330.

This is an article I had published recently. It's very timely to our current msrket where I see many borrowers making many mistakes while trying to get "the best" rate for their loan. Let me know if you find it useful.

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Top 7 Reasons You’ll Never Knowingly Secure The “Bottom Of The Market” Mortgage Rate

There’s a lot to be said for homeowners and buyers who take the time to do their research when it comes to securing a home loan. After all, this is likely the largest investment you’ll ever make, so it’s worth it to spend the time and searching for the best loan, at the best interest rate. However, try as you might, it’s impossible to knowingly secure the absolute bottom of the market rate, as too many factors play a role in interest rate changes. Here are the top 7 reasons that you’ll never be able to knowingly get the “best” rate on a mortgage loan.

1. Rates Change Constantly.

Interest rates on mortgage loans are in a constant state of flux. Certainly from day to day, and even hour to hour, rates change. This means that you may see 2, 3, 4 or more different interest rates in a single day. It’s impossible to know first thing in the morning for example, if rates may increase, or decrease by the end of the day.

2. Different Programs Come From Different Lenders.

Say you’re doing your due diligence, and have decided to shop around to get the best interest rate. You call three different (and hopefully reputable) brokers or lenders. It’s highly likely that they (unless you ask for a very specific product) will quote you rates from different loan options. One may give you an interest rate quote for a loan program with no points affixed. A different lender may quote you an interest rate on a loan with 1 point. The interest rates on these different types of loans will vary, in some cases making a difference in rate of .25%-.50% or more

3. You’ll Never Get Two Quotes At The Same Moment in Time.

When you call a lender for a quote, they will provide you with an interest rate as it stands at that particular moment in time. When you call the next lender, you’ll be speaking to them at a different time, and as a result they’ll be quoting the rates at that moment in time. That is, because of the time differential, shopping for the lowest rate is like trying to compare apples and oranges; as time lapses can produce very different results. Shopping for a rate would be very similar to shopping for aspirin, for example. You call several different stores to see who has the lowest price. By the time you find what you think is the lowest price, and have purchased the aspirin, you go to a different store only to find out that aspirin had gone on sale at the first store you called, or they had a coupon in the store advertiser, which you didn’t know about.

4. You Have To Assume That Everyone You Talk To Is Telling The Truth.

In a perfect world, every broker, loan officer, mortgage advisor, etc would always give you a fair and honest quote. Unfortunately, this is not the case. As in every industry there will always be bad apples, who are more concerned with capturing your business, even if that means they have to use the infamous bait and switch (quote you a low rate, then change it at the last minute).

5. Lenders Will Have Different Disclosure Requirements.

Much like different lenders will have different guidelines for determining who qualifies for a loan, and which loan product they’ll qualify for, they also have different disclosure requirements. That means, information that your loan agent, or the lender has to disclose to you, will vary. For example, most mortgage lenders don’t have to disclose what they are making on the loan, but some do. Those who do have to disclose may appear to have higher costs, when actually they may be lower. That’s because the disclosure forms are different and can be misleading.

6. Honest Brokers and Agents Will Probably Not Have The Lowest Quote.

This is another sad reality when it comes to securing a mortgage loan. Honest, professional brokers, will rarely provide you with the lowest quote. The reason for this is simple. Experienced, trustworthy mortgage brokers will quote you a fair, honest price up front, regardless of what that may be. They will not go to any lengths necessary (read: bait and switch) to secure your business. This doesn’t mean that they’ll have the highest quotes, but they won’t quote you a rate that is substantially lower than others you’ve received.

7. Your Notes Are Likely To Be Disorganized

You’re going to get a lot of information from each broker you speak with. Even with your best efforts at taking detailed notes, by the time you’ve finished shopping for rates, and compiled all of your notes, you’re likely to be overwhelmed. Looking through your notes to find all of the details from the first broker you talked with, and comparing them with notes from the third or fourth broker, you’re also liable to find that you don’t remember exactly what certain numbers in your notes mean. Similarly, as stated earlier, you may find that you have quotes for very different programs, and you’ll need to call some brokers back to clarify quotes, or request new quotes.

Again, it is worth it to do your homework, and shop around for the best loans for your needs. But bear in mind that there is no way to conclusively know that you’re getting the “best” rate or that you’re obtaining a loan at the “perfect” time, when rates are at bottom of the market levels.

However, these days especially, if you work with a professional, reputable and experienced broker, you’re bound to get a great rate, and receive incredible service at the same time.

Refinances are on the rise, and buyers are coming back into the housing market in droves. If you’re considering refinancing, or buying a new home, congratulations; there hasn’t been a better time in years. However, that doesn’t mean that you should be hasty in your decision, particularly when it comes to choosing your mortgage broker.

To that end, for the next couple of weeks, I’m going to provide some tips for selecting a mortgage broker who can best serve your needs. Since there are dozens of things to consider, I’ll be posting questions for you to ask your broker in groups of three. Without further ado then….

1. How long have you been in the business?

There are a few reasons why you’ll want to know how long your broker has been in mortgage business. The first being that the length of time they’ve been a mortgage broker will give you some idea of how much experience they have. The mortgage industry, (like the stock market and the real estate market) is cyclical. That means that if you find a mortgage broker who has been in the industry for 10 or more years, they’ve undoubtedly seen the peaks and valleys of the industry and have remained committed to their career, and to serving clients even during difficult markets.

This doesn’t mean that a broker with less experience is inept or unqualified. Everyone has to start somewhere. But, you do have to consider the possibility that if a broker tells you they’ve been in the industry for six months; they may not be fully invested in their career. That is, they may change careers in a year, and therefore wouldn’t be able to assist you with future refinances or home purchases. On the other hand, if you find a broker who has been in the industry 20 or more years, you can probably count on the fact that they’ll be around to serve you for years to come.

2. How many loans have you closed?

This is another good indication of how experienced a loan officer is, and may help you feel comfortable in working with a broker who hasn’t been in the business a long time. If you find a broker who has only been in the mortgage industry for a year, for example, but has closed 100 loans in that time (particularly given the housing market of the last year); you can probably rest assured that they are successful for a reason. (Namely that they have been properly trained, and as a result, are very good at their job!)

On the other hand, if you find a broker who has been in business for 10 years but has only closed 20 loans, I’d keep looking for another broker.

3. What kind of training do you have?

Any broker worth their salt will gladly let you know exactly what kind of training they’ve received. If you find a broker beating around the bush, or giving a vague response to this question; steer clear. Professionally trained mortgage brokers will tell you exactly what courses they’ve completed, what programs they’ve received designations from, and any ongoing training they’re receiving. Naturally, the more training a broker has received, the better (particularly if it’s through professional organizations such as the National Association of Mortgage Brokers, or a state wide Association of Mortgage Brokers).

Ok folks, that’s it for today. I’ll be back in a few days with other “reminder tips” to consider before choosing your mortgage broker. Have a great weekend!

Those of us in the mortgage business know just how many incredible opportunities are being presented in this otherwise dismal economic climate. From opportunities to buy at insanely low prices, to interest rates not seen in decades, we know (because we’re immersed in the business day in and out) that it is unequivocally one of the best times in history to be a buyer. We also know that it’s a remarkable time to be a homeowner, as you can save thousands by refinancing into safe, old fashioned 30 year fixed loans.

But for all of our efforts to spread this word, no one has been more helpful than President Obama in getting the word out. Citing the fact that millions of people can save thousands by refinancing, and the fact that interest rates are dipping into ranges we haven’t seen since the 1970’s; President Obama has become our nation’s greatest de facto pitchman for mortgage refinancing! And for that, we should all thank him, for helping us to realize just how much money we can all be saving by refinancing our homes today.

Want to talk about refinancing your mortgage? Give us a call at 415-406-2330.

If there is a silver lining to be found behind this otherwise gloomy economic state, it’s that there are great deals to be found everywhere you look. From cars to houses, things have gotten much cheaper. And as a homeowner, that means your mortgage can get cheaper too. Here are the top ten reasons you should refinance now.

10. Interest Rates just don’t get any better than this. We’re talking in the 4-5% range!

9. Safe, government sponsored loans are available. The days of exotic, unaffordable mortgages are history! (For now anyway!)

8. Lack of equity isn’t much of a problem. With new incentives from the economic stimulus plan, lenders are willing to refinance even if you don’t have much equity.

7. You can be saving a lot over the life of a loan. You can literally save yourself tens of thousands of dollars in interest. Who couldn’t use an extra $15,000, $30,000, $60,000,

$120,000 or more over the life of your loan?

6. You could be saving a lot every month. Refinancing into a lower interest rate loan can save you hundreds of dollars each month. How about an extra $200 or $300 or more in

your pocket each month?

5. You can pay off your loan faster. Just because you refinance into a 30 year fixed loan doesn’t mean you can’t pay it off sooner. Just paying a bit extra towards your principal each month can shave years off of the life of your loan.

4. Lending guidelines are loosening up. Even if you tried to refinance six months ago, only to find that you weren’t able, you may be able to now. Major changes have taken place in the lending industry, and getting a loan is getting easier.

3. President Obama is even encouraging you to refinance. After all, maybe with the money you’ll save, you can put it back in the economy.

2. What do you have to lose? Nothing! You only stand to gain if you can reduce your interest rate.

1. There is no telling how long rates will stay this low! Interest rates change daily, even hourly, and there is never any guarantee they won’t start increasing again.

Recently, S&P Case-Shiller Home Price Index released a new report on home prices that ought to come as good news to home buyers. As of January of this year, home prices in the Bay area were down more than 30% from the same time last year. That puts median home prices at levels we haven’t seen since 2003!

If you’ve been waiting to buy a home, in hopes that prices will decline further, this news should nudge you to begin looking now. Of course there is always the possibility that prices will decline a bit more, but when you couple these low prices, with the ongoing incredibly low interest rates, it’s clear that this is phenomenal time to be a buyer!

Incidentally, although you’ve heard much about the “frozen” credit markets, with the new Housing Affordability and Stabilization Plan going into effect next week, we expect lending guidelines to loosen, thus beginning to “thaw” the frozen credit markets.

Give us a call today to start working on your pre-approval, and take advantage of this incredible time to be a home buyer. We can always be reached at 415-406-2330.

As you may know, the Housing Affordability and Stabilization Plan (aka “Making Home Affordable”) goes into effect on April 4, 2009. This program is designed to help homeowners who need to refinance their mortgage, but don’t have 20% equity. It is also designed to help those that (due to financial hardship) are finding that keeping up with their mortgage is nearly impossible. Although the program is complex, I’ve broken it down into the basics.

If you’re struggling to refinance due to a lack of equity:

· In order to refinance your current mortgage under this program, the loan must be for your primary residence (no second, vacation or investment properties apply).

· Your current loan must be through Fannie Mae or Freddie Mac. Loans owned by any other servicers are not eligible!

· You will need to qualify in the same way you would qualify for any refinance (proof of assets, income, and other debts).

· You will be required to purchase PMI (Private Mortgage Insurance) if you do not already have it.

· Limits are available up to $729,750 in high cost areas like California.

· You may be eligible for help in refinancing up to 105% of your mortgage

If you’re struggling to make your payments and you need a loan modification:

· This too must be your primary residence.

· You must be in danger of defaulting, or already in default (meaning you’ve missed payments).

· Your mortgage payment may be reduced to no more than 31% of your gross income.

What Remains To Be Seen:

· We don’t have a final list of which banks will be participating in these programs. By law, if a bank receives government bailout money, they are required to participate. However, even if they don’t receive money, they may still opt to participate.

· Second mortgages will need to take a backseat, and the servicer of that loan will need to agree to remain in the “secondary position,” to your new loan. We’re hopeful that most will agree to do this.

· Fees have yet to be determined. Again, we’re hoping that fees accompanying these modifications and refinances will remain low, but we don’t have definitive answers just yet.

With such a broad reaching plan, there will undoubtedly be changes to these programs as we move forward with “Making Home Affordable.” Rest assured though, that the team at Smith Craine Finance is keeping abreast of all changes, and is here to offer you advice and assistance with refinancing, or loan modifications.

Please don’t hesitate to contact us today to learn more, and to start working towards lowering your monthly mortgage payments. Interest rates remain at all time lows, and credit is once again beginning to flow. We can always be reached at 415-406-2330.

Thought I'd post this as aa shorter version of the long tax credit explanation that I previously posted. This is one of my newspaper columns:

Where’s The Catch With The Home Buying Tax Credit?

Q: I’ve heard about the $8,000 tax credit for first time home buyers, and it’s definitely got me interested, but there’s got to be a catch. What is it?

A: There is no catch per se, but there is naturally, some fine print. To begin, the $8,000 tax credit is the maximum amount you can receive. The way this incentive is written is that you’ll receive a tax credit of 10% of the purchase price, up to a maximum of $8K. (Of course, here in the Bay Area, the $8K is pretty much guaranteed).

However, the tax credit isn’t available to everyone. As a single person, you are only eligible for the full credit if you make less than $75,000 per year or less than $150,000 per year for couples. Please note; you may be able to get a partial credit if you make more than that, but there is no guarantee. You also need to know that “new home buyer” in this case means that you can’t have owned a home (even as an investment) during the last three years.

You should also be aware that once you purchase the home, you need to live in it for at least three years, or you may be forced to return the credit. That means that this credit won’t apply if you plan to rent out your home, or use it as your secondary residence or vacation home. Finally, the home must be purchased before November 30, 2009 in order for you to be eligible.

So, while there is no catch, there are clearly a few stipulations that must be met. However, this new incentive is definitely a step in the right direction towards bringing more buyers into the market. Even without this incentive, it’s a magnificent time to be a buyer. There remains a great selection of homes currently for sale, not to mention interest rates continue to remain at historic lows. So this tax credit is really just an added bonus for those whose are ready to buy a home. Happy house hunting!

Last week mortgage applications surged up 11%, a good indication that the spring real estate season may have begun a bit early. According to reports from the Mortgage Bankers Association, applications for home purchase loans and refinance loans increased 11.3%.

Even better for homeowners and buyers is that interest rates on 30 year fixed loans are on average just below 5%, which is the second lowest level since 1990. These low interest rates combined with low home prices, appear to be driving buyers back into the market, as homeownership becomes bit by bit, more affordable.

Moreover, this good news comes on the heels of the passage of the Homeowner Affordability and Stability Plan which aims to help troubled homeowners to modify their existing mortgages.

I don’t want to jump the gun, but it’s beginning to look like things might be moderately improving for our troubled housing market. More buyers equates to less inventory, meaning that home values should stabilize. Moreover, with more lenders willing and eager to modify existing mortgages, as a result of Obama’s new plan; foreclosure rates should begin to decline.

Let’s all keep our fingers crossed that more good news like this is on the horizon!